Wrap Text
Reviewed condensed consolidated interim financial results for the six months ended 30 June 2016
ANGLO AMERICAN PLATINUM LIMITED
Incorporated in the Republic of South Africa
Registration number: 1946/022452/06
Share code: AMS
ISIN: ZAE000013181
(Amplats, the Company, the Group or Anglo American Platinum)
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 30 June 2016
Anglo American Platinum Limited's condensed consolidated reviewed interim financial results for the six months ended 30 June 2016 have been independently
reviewed by the Group's external auditors. The preparation of the Group's reviewed interim results for the six months ended 30 June 2016 was supervised by
the Finance Director, Mr I Botha, CA(SA).
PERFORMANCE HIGHLIGHTS
LOST-TIME INJURY-FREQUENCY RATE (LTIFR)
per 200,000 hours worked
2015: 1.04
2016: 0.75
REFINED PLATINUM PRODUCTION
2015: 1.10 Moz
2016: 1.01 Moz
PRODUCED PLATINUM PRODUCTION
2015: 1.13 Moz
2016: 1.15 Moz
HEADLINE EARNINGS
2015: R2.47 billion
2016: R1.04 billion
NET DEBT
2015: R12.91 billion
2016: R9.92 billion
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
six months ended Year ended
30 June 30 June % 31 December
R millions Notes 2016 2015 change 2015
Gross sales revenue 3 30,663 29,858 59,829
Commissions paid (8) (4) (14)
Net sales revenue 30,655 29,854 3 59,815
Cost of sales (27,948) (25,530) (10) (54,544)
Gross profit on metal sales 3 2,707 4,324 (37) 5,271
Other net expenditure 5 (213) (70) (279)
Loss on impairment and scrapping of property, plant
and equipment (15) (30) (10,242)
Market development and promotional expenditure (317) (427) (800)
Operating profit/(loss) 2,162 3,797 (43) (6,050)
Impairment of investments in associates 14 (104) - (4,082)
Impairment of non-current financial assets 14 (111) - (1,792)
Impairment of available-for-sale investment in
Royal Bafokeng Platinum Limited (RB Plat) - - (775)
Interest expensed (691) (530) (1,049)
Interest received 58 89 98
Remeasurement of loans and receivables 32 23 40
Gains/(losses) from associates 34 (270) (529)
Profit/(loss) before taxation 1,380 3,109 (56) (14,139)
Taxation 6 (459) (682) 1,934
Profit/(loss) for the period/year 921 2,427 (62) (12,205)
Other comprehensive income, net of income tax
Items that will be reclassified subsequently to profit or loss (88) 9 1,590
Deferred foreign exchange translation (losses)/gains (493) 126 1,441
Share of other comprehensive gains from associates - 49 49
Actuarial loss on employees' service benefit obligation (7) (1) (4)
Net gains/(losses) on available for sale investments 412 (165) (671)
Recycling of cumulative losses on impairment of
available-for-sale investment - - 775
Total comprehensive income/(loss) for the period/year 833 2,436 (10,615)
Profit/(loss) attributable to:
Owners of the Company 938 2,444 (62) (12,125)
Non-controlling interest (17) (17) (80)
921 2,427 (12,205)
Total comprehensive income/(loss) attributable to:
Owners of the Company 850 2,453 (10,535)
Non-controlling interest (17) (17) (80)
833 2,436 (10,615)
Headline earnings 7 1,044 2,471 (58) 107
Number of ordinary shares in issue (millions) 268.2 267.8 268.0
Weighted average number of ordinary shares in issue (millions) 261.8 261.2 261.4
Weighted average number of diluted ordinary shares
in issue (millions) 262.5 261.9 262.2
Earnings/(loss) per ordinary share (cents)
- Basic 358 936 (62) (4,638)
- Diluted 357 933 (62) (4,625)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
six months as at as at
30 June 30 June 31 December
R millions Notes 2016 2015 2015
ASSETS
Non-current assets 52,152 66,511 52,205
Property, plant and equipment 39,380 47,755 39,869
Capital work-in-progress 6,417 7,191 6,548
Investments in associates 8 3,969 7,655 3,883
Investments held by environmental trusts 914 866 882
Other financial assets 9 1,472 3,041 1,023
Other non-current assets - 3 -
Current assets 24,576 23,806 21,755
Inventories 10 16,314 17,998 16,571
Trade and other receivables 2,235 2,808 2,585
Other assets 702 595 927
Other current financial assets 24 3 -
Taxation - 30 -
Cash and cash equivalents 5,301 2,372 1,672
Total assets 76,728 90,317 73,960
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 27 27 27
Share premium 22,498 22,327 22,395
Foreign currency translation reserve 2,293 1,471 2,786
Available-for-sale reserve 436 (245) 24
Retained earnings 15,981 29,654 15,202
Non-controlling interest (452) (274) (411)
Shareholders' equity 40,783 52,960 40,023
Non-current liabilities 21,694 22,698 22,776
Non-current interest-bearing borrowings 11 10,904 9,444 12,124
Obligations due under finance leases 95 - 94
Environmental obligations 2,525 2,220 2,404
Employees' service benefit obligations 17 10 14
Deferred taxation 8,153 11,024 8,140
Current liabilities 14,251 14,659 11,161
Current interest-bearing borrowings 11 4,210 5,841 2,209
Obligations due under finance leases within one year 15 - 14
Trade and other payables 7,391 6,963 6,818
Other liabilities 2,591 1,844 2,075
Other current financial liabilities - - 2
Share based payment provision 15 11 11
Taxation 29 - 32
Total equity and liabilities 76,728 90,317 73,960
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
R millions 2016 2015 2015
Cash flows from operating activities
Cash receipts from customers 30,784 30,196 60,563
Cash paid to suppliers and employees (24,429) (23,751) (49,621)
Cash from operations 6,355 6,445 10,942
Interest paid (net of interest capitalised) (556) (443) (857)
Taxation paid (399) (1,502) (1,821)
Net cash from operating activities 5,400 4,500 8,264
Cash flows used in investing activities
Purchase of property, plant and equipment
(includes interest capitalised) (2,168) (2,390) (5,152)
Proceeds from sale of plant and equipment 76 24 41
Proceeds on sale of mineral rights and other investments - 2 3
Funding to associates (156) (264) (739)
Acquisition of equity investment in associate - - (23)
Advances made to Plateau Resources Proprietary Limited (Plateau) (111) (33) (260)
Net decrease/(increase) in investments held by environmental trusts - 3 (1)
Interest received 45 35 76
Growth in environmental trusts 3 - 6
Other advances (39) (1) (15)
Net cash used in investing activities (2,350) (2,624) (6,064)
Cash flows from/(used in) financing activities
Purchase of treasury shares for the Bonus Share Plan (BSP) (163) (120) (120)
Purchase of Anglo American plc shares for the Anglo Share Schemes (6) (4) -
Proceeds from/(repayment of) interest-bearing borrowings 781 (535) (1,487)
Repayment of finance lease obligation (8) - (21)
Unpaid dividends (claimed)/written back (1) - 19
Cash distributions to minorities (24) (47) (121)
Net cash from/(used in) financing activities 579 (706) (1,730)
Net increase in cash and cash equivalents 3 629 1,170 470
Cash and cash equivalents at beginning of period/year 1 672 1,202 1,202
Cash and cash equivalents at end of period/year 5 301 2,372 1,672
Movement in net debt
Net debt at beginning of period/year (12,769) (14,618) (14,618)
Net cash from operating activities 5,400 4,500 8,264
Net cash used in investing activities (2,350) (2,624) (6,064)
Other (204) (171) (351)
Net debt at end of period/year (9,923) (12,913) (12,769)
Made up as follows:
Cash and cash equivalents 5,301 2,372 1,672
Non-current interest-bearing borrowings (10,904) (9,444) (12,124)
Obligations due under finance lease (95) - (94)
Current interest-bearing borrowings (4,210) (5,841) (2,209)
Obligations due under finance lease within one year (15) - (14)
(9,923) (12,913) (12,769)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency Available- Non-
Share Share translation for-sale Retained controlling
capital premium reserve reserve earnings interest Total
Rm Rm Rm Rm Rm Rm Rm
Balance as at 31 December 2014 (audited) 27 21,846 1,345 (80) 27,598 (210) 50,526
Total comprehensive income for the period 126 (165) 2,492 (17) 2,436
Deferred tax charged directly to equity 1 1
Cash distribution to minorities (47) (47)
Shares acquired in terms of BSP - treated as treasury shares (-)* (255) 135 (120)
Shares vested in terms of the BSP -* 285 (285) -
Shares vested in terms of the group Employee Share Option Scheme (Kotula) -* 451 (451) -
Equity-settled share-based compensation 164 164
Shares purchased for employees - -
Balance as at 30 June 2015 (reviewed) 27 22,327 1,471 (245) 29,654 (274) 52,960
Total comprehensive loss for the period 1,315 269 (14,572) (63) (13,051)
Deferred tax charged directly to equity (1) (1)
Cash distributions to minorities (74) (74)
Shares acquired in terms of BSP - treated as treasury shares (-)* - - -
Shares vested in terms of the BSP -* 68 (68) -
Shares vested in terms of the group Employee Share Option Scheme (Kotula) -* - - -
Equity-settled share-based compensation 174 174
Shares purchased for employees (4) (4)
Unpaid dividends written back 19 19
Balance as at 31 December 2015 (audited) 27 22,395 2,786 24 15,202 (411) 40,023
Total comprehensive income for the period (493) 412 931 (17) 833
Deferred tax charged directly to equity 1 1
Cash distributions to minorities (24) (24)
Shares acquired in terms of BSP - treated as treasury shares (-)* (163) (163)
Shares vested in terms of the BSP -* 266 (266) -
Shares vested in terms of the group Employee Share Option Scheme (Kotula) -* -
Equity-settled share-based compensation 141 141
Shares purchased for employees (27) (27)
Unpaid dividends claimed (1) (1)
Balance as at 30 June 2016 (reviewed) 27 22,498 2,293 436 15,981 (452) 40,783
*Less than R500 000.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2016
1. The condensed consolidated interim financial statements are prepared in accordance with and containing the information required by IAS 34 Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. The accounting policies applied in the preparation of
these condensed consolidated interim financial statements are in terms of International Financial Reporting Standards and are consistent with those applied
in the financial statements for the year ended 31 December 2015, except for the adoption of various amendments to accounting standards in the six months
ended 30 June 2016. These changes did not have a material impact on the financial results of the Group.
2. SEGMENTAL INFORMATION
Net sales revenue Operating contribution
Reviewed Audited Reviewed Audited
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
R millions 2016 2015 2015 2016 2015 2015
Operations
Mogalakwena Mine 7,127 7,216 13,864 2,318 3,174 5,159
Amandelbult Mine 5,175 4,097 9,032 481 436 826
Unki Platinum Mine 1,103 1,035 2,024 (9) 132 75
Twickenham Project 148 145 329 (321) (386) (743)
Modikwa Mine1 773 729 1,469 (9) 52 73
Mototolo Mine1 743 731 1,411 165 232 370
Kroondal Mine1 1,582 1,502 3,010 197 392 472
Rustenburg Mine 5,640 5,495 11,117 306 433 38
Union Mine 1,888 1,862 3,695 309 (10) 88
Total - mined 24,179 22,812 45,951 3,437 4,455 6,358
Process Tailings Retreatment2 - 30 61 - (4) (22)
Purchased metals 6,476 7,012 13,803 374 1,161 1,562
30,655 29,854 59,815 3,811 5,612 7,898
Other costs (1,104) (1,288) (2,627)
Gross profit on metal sales 2,707 4,324 5,271
1 Anglo American Platinum Limited's share (excluding purchase of concentrate)
2 Includes slag tailings retreatment at Mortimer Smelter closed September 2015
Information reported to the Executive Committee of the Group for purposes of resource allocation and assessment of segment performance is done on a mine
by mine basis.
Changes to the segmental information
The following change to the segmental reporting was made following changes to internal reporting to the Executive Committee:
For the current period and the year ended 31 December 2015, purchased metals exclude tailings from Anglo American Platinum Limited's mines treated by a
third party with the concentrate being purchased by Anglo American Platinum Limited. The results for this have been included in the operation from which
the tailings arose. Consequently, the results for the six months ended 30 June 2015 were reclassified in a similar manner. This resulted in the following
changes to the 30 June 2015 comparative figures:
Net sales revenue Operating contribution
R millions as reported restated as reported restated
Amandelbult Mine 4,015 4,097 398 436
Rustenburg Mine 5,422 5,495 409 433
Purchased metals 7,167 7,012 1,223 1,161
16,604 16,604 2,030 2,030
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
R millions 2016 2015 2015
3. GROSS PROFIT ON METAL SALES
Gross sales revenue 30,663 29,858 59,829
Commissions paid (8) (4) (14)
Net sales revenue 30,655 29,854 59,815
Cost of sales (27,948) (25,530) (54,544)
On-mine (16,672) (16,347) (33,772)
Cash operating costs (15,105) (14,310) (29,918)
Depreciation (1,567) (2,037) (3,854)
Purchase of metals (6,704) (5,110) (10,247)
Smelting (1,630) (1,586) (3,403)
Cash operating costs (1,332) (1,353) (2,886)
Depreciation (298) (233) (517)
Treatment and refining (1,687) (1,637) (3,381)
Cash operating costs (1,327) (1,295) (2,678)
Depreciation (360) (342) (703)
(Decrease)/increase in metal inventories (151) 438 (1,114)
Other costs (note 4) (1,104) (1,288) (2,627)
Gross profit on metal sales 2,707 4,324 5,271
Gross profit margin (%) 8.8 14.5 8.8
4. OTHER COSTS
Other costs comprises the following principal categories:
Share-based payments - other share schemes 161 137 310
Share-based payments - The Kotula Trust (Group ESOP) - 31 31
Corporate costs 161 257 483
Royalties 234 267 321
Contributions to education and community development 72 138 490
Research 102 127 330
Transport of materials 208 158 318
Exploration 50 49 144
Other 116 124 200
1,104 1,288 2,627
5. OTHER NET EXPENDITURE
Other net expenditure comprises the following principal categories:
Net realised and unrealised foreign exchange gains 122 282 791
Project maintenance costs1 (61) (67) (124)
Restructuring and other related costs (344) (345) (996)
Profit on disposal of property, plant and equipment; and conversion rights 1 (10) (42)
Other - net 69 70 92
(213) (70) (279)
1 Project maintenance costs comprise costs incurred to maintain land held for
future projects and costs to keep projects on care and maintenance. It also
includes the costs of the operations put onto care and maintenance once the decision was made.
% % %
6. TAXATION
A reconciliation of the standard rate of South African normal taxation to that
charged in the statement of comprehensive income is as follows:
South African normal tax rate 28.0 28.0 (28.0)
Disallowable items 1.2 2.6 1.4
Impairment of loans and investments 4.4 - 13.2
Prior year underprovision/(overprovision) 1.3 (0.1) (0.3)
Effect of after-tax share of (income)/losses from associates (0.7) 2.4 1.0
Interim effective tax rate adjustment 1.0 (6.0) -
Difference in tax rates of subsidiaries (1.7) (4.1) (0.6)
Other (0.3) (0.9) (0.4)
Effective tax rate 33.2 21.9 (13.7)
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
R millions 2016 2015 2015
7. RECONCILIATION BETWEEN PROFIT/(LOSS) AND HEADLINE EARNINGS
Profit/(loss) attributable to owners of the company 938 2,444 (12,125)
Adjustments
Net (profit)/loss on disposal of property, plant and equipment (12) 10 25
Tax effect thereon 3 (3) (7)
Profit on sale of other mineral rights and investments - (2) (3)
Tax effect thereon - - -
Impairment of available-for-sale investment in RB Plat - - 775
Tax effect thereon - - -
Impairment of investments in associates 104 - 4,082
Tax effect thereon - - -
Loss on impairment and scrapping of property, plant and equipment 15 30 10,242
Tax effect thereon (4) (8) (2,862)
Non-controlling interests' share - - (20)
Headline earnings 1,044 2,471 107
Attributable headline earnings per ordinary share (cents)
- Headline 399 945 41
- Diluted 398 943 41
8. INVESTMENTS IN ASSOCIATES
Listed
Investment in Atlatsa Resources Corporation (Atlatsa)1 - 623 -
Unlisted 3,969 7,032 3,883
Bokoni Platinum Holdings Proprietary Limited (Bokoni Holdco)1
Carrying value of investment - 719 -
Loans to associate - 28 -
Bafokeng-Rasimone Platinum Mine (BRPM)
Carrying value of investment 3,526 5,861 3,434
Richtrau No 123 Proprietary Limited
Carrying value of investment 5 5 5
Peglerae Hospital Proprietary Limited
Carrying value of investment 52 64 52
Hydrogenious Technologies GmbH
Carrying value of investment 17 - 26
Unincorporated associate - Pandora
Carrying value of investment 369 355 366
3,969 7,655 3,883
1 Equity investments in Atlatsa and Bokoni Holdco were impaired during the
year ended 31 December 2015. New loans advanced to Bokoni Holdco and
capitalised to the equity investment were impaired during the six months
ended 30 June 2016. Refer note 14.
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
R millions 2016 2015 2015
9. OTHER FINANCIAL ASSETS
Loans carried at amortised cost
Loans to Plateau Resources Proprietary Limited (Plateau) - 1,203 -
Loan to Atlatsa Holdings Proprietary Limited (Atlatsa Holdings) - 336 -
Loan to ARM Mining Consortium Limited 66 66 66
Advance to Bakgatla-Ba-Kgafela traditional community 189 171 179
Convertible notes in United Hydrogen Group Inc. 29 - -
Other 75 75 75
359 1,851 320
Available-for-sale investments carried at fair value
Investment in Royal Bafokeng Platinum Limited (RB Plat) 990 1,042 597
Investment in Wesizwe Platinum Limited 106 148 87
Food Freshness Technology Holdings 17 - 19
1,472 3,041 1,023
10. INVENTORIES
Refined metals 1,613 3,144 4,161
At cost 1,266 1,901 2,619
At net realisable value 347 1,243 1,542
Work-in-process 12,063 12,248 9,679
At cost 11,585 7,881 6,529
At net realisable value 478 4,367 3,150
Trading metal originating from third parties at fair value less costs of disposal1 14 - -
Total metal inventories 13,690 15,392 13,840
Stores and materials at cost less obsolescence provision 2,624 2,606 2,731
16,314 17,998 16,571
1 Trading metal comprises metal acquired from third parties in a refined
state, and which is valued at spot prices at the end of the reporting period.
11. INTEREST-BEARING BORROWINGS
The Group has the following borrowing facilities:
Committed facilities 22,300 22,329 22,316
Uncommitted facilities 8,881 9,547 8,928
Total facilities 31,181 31,876 31,244
Less: Facilities utilised1 (15,114) (15,285) (14,333)
Non-current interest bearing borrowings (10,904) (9,444) (12,124)
Current interest bearing borrowings (4,210) (5,841) (2,209)
Available 16,067 16,591 16,911
Weighted average borrowing rate (%) 8.57 7.29 7.91
1 Includes R9,100 million and R4,179 million owing to Anglo American SA Finance
Limited on the committed and uncommitted facilities respectively as at 30 June 2016.
Committed facilities are defined as the bank's obligation to provide funding
until maturity of the facility by which time the renewal of the facility is
negotiated. R19,657 million (30 June 2015 R18,529 million; 31 December 2015
R18,515 million) of the facilities is committed for one to five years; R2,300
million (30 June 2015 R2,300 million; 31 December 2015 R2,300 million) is committed
for a rolling period of 364 days; while the rest is committed for less
than 364 days. The Company has adequate committed facilities to meet its future
funding requirements.
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
R millions 2016 2015 2015
12. COMMITMENTS
Mining and process property, plant and equipment
Contracted for 1,206 1,844 1,256
Not yet contracted for 7,245 9,231 8,636
Authorised by the directors 8,451 11,075 9,892
Allocated for:
Project capital 4,027 6,304 4,757
- within one year 448 1,656 802
- thereafter 3,579 4,648 3,955
Stay-in-business capital 4,424 4,771 5,135
- within one year 983 3,641 2,736
- thereafter 3,441 1,130 2,399
Capital commitments relating to the group's share in associates
Contracted for 265 464 244
Not yet contracted for 1,671 1,806 1,697
Authorised by the directors 1,936 2,270 1,941
Other
Operating lease rentals - buildings 44 292 60
Due within one year 35 129 33
Due within two to five years 9 163 27
More than five years - - -
These commitments will be funded from existing cash resources, future operating
cash flows, borrowings and any other funding strategies embarked on by the
Group.
13. FAIR VALUE DISCLOSURES
This announcement does not include the information required pursuant to paragraph 16A(j) of IAS 34. The full interim report is available on the Company's
website, at the Company's registered offices and upon request.
14. IMPAIRMENT OF EQUITY INVESTMENT IN BOKONI HOLDCO AND ASSOCIATED LOAN
The Group has a 49% equity investment in Bokoni Holdco, which is equity accounted as an associate. The Group fully impaired the investment in Bokoni at 31
December 2015. During the six months ended 30 June 2016, the Group advanced further funding to Bokoni, 49% of which was capitalised to the equity
investment. 51% of the funding was recognised as a loan to Plateau at amortised cost.
In light of the difficult market conditions and negative cash flows incurred by Bokoni Platinum Mine, the Group has fully impaired its additional equity
interest in Bokoni Holdco by R104 million to reflect the recoverable amount at its value in use. This impairment is included in basic earnings but excluded
from headline earnings. The Group has further fully impaired the loan to Plateau to the value of R111 million, which impairment is included in basic and
headline earnings.
15. CHANGES IN ACCOUNTING ESTIMATE FOR INVENTORY
During the current period, the Group changed its estimate of the quantities of inventory based on the outcome of a physical count of in-process metals. The
Group runs a theoretical metal inventory system based on inputs, the results of previous counts and outputs. Due to the nature of in-process inventories
being contained in weirs, pipes and other vessels, physical counts only take place once per annum, except in the Precious Metal Refinery, where the
physical count is usually conducted every five years. The Precious Metal Refinery physical count was conducted by exception again in 2016.
This change in estimate has had the effect of increasing the value of inventory disclosed in the financial statements by R589 million (30 June 2015:
increase of R2,175 million; 31 December 2015: increase of R2,175 million). This results in the recognition of an after tax gain of R424 million (30 June
2015: after-tax gain of R1,566 million; 31 December 2015: after-tax gain of R1,566 million).
16. UNKI PLATINUM MINE INDIGENISATION PLAN
Following approval of its indigenisation plan by the Government of Zimbabwe, Anglo American Platinum signed a Heads of Agreement with the Government of
Zimbabwe in November 2012 that set out the key terms of the approved indigenisation plan for the Company's Unki mine investment. The plan has not yet been
implemented.
President Mugabe issued a press statement in early April 2016, which sought to clarify the government of Zimbabwe's position on indigenisation. In terms of
the statement, existing mining companies such as Unki, would achieve compliance with the indigenisation requirements through ensuring that at least 75% of
gross sales proceeds are spent and retained in Zimbabwe. President Mugabe concluded by stating that he had directed that the Indigenisation legislation be
amended to comply with this latest position. Amendments to the Indigenisation Act are yet to be made.
Stakeholders will be kept informed of any material developments in this regard.
17. DISPOSAL OF RUSTENBURG MINE
In 2015, Amplats entered into a sale and purchase agreement with Sibanye Rustenburg Platinum Mines Proprietary Limited (a subsidiary of Sibanye Gold
Limited) (Sibanye) for the disposal of Rustenburg Mine. The transaction required various regulatory approvals. Progress has been made in fulfilling the
conditions precedent including the approval by Sibanye shareholders and the South African Competition Authorities. The application in terms of section 11
of the MPRDA for the transfer of the relevant Mining Right and the Prospecting Right to Sibanye was submitted to the Department of Mineral Resources (DMR)
on 4 February 2016. Although it is envisaged that the transaction will become unconditional during the second half of 2016, the approval by the DMR remains
a key outstanding condition precedent and therefore Rustenburg Mine cannot be reclassified as held-for-sale at this stage.
18. POST BALANCE SHEET EVENTS
There have been no material events subsequent to 30 June 2016.
19. AUDITOR'S REVIEW
The condensed consolidated interim results has been reviewed by the Company's auditors, Deloitte & Touche. The review of the condensed consolidated interim
financial statements was performed in accordance with ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the
Entity. The auditor's review report does not necessarily report on all the information contained in this announcement. Shareholders are therefore advised
that, in order to obtain a full understanding of the nature of the auditors' engagement, they should obtain a copy of the auditor's review report together
with the accompanying financial information from the Company's registered office. Their unmodified review report on the Group's condensed consolidated
interim financial statements is available for inspection at the Company's registered office. Any reference to future financial performance, included in
this announcement, has not been reviewed or reported on by the Company's auditors.
INTERIM GROUP PERFORMANCE DATA (unaudited)
for the six months ended 30 June 2016
SALIENT FEATURES
Six months ended Year ended
30 June 30 June 31 December
2016 2015 % change 2015
Average market prices achieved
Platinum USD/oz 971 1,160 (16) 1,051
Palladium USD/oz 551 779 (29) 703
Rhodium USD/oz 679 1,133 (40) 958
Gold USD/oz 1,210 1,198 1 1,156
Nickel USD/lb 3.93 6.11 (36) 5.32
Copper USD/lb 2.12 2.42 (12) 2.35
USD basket price - Pt (net sales revenue per Pt oz sold) USD/oz Pt sold 1,632 2,157 (24) 1,905
USD basket price - PGM (net sales revenue per PGM oz sold) USD/oz PGM sold 824 1,038 (21) 939
R basket price - Pt (net sales revenue per Pt oz sold) R/oz Pt sold 25,100 25,748 (3) 24,203
R basket price - PGM (net sales revenue per PGM oz sold) R/oz PGM sold 12,679 12,394 2 11,930
Exchange rates
Average exchange rate achieved on sales ZAR/USD 15.38 11.94 29 12.71
Exchange rate at end of the period/year ZAR/USD 14.68 12.14 21 15.47
Unit cost performance
Cash on-mine cost/tonne milled R/tonne 704 737 (4) 751
Cash operating cost per refined Pt ounce1 R 22,496 20,108 12 18,790
Cost of sales per total Pt ounce sold2 R 22,886 22,019 4 22,070
Productivity
m2 per total operating employee per month3 6.74 6.53 3 6.71
Refined platinum ounces per employee4 29.7 29.5 1 33.2
Financial statistics
Gross profit margin % 8.8 14.5 (39) 8.8
Operating profit as a % of average operating assets % 7.3 11.2 (35) (9.6)
EBITDA R million 4,326 6,154 (30) (1,467)
Return on average shareholders' equity % 9.4 6.4 47 (27.0)
Return on average capital employed % 8.5 7.4 15 (11.2)
Return on average attributable capital employed % 8.7 7.9 10 (11.5)
Current ratio 1.7:1 1.6:1 6 1.9:1
Debt:Equity ratio 1:2.7 1:3.5 (23) 1:2.8
Interest cover - EBITDA times 5.9 9.4 (37) (1.2)
Debt cover ratio times 0.4 0.4 - 0.8
Net debt to capital employed % 19.6 19.6 - 24.2
Interest-bearing debt to shareholders' equity % 37.3 28.9 29 36.1
Net asset value as a % of market capitalisation % 41.2 71.6 (42) 80.1
Effective tax rate % 33.3 21.9 52 (13.7)
Market information and share statistics
Total shares in issue millions 268.2 267.8 - 268.0
Weighted average number of shares in issue millions 261.8 261.2 - 261.4
Treasury shares held millions 1.4 1.9 (26) 1.7
Market capitalisation R billion 99.0 74.0 34 50.0
Closing share price cents 36,727 27,422 34 18,534
1 Cash operating cost per refined platinum ounce excludes ounces from purchased concentrate and associated costs.
2 Total platinum ounces sold: refined platinum ounces sold plus platinum ounces sold in concentrate.
3 Square metres mined per operating employee including processing, but excluding projects, opencast and tailings retreatment employees.
4 Refined platinum ounces per employee: mined refined platinum ounces divided by own and attributable Amplats joint venture operational employees.
REFINED PRODUCTION
Six months ended Year ended
30 June 30 June 31 December
2016 2015 % change 2015
Total operations
Refined production from mining operations
Platinum 000 oz 772.8 820.5 (6) 1,836.9
Palladium 000 oz 516.7 569.7 (9) 1,238.2
Rhodium 000 oz 105.7 103.5 2 225.8
Gold 000 oz 41.6 49.6 (16) 91.5
PGMs 000 oz 1,583.4 1,661.0 (5) 3,674.7
Nickel 000 tonnes 10.3 10.3 - 21.9
Copper 000 tonnes 6.1 7.2 (15) 14.9
Chrome 000 tonnes 252.0 192.8 31 566.5
Refined production from purchases
inclusive of returns
Platinum 000 oz 235.6 282.5 (17) 621.9
Palladium 000 oz 137.2 166.1 (17) 356.7
Rhodium 000 oz 32.7 38.4 (15) 79.4
Gold 000 oz 8.6 10.9 (21) 21.5
PGMs 000 oz 474.0 550.5 (14) 1,193.7
Nickel 000 tonnes 1.8 1.8 - 3.9
Copper 000 tonnes 0.9 1.0 (10) 2.2
Chrome 000 tonnes - - - -
Total refined production
Platinum 000 oz 1,008.4 1,103.0 (9) 2,458.8
Palladium 000 oz 653.9 735.8 (11) 1,594.9
Rhodium 000 oz 138.4 141.9 (2) 305.2
Gold 000 oz 50.2 60.5 (17) 113.0
PGMs 000 oz 2,057.4 2,211.5 (7) 4,868.4
Nickel - Refined 000 tonnes 12.1 11.7 3 25.4
Nickel - Matte 000 tonnes - 0.4 (100) 0.4
Copper - Refined 000 tonnes 7.0 7.9 (11) 16.8
Copper - Matte 000 tonnes - 0.3 (100) 0.3
Chrome 000 tonnes 252.0 192.8 31 566.5
PLATINUM PRODUCED (M&C)1
Six months ended Year ended
30 June 30 June 31 December
2016 2015 % change 2015
Total operations 000 oz
Mogalakwena Mine 207.8 204.3 2 392.5
Amandelbult Mine 217.1 189.0 15 437.5
Unki Platinum Mine 36.4 32.2 13 66.5
Twickenham Project 3.0 5.1 (41) 13.0
Joint ventures 255.3 232.2 10 482.7
Rustenburg Mine 218.7 243.6 (10) 485.4
Union Mine2 75.5 65.5 15 141.1
Purchases from third parties and associates 138.9 153.2 (9) 318.6
M&C platinum production 1,152.7 1,125.1 2 2,337.3
Pipeline stock adjustment 59.9 133.3 (55) 133.3
1,212.6 1,258.4 (4) 2,470.6
Refined platinum production (excl. toll refined metal) 1,008.4 1,102.9 (9) 2,458.7
1 Platinum in concentrate produced and purchased
2 Includes slag tailings at Mortimer Smelter (closed in Q3 2015).
RESULTS COMMENTARY 2016
DELIVERING ON OUR STRATEGY TO MANAGE FOR THE CURRENT ENVIRONMENT AND PREPARE FOR THE FUTURE
Managing the business for the current environment
Cash improvement initiatives, stringent cost control and disciplined capital allocation to mitigate mining inflation and low PGM price environment
Generating free cash flow and deleveraging the balance sheet
Progress and delivery of value driven strategy
Operational excellence to maximise potential of high quality PGM asset
Repositioning the portfolio to create a high margin and attractive portfolio
Prepare for the future by committing to market development, mining innovation, and people and communities
ANGLO AMERICAN PLATINUM'S STRATEGY
Restructuring
Anglo American Platinum continues to make progress in implementing its value driven strategy and delivering on promises. Since 2013, the Company has
reduced unprofitable platinum production by over 350 koz arising from placing Marikana on care and maintenance, the consolidation of Rustenburg mines from
five to two mines and Union from two to one mine, closure of the Union declines, and the restructuring at Bokoni placing the unprofitable Vertical and UM2
shafts on care and maintenance.
Significant headcount reductions have occurred since the start of the restructuring in 2013, ensuring that the business across our operations and support
services is rightsized to service a smaller and less complex organisation. Operational efficiencies have enabled production volumes to be sustained without
the need for capital.
The Company has identified R1.0 billion of overhead cost savings through the reduction of 400 managerial positions, resulting in R200 million per annum of
overhead labour cost savings, and R800 million of non-labour overhead savings. In H1 2016, R0.4 billion of these overhead savings had been achieved with
the full R1 billion run rate to be achieved by Q4 2016.
The Twickenham project continued to make substantial cash losses and unlikely in the current environment to generate positive cash flow. As a result, the
decision was taken to place Twickenham on care and maintenance, with 1,000 positions identified to exit the project, reducing the cash losses made in 2015.
Union Mine needed to align headcount with the smaller operation as a result of restructuring. A further 1,000 positions were also identified to exit
Union Mine. The Company embarked on a section 189 process in H1 2016 which concluded on 30 June 2016. Through retrenchment mitigation plans, a number of
employees left the organisation through voluntary separation packages, early retirement, reskilling, redeployment to other operations where vacancies were
left open as well as natural attrition. Only a limited number of employees had to be retrenched. In total the cost of the restructuring amounted to c.R150
million and will result in annual cost benefits of R320 million per annum.
Repositioning the portfolio
One of the core pillars of the Anglo American Platinum strategy is to complete the repositioning of the portfolio. The Company aims to own and operate the
best assets in the PGM industry, moving down the cost curve and increasing the contribution from mechanised mining. The retained portfolio will consist of
Mogalakwena, Amandelbult, Unki, and our JV operations, BRPM, Mototolo and Modikwa and the processing assets. The portfolio will comprise at least 70%
mechanised production resulting in lower costs, a more highly skilled work force, safer operations, a less complex organisation and more modern mining
operations. The consequence of this strategy is that we are in the process of exiting Rustenburg, and will exit Union, Bokoni, Pandora and Kroondal.
Update on the disposal of Rustenburg Operations to Sibanye
The announcement of the disposal of the Rustenburg Operations (the Transaction) on 9 September 2015 to a subsidiary of Sibanye Gold Limited (Sibanye) was a
significant step in transitioning the portfolio, allowing the Company to better focus its management and capital allocation. Progress continues to be made
towards fulfilling the conditions precedent of the Transaction, and key steps have been made including:
- Sibanye obtaining shareholder approval on 18 January 2016, as per JSE Listing Requirements;
- South African Competition Authorities approving the Transaction in accordance with the Competition Act on 16 March 2016; and
- Sibanye and Anglo American Platinum completing various ancillary agreements on separation areas.
The application in terms of section 11 of the MPRDA for the transfer of the relevant Mining Right and the Prospecting Right to Sibanye was submitted to the
Department of Mineral Resources (DMR) on 4 February 2016. Although it is envisaged that the Transaction will become unconditional during the second half of
2016, the Section 11 approval remains the key outstanding condition precedent for the completion of the Transaction.
Union
As a result of the implementation of a revised and optimised mine plan, including reducing loss-making production and various cost reduction initiatives,
the mine has significantly improved its financial performance. The sales process continues and the Company will update the market with further information
as appropriate.
Bokoni
Technical work to review the mine extraction strategy and to develop a path towards a sustainable and optimised operation, in collaboration with our
partner, is well advanced. Following the closure of Vertical and UM2 shafts and reducing headcount by a third, Bokoni is implementing its new optimised
mine plan. Discussions with our partner to agree the most appropriate exit for Anglo American Platinum are ongoing.
Pandora
The Company continues to assess options to exit its stake in Pandora.
OPERATIONAL EXCELLENCE
Safety, Health and Welfare
Tragically we had four losses of life due to work related incidents during the first half of 2016. Mr. Mlamuli Cornelius Kubheka and Mr Mveliso Ntamehlo
were fatally injured in a winch related incident at Amandelbult on 26 April 2016. Mr Tamsanqa Ngqambiya sustained fatal injuries in a fall of ground at
Rustenburg on 3 June 2016. Mr Pieter Henrico was injured when struck by a rock conveyance at Rustenburg on 31 March 2016 and passed away on 9 July 2016.
Our deepest condolences go to the families, friends and colleagues of Mr Kubheka, Mr Ntamehlo, Mr Ngqambiya and Mr Henrico. We are conducting independent
investigations into these incidents and will incorporate the learnings into our Safety, Health and Environmental strategy, as well as intensify
the focus on critical controls.
The tragic fatal incidents came after a record fatality-free period of 323 days, highlighting the Company's focus on improving safety. Anglo American
Platinum's lost-time-injury-frequency-rate (LTIFR) was 0.75, a record performance, reducing 28% compared to the LTIFR of 1.04 in the first half of 2015
(comparative period). The Company continues to strive for zero harm, and has a well-established safety strategy in place to drive this ambition.
Significant efforts have been made to improve our disease awareness and prevention programmes. The Company has seen a significant increase in employee
participation in the Disease Management Programme. The encouraging uptake of anti-retroviral treatment has also increased during the year, with early signs
of a reduction of HIV/AIDS and tuberculosis related deaths. The Company has implemented support mechanisms, and increased our tuberculosis prevention
efforts through various awareness and social campaigns, underpinned by active management of cases.
OPERATIONAL PERFORMANCE
The operational performance of the Company improved with platinum production (on a metal in concentrate basis) increasing from 1,125 koz to 1,153 koz, a 2%
increase versus the comparative period. Retained own mine operations, excluding projects, saw an 8% improvement in platinum production to 461 koz.
Mogalakwena
Production from Mogalakwena increased to 208 koz, a 2% improvement. Mogalakwena had a strong milling performance which increased 6% year-on-year partly
offset by the return to lower normalised grades. Expected production for the full year remains at 400 koz including the concentrate which is treated at
Baobab concentrator. Cash operating costs increased as a result of inflationary increases, exacerbated by the weakening of the Rand (c.25% of Mogalakwena's
overall cost base is US Dollar related). Mogalakwena continued to produce cash operating margins of 49% and produced R2.1 billion of operating free cash
flow.
Mogalakwena has increased production from 305 koz in 2012 to 392 koz in 2015 through operational efficiencies, without the need for expansion project
capital. Previously it was anticipated that the next phase of scaling the mine was to increase production from 360 koz to 420 koz through a debottlenecking
of the concentrator. However, given the excellent mining performance, the debottlenecking project is being rebased to take into account the latest
operational performance.
Amandelbult
Amandelbult production increased by 15% to 217 koz due to operational efficiency improvements from underground operations, and production from the new UG2
opencast area, which contributed 18 koz. The cash operating cost per platinum ounce decreased by 3% year-on-year to R18,425 per ounce. The lower unit cost
was achieved through increased volume and the benefits of labour reductions during the 2015 restructuring process. Amandelbult delivered R916 million of
operating free cash flow for the period.
The new chrome plant at Amandelbult was commissioned in June 2016 and is expected to reach steady state production by the end of H1 2017. The R400 million
plant is expected to generate additional free cash flow of c.R350-400 million per annum (based on current prices and FX rates) once it reaches steady
state.
The Tumela Upper section which accounts for c.100 koz of annual production will reach the end of its life by 2020-2022. The best solution was previously
thought to be to replace Tumela Upper through sinking the Tumela 5 vertical shaft. As Dishaba and Tumela mines were consolidated to simplify the business
and reduce overhead, new options for replacement ounces were developed looking at the two mines as one complex. Recent studies have indicated that there is
a lower capital option to replace the depleting Tumela Upper. The pre-developed UG2 reef at Dishaba has remained unmined to date and will only require
limited stay-in-business (SIB) capital for infrastructure upgrades and development. The UG2 reef at Dishaba has a good prill split with high platinum
content relative to other UG2 ore reserves across the Western Bushveld. This strategy ensures that all major capital projects at Amandelbult will be
delayed post 2020.
Unki
Production from Unki in Zimbabwe increased by 13% to 36 koz, mainly due to an increase in milled volumes through mining production efficiency improvements,
as well as an increase in grade through improved mining height control. Higher volumes and rigorous cost control led to a 15% reduction in cash
operating costs to USD1,680 per platinum ounce. However, in Rand terms, cash operating cost per platinum ounce increased to R25,832 reflecting the
continued weakness of the Rand against the US Dollar. Unki generated R73 million of operating free cash flow. A feasibility study for the construction
of a smelter using equipment readily available within the Company is complete. Construction is expected to begin during Q3 2016 once all the remaining
regulatory approvals have been secured. Commissioning of the smelter is expected during H2 2018.
Joint ventures and third parties
Platinum production from Joint Ventures, inclusive of both mined and purchased production, increased by 8% to 388 koz. All mines showed year-on-year
improvements with the exception of Bokoni. Modikwa production increased 19% due to improved crew efficiencies and commencement of South 2 Phase 2 shaft.
BRPM production increased 16% due to start of production at Styldrift shaft and improved North Shaft. Mototolo production increased 11% and benefited from
increased throughput, increased grade and improved concentrator recoveries. Kroondal achieved the best first half performance since inception up 6% to 137
koz due to strong mining performance and concentrator plant recovery improvements. Production at Bokoni was down 16%. However, on a normalised basis,
accounting for the closure of the unprofitable UM2 and Vertical shafts in Q4 2015, Bokoni saw an increase in production despite the two fatalities and
community unrest which caused a loss of ten production shifts.
Platinum ounces purchased from third parties decreased by 76% year-on-year from 25 koz to 6 koz as a result of the termination of certain contracts in
2015.
Non-core operations - Rustenburg and Union
Platinum production from Rustenburg, including the Western Limb Tailings Retreatment (WLTR), decreased by 10% to 219 koz. Lower production was due to
section 54 safety stoppages, mining through difficult ground areas and marginally lower grade. This was partially offset by an improvement in production
from the WLTR which increased by 13% to 26 koz, in part due to new production from the East tailings dam. Rustenburg generated R439 million of operating
free cash flow, while the cash operating cost increased by 10% to R21,920 per platinum ounce. The unit cost increase was as a result of lower volumes,
notwithstanding the implementation of cost saving initiatives.
Platinum production from Union increased 15% to 75 koz, the mine's best performance since 2013, as a result of implementation of the optimised mine plan
and productivity improvements. This was achieved despite the closure of the decline sections which removed c.60 koz of annual production and closure of
marginal production areas. Union generated R212 million of attributable operating free cash flow, while the cash operating cost decreased by 23% to R19,310
per platinum ounce. The unit cost reduction was achieved through increased volumes, benefiting from the restructuring process and cost saving initiatives
on mining materials.
Refined production and sales
Refined platinum production decreased by 9% to 1,008 koz owing to a section 54 safety stoppage at the precious metal refinery (PMR) in Q1 2016 which
stopped production for 12 days and impacted production build-up for a further 37 days. The PMR has recovered to steady state and made up most of the
shortfall in production. The remainder of the shortfall in refined production is expected to be recovered in H2 2016.
Refined platinum sales volumes increased by 5% to 1,221 koz despite the reduction in refined production in the period. Platinum sales were higher than
refined production by 213 koz, and were delivered through the drawdown of refined inventory and some market activities. A limited number of these market
instruments are due to close out in Q3 2016.
The annual physical stock count of in-process metals resulted in the Company increasing its estimate of the quantity of inventory by an additional 60 koz
of platinum and 26 koz of palladium. This is significantly lower than the additional inventory found in the stock count process in the comparative period
which was abnormally high and resulted in an additional 133 koz of platinum and 75 koz of palladium.
Section 54 safety stoppages have impacted production in the period across almost all operations. The Principal and Chief Inspectors continue to be engaged
to ensure the impact of these notices can be limited and that Section 54s are only used as a last resort by the regulator.
FINANCIAL PERFORMANCE
Overview
Earnings before interest and tax (EBIT), after normalising for stock gains in both H1 2015 and H1 2016, increased by 12% to R1.5 billion. The 2015 earnings
benefited from a pre-tax stock gain of R2.2 billion compared to R0.6 billion in 2016. Net debt reduced by R2.9 billion to R9.9 billion.
The decline in US Dollar metal prices was partly offset by a weaker Rand resulting in the Rand basket price per platinum ounce ending 3% weaker at R25,100,
compared to R25,748 in H1 2015.
The Company's cash operating costs of R17.8 billion increased by 5%, well below the level of mining inflation, as a result of cost reduction initiatives
and benefits from the 2015 restructuring process.
Unit costs at R19,436 per platinum ounce increased by 2% over R19,095 achieved in H1 2015.
Sales and working capital
Net sales revenue increased by 3% to R30.7 billion, primarily due to an increase in sales volumes of platinum and despite a weaker Rand basket price.
Refined platinum sales for the period increased to 1,221 koz, an increase of 5%, however sales of refined palladium and rhodium decreased by 2% and 7%
respectively. Nickel sales increased by 5% as a result of an increase in production from Mogalakwena.
The average US Dollar basket price per platinum ounce sold decreased by 24% in 2016 to USD1,632, versus USD2,157 achieved in 2015. The average US Dollar
sales price achieved on all metals declined, with platinum down by 16% to USD971 per ounce; palladium down by 29%, rhodium down by 40%, nickel down by 36%
and copper down by 12%.
The average Rand/US Dollar exchange rate weakened by 29% to R15.38/USD from the R11.94/USD average during the comparative period in 2015. After taking into
account the effect of the weakening of the Rand against the US Dollar, the average realised Rand basket price per platinum ounce was 3% weaker at R25,100.
Working capital decreased by R1.3 billion to R12.3 billion as at 30 June 2016. This is a further decrease following the R1.0 billion decrease in 2015.
Working capital days decreased to 43 days compared with 76 in 2015. The decrease was mainly due to extending creditor payment periods for key suppliers.
Costs
Cost of sales increased by 9%, from R25.5 billion to R27.9 billion mainly as a result of an increase in cash operating cost by R1.0 billion, R1.6 billion
higher costs for purchase of metals and R0.6 billion movement in metal inventory, partly offset by lower overhead costs of R0.4 billion and lower
amortisation of R0.4 billion. R0.8 billion of purchased metals relating to market activities will reverse when the instruments are closed out.
Costs for purchases of metal increased by 31% to R6.7 billion. The higher costs are due to leasing and buying of metals to fill contractual sales
obligations post the section 54 safety stoppage at the PMR, the weaker Rand/US Dollar exchange rate and marginally higher volumes of metals purchased,
partly offset by lower US Dollar metal prices used in determining the cost of purchased metals. R0.8 billion of purchased metals relating to market
activities will reverse when the instruments are closed out.
The cash operating cost per platinum ounce (excluding projects) was R19,436, an increase of less than 2% over H1 2015 and less than 1% over 2015.
EBIT
EBIT amounted to R2.1 billion, compared to R3.5 billion in H1 2015, principally due to a R1.6 billion lower pre-tax stock gain in 2016. Therefore, on a
normalised basis, EBIT increased by 12% from R1.3 billion to R1.5 billion. Positive contributions to normalised EBIT included the weakening of the Rand
against the US Dollar contributing R5.0 billion, lower costs of R1.4 billion, which was partly offset by lower prices of R4.6 billion and lower sales
volumes, in particular palladium and rhodium.
Cash flow
Despite the decline in the rand PGM basket price in 2016, the Company generated free cash flow from operations of R3.2 billion. This was delivered after
paying for capital expenditure and capitalised waste stripping of R2.0 billion; taxes of R0.4 billion; interest of R0.7 billion; funding to associates of
R0.3 billion and other expenditures of R0.1 billion.
Capital expenditure
Total capital expenditure (excluding capitalised waste stripping at Mogalakwena) was R1.4 billion, a decrease of 15% against the R1.6 billion spent in the
comparative period. SIB capital expenditure was in line at R1.1 billion, and project capital was R334 million, a 45% decrease as no new major projects have
been implemented. Capitalised waste stripping at Mogalakwena amounted to R616 million, an increase of R73 million.
Net debt and dividend
The balance sheet position of the Company has further improved as a result of ensuring operations are cash positive, disciplined capital allocation and
overheads are rightsized. In addition, the Company is focused on decreasing its working capital. Consequently the debt position has improved to
R9.9 billion at 30 June 2016 from R12.8 billion at 31 December 2015.
The Company has committed facilities of R22.3 billion and is comfortably within its debt covenants. R19 billion of the facilities are committed for one to
five years; R2.3 billion is committed for a rolling period of 364 days; while the rest is committed for less than 364 days. The Company has adequate
committed facilities to meet its future funding requirements.
Owing to the net debt position of the Company, and considering future capital funding requirements in an uncertain macroeconomic environment, the Board has
decided not to declare a dividend in H1 2016.
Anglo American Platinum will continue to monitor its capital requirements and to prioritise deleveraging the balance sheet before considering future
dividend payments.
Disciplined capital allocation
Disciplined capital allocation is a key priority for Anglo American Platinum. The Company has a number of high quality and high returning projects with the
ability to be at the lower end of the cost curve, however current market conditions dictate that these capital decisions be delayed until after 2017. Anglo
American Platinum is able to maintain current production in the near term without any major capital investment.
Aside from the normal quantitative and qualitative assessments, any projects will only be considered if the Company sees market demand for additional
ounces and if the Company has adequate balance sheet strength.
SIB capital allocation was re-engineered with the introduction of a specialised capital excellence team (CET), an SIB investment committee and a revised
project execution strategy in late 2014. Capital is allocated to sustain operational performance without introducing risk. The primary mission of the CET
is to review SIB projects to find optimal solutions. The SIB Investment Committee comprising representatives from Technical, Operations, Finance and
subject matter experts, scrutinise and recommend SIB projects for execution. The Project execution strategy provides for embedded professional project
execution of SIB projects at the operation at a lower cost, with more focus. These SIB tactics have resulted in a thoughtful, risk based approach,
allocating SIB capital appropriately to sustain operations.
MARKETS
Platinum
Despite the increase in platinum price over the first six months of 2016, the average price remains below 2015 levels. The platinum price rallied from a
multi-year low in US Dollar terms in January 2016 as concerns over the US and the global economy depressed the US Dollar, although it remains below
previous year levels. US monetary policy has been a key factor for the platinum price. Mixed data out of the US and wider economic concerns continue to
impact the US Federal Reserve's stance on interest rate hikes. Platinum moved higher as expectations of an interest rate hike were pushed out. Further safe
haven buying was supported by uncertainty created in financial markets following Britain's vote to leave the European Union at the end of H1 2016. Platinum
market sentiment has improved over the first six months of 2016 evidenced by the increase in platinum New York Mercantile Exchange net length of
approximately 1,400 koz to 1,800 koz.
The global platinum market is expected to remain tight in 2016 driven by constrained primary supply in South Africa. Demand growth is expected to remain
muted. Autocatalyst demand is supported by positive momentum in light vehicle sales in Western Europe, up 9%, with platinum light duty diesel loadings set
to rise again in 2016 as a result of Euro 6b implementation. Initial indications show the Chinese platinum jewellery market has stabilised and could return
to growth after a challenging 2015. Industrial applications continue to support platinum consumption alongside positive investment demand. Potential for
South African primary supply growth is limited as the low price environment weighs on development capital and operating costs. Secondary supply from
autocatalyst recycling is forecast to strengthen modestly following a fall in 2015, owing to weaker scrappage economics during last year.
Palladium
Palladium demand is forecast to remain strong, benefiting from car production growth in China, the largest gasoline market. Light duty vehicle sales in
China, c.97% gasoline share, are up 7.6% year-on-year through to the end of June, whilst US sales increased by 1.5% providing a stable base for palladium
automotive demand. Palladium ETF net metal liquidation is expected to offset some of the growth in automotive and industrial usage. However the major
liquidation seen in 2015 of 663 koz ounces is not expected to be repeated in 2016 with year-to-date liquidation amounting to 125 koz. The palladium price
in the first half of the year remained relatively range bound.
Rhodium
The rhodium market is expected to be well supplied in 2016. Autocatalyst demand is expected to benefit from tightening emissions legislation and technology
changes in China and Europe respectively, supported by automotive production growth. Industrial demand is expected to grow due to expansion in the glass
sector.
Automotive
Slow growth in global platinum autocatalyst demand is forecast in 2016. Europe is expected to lead platinum autocatalyst demand growth, more than
offsetting a decline in demand from North America and Japan. Western European light duty vehicle sales have been strong to date, up 8.5% in comparison to
the same period in 2015. Platinum usage is expected to increase with marginally higher loadings in 2016 attributable to the Euro 6b implementation. Despite
heightened media focus on diesel vehicles following news of emissions irregularities, diesel's share remains resilient at marginally under 50%. The Chinese
Heavy Duty Diesel (HDD) sector is forecast to be a growth market for platinum with demand expected to increase in 2016, albeit off a low base, through an
increase in both loadings and production. Emissions legislation is and will be the key focus in many regions going forward. For example India is moving
directly to Bharat Stage 6 legislation (Euro 6 equivalent) and China is working towards rolling out China 5 and China V rules in the light and heavy duty
markets respectively. Light duty vehicle sales in the US are up 1.5%, whilst Japan and Brazil have underperformed over the first half of the year down 6.4%
and 18.9% respectively.
The automotive industry is making concrete steps towards zero emissions through greater electrification of the passenger vehicle's powertrain. Hybrid
technology is the first step in a journey to full electric vehicles, whether powered by a battery or a fuel cell.
Sales of full electric vehicles and hybrids currently account for two million units per year from annual global volumes of 90 million light duty vehicles
but this figure is expected to grow to just under 10 per cent of the market over the next decade. During this period, the internal combustion engine -
whether diesel or gasoline-fuelled - is expected to play a dominant role and overall forecast growth in the number of automobiles produced annually to just
under 120 million units by 2025 suggests that not only will this technology continue to be central to the automotive sector but that the number of internal
combustion engine vehicles produced each year is likely to grow over this period. With almost all of these fitted with a PGM-containing catalyst, this
should be supportive of PGM demand over this timescale.
This stage of the journey towards fully electric vehicles is also supportive of demand for our metals. Hybrid cars all use a type of combustion engine and
consequently require the use of PGM-based emissions after treatment. Further penetration of this technology at the expense of conventional vehicles
therefore presents a minimal risk of disruption to metal demand over the next decade. In the longer term, we see opportunities for fuel cell electric
vehicles (FCEV) and battery electric vehicles in different segments of the passenger vehicle market. FCEV, which utilise a platinum catalyst, currently
seem better positioned to provide greater range and ease of refuelling, and the commercialisation of this technology could provide a significant boost to
platinum demand over the longer term.
Industrial
Industrial demand provides a steady base for platinum consumption, generally growing in line with the global economy. There is potential for industrial
demand to achieve growth in excess of this in 2016. Industrial demand is typically from a combination of metal to replace in-process losses and metal for
new plant capacity. Consumption in chemical, electrical, petroleum refining and bio-medical applications is in line with expectations. The glass sector is
expected to be the primary driver of industrial growth this year due to potential expansion of capacity in both display glass and fibreglass segments. PGM
containing stationary applications using fuel cell technology are expected to grow in 2016, in particular in large power generation, residential combined
heat and power units and telecommunications, albeit off a low base.
Jewellery
The Chinese platinum jewellery sector is expected to stabilize and return to growth in 2016 after a challenging 2015. China is the largest platinum
jewellery market accounting for more than 60% of global platinum jewellery demand. Platinum volumes on the Shanghai Gold Exchange (SGE) have performed well
year-to-date, up 3.7%. Using SGE volumes as a high level indicator for platinum jewellery performance, initial indications in 2016 are therefore
encouraging and are supported by market development activities. Platinum Guild International (PGI) is our conduit for market development efforts in the
jewellery markets. Jewellery companies supported by the PGI continue to benefit from these initiatives, outperforming other market participants in key
regions. Targeted PGI marketing efforts in India continue to support this growth market for platinum jewellery which grew by nearly 30% in 2015. This trend
is expected to be extended in 2016.
Investment
Following an exceptional year in 2015 for physical investment in platinum bars in Japan of 630 koz, positive momentum was carried into 2016 with
approximately 320 koz of buying in the first six months of the year. Buying was strong in the first quarter before slowing due to an increase in the
platinum price. Liquidation of 230 koz in platinum Exchange Traded Funds (ETFs) in 2015 was symptomatic of wider market sentiment last year. In contrast
platinum ETF holdings were fairly steady in the first six months of 2016, declining by only 35 koz. Weak sentiment towards palladium has extended into 2016
as evidenced by the liquidation in ETF holdings, albeit at a slower rate than last year. Palladium year-to-date liquidation amounts to 125 koz. The World
Platinum Investment Council (WPIC) has increased its range of market development activities to promote platinum as an investment product. In the first half of
2016 the Austrian Mint issued its first platinum coin as part of the prestigious Vienna Philharmonic range.
PREPARING FOR THE FUTURE
Market development
Market development forms a core part of Anglo American Platinum's commercial strategy. The Company has continued to increase its focus to stimulate demand
across jewellery, investment and industrial segments.
In the jewellery sector, the industry-funded PGI continues to show success with PGI-supported retail partners outperforming their industry peers in China,
the US and Japan. In India, a new brand driven approach that leverages co-funding from retailers and which sets aggressive targets/criteria for retailers
to qualify as partners is proving successful. The PGI-owned bridal jewellery brand, Evara, has proven hugely successful with platinum jewellery demand in
India growing from 23 koz in 2008 to 225koz in 2015.
On the industrial front the objective is to accelerate the uptake of fuel cell electric vehicles (FCEVs) and to increase demand not only for platinum, but
also for the minor metals: rhodium, ruthenium and iridium. The Company continues to focus on FCEV activities that support consumer perception and hydrogen
infrastructure in key markets (USA, Germany, UK) while leveraging third party funding to maintain scale and impact. In the first half of the year the
Company spearheaded a world record-setting event, with Anglo American Platinum's Hyundai iX35 hydrogen car setting the record for the world's longest
continuous journey in a fuel cell electric vehicle of 6,096 miles over six days, and the longest FCEV journey in the UK on a single tank of hydrogen,
travelling 406 miles.
The Company's PGM Investment Programme (PGMIP) also continued to invest in technologies that aim to address the high delivered cost of hydrogen which is a
key lever to enable the economic viability of hydrogen refuelling stations and hence the uptake of FCEVs. During H1 of 2016, Hydrogenious Technologies',
one of the PGMIP's portfolio companies, launched its first commercial hydrogen storage and logistics system using the innovative Liquid Organic Hydrogen
Carrier technology. Hydrogenious Technologies also signed a deal with United Hydrogen Group (UHG), a hydrogen distribution company based in the United
States, which is also part of the PGMIP portfolio. The technology will increase delivery ranges and decrease the operating costs of hydrogen logistics for
UHG. Further, the agreement enables Hydrogenious Technologies to enter the USA, which represents over 50% of the global hydrogen market, and will catalyse
the rollout of hydrogen refuelling infrastructure for FCEVs.
On the investment segment, the industry-funded WPIC continues to make progress and has become a trusted source of objective and reliable market data to
platinum investors worldwide. The WPIC continues to stimulate investor demand for physical platinum globally through targeted market initiatives, this
includes for example the exclusive agreement between WPIC and Rand Merchant Bank to extend the global reach of platinum bullion coin custodial certificates
to retail and institutional investors. Furthermore WPIC have established a partnership with Valcambi, a precious metals refiner, to increase the
availability of platinum bar and coin products for the global retail market. This partnership provides a platform for platinum investment growth in the US.
Mining innovation
Anglo American Platinum continues to invest in new mining and processing technology (NMT) in key areas which could unlock value in mining and processing,
as well as support the strategy to modernise the Company. The Company moved the NMT centre from Rustenburg to Twickenham (Hackney shaft) which will provide
the platform to prove the value of advancements in technologies in an operational environment. The Company has started testing the advanced Extra Low
Profile and Ultra Low Profile equipment which enables mechanised mining of narrower stoping widths of 1.6m and 1.2m respectively. Locomotives and Dozers
fuelled from fuel cell technology have also been developed.
People and communities
In support of the Company's strategy, an integrated and holistic human resource development plan is in place that takes cognisance of the changing make-up
and skills sets that will be required of the workforce as operations increasingly modernise over time. As an element of this plan, employees and learners
are provided the opportunity to obtain skills required to perform roles within the Company and advance along defined career paths, based on opportunity and
suitability.
Employee financial well-being is a critical component of overall employee wellness and ensuring employees are focused and productive at work. Therefore the
Company continues to make good progress with Summit Financial Solutions (Summit) on the implementation of its employee financial wellness program,
Nkululeko. The program is intended to address high levels of personal debt and challenge irresponsible lending practices to employees. To date 7,809
employees have approached the Nkululeko financial consultants for advice on how to reduce debt and 1,490 employees are on formal debt counselling programs,
with c.R30 million saved for employees in annual debt installments. The number of emolument attachment orders have been reduced from 5,877 in 2011 to 1,088
in 2016 and court proceedings, against certain debt administrators to stop abusive practices are continuing.
The Company is focussed on investing in, and building relationships with employees and surrounding communities. The Company has invested over R300 million
per annum in the development of host communities around our operations to ensure harmonious relationships, and to ensure our employees live in stable and
serviced communities. Despite these efforts, there remains a tangible back-log in the provision of services in many of the communities around operations
and the Company will continue to work with government and communities to reduce this back-log over time.
Mining Charter
The Mining Charter provided guidelines on the key milestones of mining industry transformation that had to be achieved between 2004 and 2014. It included a
range of transformation pillars on ownership, human resources development, employment equity, procurement and enterprise development, housing and living
conditions, mine community development, and sustainable development and growth. The beneficiation pillar was suspended pending finalisation of policy and
legislation on beneficiation.
Anglo American Platinum submitted its Mining Charter compliance report ahead of the 14 March 2015 deadline to the DMR using the prescribed template. Anglo
American Platinum has not received any notification or report from the DMR setting out the DMR's assessment of progress in achieving the targets set out in
the Mining Charter, and the Company remains of the view that it has met its targets as contained in the Mining Charter.
Following the publication for comment of the Reviewed Broad Based Black-Economic Empowerment Charter for the South African Mining and Minerals industry on
15 April 2016, Anglo American plc submitted comprehensive comments, which comments contain material concerns. Anglo American Platinum's comments were
incorporated into the submission made by Anglo American plc. We continue to participate in high level discussions with the DMR to achieve a sustainable
outcome for the South African mining industry.
Wage negotiations
The wage agreement that was in place for the period 2013-2015, expired on 30 June 2016. All wage demands from the negotiating Unions have been received and
new wage negotiations are currently underway. In advance of the wage negotiations, the Company has been communicating at various levels including bilateral
conversations by the CEO with the senior leadership of the Unions, and at 'Future Forums' with employees. These engagements are aimed at reaching a shared
common understanding of the current economic environment the Company is operating in. The Company will retrospectively apply the agreed increases from 1
July 2016.
MINERAL RESERVES AND RESOURCES STATEMENT
There have been no material changes to the mineral resource and reserve estimates as disclosed in the 2015 Ore Reserves and Mineral Resources report.
OUTLOOK
In view of the current and expected market conditions, Anglo American Platinum is proactively aligning its business to manage through the current
environment. Stringent controls have been placed on costs, and restructuring recently completed at Union Mine and Twickenham project will deliver
additional cost savings. Cash flow generation remains a key focus, and in light of the current market conditions, project capital expenditure remains on
projects-in-process. The Company looks to strengthen its financial position to enable the business to manage through the cycle and be able to execute on
high returning projects when the market conditions require more metal.
Market outlook
Anglo American Platinum continues to focus on delivering on the strategy of value and not volume; repositioning the portfolio; exiting non-
core assets and continuing to focus on market growth opportunities while its operations deliver on their full potential. Macro-economic factors, including
the global economic outlook and wider monetary policy stances are expected to be key in platinum price determination in the short term. After a recovery in
South African production in 2015, supply growth is expected to be limited in the near term as industry capital expenditure is constrained in the current
low price environment. Secondary supply is set to return to near normal levels in 2016 and steady growth thereafter, in line with expectations. Platinum
usage and consumption is underpinned by the autocatalyst and industrial demand segments in the short to medium term, with potential for growth in jewellery
and investment markets. Strategic market development activities in these demand segments are pivotal to sustaining and growing these markets. Similar to
2015, platinum markets are expected to remain tight.
Operational outlook
Platinum production has a seasonal production profile that is skewed to the second half of the year. This is due to a higher proportion of public holidays
occurring in the first half of the year, as well as normal stock takes and maintenance occurring in the first half of the year. Production is
likely to be at the upper end of our guided range of 2.3 - 2.4 million ounces.
Financial outlook
Cost inflation remains a challenge, with labour, electricity and foreign currency denominated input costs under continued inflationary pressure. Mining
inflation currently runs at around South African CPI +1.3%. Anglo American Platinum has implemented a number of cost reduction initiatives which aim to
offset mining inflation. As such, the Company reiterates its estimates that cash unit costs will be between R19,250 and R19,750 per platinum ounce (M&C)
which equates to a 0% to 2.5% increase in 2016, significantly below mining inflation.
The Company's project portfolio has been aligned to the strategic proposals of the Portfolio Review released in 2013. Capital investment decisions have
been delayed to after 2017, and will be dependent on market demand for additional ounces, and the balance sheet strength of the Company. Capital
expenditure guidance for the year has slightly reduced to between R3.5 billion to R4.0 billion excluding capitalised waste stripping for 2016 (previously
R3.7 billion to R4.2 billion). SIB capital is between R2.7 billion and R3.0 billion with project capital estimated between R0.8 billion and R1.0 billion.
In addition, capitalised waste stripping will be around R1.2 billion for the year. SIB capital expenditure and project capital expenditure are expected to
remain at similar levels for 2017.
The Rand remained weak against the US Dollar during the first half of 2016, and our earnings remain highly geared to the Rand/US Dollar exchange rate.
Johannesburg, South Africa
22 July 2016
ADMINISTRATION
Executive directors
CI Griffith (Chief executive officer)
I Botha (Finance director)
Independent non-executive directors
MV Moosa (Independent non-executive chairman)
RMW Dunne (British)
NP Mageza
NT Moholi
D Naidoo
JM Vice
Non-executive directors
M Cutifani (Australian)
R Medori (French)
AM O'Neill (British)
AH Sangqu
PG Whitcutt (Alternate to R Medori)
COMPANY SECRETARY
Elizna Viljoen
elizna.viljoen@angloamerican.com
Telephone +2711 638 3425
Facsimile +2711 373 5111
FINANCIAL, ADMINISTRATIVE, TECHNICAL ADVISERS
Anglo Operations Proprietary Limited
CORPORATE AND DIVISIONAL OFFICE, REGISTERED OFFICE
AND BUSINESS AND POSTAL ADDRESSES OF THE
COMPANY SECRETARY AND ADMINISTRATIVE ADVISERS
55 Marshall Street, Johannesburg 2001
PO Box 62179, Marshalltown 2107
Telephone +2711 373 6111
Facsimile +2711 373 5111
+2711 834 2379
SPONSOR
Rand Merchant Bank
a division of FirstRand Bank Limited
REGISTRARS
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown 2107
Telephone +2711 370 5000
Facsimile +2711 688 5200
AUDITORS
Deloitte & Touche
Buildings 1 and 2, Deloitte Place
The Woodlands, Woodlands Drive
Woodmead
Sandton 2196
INVESTOR RELATIONS
Emma Chapman
emma.chapman@angloamerican.com
Telephone +2711 373 6239
FRAUD LINE - SPEAKUP
Anonymous whistleblower facility
0800 230 570 (South Africa)
angloplat@anglospeakup.com
25 July 2016
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