Platinum is tarnished at Anglo American

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The Independent Online

Anglo American, one of the world's biggest mining companies, is set to scale back ambitious production targets after the strengthened South African rand made the project too expensive.

The group's subsidiary, Anglo Platinum, which last year accounted for around 23 per cent of Anglo American's operating profits, had intended to raise production levels from 2.2 million ounces a year in 2002 to 3.4 million by 2006. But it warned in the summer that it was reviewing the targets as the rand continued to rise against the US dollar, and on Thursday it is expected to announce a big reduction. Nick Hatch, mining analyst at Investec, said it could be "anywhere between 250,000oz and 500,000oz less than the target".

Anglo Platinum, the world's largest producer of the precious metal, had originally estimated that the costs of raising production would be 12.9bn rand (£1.2bn) and said it would do so through a mix of new projects and expanding existing ones. However, the rand's increased strength against the weakened US dollar since then has added greatly to the cost. The currency stood at around eight rand to the dollar when it first made that announce-ment; the greenback is now worth around six rand. Alex Wood, a mining analyst at Williams de Broe, said: "At eight rand to the dollar, it's expensive, but at six, it just gets more and more expensive."

Platinum's main use is in the manufacture of jewellery, although it has an industrial use in the production of catalytic converters. The metal's prices have soared in the last three years, fuelled by speculative investors and turbulence in such markets as currencies, commodities and equities. Concerns about a cut in supplies, notably from the Johannesburg-based Anglo Platinum, have also had an impact. Two weeks ago, the precious metal hit a 23-year high of $773.5 per troy oz, the measurement it is traded in.