Anglo American Platinum (JSE: AMS) grapples with a challenging landscape, mirroring the woes of the broader platinum industry. Plummeting platinum group metal (PGM) prices, particularly palladium and rhodium, dealt a heavy blow to 2023 earnings, with a 35% drop compared to the previous year. This, coupled with higher mining and processing costs, resulted in a significant decline in share price, exceeding 26.96% year-to-date and 13.9% in the past week alone.
While a glimmer of hope emerged with CEO Duncan Wanblad’s prediction of a price recovery around the corner, recent production updates paint a concerning picture. Total PGM production for Q4 2023 dipped 6%, with own-managed mines experiencing a 3% decrease. Joint operations witnessed a steeper decline of 47%, primarily due to the divestment of Kroondal.
Despite these headwinds, AMS partially mitigated the production decline through increased purchases of PGM concentrate from third parties. Additionally, the company expects production to range between 3.3 million and 3.7 million ounces in 2024, with cost per unit remaining within a projected range.
Technical
The daily chart shows that AMS is currently trading lower within an ascending channel following a failed attempt to sustain a break above the channel, suggesting a bearish trend. The recent break below the 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line) further confirms this trend. However, the downward-sloping RSI (26.97) indicates oversold territory, potentially signalling a temporary price rebound.
With the price action firmly targeting the channel’s support following a sustained push lower, the reaction of the market around the support could determine the price action’s short-term trajectory with the earnings looming. A sustained break below the channel, on significant volume, could offer short-term trading opportunities towards the initial support at the R641.45 price level, with the 4th of September 2023 low of R 580.07 acting as the next significant level lower.
However, a push towards the 61.80% Fibonacci retracement level (R740.48) could materialize should the channel’s support hold. A successful bridge of the initial support and a sustained break above the zone could trigger a run, with the R839.58 and R900.89 resistance levels acting as the next significant levels higher.
Summary
Anglo-American Platinum faces significant headwinds, reflected in its declining share price and earnings. However, potential cost-cutting measures and anticipated price recovery offer a glimmer of hope. Technically, the stock is oversold and could see a short-term bounce, but the overall trend remains bearish.
Sources: TradingView, Dow Jones Newswire, CNBC, Reuters, Investing.com.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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