VALTERRA Platinum kicked off life as an independent company in relatively poor financial form, posting on Monday a heavier-than-expected 81% decline in headline share earnings for the six months ended June of R4.73 per share.But the company is expected to register a strong second-half recovery, largely aided by improved metal prices, which could see it handsomely in net cash. Higher production and a consequent reduction in unit costs would also assist.The platinum group metal (PGM) miner officially demerged from Anglo American on 28 May, just as metal prices began to improve. But these market improvements were not fully reflected in the firm’s numbers. The average PGM basket price during the six months was 5% higher during the period (3% in rand).As guided, however, the damage came from lower production, down 22%, owing to flooding at Amandelbult’s Tumela mine in Limpopo province. Valterra also took demerger costs and a scrapping charge of R900m of which the decommissioning of the Mortimer smelter accounted for R600m.Lower production put pressure on unit costs, increasing to R20,500 per PGM ounce in the first half against guidance of R17,000 to R18,500/oz. Consequently, Valterra has increased unit cost guidance to R19,000 to R19,500/oz, although actual second-half unit costs were likely to average R17,500/oz, representing an expected recovery in overall performance.According to Visible Alpha, the S&P company, market consensus for headline earnings was for R9.68/share.“We have well flagged the Amandelbult flooding and the impact that that would have,” said Craig Miller, CEO of Valterra Platinum, in an interview. “We also flagged the demerger costs that we would incur. So those are your key drivers around the reduction in earnings from 2024 to 2025.”Whilst sales were disappointing – falling 25% to 1.48 million oz in line with lower refined production – metal price improvements only marginally influenced the period under review. “July prices are 20% up on where they were in the second quarter,” said Miller. “Those will come through in the second half as we’re delivering on two million ounces,” he said.Valterra slid into net debt of R4.9bn as of 30 June, which it said was partially due to a year-end dividend payment. As Amplats, the listed subsidiary of Anglo American, the company announced in February a R15.7bn special dividend for the 2024 financial year.Despite these underwhelming operating and financial performance, Valterra declared a R500m or R2/share interim dividend, in line with its 40% of headline earnings payout policy.The second half is likely to be far improved, with Tumela ramping up production post the flooding incident. There is also the lion’s share of a R4bn to R5bn insurance claim to be paid out this year. Post deductibles, this will be R3.6bn to R4.2bn coming into earnings.Sayurie Naidoo, Valterra Platinum CFO, expected the company to be cash neutral owing to R2bn in cost savings, a R1bn lower capex than guided, and a 15% step up in own production in the second half. In reality, Valterra could do much better than this. “If you look at our first-half earnings, at current spot prices, which is about 30% higher than our achieved basket price for the first half, that’s about R7.5bn in extra earnings,” said Naidoo.René Hochreiter, an analyst for Noah Capital, forecast “a big improvement” in Valterra in the second half of its financial year. It was “still the best value big platinum company in our rankings,” he said, adding that lower AISC was critical.All-in sustaining costs (AISC) guidance has been maintained at $970 to $1,000/oz following a first-half blowout of $1,213 per 3E oz.The post Valterra to
surge into net cash after disappointing start appeared first on Miningmx.
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