Looking at Anglo American Platinum’s (Amplats’s) interim results, you’d never have guessed that the past six months have been a roller-coaster ride marked by a pandemic, nationwide lockdowns and an economic meltdown.
In fact, Amplats’s own share price performance year to date belies what a volatile time it has had: the stock, at just over R1,400, is now about 5% up for the year.
In the throes of March’s vicious sell-off, however, Amplats shares thudded to a low of R442. If you were brave enough to wade in, you’d have made a gain of 217% since.
In the six months ended June 2020, the platinum producer delivered what it describes as "a solid financial performance" with revenue 28% higher at R55bn, though profit was 9% lower at R9.35bn. While the lockdown did hit production (down 25%) and sales (38% lower), soaring platinum group metals (PGMs) saved the day.
Palladium and rhodium prices both dropped in March (along with just about everything else in the market), but recovered to end the period higher year on year.
The average basket price of Amplats metals increased 56% in the six months ended June, while the rand basket price was 80% higher.
It means the company is cash flush enough to pay out an interim dividend of R2.8bn.
Amplats, a favourite among investors, says it performed well despite the pandemic. But could it, in fact, have been because of it?
After all, a few weeks of production losses from SA — which holds the bulk of the world’s PGM reserves — helped push metal prices skywards when stimulus-driven demand from China resumed.
And unprecedented stimulus efforts in the US strengthened the dollar, driving money out of emerging currencies like the rand.
Speaking to the FM, Amplats CEO Natascha Viljoen says government stimulus has helped the electric vehicle (EV) market, "where we’ve seen quite an uptake [and] support for EV buying. We’ve also seen some tax reductions affecting not just electric vehicles, but also internal combustion engine vehicle sales."
The automotive sector accounts for 35% of platinum demand, and about 80% of palladium and rhodium demand.
Seleho Tsatsi, analyst at Anchor Capital, says: "I think there’s no doubt that fiscal and monetary stimulus across the globe has been supportive of markets this year."
He cautions that "parsing out how much of what’s happened this year is down to this stimulus and what’s down to fundamentals, is difficult to do".
But René Hochreiter, consulting mining analyst at Noah Capital Markets and Sieberana Research, says PGM demand is real.
"People are buying cars to avoid public transport, investment demand is strong while the uncertainty persists, industrial demand is moderate to good [and] jewellery demand for platinum [is] not so weak outside China."
Hochreiter reckons a rebound in demand in 2021 is highly likely, because businesses in general will have access to cheap labour as a result of the enormous numbers of newly unemployed people desperate for work.
"Economists are predicting a 9% increase in GDP in China and the steel demand there for the first half of 2020 is actually higher than [in] the first half of 2019 — partly because of strong car demand, which is a big consumer of steel," he says.
Viljoen says there are many questions about what lies ahead, such as how the pandemic will shape consumer behaviour and in turn affect vehicle and other consumer demand for PGM-containing products.
"In the long term, we see consumption rates normalising," she says.
Still, Amplats will now look to what it can control: its costs.
"What we can do is lock in cost," says Viljoen. "A focus for us in a Covid environment — and having a little bit more flexibility from a good price environment — is how to use this opportunity to drive our business down the cost curve to be resilient through cycles."
Having stepped into the role in April just as the pandemic struck, Viljoen chooses to look on the bright side.
"I think there is never a better time to really get to know the business and the team than under extraordinary circumstances," she says. "We have a really good business, a suite of very strong assets [and] a value chain that gives us strategic benefit. The challenges and uncertainty around Covid have just given us an enhanced focus on how to enrich that."
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