Force Majeure Prompts Amplats to Shut Smelter, Revise Guidance

Anglo American Platinum (LSE:AAL,OTC Pink:AGPPF) will be unable to meet its previous guidance for 2020 following an explosion at its Anglo converter plant (ACP) in February.

The explosion and subsequent fire at the Waterval smelter in Rustenburg, South Africa, compelled the world’s largest platinum producer to shutter Phase A in the ACP while repairs are conducted.

The situation was further compounded when water was found inside the furnace of Phase B, which had been commissioned and ramped up in order to take over for Phase A. Phase B was also taken offline.

“Notwithstanding extensive testing being conducted to determine the source of the water, and a number of circuits being isolated, water continued to be observed in the furnace,” reads a press release. “This poses a high risk of explosion and the company has determined that it has no other option but to temporarily shut down the phase B unit.”

With both Phase A and B temporarily offline, Amplats will be unable to process the amount of material outlined in its guidance for this year.

“Anglo American Platinum has had to declare force majeure to customers, suppliers of third-party purchase of concentrate and suppliers of tolling material, as we are unable to complete the processing of material during the converter repair,” the company stated.

Prior to the setback, Amplats had expected to produce 4.2 million to 4.7 million ounces of platinum and palladium in total — more specifically, 2 million to 2.2 million ounces of platinum and 1.4 million to 1.5 million ounces of palladium.

Those numbers are now lower in the revised guidance, coming in at 1.5 million to 1.7 million ounces of platinum and 1.1 million to 1.2 million ounces of palladium.

Amplats anticipates repairs to Phase B will take roughly 80 days. Phase A, which experienced the explosion, will be out of commission for much longer while it is fixed. The estimated restart date is sometime in Q2 2021.

The unforeseeable circumstances will also impact platinum-group metals (PGMs) producers Sibanye-Stillwater (NYSE:SBGL) and African Rainbow Minerals (OTC Pink:AFBOF,JSE:ARI), which send material to Amplats for processing.

Longer term, the temporary shuttering could be a tailwind for PGMs prices. Both platinum and palladium are used in the automotive industry to bolster the efficiency of catalytic converters and their emission-reducing capabilities.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.