Investor Update

Nov 5, 2020

Press Release

Good day, ladies and gentlemen, and welcome to Anglo American 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 all the participants who have joined by the HD Web Phone, please ensure that you give your microphone permission to make yourself audible before accessing the question queue. Please note that this conference call is being recorded. I'd now like to hand the conference over to the CEO, Natasha Volhoun. Please go ahead, ma'am. Thank you so much, and good morning, ladies and gentlemen, and thank you for joining this Anglo American 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 ICPB units following a series of water leaks. We have been indicating through the year and again in our Q3 production report on the October 22 that the ICPB has been fragile since start up early in the year. We have increased the monitoring controls and controls around our ICP5B unit to be able to continually state the condition of the converted plant, and 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 light series of leaks on our Phase B Unit, we took the decision to close Phase B Unit at this stage. The ITB management team has really done an extraordinary piece of work to keep Phase B operating safely over the over the past number of months. And now the focus can solely be on finalizing the construction of ACPA and the commissioning, and that is very well on track to start up towards the end of this year. And they have managed to pull this forward from Q2 next year into this year. So this is also part of a broader asset integrity strategy that we have rolled out across our business. And in line with this, our five 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 is 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 ICP B is already on-site. So that brings us then to the impact for the remainder of the year. So from a refined production perspective, as of the October, the company has refined 2,400,000 PGM ounces. The closure of ITP B units until ITP Phase units is recommissioned will result in an increase in our working process inventory, and this will be released the moment we get ICP A up and running. We've made significant progress, as I mentioned, in our 5A units, and it remains on track to commission as before the end of the year. As a result of the closure of ACP 5B units, we've lowered both our refined and production guidance sorry, refined production and sales guidance for 2020 to circa 2,500,000 PGM ounces. And previously, this was three point one million and three point three million PGM ounces. There's no change to our other guidance as the rest of the operations are running well. So M and C production remain between three point six million and three point eight 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, Call. The first question comes from Alan Sikhin of Business Day. Hi, hello everyone. Hi, Natasha. A number of questions. I noticed that there's no force majeure declared now. Is there a reason for that? Alan, we will continue to manage our obligations within our contractual agreements. And I think we are encouraging our customers to ensure that we can do that. Okay. So does Amplat have enough metal or cannot source enough metal on the market to meet those contractual obligations until ACPA is up and running? We are certainly working with our customers, Alan, to make sure that we can comply to obligations and meet their needs. Okay. Sorry, I mean, just to complement that, as Natasha 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 of the markets to meet those contractual obligations? I think that's all working process or 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 ICT that we will be maximizing as much as possible. Then the two questions following that. The cost of the rebuild of ACP B in 2021, I mean, what is being spent on ACP A up to this point? Alan, on ACPA, you recall that our guidance was between million and ZAR600 million. We're still operating within that capital range. And so that's still underway. Clearly, obviously, with regards to ACP, the rebuild, we'll provide you updated guidance on that. I can't put up my head. Just remember the numbers, but it is something that we're working through at the moment. We'll come back to Craig, while I've got 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? Alan. So current spot prices, the impact of EBITDA in 2020 as a consequence of this is between billion and ZAR6 billion. So 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. And so as we unwind that work in progress pipeline, those earnings will come through. And we anticipate the pipeline to unwind over the next eighteen months or so, to taking us into 2022 and given the disruption now and the ongoing performance of the asset from an M and T perspective. Okay. Just so I understand, so the EBITDA impact for 2020 is between ZAR5 billion and ZAR6 billion, but this will be unwound over the next eighteen months as stockpiles are work through, right? That's correct. Exactly. So it's not a a timing it's a timing rather than a loss. Yeah. Sure. Okay. Thank you. Thank you. We have a question from David McKay of Mining Good 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. So it's just related to the revision that we're making now to our refined and sales guidance, taking us from between 2,100,000.0, 2,300,000.0 down to 2,500,000.0 pg in ounces. Got it. Okay. All righty. And then Craig, just this is probably one for you. Just would this event at all change your the Board's thoughts perhaps maybe you can say regarding the dividend full year dividend payment? David, as you know, we do have a capital discipline capital allocation approach. We will affect the dividend as we always do at each reporting period. And so we'll start working on that towards the end of the year and in preparation for our results releases in February. I think it's just worth pointing out, just from a liquidity perspective, we have about billion of cash available at the October and ZAR25.5 billion of committed facilities. So from a liquidity perspective, we're in good shape. Very much. David, does that conclude your question? It does. Thank you. Thank you very much. The next question comes from Felix Ngini of Bloomberg News. Yeah. Hi. Good morning. Just to clarify, what's the platinum palladium split on the revised guidance? And 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, so just I've mentioned earlier, we've pulled it forward by, I think, by close to four months from next year, well, even a little bit more. We are in the end, the last bit of construction, and we'll start commissioning. So I'm happy to commit that it will be before the end of this year. Felix, to your other question, and the anticipated platinum production is about 1,100,000 ounces, refined production is about 1,100,000 ounces and palladium production about 800,000 ounces. Okay, that's fine. Thank you. We have a follow-up question from Alan Sikhan of Business Day. Sorry, before I get to my question. Craig, sorry, missed the numbers that you told Felix. What are the reductions in platinum, palladium and rhodium, please? They're not the reductions. They're the revised. So in determining the revised 2,500,000 PGM ounces of refined production for the year, that will comprise of about 1,100,000 platinum ounces and about 800,000 palladium ounces. And do you have a rating number on that? No. Okay. Sorry, and 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, no, no. So just recall, so when we can so in March, when we our original guidance was between four point three million and four point seven million PGM ounces for the year. Then clearly, then we had the ATT incident and we revised the refined production guidance down by about 900,000 PGM ounces. And then clearly, then today, we're taking that down by further sort of six, seven hundred thousand ounces to get to your two two two and a half thousand ounces. So the cumulative impact is between sort of one point five and one point six million ounces as a consequence of the ATP incident. The delta of that between the 4.2 to sorry, 4.3 to 4.7 and the 2.5 is obviously clearly the impact of COVID, where we've had lower throughput of MNC, which you recall back in April. Fair enough. And 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? Think think, Alan, it's a it's a tricky one to try and and gauge between the impact of COVID, the uncertainty in Europe, and US Elections. So if I had a crystal ball, I would venture a a view on that. And and you don't have one to hand. Right? Oh my goodness. If I had one, I wouldn't want to be next year. And, Natasha, is is there a plan b for ACPA when it comes into production next year at the end of this year, by the end of this year? What happens if there's problems with that as well? Or are you completely confident that that the rebuild is of such a quality that you're not gonna have to disrupt refined production again? Yeah. Alan, we we are very measured in our price hunter on b. So what we're gonna do with b, we're not gonna demolish it as a whole. Our more fragile areas are in the cooling area of the furnace, whilst the half is more has got a high level of integrity. So we're gonna start our rebuild in the areas where we've got the biggest risk in the cool in the cooling design in and the freeboard and and off-site areas. We'll leave the heart intact. When we've done that, we will then convert we'll reconvert and and demolish the heart and rebuild the heart. So 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 I to make sure that we protect the integrity of I. That's also why we we're working towards the end of the year to 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 I, and we'll continue to reap both 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. It's been a pleasure. And thanks, Craig. The next question comes from Sibangiri Kamalu of Media24. This is probably just a weird question. So with both our phase A and B being out, where is the processing taking place? Since Natasha mentioned that the company has not declared a false renewal, I was wondering where is the processing taking place right now. Okay. All right. Thank you, Stephen. Good So doing really we so our pipeline has stopped. We obviously, up to the point that we stopped ICPB now, we have had metal that was going through the pipeline. So we will continue to process that and empty the pipeline. And then we will fill the pipeline at the moment A is up and running. So no other processing will be taking place the moment the pipeline is empty, but we are still processing whatever metal is in the pipeline. Okay. Thank you. Sorry, perhaps I can just add. So Stephen really I don't know if it would be helpful if we consider the value chain. We're very aware that ICP 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. And that pipeline, we've continued, obviously, the metal was flowing through from ICP into the base metal and precious metal refinery. And that's the portion that will continue until all of that metal is processed. Okay. Thank you. Thank you. We have a follow-up question from Alan Second of Business Day. Craig, cumulative reduction in refined production for the year, is it fair to say that that's going to be released over that eighteen month period that you mentioned earlier? Yes, Alisa. That's the expectation that this build up, let's call it, say, 1,200,000 PGM ounces, we will release over the next eighteen months into the next around about mid-twenty twenty two. Into mid twenty. Okay. Alright. That's brilliant. Thank you so much. That was the final question. Do you have any closing comments? Thank you so much. Again, just from our side, thank you for making yourself available at such a short notice. Again, just wanting to reemphasize that I think it's really important for us to have run this asset tightly. We've definitely had a very competent team who's also fairly new with us, who looked off to this and made sure that we could mitigate through the concerns on integrity in this furnace and keep it up and running for as long as as they did. But 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. So very confident that this is the right decision. Also very pleased that we've been able to pull back ICPI significantly. And the focus now with the team and with operational and the project team is to get ICPI up and running, get it stable and with enough with well, stable and with a high level of integrity so that we can run through this working process that we've pulled up over the last year. Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your line.