Anglo American Platinum acting CEO Bongani Nqwababa speaks at the presentation of the company's results in Johannesburg yesterday. Picture: MARTIN RHODES

THE platinum market will take years to recover and Anglo American Platinum, the largest miner of the metal, is curtailing production to accommodate weak demand and low prices, says its interim CEO, Bongani Nqwababa.

Amplats suspended its dividend payment for its interim period to end-June as net debt more than doubled to R9,54bn.

The company, 80% owned by Anglo American, lowered its full-year platinum production target by 100000oz due to market conditions. It is now forecasting 2,4-million to 2,5-million ounces of platinum output, from an earlier target of 2,5-million to 2,6-million ounces.

Amplats is conducting a year-long review of its business to restore profit margins and figure out how its mines and plants will operate in a low-price environment. The results will be released at the end of the year.

Delivering the company's financial results, Mr Nqwababa, who relinquishes the CEO position in September when Kumba Iron Ore CEO Chris Griffith takes up the role, said yesterday: "It's clearly a bloodbath, as you can see."

Net sales revenue fell 22% year on year to R19,4bn and headline earnings, which strip out one-off items, dropped 78% to R713m.

Operating cash flow turned negative. A year ago it was a positive R4,7bn compared with this year's outflow of R2,6bn. Net debt grew 119% to R9,5bn.

Neville Nicolau quit as Amplats CEO last Thursday.

Amplats expects the platinum market to weaken for two or three more years with economies in Europe, which uses a third of the world's platinum to make autocatalysts in diesel vehicles, not forecast to recover any time soon, Mr Nqwababa said.

For this reason, the market should factor in Amplats maintaining production towards the upper end of the 2,4-million -2,5-million-ounce range for two or three years, he said.

The market has a surplus of about 500000oz of platinum.

Amplats is reviewing five areas of its business, including its marketing and commercial agreements, projects, operations, organisational structure, overheads and its portfolio of assets.

"At current PGM (platinum group metal) prices, Anglo Platinum's cash margins do not appear to be sustainable unless higher-cost operations or shafts are suspended," BMO Capital Markets said in a note.

One of the first casualties in the review was the suspension of the Marikana mine that Amplats shared with Aquarius Platinum. Talks are under way with Aquarius about their shared Kroondal mine.

Asked what would happen if Aquarius did not want to suspend one of its two remaining operating mines, Mr Nqwababa said: "The numbers are my friend. If the numbers clearly indicate that we are making losses and our debt is increasing, there would be no reason to keep the operation open."

Currently, 60% of Amplats' own operations are carrying costs in line with the first half of the global platinum mining cost curve. The intention was to try to bring as many of its other mines into that space, which would mean other companies would have to cut production before it would have to, he said.

Its six joint ventures, excluding the BRPM project with Royal Bafokeng Platinum, were in the top half of that curve and these were coming under careful scrutiny, he said.

"The primary objective is to remove unprofitable ounces from the market and to deliver value to shareholders and stakeholders throughout the economic cycle," Mr Nqwababa said.

"We will not be producing sustainably loss-making ounces and delivering them into a surplus market.

"We are investigating all options in the short, medium and long term, including, can the operations be improved, fixed or moved down the cost curve by improving performance and taking costs out, or are the operations better off not being part of our critical base portfolio? All options are on the table."

In February, Amplats cut its capital expenditure target for the year by R1bn to R8bn. It has trimmed it by a further R700m to R7,3bn.

"We will also continue to focus on asset optimisation and supply chain management as well as increasing production from lower-cost mines like Mogalakwena," the company's financial report said.

seccombea@bdfm.co.za