Anglo American Platinum issued a SENS announcement on 6 March 2020 regarding the temporary closure of the Anglo Converter Plant (ACP) and the declaration of force majeure to secure a safe operating environment. Anglo American Platinum has since started the repair process and has been in discussions with third parties from which it purchases concentrate and for which it toll-treats 4E material and agreed in principle revised terms for the duration of the force majeure period. Anglo American Platinum does not foresee any customer agreements being terminated as a result of this disruption.
The force majeure period is defined as starting on 6 March 2020 and remains ongoing for the time it takes to repair ACP Phase B which is expected to be approximately 80 days, ending around 25 May 2020.
ACP repair process and capital expenditure update
The total repair time, including the time to procure all necessary spares and equipment, is estimated at 80 days. The repair team is on site executing the work, and a full investigation is under way to understand the cause and nature of the water ingress into the furnace. The majority of the replacement equipment (i.e. waffle coolers) can either be obtained from the undamaged waffle coolers in the Phase A unit or spares available in inventory. All procurement of additional equipment is from within South Africa, so no supply chain disruptions are anticipated.
A project team is also in place to execute the repairs to Phase A, and orders for the long lead items have been placed. It is still estimated that repairs will be complete by Q2 2021.
The estimated capital expenditure for replacement equipment and repair of ACP Phase B is R150 to R200 million, which will be incurred in 2020, while the estimated capital expenditure to rebuild Phase A will be R500 to R600 million, of which R100 million is expected to be incurred in 2021. These are incremental capital expenditure amounts to full year guidance previously provided but exclude any potential insurance proceeds.
As a result of the activities under way at the ACP, the Company is reviewing its capital plans for 2020 and will provide a further update of the full year capex guidance in due course.
Force majeure agreement with Sibanye-Stillwater
Anglo American Platinum has agreed in principle revised processing agreements with Sibanye-Stillwater at the different operations including:
- Toll-treatment of 4E material from Rustenburg:
PGM concentrate from Rustenburg that is processed at Anglo American Platinum’s processing facilities will continue to be smelted by Anglo American Platinum and will continue to receive a smelting fee. For the period of the force majeure, smelter matte will be returned to Sibanye-Stillwater for further treatment and refining.
- Kroondal pool and share agreement (PSA classified as 50% purchase of concentrate and 50% JV mined production)
The Kroondal joint venture operations operate under a PSA agreement, whereby Anglo American Platinum purchases 100% of the concentrate, with 50% accounted as own-mine production and 50% as purchase of concentrate from the Kroondal PSA.
50% of the concentrate produced by the Kroondal PSA will be sold to and processed by Sibanye-Stillwater for the duration of the force majeure period under the same terms as the pre-existing purchase of concentrate terms with Anglo American Platinum. Sibanye-Stillwater will market and sell the material.
The remaining 50% of concentrate produced will continue to be purchased by Anglo American Platinum and smelted at one of the Company’s smelter complexes. Together with Sibanye-Stillwater, we have established revised payment terms which allow for delays in payment during the force majeure period.
- Platinum Mile (classified as third party purchase of concentrate)
Platinum Mile concentrate will be sold to and processed by Sibanye-Stillwater, who will take ownership of the material for the duration of the force majeure period under the same terms as the pre-existing purchase of concentrate agreement with Anglo American Platinum. Sibanye-Stillwater will market and sell the material. In 2019, Platinum Mile produced 23,600 PGM ounces.
These revised terms will only be applicable during the force majeure period, which is the period it takes to repair ACP Phase B.
Force majeure to purchase of concentrate suppliers
Anglo American Platinum purchases concentrate from Royal Bafokeng Platinum Limited (“RBPlats”), the independently managed Modikwa joint-venture (“Modikwa JV”), Siyanda Resources (“Siyanda”) and small volumes from other third parties. The Company can confirm that it has engaged with all parties and agreed in principle temporarily revised terms which will allow concentrate to continue to be delivered to the Company’s smelters during the force majeure period. Anglo American Platinum will continue to smelt concentrate received at all its four smelter complexes. Together with our partners RBPlats, the Modikwa JV and Siyanda, we have established temporarily revised payment terms which allow for delays in payment during the force majeure period.
Force majeure to customers
Anglo American Platinum continues to work with its customers, within the provisions of the force majeure clauses in their agreements, to minimise the impacts of the disruption. The force majeure protections are such that the Company does not foresee any agreements being terminated as a result of this disruption, including the customer prepayment which remains in place.
Guidance for 2020
Initial estimates of the impact on refined production guidance have not changed, and are reiterated below (which excludes toll treated material):
| Guidance |
M&C Production |
Refined Production |
| (‘000 ounces) |
Previous FY2020
M&C production guidance |
New H1 2020
Refined production guidance |
Revised FY2020
Refined production guidance |
Previous FY2020
Refined production guidance |
| Platinum |
2,000 – 2,200 |
400 – 450 |
1,500 – 1,700 |
2,000 – 2,200 |
| Palladium |
c.1,400 |
300 – 350 |
1,100 – 1,200 |
1,400 – 1,500 |
| Rhodium |
-- |
65 – 75 |
250 – 350 |
-- |
Total PGMs
(5E + gold) |
4,200 – 4,600 |
850 – 1,050 |
3,300 – 3,800 |
4,200 – 4,700 |
As a result of the changes in the agreements with third parties, in particular the sale of concentrate from Platinum Mile and 50% of the Kroondal PSA to Sibanye-Stillwater, and not due to production reductions, we revise our production guidance (metal in concentrate basis) to be at the lower end of previously provided guidance of between 4.2 - 4.6 million PGM ounces, and we maintain our revised refined production of 3.3 - 3.8 million PGM ounces.
Unit cost of production guidance remains between R10,600 - R11,000 per PGM ounce.
Forward-looking statements
Certain statements made in this announcement constitute forward-looking statements. Forward-looking statements are typically identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “intends”, “estimates”, “plans”, “assumes” or “anticipates” or the negative thereof, or other variations thereon, or comparable terminology, or by discussions of, for example, future production, present or future events, or strategy that involves risks and uncertainties. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’s control and all of which are based on the Company’s current beliefs and expectations about future events. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual production and performance to differ materially from any expected future production or performance, expressed or implied, by the forward-looking statement. The forward-looking statements contained in this report speak only as of the date of this report and the Company undertakes no duty to update any of them and will not necessarily do so, in light of new information or future events, except to the extent required by applicable law or regulation.