Valterra Platinum Limited (VAL) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Anglo American Platinum's Media Call. [Operator Instructions] Please note that this conference call is being recorded. I'd now like to hand the conference over to the CEO, Natascha Viljoen. Please go ahead, ma'am.

Okay. Thank you so much, and good morning, ladies and gentlemen, and thank you for joining this Anglo American Platinum briefing call at such a short notice. I'm joined here today by Craig Miller, our Finance Director. You would have seen that since announcement that we've released this morning that we have made the preemptive decision to close ACP B units following a series of water leaks. We have been indicating through the year and again in our Q3 production report on the 22nd of October that the ACP B has been fragile since start of early in the year. We have increased the monitoring control and controls around our ACP Phase B units to be able to continually assess the condition of the converter plant. And it has served us well to this point in discovering water leaks, helping us to shut down the furnace safely and bring it back up safely. Our primary concern has always been for the safety of our employees as well as ensuring a safe operating environment and protecting the integrity of our plant and surrounding assets. However, given the increase in the number of leaks and further repair work required at this stage to repair the late series of leaks on our Phase B unit, we took the decision to close Phase B unit at this stage. The ACP management team has really done an extraordinarily good work to keep Phase B operating safely over the past number of months. And now the focus can solely be on finalizing the construction of ACP A and commissioning. And that is very well on track to start out towards the end of this year, and they have managed to pull it forward from Q2 next year into this year. So this is also part of a broader asset integrity strategy that we have rolled out across our business. And in line with this, our Phase B unit will now undergo a full rebuild in 2021. We will do in a way to mitigate the risk that we have only Phase A up and running. There are portion of Phase B that is of higher risk than others, and we will schedule it in a way to allow us to target the high-risk areas first and then the low-risk areas that will allow us that, if necessary, we will have a backup. Also probably just important to note that all our long lead items for the rebuild of ACP B is already on site. So that brings us then to the impact for the remainder of the year. So from a refined production perspective, as of the end of October, the company has refined 2.4 million PGM ounces. The closure of ACP B unit until it ACP Phase A unit is recommissioned will result in an increase in our working process inventory, and this will be released the moment we get ACP A up and running. We've made significant progress, as I mentioned, in Phase A unit, and it remains on track to commission before the end of the year. As a result of the closure of ACP Phase B unit, we've lowered both our refined and production guidance -- sorry, refined production and sales guidance for 2020 to circa 2.5 million PGM ounces. And previously, this was 3.1 million and 3.3 million PGM ounces. There's no change to our other guidance, as all the operations are running well. And so M&C production remains between 3.6 million and 3.8 million PGM ounces. We do have contingency plans in place, and we will be engaging with our customers to minimize any disruption to contractual obligations. We can now take questions.

[Operator Instructions] The first question comes from Allan Seccombe of Business Day.

A number of questions. I noticed that there's no force majeure declared now. Is there a reason for that?

Allan, we will continue to manage our obligations within our contractual agreements. And I think we are encouraging our customers to ensure that we can do that.

Okay. So does Anglo have enough metal? Can it source enough metal in the market to meet those contractual obligations until ACP A is up and running?

We are certainly working with our customers, Allan, to make sure that we can comply to obligations and meet their needs.

Sorry, Allan, just to complement that, as Natascha states that, our contingency plans have been put in place in order to mitigate any impact to them.

Okay. Would this be a purchase of metal off the markets to meet those contractual obligations?

Allan, those are all work in progress, on progress at the moment. Between conversations with our customers and sourcing metal, we also have metal in the pipeline on the other side of ACP that we will be maximizing as much as possible.

And then the -- 2 questions following that. The cost of the rebuild of ACP B in 2021, I mean, what has been spent on ACP A up to this point?

Allan, on ACP A, you recall that our guidance was between ZAR 500 million and ZAR 600 million. We're still operating within that capital range. So that's still underway. Clearly, obviously, with regards to the ACP B and the rebuild, we'll provide you updated guidance on that. I can't, on the top of my head, just remember that number, but it is something that we're working through at the moment. So we'll come back to you.

Okay. And then, Craig, while I've got you on this one. The cost of this lost traction of the lost refined production for the year, have you got a number for it that we can use?

Look, Allan, with the current spot prices, the impact of EBITDA in 2020 as a consequence of this is between ZAR 5 billion and ZAR 6 billion. So -- but I think that's important just to point out that this is impacting 2020, and this inventory is clearly in our work in progress pipeline. And so as we unwind that work in progress pipeline, those earnings will come through. We anticipate the pipeline to unwind over the next 18 months or so to taking us into 2022 given the disruption now and the ongoing performance of the asset from an M&C perspective.

Okay. Just so I understand, so the EBITDA impact for 2020 is between ZAR 5 billion and ZAR 6 billion, but this will be unwound over the next 18 months as stockpiles are worked through, right?

That's correct. Exactly.

Yes. But it's not -- it's timing rather than a loss.

[Operator Instructions] We have question from David McKay from Miningmx.

Can you hear me?

David, yes, we can.

Okay. Just wanted to confirm that EBITDA hit, was that a function of this latest event now? You're not referring to all of the events that occurred this year?

That's correct, David. It's just related to the revision that we're making now to refine the sales guidance, taking us from between 3.1 million to 3.3 million ounces to 2.5 million PGM ounces.

Got it. Okay. All righty. And then, Craig, just -- this is probably one for you. Just would this event at all change the Board's thoughts? Perhaps maybe you can say regarding the dividend, full year dividend payment.

So David, as you know, we do have a capital -- sorry, disciplined capital allocation approach. We will expect the dividend back as we always do at each reporting period. And so we'll start working on that towards the end of the year and in preparation for our results releases in February. I think it's just worth pointing out just from a liquidity perspective, we have about ZAR 28 billion of cash available at the end of October and ZAR 25.5 billion of committed facilities. So from a liquidity perspective, we're in a good shape.

The next question comes from Felix Njini of Bloomberg News.

Just to clarify, what's the platinum-palladium split on the revised guidance? And if you don't mind just reminding us again, when is Phase A expected to come back onstream? You said later this year. Do you have an exact date?