Valterra profit hit by platinum mine flooding, spinoff costs

Valterra Platinum Ltd. said first-half profit likely fell as much as 98% after flooding curbed mine output and it incurred costs related to its recent spinoff from Anglo American Plc.

Earnings declined as sales volumes of platinum-group metals dropped by 25%, the Johannesburg-based company – formerly known as Anglo American Platinum Ltd. – said Friday in a statement. Heavy rain and flooding in February disrupted operations at the firm’s Amandelbult mine.

Profit was also hit by 1.4 billion rand ($79 million) in one-off demerger-related costs when Valterra split from Anglo at the start of June, as part of the London-listed group’s ongoing restructuring process. Anglo last year committed to offloading its coal, nickel, platinum and diamond businesses to focus on its iron ore and copper assets.

While Valterra and its peers in South Africa – which is by far the world’s largest platinum producer – have been tackling a prolonged slump in PGM prices, there have been signs of improvement due to investment demand and jewelry fabrication in China. Platinum and palladium have risen 58% and 43%, respectively, this year – with most of those increases occurring since the beginning of May.

The platinum rally “has lifted the PGM basket price above cost support,” as the focus shifts “to market deficits,” analysts at UBS Group AG wrote in a note earlier this month.

Still, developments in the auto sector – the biggest consumer of PGMs – have created longer-term uncertainty around demand because electric vehicles don’t currently use the metals.

Valterra remains on track to meet its annual target for refined production of 3 million to 3.4 million ounces, albeit toward the bottom end of the range, the company said. The drop in earnings was partially offset by cost savings of 2.1 billion rand during the period, it said.

The miner’s shares rose as much as 5.5% in Johannesburg trading. Valterra has gained about 24% since the firm separated from Anglo.

(By Rene Vollgraaff and William Clowes)