Research archive for AMS

Amplats warned that earnings would be well lower (much lower), in the face of what we now know is a changing company. Changing from expensive underground mining to fewer and more profitable open cast and mechanised mining. That is effectively the future that has been chosen by the shareholder. And to think that the share price of Amplats in Rand terms is down nearly 60 percent. The going has been more than tough, it has been awful. See the twelve months ended 31 December 2015 trading update.

Yesterday we received news that, Anglo American Platinum Limited Announces The Sale Of Its Rustenburg Operations. The basics of the deal are that Sibanye will buy the asset for a minimum of R 4.5 billion and a maximum of R20 billion, with an upfront payment of R1.5 billion.

Whoa, can you read the Anglo American Platinum trading statement? It actually was not posted on the Amplats website, believe it or not, it was nowhere online, only on the SENS service. The first part is pretty basic and self explanatory: headline earnings and headline earnings per share ("HEPS") for the period are likely to decrease to be between R650 million and R875 million and 250 cents and 335 cents per share respectively. The prior year it was 1.451 billion Rand, 556 cents per share. Basic EPS is "likely to increase to be between R495 million and R705 million and 190 cents and 270 cents per share respectively." The upshot of it all is that the stock is down 3.3 percent, not good. I am interested to see in the results (9 February) the further action taken with regards to the unprofitable mines to reflect the reality of lower platinum prices. Phew, we still continue to avoid single commodity stocks, the prospects still look patchy at best.

Staying with platinum, Amplats have reported For the six months to end June 30 2014. What I find quite interesting is that the first picture has a heavy dragline that has both a Chinese and South African flag. I have no idea why, perhaps someone can enlighten me.

We have this ghastly situation that continues to fall into the category of unsolvable for the time being along the platinum belt in South Africa. 100 odd days ago, newer mining union AMCU decided that they would draw a line in the sand and demand a minimum wage of 12500 Rand for the rank and file employee and they have stuck to that number, despite numerous rounds of negotiations.

The strike in the platinum sector is still dragging on, it has been going since 23 January. In terms of progress NUMSA accepted the wage offer from the mines on the 20 March, which is great news for the companies, miners and the local communities who rely on miners spend. AMCU the more militant union is still on strike and are calling for the coal and gold miners to join in as solidarity.

AngloPlats have reported results for their first half this morning. The headlines will read, "Amplats reports 88 percent jump in earnings for first half". And it is true, on a per share basis the company reported 514 cents headline earnings per share. 1.341 billion Rand, versus 713 million Rand for the first half of 2012. And this after a loss of 1.468 billion Rand at the full year stage, 2012 was a very forgettable year for the platinum mining community. I have a sense that it won't be forgotten in a hurry, the horror of Marikana still clouds us all, in less than a month (16th of August), it will be one year on from that fateful Thursday. It will be a Friday, and a day of inward reflection.

As expected, we are going to start to see some of the trading updates of the Anglo stable companies, this first one was from Amplats yesterday. The release says that "Headline earnings per share ("HEPS") for the period is expected to increase to between 480 cents and 535 cents from 273 cents reported for the six months ended 30 June 2012." Sounds a lot better. Due to what? Well, the weaker Rand did benefit them, but there were also higher sales volumes which sounds encouraging. Results expected Monday next week. We will do a detailed write up then.

Amplats sank over five percent on the day to end at levels last seen in the second half of 2005, closing at 312.90. The stock was at these very levels in December of 2002. So over the last 3801 days, the stock basically has gone "nowhere". Even though the highs are late May 2008, where the stock topped 1480 ZAR a share. It has of course paid you a dividend over that time, 188.38 ZAR to be precise, so you have not been left feeling empty. But since 2008 the company has only paid 3 dividends in four and a half years. Their parent company must be feeling a little aggrieved at the performance. In 2012 total production was 2.22 million ounces, at a cash cost of 16,364 ZAR per refined ounce. Granted that last year was a little extraordinary, in terms of the operating environment, it was none the less perhaps a sign of a less fluid operating environment.

Sometimes bad news is ummmm..... good news. And someone elses bad news might be your good news, especially if you are a hyena or vulture, who get a bad rap, but sure clean up a real stink. And the news that the Amplats restructuring as well as the usual (sigh, sadly) labour unrest events, could actually send the platinum price more than a little higher in the coming months. See this: This Is What Could Drive Platinum Higher, Very Soon. Remember how ironically lower production (as a result of power "constraints") back in early 2008 led to enormously high platinum prices which equalled monster profits for the platinum producers. Perhaps..... but in the office we feel more inclined to be in the Rand price of platinum. Did you watch Hot Stoxx on CNBC (channel 410 on DSTV) last night? No? Don't forget that each and every weekday night at 8 and then every weekday morning at 8 (repeat) that the Hot Stoxx show is on. Personally I think it is an awesome show, but I would say that of course. Watch it and send feedback to us, and Paul specifically. You can also watch it online at ABNDigital.com – check it out: HOT STOXX.

Platinum stocks got whacked, in particular Amplats as news came through that inter union violence had again risen at their Siphumelele mine, part of the Amplats Rustenburg mines. Siphumelele is next door to the Khomanani mine, where remember shafts one and two are targeted as potentially being shuttered in the operational review. So, as you can imagine tensions are already high. The official Amplats parent, Anglo American release is as follows: Incident at Siphumelele mine in Rustenburg. So it seems from that release that NUM shop stewards were told to vacate their offices by the workers committee at the mine. Now, what the release does not say is that rival union AMCU was involved here. That is what is being widely reported. So, once again it is about union rivalry.

A company with problems of their own, not too dissimilar to the ones mentioned above is Anglo American Platinum Limited. The opening lines are unfortunately the long and the short of what was a year to forget: "In a year that was marred by illegal and violent industrial action across the mining industry, and where continued high levels of inflation and a subdued macroeconomic environment, particularly in Europe, led to severe margin contraction, Anglo American Platinum today reported an operating loss of R6,334 million for the year ended 31 December 2012. This represents a 180% reduction, from a profit of R7,965 million in 2011." This notion that mining companies have billions of Rands, perhaps someone should send those two short lines to the powers that be.

Platinum stocks got clubbed, Amplats sank nearly six percent as the company saw huge pushback from labour unions and government alike, threatening revoking of mining licences, calling the company irresponsible and suggesting that there was a lack of communication from the companies side. It is a highly emotive issue, losing jobs, but there are also economic realities that should have been conveyed a whole lot better. Europe is not buying new cars, those sales are at a 20 year low. December did not look much better in seeing that trend shift soon, there was a mid teen percentage fall off in new motor vehicle registrations across many of the key European territories. The major platinum usage is in controlling emissions from motor vehicles. Lower sales equals lower demand. Amplats does not set the price of the metals that they produce. Equally, they do not set the electricity price, they do not have flexibility over labour. But, they do have a bloated management structure that needed changing. And jobs across the board are at stake here, including 250 high paying jobs at head office. What was fairly encouraging (from my point of view) is that Amplats workers called off their short term strike in order to return to work, because the general consensus was that job security was a problem. I guess everyone is concerned in light of recent announcements.

The response from both government and the unions to the Amplats announcement was of course noticeable shock and horror. Amplats is not SAA. There is no seemingly bottomless pit of money to help the business out when times are tough. There are real shareholders making real life economic decisions. Either it is these four shafts, or all the mines go in a while if the prevailing economic conditions exist. Government could lend a helping hand by strong arming Eskom to offer cheaper electricity prices to marginal mines. With all due respect, Minister Shabangu probably has little real world experience on the business of business. The economic realities are that the mines are losing money. Yes, the idea that mining companies are "making billions" is false. Amplats are going to report a loss for the year. A rather big one at that too, perhaps the parties that are outraged by the shaft closures and job losses failed to see the announcement only a day prior to this one. Oh, and all these businesses pay substantial and hefty tax bills, which contribute to the rather pleasing on the eye lifestyles, talking about large sums of money.

The operational review at Amplats happened sooner than most folks expected, later than originally telegraphed. And you can find all of it right here -> Anglo American Platinum takes action to create a sustainable, competitive and profitable platinum business. It is a tough read, because the economic realities are laid out. Four shafts in the Rustenburg region are to be put on care and maintenance, Khuseleka 1 and 2 and Khomanani 1 and 2. Production will therefore be ratcheted back by as much as 400 thousand ounces per annum. The new annual production target is 2.1 to 2.3 million ounces per annum. This is more realistic I suspect and away from the production at all costs.