OREANDA-NEWS.    Anglo American Platinum Limited (‘Anglo American Platinum’ or ‘the Company’) reported results for the six months ended 30 June 2014 showing reduced profitability as a result of the prolonged industrial action, though partially mitigated by the sale of inventory during the period. Headline earnings decreased to R157 million compared to R1.3 billion in 2013; profit attributable to shareholders was R429 million or R1.64 per share; and headline earnings was R0.60 per share.

The first half of 2014 was characterised by an unprecedented five month strike, which impacted on production and, therefore, profitability. Net sales revenue of R27.8 billion was 15% higher than the R24.1 billion in 2013, due primarily to the impact of the weakening of the rand / US dollar exchange rate and a marginal improvement in the US dollar basket price. Refined platinum sales for the period marginally declined to 1.04 million ounces. This was achieved despite 440,000 ounces of equivalent refined production lost during the industrial action and subsequent ramp up, as sales were supplemented with a draw down in stock of approximately 300 koz. As part of the ongoing strategy to extract value from our marketing business, the commissions paid on sales reduced to R10 million in the first half of 2014, compared to the R181 million paid in the same period in 2013.

Equivalent refined platinum production (equivalent ounces are mined ounces expressed as refined ounces) from the mines managed by the Company and its joint venture partners for the first half of 2014 at 715 koz, was 39% lower. This impact was mainly a result of the industrial action, but also from the consolidation of certain mines (at Union and Rustenburg) in 2013.

In spite of the challenges of such a prolonged strike, Mogalakwena mine, Unki mine and Twickenham (a mine in development) continued to operate throughout the period. Mogalakwena achieved a record performance, increasing production by 20.4 koz to 184.8 koz ounces, a 12% increase, as a result of higher achieved 4E built-up head grade and increased concentrator throughput, supported by improved mining performance.

Equivalent refined production in the second half of 2014 will be impacted by the post-strike ramp-up process which is estimated to return to steady state by Q4 2014. The Company has working inventory levels that are currently lower than normal operating levels and will necessitate a re-stocking as production resumes and returns to normal. As a result, the Company has revised both refined production and sales guidance to between 2.0 and 2.1 million platinum ounces from the 2.1 million ounces previously guided.

Chris Griffith, CEO of Anglo American Platinum, said: “The dominant feature of the first half was the strike during which 40% of our production was not in operation. However, we were able to ensure security of supply to our customers throughout the period, and those operations unaffected by the strike showed stable and improved performances. Since the end of the strike, we have been working to ensure a safe return to work and rebuilding relationships with our employees and the ramp-up process is proceeding well.”

Finally, we remain committed to our safety target of zero harm. However, we must report the death of Mr Willie Smit who was fatally injured at Waterval Smelter on 9 April 2014. Our sincere condolences go to the family, friends and colleagues of Mr Smit.”

The global platinum market is expected to remain in deficit in the short and medium term as steady demand growth exceeds growth in primary and secondary supply. The impact on supply from the industrial action in 2012, the introduction of platinum Exchange Traded Funds in 2013 and the most recent industrial action in 2014 has resulted in a significant reduction of above-ground Platinum stocks. Palladium demand is expected to increase in 2014 while the Rhodium market is expected to remain balanced.

With the restructuring process announced in 2013 now largely complete, the next stage of the transition of the Company is the repositioning of the portfolio. Anglo American Platinum has a number of high quality assets, however both management time and capital are finite. Therefore the decision has been made to reposition the portfolio to focus on our assets that can deliver higher margins, lower costs and improved return on capital.

The intention to exit Union mine and concentrators has already been announced, and it has now been concluded that Rustenburg and our Pandora JV asset will be better placed in the hands of new owners who would be able to provide the focus and capital for the operations to have a successful future. The Company therefore plans to divest these assets in the most appropriate manner, and prioritise its capital spend and focus on Mogalakwena, Unki, Twickenham, Amandelbult and the JV assets – Mototolo, Modikwa, Kroondal and BRPM. We are assessing our Bokoni JV asset and will make a further announcement on this in due course

Chris Griffith, CEO, added: “The delivery of our strategy will allow us to focus capital efficiently on the repositioned portfolio, achieving a more profitable, sustainable company for the future. We will continue to work closely with all key stakeholders to ensure optimal outcomes for the assets, employees and the South African platinum industry as a whole.”