Our opinion on the current state of AMS

Anglo American Platinum (Amplats), recognized as the second-largest platinum producer globally, falls under the substantial ownership of Anglo American with a 77.62% stake. The company has been at the forefront of transforming platinum mining in South Africa, shifting from deep-level mining to shallower, more mechanized operations. This strategic pivot has significantly reduced the number of mines from 18 to 7 over the last five years, alongside a 50% reduction in both overheads and workforce, enhancing efficiency and profitability.

Amplats' Mogalakwena operation, known for its palladium-rich deposits, operates within the lowest cost quartile of the platinum group metals (PGM) industry worldwide. The company's investment in expanding this mine is expected to significantly increase platinum and palladium production. Furthermore, Amplats' acquisition of Glencore's stake in the Mototolo joint venture and the adjacent Der Brochen property underscores its commitment to growth and operational optimization.

Despite the advancements and strategic operations, the platinum industry faces challenges from an effective recycling industry that recovers approximately 2 million ounces annually from old auto catalysts. These dynamics contribute to the volatility and unpredictability of PGM shares, with Amplats being no exception.

Recent developments include plans to relocate 1,000 families to facilitate production expansion at Mogalakwena, the extension of the life of the Mototolo/De Brochen mines, and the resignation of CEO Natascha Viljoen, set to serve a 12-month notice period. For the year ending on 31st December 2023, Amplats reported a slight decrease in refined PGM production and a significant drop in the rand basket price per ounce, leading to a 24% reduction in revenue and a 71% fall in HEPS. These results reflect the broader challenges facing the industry, including Eskom load curtailment and declining PGM prices.

Given the speculative nature of investments in PGM shares due to fluctuations in international metal prices and industry challenges such as load shedding, potential investors are advised to exercise caution. The recommendation is to wait for a clear upward trend before considering investment, especially in light of the share's performance decline since March 2022 and the recent announcement regarding potential employee retrenchments.