ANGLO American Platinum (Amplats), the world's largest platinum producer, warned yesterday of a big drop in headline earnings per share because of lower sales and prices during the first half of the year.

The South African platinum sector is under pressure from rising costs and a stagnant rand price for platinum group metals. Operational issues have also fed into the sector's difficulties.

Aquarius Platinum has been one of the highest-profile casualties, suspending two mines - Marikana, which it shares with Amplats - and its wholly owned Everest South.

Amplats has said it is reviewing its assets to restore profit. The company is widely expected to suspend other joint ventures or mothball unprofitable shafts.

The miner, headed by Neville Nicolau and 80% owned by Anglo American, said its interim headline earnings per share would be between R2,70 and R2,80, down from R12,63 a year earlier.

"The expected decrease in Heps (headline earnings per share) is primarily due to lower sales and lower realised prices during the first half of 2012," the company said yesterday.

"Platinum sales volumes . were lower primarily due to the delayed restart of the converter plant post its annual maintenance," it said. "Heps for the period has also been adversely affected by higher than expected industry cost inflation, particularly for labour, diesel and electricity."

Headline earnings strip out exceptional items.

Basic earnings per share would come in between R1,75 and R1,85, compared to R12,73 before.

Amplats said its basic earnings would reflect a R256m loss after it revalued its stake in Wesizwe Platinum, where development costs have risen to R12bn from R8bn.

Amplats is recording a one-off charge of R388m related to the write-down of its unviable Tumela 4 shaft. It is posting another accounting charge of R505m due to the suspension of Marikana.

Citigroup has said Amplats should close its Khuseleka, Thembelani and Khomanani mines as well as the Kroondal mine shared with Aquarius.

Stanlib's Kobus Nell has said Amplats may announce part of its restructuring plans at its results presentation next week.

Amplats has said the review will be completed by the end of this year.

"We believe that Anglo Platinum has limited operational flexibility due to its requirement to maintain production at (unprofitable) Rustenburg Merensky shafts due to processing requirements," Barclays Capital said.

Platinum miners dilute chrome-rich UG2 ore with ore from the Merensky reef. Chrome is damaging to smelters.

Barclays said Amplats had limited short-term opportunity to cut output and it expected platinum metals to remain in surplus.

seccombea@bdfm.co.za