Our opinion on the current state of AMPLATS(AMS)

Anglo American Platinum (Amplats or AMS) stands as the second-largest platinum producer globally, under the majority ownership (77.62%) of Anglo American. In recent years, Amplats has strategically shifted from deep-level mining to more economical and mechanized methods, significantly reducing its operational footprint from 18 mines to 7. This transition has notably cut overhead costs and the workforce by 50%, enhancing operational efficiency and profitability.

Amplats' flagship Mogalakwena operation, known for its palladium-rich deposits, operates within the lowest cost quartile of the platinum group metals (PGM) industry worldwide. A planned expansion at this site is expected to significantly increase platinum and palladium output, reinforcing the company's strong position in the PGM market.

Additionally, Amplats has consolidated its mining interests by acquiring Glencore’s 40.2% stake in the Mototolo mine and the adjacent Der Brochen property for R1.5 billion. This acquisition allows Amplats to expand the Mototolo mine into Der Brochen without additional surface infrastructure, optimizing production and resource use.

However, the platinum industry faces challenges from an effective recycling industry, which recovers approximately 2 million ounces annually from old auto catalysts, potentially impacting demand for newly mined platinum. Despite this, Amplats remains a leading choice among PGM shares on the Johannesburg Stock Exchange (JSE), though it is subject to the inherent volatility and unpredictability of commodity stocks.

In December 2021, Amplats announced a significant R3.9 billion investment to extend the life of the Mototolo/De Brochen mines beyond 30 years, underscoring its commitment to long-term production sustainability. However, the company faces potential unrest with plans to relocate 1,000 families to boost production at Mogalakwena, highlighting the social challenges associated with mining operations.

Financially, the year ending 31st December 2023 was challenging for Amplats. The company reported a slight decrease in refined PGM production and a significant 26% drop in the rand basket price per ounce, contributing to a 24% decline in revenue and a 71% fall in headline earnings per share (HEPS). Factors such as Eskom's load curtailment adversely impacted production, although this was partially offset by releasing concentrate stocks.

Looking ahead to the first quarter of 2024, PGM production decreased by 7%, while sales volumes remained unchanged, indicating ongoing operational challenges. Amplats continues to face industry-wide issues such as load shedding and declining commodity prices, which have pressured the share price since March 2022.

Given these dynamics, potential investors should approach Amplats with caution. The company's performance and stock price are heavily influenced by fluctuating international prices for PGMs and operational challenges. Investors are advised to look for a clear upward trend before considering entry, as indicated by the recent suggestion to watch for a break through the downward trendline for more favorable investment conditions. Additionally, the announced potential retrenchment of 3,700 employees in February 2023 could further affect the company’s operations and stock performance.