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Business update and trading statement for the 12 months ending 31 December 2015
ANGLO AMERICAN PLATINUM LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1946/022452/06)
Share Code: AMS
ISIN: ZAE000013181
(“The Company" or "Anglo American Platinum")
BUSINESS UPDATE AND TRADING STATEMENT FOR THE 12 MONTHS ENDING 31 DECEMBER 2015
BUSINESS UPDATE
Anglo American Platinum advises shareholders of the decisive action under way to mitigate the
effects of the low Platinum Group Metal (“PGM”) price environment that is expected to prevail in
the short to medium-term and its accounting consequences.
- Managing the business for the weak PGM price environment
- Optimisation of mine plans to ensure each mining complex is cash positive
- Reduction in indirect labour and overhead cost savings well advanced
- Capital discipline continues, with major capital project decisions delayed until 2017
- Repositioning of the portfolio continues
- Signed the Sale & Purchase agreement for Rustenburg operations with Sibanye
- Balance sheet strength maintained
- Robust committed liquidity headroom
- Restructuring costs of R0.9 billion (pre-tax) and impairments/ write-offs of the
carrying value of assets of R14.2 billion (post-tax), with R2.0 billion impacting
headline earnings
- Basic and headline earnings will be at least 20% lower than the comparative period
largely due to such costs and charges
MANAGING THE BUSINESS FOR THE WEAK PGM PRICE ENVIRONMENT
Rightsizing the organisation and restructuring overhead
As previously announced, the support and service functions have been reorganised and
overhead structure rightsized to support a more focused and less complex business with a
reduction of 420 positions mainly in managerial and supervisory roles. The majority of
employees in these positions have accepted and been paid voluntary severance packages
(“VSPs”), with the remaining positions to leave the Company during 2016. This reorganisation
will deliver labour cost savings of R200 million per annum from 2016. In addition, non-personnel
overhead savings of R600 million will be delivered by 2017, with further upside identified.
Optimisation plans focusing on the need to be cash positive have identified opportunities to
further increase efficiencies at the operations. The revised development timeline and plan for
Twickenham has led to 550 employees and contractors leaving the Company. During the section
189 process involving support and services functions, VSPs were offered to all employees at the
Company’s own mines. This will result in a reduction in headcount of 900 at Rustenburg, 400 at
Union and 450 at the Company’s retained portfolio. In addition, restructuring plans at the Bokoni
mine, managed by our joint venture partner Atlatsa Resources Corporation (“Atlatsa”), to stop
loss making production will lead to some 2,500 employees and contractors exiting the Bokoni
mine, largely by 31 December 2015.
The cash outflow to the Company arising from the severance packages paid for the full reduction
in headcount is c.R0.9 billion (pre-tax) and will be charged to the Income Statement in the period
to 31 December 2015, impacting basic and headline earnings. A provision of R200 million (pre-
tax) of this amount was raised in the Company’s results for the six months ended 30 June 2015
for the reduction in mainly managerial and supervisory roles.
Disciplined and focused capital allocation
Disciplined capital allocation remains a key focus for Anglo American Platinum. Given the
particularly weak PGM price environment since mid-2015, the Company has decided to
postpone investment in all growth and replacement projects. While these projects are high
quality and high margin, with the ability to be at the lower end of the cost curve, current market
conditions dictate that these capital decisions be delayed until at least 2017.
This decision has triggered the following impairments, which will be accounted for in the year to
31 December 2015:
Twickenham
Development on the Twickenham project has been suspended and the operation restructured to
reduce cash losses, including placing the Twickenham shaft on care and maintenance.
Production continues at the Hackney shaft. The mine is being redeveloped from a conventional
mine to become a largely mechanised operation, which seeks to increase productivity and the
profitability of the mine. Previous development on a conventional mine and some of the related
infrastructure and assets may not be utilised in the new mechanised mine layout. These assets,
together with capitalised interest and study costs have been written off, resulting in a R2.4 billion
(after-tax) impairment. Twickenham’s accounting carrying value after the impairment is R2.2
billion. This impairment will be included in basic earnings but excluded from headline earnings.
Tumela 5 project at Amandelbult
The Company reviewed alternative business cases for the life extension at Tumela and
concluded that a lower capital, higher returning option than the Tumela 5 shaft is the preferred
replacement project. Accordingly, development of the Tumela 5 shaft has been stopped and the
feasibility study and early development expenditure amounting to R0.3 billion (after-tax) has
been written off. This write-off will be included in basic earnings but excluded from headline
earnings.
Other assets
The Company owns three Mainstream Inert Grinding Mills which are no longer expected to be
brought into use. The carrying value of these assets of R0.1 billion (after-tax) has been written
off. This write-off is included in basic earnings but excluded from headline earnings.
Royal Bafokeng Platinum (“RB Plat”) and Bafokeng Rasimone Platinum Mine (“BRPM”)
Anglo American Platinum has a 12% shareholding in RB Plat and a 33% direct interest in BRPM.
In November 2010, when RB Plat listed, the investments in both RB Plat and BRPM were
required to be revalued for accounting purposes to the fair value at that date, which resulted in
fair value gains of R0.7 million (after-tax) and R2.9 billion (after-tax) respectively. Subsequent to
this, the Company continued to equity account 33% of the earnings of BRPM. In addition, the
12% holding in RB Plats was marked to market with the gains and losses being reflected in
Other Comprehensive Income. This has resulted in the carrying value of the investment in
BRPM increasing from R4.4 billion to R6.1 billion.
Given the decrease in PGM prices and the reduction in the market value of RB Plat shares, the
Company has assessed the carrying value of both investments for impairment. Consequently,
the investment in RB Plat has been written down by R0.8 billion (after tax) to R0.6 billion and the
investment in BRPM has been written down by R2.7 billion (after tax) to R3.5 billion. These
impairments will be included in basic earnings but excluded from headline earnings.
Atlatsa and Bokoni Platinum Holdings (“Bokoni”)
Anglo American Platinum has a 23% shareholding in Atlatsa as well as a 49% shareholding in
Bokoni. The Company, together with Atlatsa, has completed a technical review of the Bokoni
operations to develop a new optimised mine plan. As announced by Atlatsa on 16 September
2015, this plan is currently being implemented. Bokoni is likely to remain cash negative for some
time as it funds development at Brakfontein and Middelpunt Hill.
In light of the difficult market conditions and negative cash flows incurred by Bokoni, Anglo
American Platinum has written off its equity interests in Atlatsa and Bokoni with a carrying value
of R1.4 billion. These write-offs will be included in basic earnings but excluded from headline
earnings.
Atlatsa’s ability to service its debt obligations in the context of the current market conditions,
where Bokoni mine is its main source of funding, is doubtful at current price levels. Anglo
American Platinum has therefore, for accounting reasons, written off the various loans it has
extended to Atlatsa and Atlatsa Holdings (its Black Economic Empowerment shareholder), and
those loans it expects to extend in December 2015, with an accounting carrying value of R2.0
billion in aggregate. The write-off of these loans will be included in basic and headline earnings.
The Company continues with its discussions to exit from its interests in Atlatsa and the Bokoni
mine.
REPOSITIONING THE PORTFOLIO
Anglo American Platinum continues with its repositioning to create a high quality asset portfolio
with low cost, high margin production, low safety risk and high productivity through
mechanisation. The announcement of the signed Sale and Purchase Agreement (“SPA”) of the
Rustenburg operations on 9 September 2015 was a significant step in transitioning the portfolio,
allowing the Company to focus its capital allocation decisions on higher priority capital projects in
a more focused portfolio.
For accounting purposes, Anglo American Platinum considers its mining, smelting and refining
operations as a single Cash Generating Unit (“CGU”). Following the announcement of the
signing of the SPA, the Rustenburg assets can now be assessed separately within the CGU for
impairment. As such, the recoverable value of the Rustenburg operations is calculated as the
fair value of the estimated proceeds less transaction costs. It excludes any economic value
generated from the future purchase of concentrate and toll treatment arrangements which will be
recognised for accounting purposes at the time when the benefit is received. Accordingly, the
Company will impair the fixed assets of the Rustenburg operations by R4.6 billion (after-tax)
during the year ending 31 December 2015.
As the transaction remains subject to various regulatory approvals, the Rustenburg operations
have not been reclassified as held for sale at this stage.
The Company continues to proceed with the exit of the other mines identified as non-core, being
Union, Pandora and Bokoni. The Union mine plan is being refined in order to facilitate an exit
process during 2016, and the Company is in discussions with its joint venture partners to enable
its exit from the Bokoni and Pandora mines.
BALANCE SHEET STRENGTH MAINTAINED
The balance sheet position of the Company remains strong as a result of focusing on ensuring
operations are cash positive, disciplined capital allocation and ensuring overheads are right-
sized. Consequently, the net debt position has improved from the year ended 31 December
2014 of R14.6 billion. The Company has legally binding committed facilities of R22 billion and is
comfortably within its debt covenants. The committed facilities that were due to mature in 2015
were rolled over and only R1.5 billion of facilities are due to mature in 2016.
TRADING STATEMENT FOR THE 12 MONTHS ENDING 31 DECEMBER 2015
Anglo American Platinum will release results for the twelve months ending 31 December 2015
("the period") on the Johannesburg Stock Exchange News Service (“SENS”) on [8] February
2016.
With reference to the listings requirements of the JSE Limited, companies are required to
publish a trading statement as soon as they become reasonably certain that the financial
results for the period to be reported on next will differ by at least 20% from those of the
previous corresponding reporting period.
Anglo American Platinum advises shareholders, with reasonable certainty and largely due to
the asset impairments and write-offs set out above, that headline earnings and headline
earnings per share (“HEPS”) for the twelve months ending 31 December 2015 will be at least
20% (R157 million or 60 cents per share) lower than the reporting period for the twelve months
ended 31 December 2014 (“the comparative period”). Headline earnings and HEPS for the
comparative period were R786 million and 301 cents respectively.
Basic earnings and basic earnings per share (“EPS”) will also be at least 20% (R125 million or
48 cents per share) lower than the comparative period. Basic earnings and EPS for the
comparative period were R624 million and 239 cents respectively.
The forecast financial information on which this trading statement is based has not been
reviewed, or reported on, by the Company’s external auditors.
Johannesburg
8 December 2015
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
For further information, please contact:
Investors:
Emma Chapman
Tel: +27 (0)11 373 6239
emma.chapman@angloamerican.com
Media:
Mpumi Sithole
Tel: +27 (0)11 373 6246
mpumi.sithole@angloamerican.com
Notes to editors:
Anglo American Platinum Limited is a member of the Anglo American Plc Group and is the
world's leading primary producer of platinum group metals. The company is listed on the
Johannesburg Securities Exchange (JSE). Its mining, smelting and refining operations are
based in South Africa. Elsewhere in the world, the Group owns Unki Platinum Mine in
Zimbabwe. Anglo American Platinum has a number of joint ventures with several historically
disadvantaged South African consortia as part of its commitment to the transformation of the
mining industry. Anglo American Platinum is committed to the highest standards of safety and
continues to make meaningful and sustainable difference in the development of the
communities around its operations.
www.angloamericanplatinum.com
Anglo American is a global and diversified mining business that provides the raw materials
essential for economic development and modern life. Our people are at the heart of our
business. It is our people who use the latest technologies to find new resources, plan and build
our mines and who mine, process and move and market our products – from bulk commodities
and base metals to precious metals and diamonds (through De Beers) – to our customers
around the world. Our diversified portfolio of products spans the economic development cycle
and, as a responsible miner, we are the custodians of precious resources. We work together
with our key partners and stakeholders to unlock the long-term value that those resources
represent for our shareholders, but also for the communities and countries in which we operate
– creating sustainable value and making a real difference. Our mining operations, growth
projects and exploration and marketing activities extend across southern Africa, South America,
Australia, North America, Asia and Europe.
www.angloamerican.com
Date: 08/12/2015 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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