Top Platinum Miner Says Payouts to Decline as South Africa Power Outages Hit

Felix Njini, Bloomberg News

Natascha Viljoen, chief executive officer of Anglo American Platinum Ltd., speaks on the opening day of the Investing in African Mining Indaba in Cape Town, South Africa, on Monday, May 9, 2022. Mining executives, investors and government ministers are meeting in Cape Town for the African Mining Indaba, the continent’s biggest gathering of one of its most vital industries. , Bloomberg

(Bloomberg) -- Anglo American Platinum Ltd., the No. 1 platinum miner by value, said investor payouts will drop as worsening power outages in South Africa curb output and push up costs.

“Will our investors continue to get their returns? Yes, they will, but the size of returns will be slightly softer,” Chief Executive Officer Natascha Viljoen said in an interview. “Will it be the returns we had in 2021? probably not.”

A year ago, the Anglo American Plc unit announced a record payout as automaker demand buoyed the price of rhodium and palladium, which are produced as byproducts of platinum mining. While metal prices have slipped back from 2021 levels, the biggest drag faced by miners are intensifying power blackouts as state-owned utility Eskom Holdings SOC Ltd. struggles to keep its unreliable coal-fired plants working.

The challenges are “worrying” as they hit hard on a sector that’s already grappling with criminal activities and sabotage at mine sites, said Viljoen. She added that the extra time she devotes to managing power outages means she only gets about six hours sleep a night. Still, at current prices, Amplats’s margins are “really good,” she said.

The power outages could cut South Africa’s output of platinum-group metals by a fifth this year, after an estimated reduction of 10% in 2022, Sibanye Stillwater Ltd. CEO Neal Froneman said in an interview last week. While the lower volumes of metals being mined from South Africa will probably help buoy prices, producers will struggle to keep a lid on costs, he said.

“What is for sure is earnings will be impacted negatively,” Froneman said in an interview. “Companies may still have some flexibility to ensure dividends and payouts to shareholders and stakeholders can still be met.”