Amplats woeful performance

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.


At the end of the 2002 financial year the plans were to expand production to 3.5 million ounces by the end of 2006. And the company was on track. Dollar cash operating costs back then (2002), per platinum ounce were 3,599 ZAR. Cash operating costs are up four and a half fold over a period of a single decade. Wow. That is nothing short of incredible. Incredibly bad for the shareholders. In 2011 those cash costs per ounce were 13,522 ZAR per ounce, in 2010 that number was 11,730 ZAR per ounce. So the number has not exactly been creeping up, it has been barrelling up.


In 2002, according to the annual report of Amplats, the average number of mine employees was 34527, down from a high of 38238 in the year 2000. Y2K and all that, remember what was compliant and what was not? We even had an extra day at the beginning of the year 2000 to deal with the roll over. At that stage, according to the Amplats 2002 Annual report, "total mine employee productivity" was 11 metres squared per employee, per month.

Fast forward to 2012, a tough year by all accounts, for the company. What are those same comparable numbers? Well, according to the 2012 annual report, productivity measured in square metres was 6.05. However, the average number of employees in service number 48,235, a significant jump from the 2002 year. The number of contractors however were reduced significantly between 2008 (24 and a half thousand) to 2012, where there are only 6800 left, and the plans are to let more go. Perhaps it was a case of employing too many people in anticipation of ramping up production and that never quite reached the heights envisaged, part because of the crisis of 2008, part I guess due to the recent motor vehicle demand slump in Europe. And part because of the rising costs.


Something needs to be done. And nobody is willing to give an inch, although business needs to be practical about the business as a whole. I was told by a business journalist yesterday that NUM is of the opinion that if the company cannot run the mines, i.e. wants to mothball them, then the government must take that over and run it. Now excuse me for being a cynic, but I asked her, well, what about SAA, Telkom, Eskom and so on. But I guess the idea for the unions of formal government employment, that is much better for the unions. Gee, it seems that this road has a long and winding journey ahead for all that have to follow it. We continue to avoid these stocks as investments.