Rebuilding the credibility of public companies and their respective management teams has been a big theme of the Investing in Africa Mining Indaba 2016 thus far. There seems to be widespread recognition that the “growth at any cost” mantra of the last decade has been an unmitigated disaster from the perspective of shareholders’ wallets. That together with the sober realisation that the commodity market is not going to turn anytime soon, has put a laser-like focus on the returns being generated in the industry.
But it seems for Anglo American Platinum (Amplats) that realisation has come quicker than most. The company now appears to be past the point of having to take any more painful medicine following the announcement of results for the financial year ending December 2015. “At current prices, all of our operations are cash flow positive – with the exception of Pandora,” said CEO Chris Griffiths.
It was largely commodity prices that dictated the mammoth R14bn impairment of assets at year end, as was previously disclosed. But the company announced two other developments with regards to cleaning up its portfolio: the decision to place Twickenham mine on care and maintenance, and the decision to sell Amplats’ share of Kroondal.
While the company has halted investment in all new growth projects, its business continuity capex has not been affected. The portfolio rebalancing – which will ultimately see the Rustenburg assets transferred to Sibanye by year-end – and has also included the streamlining of operations, resulted in unit cash costs for retained assets falling 1.3% to R18 145 per PGM ounce. Capital expenditure has been trimmed, and is expected to be between R3.7bn and R4.2bn in 2016. So this is a company that has been primed to now begin pumping cash.
This should further reduce net debt, which fell from R14.6bn to R12.8bn during the course of the year. Post-impairment, investors would really like to see some healthy returns on invested capital, and Amplats appears able to do this.
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