Platinum group metals (PGMs) producer Anglo American Platinum (Amplats) has reported that its metal-in-concentrate, refined production and costs are all expected to be within guidance for 2023, with capital expenditure (capex) about R1.5-billion below guidance.

However, over the next three years, various cost-cutting initiatives will be implemented to preserve the company’s growth prospects.

Amplats CEO Craig Miller said on December 8 in an update on the company’s performance for this year, as well as its capex and production guidance for the next three financial years, that an action plan was in progress to adapt to the external environment to deliver an enhanced cost position and value-focused capital allocation, while preserving the company’s long-term growth optionality.

“We expect to meet 2023 production and cost guidance, despite a broad set of external pressures, and to do so with a strong safety performance. In responding to the prevailing weakness of the PGM basket price environment and persistent cost inflation, we are deploying a series of measures to improve our competitive position while preserving our long-term optionality,” Miller said.

He explained that this action plan would include initiatives to reduce both yearly costs by about R5-billion and stay in business capital by about R5-billion next year.

“We are also resequencing growth investments and prioritising higher-margin production from our own operations through our processing facilities. These measures will allow us to capitalise on our industry-leading portfolio for the long-term benefit of our stakeholders,” Miller said.

He noted that metal-in-concentrate and refined production were expected to be within guidance at about 3.8-million PGM ounces for the year, with cash operating unit costs expected to be within the upper end of guidance at about R17 800/oz.

Total capex for this year is expected to be about R20.5-billion. This is R1.5-billion lower than previous guidance, primarily owing to delays in spend for the Mototolo-Der Brochen life extension and optimisation of cash flows.

Miller explained that stay-in-business capital was expected to be about R11.1-billion, with life extension capital lower at about R2.4-billion. Meanwhile, Mogalakwena Underground capital was expected to be about R1-billion and breakthrough capital about R1.8-billion. Capitalised waste stripping costs at Mogalakwena were expected to be about R4.2-billion.

“We will continue to demonstrate value-based capital allocation discipline. We are implementing a variety of actions as we reprioritise capital expenditure and deploy measures to reduce costs in response to the current low PGM basket price environment. These measures will ensure that we improve our competitive position and protect returns, while preserving our long-term optionality,” he said.

Looking ahead from 2024 to 2026, Miller said metal-in-concentrate production from Amplats operations, including its 50% share of Modikwa, would remain near current production levels of between 2.1-million and 2.3-million ounces.

He said refined production was expected to be between 3.3-million and 3.7-million ounces in 2024, while production for 2025 and 2026 was expected to decrease to between 3-million to 3.4-million ounces, as various third-party processing arrangements transition to toll arrangements and lower volumes were expected.

“PGM basket prices have weakened materially on the backdrop of various macroeconomic factors as well as the outlook on battery electric vehicle penetration into the automotive market.

“Given this, we’re responding to this low price environment and demand uncertainty by implementing a series of measures to protect the long-term sustainability of the business and improve our competitive position, while preserving our long-term optionality,” Miller said.

He also detailed Amplats’ cost optimisation initiatives. Operational cost efficiencies, overhead reductions, supplier/service provider contract renegotiations, and work prioritisation programmes were expected to realise yearly savings of about R5-billion.

This is expected to result in cash operating unit costs of between R16 500/oz and R17 500/oz of PGMs next year, more than offsetting expected average input cost inflation of about 6%.

Miller said Amplats would be targeting an all-in sustaining cost (AISC) of below $1 050/oz of three element (3E) PGMs. He noted that a review was under way to identify other opportunities to further enhance the company’s cost position.

In terms of sustaining capital, Miller said lower sustaining capital of between R16.2-billion and R16.7-billion for next year would be focused on ensuring the integrity and reliability of assets across the value chain, investing in heavy mining equipment (HME) to support the increase in waste mining and tailings infrastructure at Mogalakwena, and progressing the Mototolo-Der Brochen life extension which is expected to be completed by the first half of 2027.

He noted that, in light of the current PGMs price environment, several growth options were being rephased, which he said would improve near-term cash flows but preserve long-term optionality.

In terms of near-term growth efforts, Amplats is progressing the drilling as well as the twin exploration declines and associated studies supporting possible future underground operations at Mogalakwena. The underground operations could secure access to higher-grade ore and supplement openpit ore.

In addition, study work on the Mogalakwena third concentrator and associated debottlenecking of downstream processing capacity has been completed. The project is expected to be value accretive but further work has been postponed, with the study work on the underground development prioritised.

Miller said the study programme to debottleneck the concentrators at Amandelbult complex had been stopped. This allowed the operation to focus on improving safety, productivity and cost efficiencies at current production levels. This change would allow the rephasing and postponement of the capital investment in the new mining areas to replace depleting production from Tumela upper.

“We will focus on higher margin processing of own material and expect a reduction in third-party volumes over the next few years as a result of transition to toll arrangements and other contractual provisions in respective agreements. Volumes purchased are also subject to production plans by third parties,” Miller explained.

As a result of the volume changes in concentrate flows, a review of Amplats’ downstream processing footprint is under way. Miller noted that the company would not proceed with the Anglo Converter Plant debottlenecking project.

Over the next three years, Amplats’ own mine production will be sustained at 2.1-million to 2.3-million ounces a year. Mogalakwena metal-in-concentrate is forecast at about one-million ounces a year.

In terms of purchase of concentrate (PoC) from third parties, Kroondal would transition to a toll arrangement for the four-element (4E) metals upon the delivery of an agreed amount of volume which is currently estimated to be at the end of the second quarter of next year.

Remaining toll and PoC processing agreements with Sibanye Stillwater for its Rustenburg operations, and Kroondal, reach their contractual conclusion at the end of 2026. Material bought from Siyanda Resources will transition to a toll arrangement for the 4E metals in 2025.

As a result, PoC will decline from a current level of about 1.3-million ounces to about one-million ounces by 2025.

“We are adapting to the current environment by deploying a wide range of value-based measures. This includes embedding efficiencies, stepping up cost-saving initiatives and reprioritising our capital allocation.

“We believe the actions we are taking are critical to improve our competitive position and protect long-term returns from our PGMs that are integral to the major demand trends of improving living standards for a growing global population and the need for cleaner transport and energy,” Miller said.