Business

Anglo-American platinum unit cuts production forecast

Anglo American's shares plummeted after production forecasts for the platinum miner fell following the closure of a key processing plant in South Africa.

Anglo American Platinum, 80% owned by the London listed miner, said it would not be able to honor customer contracts after the closure of its entire conversion plant in Rustenburg.

The shares of the group listed in London have recently fallen by almost 7% to 1,717 p. Earlier, they fell more than 9%, which would have put them on track for their biggest drop in a day in four years.

Amplats said it now plans to produce 1.5 to 1.7 million ounces of platinum this year, up from an earlier forecast of 2 to 2.2 million ounces and 1, 1 to 1.2 million ounces of palladium, compared to 1.4 million to 1.5 million.

The closure of the Anglo Converter plant could result in a further spike in the price of palladium, which is produced alongside platinum.

Palladium rose 3.3% to $ 2,615 an ounce, while platinum jumped 4.1% to $ 900 an ounce on Friday.

"Our first success analysis is that the group [profit before interest, taxes, depreciation and amortization] could decrease by 15%, before taking into account possible price increases due to the reduced offer", said Edward Sterck, analyst at BMO Capital. Markets.

"However, PGM prices far exceed our baseline forecast and it seems likely that production reductions of these magnitudes are likely to stimulate further positive price reactions."

Palladium hit a record above $ 2,800 an ounce earlier this year as automakers rushed to source metal, which is used to reduce harmful emissions from vehicles.

Prior to news on Friday, Amplats predicted a market deficit of 1.9 million ounces of palladium this year, saying automakers needed more metal in their catalytic converters to meet air pollution standards.

Amplats said unit A of its Anglo conversion plant in Rustenburg, 88 miles from Johannesburg, was damaged by a coal dust explosion in February. A backup unit was to take over, but water has recently been detected in its oven.

"This poses a high risk of explosion and the company has determined that it has no choice but to temporarily shut down the Phase B unit to ensure the safety of all employees and avoiding a catastrophic event, "said Amplats.

The company estimates that the repair work to repair the backup unit would take around 80 days and that it had to declare force majeure because it is unable to process the material during its repair.

The Amplitudes EBITDA doubled last year to $ 2 billion due to soaring palladium prices and accounted for about one-fifth of Anglo American's profits.

The company announced last month that its CEO Chris Griffith has resigned after more than seven years at the helm. He is replaced by Natascha Viljoe, head of the treatment group at Anglo American.

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