Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Anglo American Platinum shares fell on Monday after the world’s biggest platinum group metal (PGM) miner reported a 43% drop in half-year profit due to weaker metal prices and lower production compared with record sales a year ago.
Amplats’ shares were down 2.56% by 0744 GMT after headline earnings per share (HEPS) – the main profit measure in South Africa – fell to 101.4 rand ($6.02) for the half year that ended June 30, from 176.47 rand a year ago.
The company said inflationary pressures and tightening monetary policy would continue to have an impact on the mining industry. Finance director Craig Miller said Amplats experienced a 10% increase in mining input costs during the period.
“Diesel prices are 61% up year on year, explosives are up 55% and chemicals are up 17% year on year. Those three components have significantly contributed to the increase in costs for us,” Miller said during a call.
Amplats maintained its guidance for 2022 unit cost of production at between 14,000 and 15,000 rand per PGM ounce, based on an oil price of around $100 per barrel. That would represent a year-on-year cost increase of between 9.1% and 16.9%.
Amplats cut its capital expenditure guidance for the full year to between 16 billion and 17.5 billion rand.
PGM prices have come off historical highs seen during early 2021 as the global economy recovered from pandemic-related disruptions, but Amplats said the basket price in the first half of 2022 is the second-highest average price on record, showing strong underlying market fundamentals despite the price volatility.
Amplats ended 2020 with a backlog of around one million ounces of PGM as it rebuilt and recommissioned its converter plant. Most of this inventory was refined and sold during 2021, resulting in higher-than-normal sales and earnings.
The company declared an interim dividend of 81 rand per share, compared to 175 rand per share last year.
Amplats shares have fallen 32% since the start of the year as lower PGM prices took their toll.
($1 = 16.8452 rand)
(By Nelson Banya; Editing by Helen Reid, Louise Heavens and David Evans)
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