Good day, ladies and gentlemen, and welcome to Valterra Platinum's media call. All participants will be in listen-only mode. There will be an opportunity to ask questions when prompted. For the benefit of other participants who have joined by the HTTP phone, please ensure that you give your microphone permission to make yourself audible before accessing the question queue. If you should need assistance during the call, please signal an operator by pressing star and then zero. Please note that this conference call is being recorded. I'd now like to hand the conference over to the CEO, Natascha Viljoen . Please go ahead, ma'am.
Thank you so much. Good morning, ladies and gentlemen. Thank you for joining this Valterra Platinum briefing call at such a short notice. I'm joined here today by Craig Miller, our Finance Director. You would have seen the same announcement that we've released this morning, that we have made the preemptive decision to close the ACPB unit following a series of water leaks. We have been indicating through the year, and again in our Q3 production report on the 22nd of October, that the ACPB has been fragile since startup early in the year. We have increased the monitoring and controls around our ACPB unit to be able to continually assess the condition of the converter plant. It has served us well to this point in discovering water leaks, helping us to shut down the furnace safely and bring it back up safely.
Our primary concern has always been for the safety of our employees, as well as ensuring the safe operating environment and protecting the integrity of our plant and surrounding assets. However, given the increase in the number of leaks and further repair work required at this stage to repair the latest series of leaks on our Phase B unit, we took the decision to close Phase B unit at this stage. The ACP management team has really done an extraordinary piece of work to keep Phase B operating safely over the past number of months. Now the focus can solely be on finalizing the construction of ACP Phase A and the commissioning, and that is very well on track to start up towards the end of this year. They have managed to pull this forward from Q2 next year into this year.
This is also part of a broader asset integrity strategy that we have rolled out across our business. In line with this, our Phase B unit will now undergo a full rebuild in 2021. We will do it in a way to mitigate the risk that we have only Phase A up and running. There are portions of Phase B that are of higher risk than others, and we will schedule it in a way to allow us to target the high-risk areas first and then the low-risk areas. That will allow us that, if necessary, we will have a backup. Also, probably just important to note that all our long lead items for the rebuild of ACP Phase B is already on site. That brings us then to the impact for the remainder of the year.
From a refined production perspective, as of the end of October, the company has refined 2.4 million PGM ounces. The closure of ACP B units until ACP A 5A unit is recommissioned will result in an increase in our work-in-process inventory. This will be released the moment we get ACP A up and running. We've made significant progress, as I mentioned, in our 5A units, and it remains on track to commission it before the end of the year. As a result of the closure of ACP 5B unit, we've lowered both our refined and production guidance. Sorry, refined production and sales guidance for 2020 to circa 2.5 million PGM ounces. Previously this was 3.1 million and 3.3 million PGM ounces. There's no change to our other guidance as the rest of the operations are running well. In-situ production remains between 3.6 million and 3.8 million PGM ounces.
We do have contingency plans in place, and we will be engaging with our customers to minimize any disruption to contractual obligations. We can now take questions.
Thank you very much, ma'am. Ladies and gentlemen at this time we open the line for question. You are welcome to press star and then one touchtone keypad on your screen. At each time you will hear confirmation tone. Following this this process [inaudible] question queue. If you decide [inaudible] in the question queue then press star then two. The first question comes from Allan Seccombe of Business Day.
Hi, and hello, everyone. Hi, Natascha. A number of questions. I notice that there's no force majeure declared now. Is there a reason for that?
Allan, we will continue to manage our obligations within our contractual agreements. I think we are encouraging our customers to ensure that we can do that.
Okay. Does Amplats have enough metal or can it source enough metal on the market to meet those contractual obligations until ACP Phase A is up and running?
We are certainly working with our customers, Allan, to make sure that we can comply to obligations and meet their needs.
Okay.
Sorry, just to complement that, as Natascha said, that there are contingency plans being put in place in order to mitigate any impact to them.
Okay. Would this be a purchase of metal off the market to meet those contractual obligations?
Allan, that's all work in progress at the moment. Between conversations with our customers and sourcing metal, we also have metal in the pipeline on the other side of ACP that we will be maximizing as much as possible.
Okay. Two questions following that. The cost of the rebuild of ACPB in 2021, and then what is being spent on ACPA up to this point?
Allan, on ACPA, you'll recall that our guidance was between ZAR 500 million and ZAR 600 million. We're still operating within that capital range. That's still underway. Clearly, obviously, with regards to ACPB and the rebuild, we'll provide you updated guidance on that. I can't, off the top of my head, just remember the numbers, but it is something that we're working through at the moment, so we'll come back to you.
Okay. Craig, why don't I bring you on this one? The cost of this lost production, of the lost refined production for the year, have you got a number for us that we can use?
Yes, Allan. At current spot prices, the impact of EBITDA in 2020 as a consequence of this, is ZAR between 5 billion and ZAR 6 billion . I think that's important just to point out that this is impacting 2020, and this inventory is clearly in our work-in-progress pipeline. As we unwind that work-in-progress pipeline, those earnings will come through. We anticipate the pipeline to unwind over the next 18 months or so, taking us into 2022, given the disruption now and the ongoing performance of the asset from an M&C perspective.
Okay. Just so I understand. The EBITDA impact for 2020 is between ZAR 5 billion and ZAR 6 billion, but this will be unwound over the next 18 months as stockpiles are worked through, right?
That's correct. Exactly.
Yeah. It's a timing rather than a loss.
Yeah, sure. Okay. Thank you.
Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, you're welcome to press star and then one. We have a question from David McKay of Miningmx.
Hi. Morning. Can you hear me?
Hi, David. Yes, we can.
Good. Okay. Just wanted to confirm that EBITDA hit. Was that a function of this latest event now? Are you not referring to all of the events that occurred this year?
That's correct, David. It's just related to the revision that we're making now to our refined and sales guidance, taking us from between 2.1-2.3 down to 2.5 million PGM ounces.
Got it. Okay. All righty. Then Craig, this is probably one for you. Just would this event at all change the board's thoughts, perhaps, maybe you can say, regarding the full-year dividend payment?
David, as you know, we do have a discipline, capital allocation approach. We will assess the dividend as we always do at each reporting period. We will start working on that towards the end of the year and in preparation for our results releases in February. I think it is just worth pointing out, just from a liquidity perspective, we have about ZAR 28 billion of cash available at the end of October and ZAR 25 and a half billion of committed facilities. From a liquidity perspective, we are in a good shape.
Thanks. Thanks very much, Craig.
David, does that conclude your questions?
It does. Thank you.
Thank you very much. The next question comes from Felix Njini of Bloomberg News.
Yeah. Hi. Good morning. Just to clarify, what's the platinum palladium split on the revised guidance? If you don't mind, just reminding us again, when is Phase A expected to come back on stream? You said later this year. Do you have an exact date?
Felix, as mentioned earlier, we've pulled it forward basically by close to four months from next year, well, even a little bit more. We are in the last bit of construction and we'll start commissioning. I'm happy to commit that it will be before the end of this year.
Felix, then to your other question, the anticipated platinum production is above 1.1 million ounces. Refined production is about 1.1 million ounces, and palladium production above 0.8 million ounces.
Okay. That's fine. Thank you.
Ladies and gentlemen, just a final reminder. If you'd like to ask a question, you're welcome to press star and then one. We have a follow-up question from Allan Seccombe of Business Day.
Sorry. Before I get to my question, Craig, sorry. I missed those numbers that you told Felix. What are the reductions in platinum, palladium, and rhodium, please?
Okay. They're not the reductions, they're the revised. In determining the revised 2.5 million PGM ounces of refined production for the year, that will comprise of about 1.1 million platinum ounces and about 800,000 palladium ounces.
Do you have a rhodium number on that?
No.
Sorry, I haven't had time to go through this properly, but so since March, the revised downward forecast of refined metal, how does this compare to what you guys were saying in March? I just need to understand, is this the entire disruption to the year, including the March force majeure and so on?
No. Just to recall, when we came, in March, our original guidance was between 4.3 and 4.7 million PGM ounces for the year. Clearly then we had the ACP incident and we revised the refined production guidance down by about 900,000 PGM ounces. Clearly then today is taking that down by a further sort of circa sort of 600,000 or 700,000 ounces to get to your 2.5 million ounces. The cumulative impact is between sort of 1.5 and 1.6 million ounces as a consequence of the ACP incident. The delta of that between the 4.2-4.7 and the 2.5 is obviously clearly the impact of COVID, where we've had lower throughput of M&C, which we recall back in April.
Fair enough. I'm not sure if you guys can answer this, but what is the impact on the overall PGM market with this much metal coming out of it?
I think, Allan, it's a tricky one to try and gauge between the impact of COVID, the uncertainty in Europe, and U.S. elections. If I had a crystal ball, I would venture a view on that.
You don't have one to hand, eh?
Oh my goodness. If I had one, I wouldn't be sitting here chat.
Natascha, is there a plan B for ACP Phase A when it comes into production at the end of this year, by the end of this year? What happens if there's problems with that as well? Are you completely confident that the rebuild is of such a quality that you're not gonna have to disrupt refined production again?
Allan, we are very measured in our approach on B. What we're going to do with B, we're not going to demolish it as a whole. Our more fragile areas are in the cooling area of the furnace, whilst the hearth has got a higher level of integrity. We're going to start our rebuild in the areas where we've got the biggest risk in the cooling zone, in the free board and offside areas. We'll leave the hearth intact. When we've done that, we will then convert and demolish the hearth and rebuild the hearth. In that phased approach, mitigating the risk that we won't take it off all at once. We have put quite a bit of focus on A to make sure that we protect the integrity of A. That's also why we're working towards the end of the year to get it up and running.
We've built in a number of the systems and the learnings that we've had from B so far into A, and we'll continue to build on the integrity of that furnace. I think probably also important just to note broader from a systemic point of view, reviewed the broader structures and asset integrity systems to continue to build our asset integrity confidence across the business.
Thank you, Natascha. Thanks, Craig. That's all.
Thank you. The next question comes from Sibongile Khumalo of Media24.
Good morning. This is probably just a weird question. With both our Phase A and B being out, are ways of processing taking place since Natascha mentioned that the company has not declared a force majeure? I was wondering where is the processing taking place right now?
Okay. All right. Thank you, Sibongile. Good morning. Sibongile, our pipeline has stopped. Obviously, up to the point that we've stopped ACP Phase B now, we have had metal that was going through the pipeline, so we'll continue to process that and empty the pipeline. We will fill the pipeline the moment Phase A is up and running. No other processing will be taking place the moment the pipeline's empty. We are still processing whatever metal is in the pipeline.
Okay. Thank you.
Sorry. Perhaps I can just add. Sibongile, I don't know if it would be helpful if we consider the value chain. We're very aware that ACP is the bottleneck, where we bring all of the metal together in our value chain for the first time. From there on, it goes to base metal refinery and precious metal refinery. That pipeline, we've continued. Obviously, the metal was flowing through from ACP into the base metal and precious metal refinery. That's the portion that will continue until all of that metal is processed.
Okay. Thank you.
Thank you. Ladies and gentlemen, just one further final reminder. If you have further questions, you're welcome to press star and then one. We have a follow-up question from Allan Seccombe of Business Day.
Geez, you guys must just love the sound of my voice by now. Craig, the cumulative reduction in refined production for the year, is it fair to say that that's going to be released over that 18-month period that you mentioned earlier?
Yes, Allan. That's the expectation.
Okay
That this will build up this, call it, say, 1.2 million PGM ounces, we will release over the next 18 months, into around about mid-2022.
Wow. Into mid-2022. Okay. That's brilliant. Thank you so much.
That was the final question. Do you have any closing comments?
Thank you so much. Sure. Again, just from our side, thank you for making yourself available at such short notice. Again, just wanting to reemphasize that I think it's really important for us to have run this asset safely. We've definitely had a very competent team, who's also fairly new with us, who looked after this and made sure that we could mitigate through the c oncerns on integrity in this furnace and keep it up and running for as long as they did. We did get to a point that I just cannot guarantee that we can run it safely. The impact of getting it wrong doesn't only have a safety implication but could also impact further infrastructure around this furnace and have a further impact that I don't think we need to manage. It's one of those times that a short-term decision could have a long-term impact.
Very confident that this is the right decision. Also, very pleased that we've been able to pull back ACP quite significantly. The focus now, with the team and with operational and the project team, is to get ACP up and running, get it stable, and with a high level of integrity so that we can run through this working process that we've built up over the last year. Thank you.
Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your line.