Wrap Text
Summarised preliminary audited consolidated financial results for the year ended 31 December 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)
SUMMARISED PRELIMINARY AUDITED CONSOLIDATED FINANCIAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2016
Anglo American Platinum Limited's summarised consolidated audited financial results for the year ended 31 December 2016 have been independently audited by
the Group's external auditors. The preparation of the Group's audited results for the year ended 31 December 2016 was supervised by the Finance Director,
Mr I Botha.
KEY FEATURES
Lost-time injury-frequency rate (LTIFR) per 200,000 hours worked
(2015: 0.98)
0.73
Refined platinum production
(2015: 2.46 Moz)
2.33 Moz
Produced platinum production
(2015: 2.34 Moz)
2.38 Moz
Headline earnings
(2015 restated: R126m loss)
R1,867m
Net debt
(2015: R12,769m)
R7,319m
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Audited
2016 2015
(Note 19)*
Notes Rm Rm
Gross sales revenue 61,976 59,829
Commissions paid (16) (14)
Net sales revenue 2 61,960 59,815
Cost of sales 3 (56,096) (54,584)
Gross profit on metal sales 3 5,864 5,231
Other net expenditure 5 (600) (514)
Loss on impairment and scrapping of property, plant and equipment (22) (10,242)
Market development and promotional expenditure (683) (800)
Operating profit/(loss) 4,559 (6,325)
Impairment of investments in associates (283) (4,082)
Impairment of non-current financial assets (111) (1,792)
Impairment of available-for-sale investment in Royal Bafokeng Platinum (RB Plat) - (775)
Share-based payment expense for facilitation of BEE investment in Atomatic 17 (156) -
Loss on disposal of Rustenburg Mine 18 (1,681) -
Interest expensed (1,329) (1,049)
Interest received 149 98
Remeasurements of loans and receivables 27 40
Losses from associates (net of taxation) (115) (529)
Profit/(loss) before taxation 1,060 (14,414)
Taxation 6 (364) 1,979
Profit/(loss) for the year 696 (12,435)
Other comprehensive income, net of income tax
Items that will be reclassified subsequently to profit or loss (465) 1,731
Deferred foreign exchange translation (losses)/gains (769) 1,582
Share of other comprehensive gains from associates - 49
Actuarial loss on employees' service benefit obligation (6) (4)
Net gains/(losses) on available-for-sale investments 310 (671)
Recycling of cumulative losses on impairment of available-for-sale investment - 775
Total comprehensive income/(loss) for the year 231 (10,704)
Profit/(loss) attributable to:
Owners of the Company 632 (12,358)
Non-controlling interests 64 (77)
696 (12,435)
Total comprehensive income/(loss) attributable to:
Owners of the Company 167 (10,627)
Non-controlling interests 64 (77)
231 (10,704)
Headline earnings/(loss) 7 1,867 (126)
Number of ordinary shares in issue (millions)# 268.3 268.0
Weighted average number of ordinary shares in issue (millions) 261.9 261.4
Weighted average number of diluted ordinary shares in issue (millions) 263.0 262.2
Earnings/(loss) per ordinary share (cents)
- basic 241 (4,728)
- diluted 240 (4,714)
* Prior year restated.
# Includes the shares issued as part of the community economic empowerment transaction, but excludes the shares held by the Group ESOP and the shares held
by various share schemes.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Audited Audited
2016 2015 2014
(Note 19)* (Note 19)*
Notes Rm Rm Rm
ASSETS
Non-current assets 51,662 52,205 66,686
Property, plant and equipment 38,574 39,869 44,297
Capital work in progress 4,892 6,548 10,736
Investment in associates 8 3,963 3,883 7,637
Investments held by environmental trusts 907 882 842
Other financial assets 9 3,326 1,023 3,120
Other non-current assets - - 54
Current assets 26,035 20,715 22,373
Inventories 10 16,369 16,305 17,100
Trade and other receivables 2,140 1,761 2,631
Other assets 1,554 927 1,440
Other financial assets 45 - -
Taxation 470 50 -
Cash and cash equivalents 5,457 1,672 1,202
Total assets 77,697 72,920 89,059
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 27 27 27
Share premium 22,498 22,395 21,846
Foreign currency translation reserve 2,317 3,086 1,504
Available-for-sale reserve 334 24 (80)
Retained earnings 14,840 14,120 26,749
Non-controlling interests (234) (408) (210)
Shareholders' equity 39,782 39,244 49,836
Non-current liabilities 19,187 22,564 21,847
Interest-bearing borrowings 11 9,398 12,124 9,459
Obligations due under finance leases 96 94 -
Environmental obligations 1,938 2,404 2,110
Employee benefits 17 14 8
Other financial liabilities 219 - -
Deferred taxation 7,519 7,928 10,270
Current liabilities 18,728 11,112 17,376
Interest-bearing borrowings 11 3,267 2,209 6,361
Obligations due under finance leases 15 14 -
Trade and other payables 10,241 6,818 7,660
Other liabilities 4,623 2,058 2,043
Other financial liabilities 567 2 -
Share-based payment provision 15 11 19
Taxation - - 1,293
Total equity and liabilities 77,697 72,920 89,059
* Prior year restated.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEAR ENDED 31 DECEMBER 2016
Audited
2016 2015
(Note 19)*
Notes Rm Rm
Cash flows from operating activities
Cash receipts from customers 61,783 60,563
Cash paid to suppliers and employees (48,187) (49,621)
Cash generated from operations 13,596 10,942
Interest paid (net of interest capitalised) (1,071) (857)
Taxation paid (1,125) (1,821)
Net cash from operating activities 11,400 8,264
Cash flows used in investing activities
Purchase of property, plant and equipment (includes interest capitalised) (5,018) (5,152)
Proceeds from sale of plant and equipment 140 41
Proceeds on sale of mineral rights and other investments - 3
Proceeds on sale of Rustenburg Mine (net of cash disposed of) 18 1,356 -
Working capital support in respect of Rustenburg Mine 18 (1,418) -
Funding to associates (448) (739)
Acquisition of equity investment in associate (34) (23)
Acquisition of available-for-sale investment in Greyrock (36) -
Acquisition of convertible notes in United Hydrogen (39) -
Acquisition of preference shares in Baphalane Siyanda Chrome Company (BSCC) 9 (84) -
Advances made to Plateau Resources Proprietary Limited (312) (260)
Net increase in investments held by environmental trusts 2 (1)
Interest received 95 76
Growth in environmental trusts 7 6
Other advances (40) (15)
Net cash used in investing activities (5,829) (6,064)
Cash flows used in financing activities
Purchase of treasury shares for the Bonus Share Plan (BSP) (163) (120)
Purchase of Anglo American plc shares for the Amplats share schemes (7) -
Repayment of interest-bearing borrowings (1,668) (1,487)
Repayment of finance lease obligation (16) (21)
Unpaid dividends written back - 19
Funding for non-controlling interest's 26% share in subsidiary 112 -
Cash distributions to non-controlling interests (44) (121)
Net cash used in financing activities (1,786) (1,730)
Net increase in cash and cash equivalents 3,785 470
Cash and cash equivalents at beginning of year 1,672 1,202
Cash and cash equivalents at end of year 5,457 1,672
Movement in net debt
Net debt at beginning of year (12,769) (14,618)
Net cash from operating activities 11,400 8,264
Net cash used in investing activities (5,829) (6,064)
Other (121) (351)
Net debt at end of year (7,319) (12,769)
Made up as follows:
Cash and cash equivalents 5,457 1,672
Non-current interest-bearing borrowings 11 (9,398) (12,124)
Obligations due under finance leases within one year (15) (14)
Current interest-bearing borrowings 11 (3,267) (2,209)
Obligations due under finance leases (96) (94)
(7,319) (12,769)
* Prior year restated.
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Foreign
currency Available- Non-
Share Share translation for-sale Retained controlling
capital premium reserve reserve earnings interests Total
(Note 19) (Note 19)# (Note 19)#
Rm Rm Rm Rm Rm Rm Rm
Balance at 31 December 2014 (Restated) 27 21,846 1,504 (80) 26,749 (210) 49,836
Total comprehensive income/(loss) for the year (Restated) 1,582 104 (12,313) (77) (10,704)
Cash distributions to minorities (121) (121)
Shares acquired in terms of the BSP - treated as treasury shares (-)* (255) 135 (120)
Shares vested in terms of the BSP -* 353 (353) -
Shares vested in terms of the Group Employee Share Option Scheme (Kotula) -* 451 (451) -
Equity-settled share-based compensation 338 338
Shares purchased for employees (4) (4)
Unpaid dividends written back 19 19
Balance at 31 December 2015 (Restated) 27 22,395 3,086 24 14,120 (408) 39,244
Total comprehensive income/(loss) for the year (769) 310 626 64 231
Non-controlling interest's 26% share in subsidiary 112 112
Cash distributions to minorities (44) (44)
Shares acquired in terms of the 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 389 42 431
Shares purchased for employees (29) (29)
Balance at 31 December 2016 27 22,498 2,317 334 14,840 (234) 39,782
* Less than R500,000.
# Prior year restated
NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
1. The summarised consolidated financial statements are presented in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, as well as the requirements of the Companies
Act of South Africa and the JSE Limited’s Listings Requirements. The summarised consolidated financial statements also contain, at a minimum,
the information required by International Accounting Standard 34 Interim Financial Reporting. The accounting policies applied in the preparation
of the consolidated financial statements from which the summarised consolidated financial statements were derived are in terms of IFRS and consistent
with those applied in the financial statements for the year ended 31 December 2015.
The directors take full responsibility for the preparation of the preliminary report and that the summarised financial information has been correctly
extracted from the underlying audited consolidated financial statements. The preparation of the Group's audited results and the summarised consolidated
financial statements for the year ended 31 December 2016 were supervised by the Finance director, Mr I Botha CA(SA).
The consolidated financial statements from which the summarised consolidated financial statements have been extracted have been audited by the Company's
auditors, Deloitte & Touche. The consolidated financial statements and the auditor's unmodified report on the consolidated financial statements are
available for inspection at the Company's registered office.
Audited Audited Audited
Net sales revenue Operating contribution Depreciation
2016 2015 2016 2015 2016 2015
Rm Rm Rm Rm Rm Rm
2. SEGMENTAL INFORMATION*
Segment revenue and results
Operations
Mogalakwena Mine 14,227 13,864 4,785 5,174 1,813 1,600
Amandelbult Mine 10,870 9,032 1,367 841 822 755
Unki Platinum Mine 2,227 2,024 22 (62) 424 454
Twickenham Platinum Mine 215 329 (448) (742) 48 268
Modikwa Platinum Mine1 1,608 1,469 18 76 175 173
Mototolo Platinum Mine1 1,418 1,411 290 371 120 105
Kroondal Platinum Mine1 3,101 3,010 318 476 406 306
Rustenburg Mine2 9,307 10,957 410 12 299 1,096
Union Mine 3,958 3,695 596 93 253 244
Total - mined 46,931 45,791 7,358 6,239 4,360 5,001
Process tailings retreatment3 - 61 - (22) - 3
Purchased metals 15,029 13,963 1,325 1,625 269 211
61,960 59,815 8,683 7,842 4,629 5,215
Other costs (note 4) (2,819) (2,611)
Gross profit on metal sales 5,864 5,231
1 Amplats' share (excluding purchase of concentrate)
2 Effective 1 November 2016, Rustenburg Mine was disposed of.
3 Includes slag tailings retreatment at Mortimer Smelter (closed September 2015).
* Prior year restated.
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:
Purchased metals was reclassified to include tailings from a third party and exclude it from Rustenburg Mine as it did not form part of the Rustenburg Mine sale.
This resulted in the following changes to the comparative figures:
Audited Audited Audited
Net sales revenue Operating contribution Depreciation
As reported Reclassified As reported Restated Reclassified As reported Reclassified
Rm Rm Rm Rm Rm Rm Rm
Rustenburg Mine 11,117 10,957 38 56 12 1,098 1,096
Purchased metals 13,803 13,963 1,562 1,581 1,625 209 211
24,920 24,920 1,600 1,637 1,637 1,307 1,307
Audited
2016 2015
Rm Rm
3. GROSS PROFIT ON METAL SALES*
Gross sales revenue 61,976 59,829
Commissions paid (16) (14)
Net sales revenue 61,960 59,815
Cost of sales (56,096) (54,584)
On-mine (32,812) (33,913)
Cash operating costs (29,615) (29,918)
Depreciation (3,197) (3,995)
Purchase of metals and leasing activities (13,518) (10,247)
Smelting (3,515) (3,403)
Cash operating costs (2,834) (2,886)
Depreciation (681) (517)
Treatment and refining (3,619) (3,381)
Cash operating costs (2,868) (2,678)
Depreciation (751) (703)
Increase/(decrease) in metal inventories 187 (1,029)
Other costs (note 4) (2,819) (2,611)
Gross profit on metal sales 5,864 5,231
* Prior year restated.
Consists of purchased metals in concentrate, secondary metals and other metals.
4. OTHER COSTS*
Other costs consist of the following principal categories:
Overheads
Corporate costs 364 483
Contributions to education and community development 419 490
Research 251 330
Exploration 95 144
Total exploration costs 162 215
Less: Capitalised (67) (71)
Other 367 200
1,496 1,647
Direct operating overheads
Transport of metals 565 318
Royalties 493 305
Share-based payments - other share schemes 265 310
Share-based payments - the Kotula Trust - 31
1,323 964
2,819 2,611
* Prior year restated.
5. OTHER NET EXPENDITURE*
Other net expenditure consists of the following principal categories:
Realised and unrealised foreign exchange losses - non-financial items - (2)
Foreign exchange (losses)/gains on loans and receivables (184) 793
Foreign exchange gains/(losses) on other financial liabilities 34 (235)
Project maintenance costs# (233) (124)
Restructuring and other related costs (342) (996)
Loss on disposal of plant, equipment and conversion rights (23) (42)
Royalties received 16 29
Other - net 132 63
(600) (514)
# 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.
* Prior year restated.
Audited
2016 2015
Rm Rm
6. TAXATION* % %
A reconciliation of the standard rate of South African normal
taxation compared with that charged in the statement of comprehensive
income is set out in
the following table:
South African normal taxation 28.0 (28.0)
Disallowable items 9.7 1.4
Share-based payment expense for facilitation of BEE investment in Atomatic 4.1 -
Employee housing expenditure disallowed 4.3 -
Impairment of loans and investments 10.4 13.2
Prior year underprovision/(overprovision) 2.3 (0.3)
Effect of after-tax share of losses from associates 3.0 1.0
Difference in tax rates of subsidiaries (3.1) (0.6)
Impact of disposal of Rustenburg Mine (note 18) (27.5) -
Zimbabwean AIDS levy 1.3 -
Other 1.8 (0.4)
Effective taxation rate 34.3 (13.7)
* Prior year restated.
7. RECONCILIATION BETWEEN PROFIT/(LOSS) AND HEADLINE EARNINGS/(LOSS)*
Profit/(loss) attributable to shareholders 632 (12,358)
Adjustments
Net loss on disposal of property, plant and equipment 23 25
Tax effect thereon (6) (7)
Loss on impairment and scrapping of property, plant and equipment 22 10 242
Tax effect thereon (6) (2,862)
Non-controlling interests' share - (20)
Impairment of investments in associates 283 4,082
Tax effect thereon - -
Impairment of available-for-sale investment in RB Plat - 775
Tax effect thereon - -
Loss on disposal of Rustenburg Mine 1,681 -
Tax effect thereon (762) -
Profit on sale of other mineral rights and investments - (3)
Tax effect thereon - -
Headline earnings/(loss) 1,867 (126)
Attributable headline earnings/(loss) per ordinary share (cents)
Headline 713 (48)
Diluted 710 (48)
* Prior year restated.
8. INVESTMENT IN ASSOCIATES
Listed (Market value: R113 million (2015: R61 million))
Investment in Atlatsa Resources Corporation - -
Unlisted 3,963 3,883
Bokoni Platinum Holdings Proprietary Limited (Bokoni Holdco)
Carrying value of investment - -
Bafokeng-Rasimone Platinum Mine (BRPM)
Carrying value of investment 3,665 3,434
Richtrau No. 123 Proprietary Limited
Carrying value of investment 5 5
Peglerae Hospital Proprietary Limited
Carrying value of investment 56 52
Unincorporated associate - Pandora
Carrying value of investment 192 366
Hydrogenious Technologies GmbH
Carrying value of investment 45 26
3,963 3,883
Audited
2016 2015
Rm Rm
9. OTHER FINANCIAL ASSETS
Loans carried at amortised cost
Loans to Plateau Resources Proprietary Limited 201 -
Loans to Atlatsa Holdings Proprietary Limited - -
Loan to ARM Mining Consortium Limited 65 66
Advance to Bakgatla-Ba-Kgafela traditional community 200 179
Convertible notes in United Hydrogen Group Inc. 33 -
Preference share investment in Baphalane Siyanda Chrome Company (note 17) 84 -
Other 103 75
686 320
Available-for-sale investments carried at fair value
Investment in Royal Bafokeng Platinum Limited 798 597
Investment in Wesizwe Platinum Limited 161 87
Investment in Greyrock Energy Inc. 34 -
Food Freshness Technology Holdings 49 19
1,042 703
Investments at fair value through profit or loss
Deferred consideration on sale of Rustenburg Mine (note 18) 1,598 -
Total financial assets 3,326 1,023
10. INVENTORIES*
Refined metals 3,165 4,077
At cost 1,665 3,317
At net realisable values 1,500 760
Work-in-progress 10,593 9,497
At cost 5,396 7,775
At net realisable values 5,197 1,722
Trading metal originating from third parties at fair value less costs of disposal# 3 -
Total metal inventories 13,761 13,574
Stores and materials at cost less obsolescence provision 2,608 2,731
16,369 16,305
* Prior year restated.
# 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.
Facility Utilised Facility Utilised
amount amount* amount amount*
2016 2016 2015 2015
Rm Rm Rm Rm
11. INTEREST-BEARING BORROWINGS
Unsecured financial liabilities measured at amortised cost
Committed 22,286 9,430 22,316 12,490
Uncommitted 5,824 3,199 8,928 1,843
Total facilities 28,110 12,629 31,244 14,333
Deferred income - 36 - -
Total interest-bearing borrowings 28,110 12,665 31,244 14,333
Disclosed as follows:
Current interest-bearing borrowings 3,267 2,209
Non-current interest-bearing borrowings 9,398 12,124
12,665 14,333
Weighted average borrowing rate (%) 8.80 7.91
Borrowing powers
The borrowing powers in terms of the memorandum of incorporation of the holding company and its subsidiaries are unlimited.
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.
An amount of R19,657 million (2015: R18,515 million) of the facilities is committed for one to five years, R1,300 million (2015: R2,300 million) is
committed for a rolling period of 364 days, R1,000 million (2015: nil) is committed for a rolling period of 18 months while the rest is committed for
less than 364 days. The Company has adequate committed facilities to meet its
future funding requirements.
Uncommitted facilities are callable on demand.
* Includes R9,100 million (2015: R9,100 million) and R3,199 million (2015: R1,843 million) owing to Anglo American SA Finance Limited on the committed and
uncommitted facilities respectively. Related interest of R1,111 million (2015: R1,139 million) was paid.
12. FAIR VALUE DISCLOSURES
The following is an analysis of the financial instruments that are measured subsequent to initial recognition at fair value. They are grouped into levels
1 to 3 based on the extent to which the fair value is observable.
The levels are classified as follows:
Level 1 - fair value is based on quoted prices in active markets for identical financial assets or liabilities.
Level 2 - fair value is determined using directly observable inputs other than Level 1 inputs.
Level 3 - fair value is determined on inputs not based on observable market data.
Fair value measurement
31 December at 31 December 2016
2016 Level 1 Level 2 Level 3
Description Rm Rm Rm Rm
Financial assets through profit and loss
Investments held by environmental trusts 907 907 - -
Other financial assets 1,643 - 1 1,642
Available-for-sale assets at fair value
Other financial assets 1,042 959 - 83
Non-financial assets at fair value through profit and loss
Trading metal inventories originating from third parties 3 3 - -
Total 3,595 1,869 1 1,725
Financial liabilities through profit and loss
Trade and other payables (6,266) - (6,266) -
Other current financial liabilities (504) - (3) (501)
Non-financial liabilities at fair value through profit and loss
Liabilities for return of metal (535) - (535) -
Total (7,305) - (6,804) (501)
Fair value measurement
31 December at 31 December 2015
2015 Level 1 Level 2 Level 3
Description Rm Rm Rm Rm
Financial assets through profit and loss
Investments held by environmental trusts 882 882 - -
Available-for-sale assets at fair value
Other financial assets 703 684 - 19
Non-financial assets at fair value through profit and loss
Trading metal inventories originating from third parties - - - -
Total 1,585 1,566 - 19
Financial liabilities through profit and loss
Trade and other payables* (2,972) - (2,972) -
Other current financial liabilities (2) - (2) -
Non-financial liabilities at fair value through profit and loss
Liabilities for return of metal - - - -
Total (2,974) - (2,974) -
* Represents payables under purchase of concentrate agreements.
There were no transfers between the levels during the year.
12. FAIR VALUE DISCLOSURES continued
Valuation techniques used to derive Level 2 fair values
Level 2 fair values for other current financial liabilities relate specifically to forward foreign exchange contracts.
The valuation of forward foreign exchange contracts is a function of the ZAR:USD exchange rate at balance sheet date and the forward exchange rate that
was fixed as per the forward foreign exchange rate contract.
Level 2 fair values for trade and other payables relate specifically to purchase of concentrate trade creditors which are priced in US dollars. The
settlement of these purchase of concentrate trade creditors takes place on average three to four months after the purchase has taken place. The fair value
is a function of the expected ZAR:USD exchange rate and the metal prices at the time of settlement.
Level 3 fair value measurement of financial assets at fair value
The Level 3 fair value of other financial assets comprises investments in unlisted companies Food Freshness Technology Holdings and Greyrock Energy Inc,
which are classified as available-for-sale in terms of IAS 39 Financial Instruments: Recognition and Measurement and the deferred consideration on the
disposal of the Rustenburg Mine which is classified as a financial asset at fair value through profit and loss. The fair values are based on unobservable
market data, and estimated with reference to recent third party transactions in the instruments of the Company, or based on the underlying discounted cash
flows expected.
The Level 3 fair value of other financial liabilities comprises the components of the deferred consideration on the disposal of the Rustenburg Mine,
payable to Sibanye, which is classified as a financial liability at fair value through profit and loss. The fair value is based on the underlying
discounted cash flows expected.
Reconciliation of Level 3 fair value measurements of financial assets and liabilities at fair value
2016 2015 2016 2015
Other financial Other financial Other financial Other financial
assets assets liabilities liabilities
Rm Rm Rm Rm
Opening balance 19 - - -
Acquisition of investment 35 19 - -
Recognition of proceeds on disposal of Rustenburg Mine (note 18) 1,615 - (494) -
Interest included in profit or loss 27 - (7) -
Total gains included in profit or loss - - - -
Total gains included in other comprehensive income 35 - - -
Foreign exchange translation (6) - - -
Closing balance 1,725 19 (501) -
Level 3 fair value sensitivities
Assumed expected cash flows, discount rates and market prices of peer groups have a significant impact on the amounts recognised in the statement of
comprehensive income. A 10% change in expected cash flows, a 0.5% change in the discount rates and a 10% change in market prices of peer groups would have
the following impact:
Financial asset Financial liability
2016 2015 2016 2015
Rm Rm Rm Rm
10% change in expected cash flows
Reduction to profit or loss 28 - - -
Increase to profit or loss 28 - - -
0.5% change in discount rates
Reduction to profit or loss 51 - 4 -
Increase to profit or loss 53 - 4 -
10% change in market prices of peer groups
Reduction to profit or loss 5 - - -
Increase to profit or loss 5 - - -
13. UNKI PLATINUM MINE INDIGENISATION PLAN
Following approval of its indigenisation plan by the government of Zimbabwe, Amplats 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.
In early April 2016, President Mugabe issued a press statement which sought to clarify the government of Zimbabwe's position on the indigenisation and
economic empowerment policy. 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. The statement concluded by stating that
President Mugabe 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.
14. ANNOUNCEMENT OF DISPOSAL TRANSACTIONS
Equity investment in Pandora
Amplats entered into a conditional Sale and Purchase Agreement (SPA) on 10 November 2016 with Eastern Platinum Limited, a wholly owned subsidiary of
Lonmin plc (Lonmin) to sell its 42.5% interest in the Pandora Joint Venture (Pandora). The consideration for this interest will comprise a deferred cash
payment of 20% of the distributable free cash flows generated by Pandora over six years, with minimum amount of R400 million; and a rental agreement for
the use and full operational control of Lonmin's Baobab concentrator for a three-year period.
Following the signing of the binding sales agreement, the investment in associate was assessed separately for impairment. As such, the recoverable value
of Pandora is calculated as the fair value of the estimated proceeds less transaction costs, and amounts to R192 million - resulting in an impairment of
R153 million. It excludes any economic value generated from the Baobab rental agreement which will be recognised for accounting purposes at the time when
the benefit is received. The recoverable amount comprises a Level 3 fair value in terms of the fair value hierarchy (as defined in note 12). The fair value
of the deferred consideration payable by Eastern Platinum Limited was determined based on the projected cash flows for Pandora's E3 operations on a mine-
to-ore basis. The relevant amounts were discounted at the cost of borrowing of Lonmin plc.
Since the transaction remains subject to DMR approval in terms of section 11, the investment has not been reclassified as held-for-sale.
Amandebult reserves
On 11 November 2016 Amplats announced the disposal of mineral resources within the Amandelbult mining right (the Resource), and surface properties above
and adjacent to the Resource, to Northam Platinum Limited (Northam) for a consideration comprising R1.0 billion in cash (the Proceeds) and an ancillary
mineral resource within Northam's Zondereinde mining right that borders Amandelbult's mining right and which provides the Company with flexibility for the
placement of future mining infrastructure.
The Resource is long-dated and outside of Amplats' long-term life-of-mine plans and therefore does not impact any current or future mining plans. The
transaction does not constrain the Company's next generation options for the Amandelbult mine, which has a number of shallow and less capital intensive
life extension options. The surface properties forming part of the transaction will enable Northam to access the Resource.
No impairment was recognised as the carrying value of the Resource is nil. The transaction remains subject to DMR approval under section 102.
15. IMPAIRMENT OF ASSETS AND INVESTMENTS
Equity investments in Atlatsa and Bokoni Holdco and associated loans
Amplats has a 22.76% shareholding in Atlatsa as well as a 49% shareholding in Bokoni Holdco (which is equity accounted as an associate). The group,
together with Atlatsa, has completed a technical review of the Bokoni Platinum Mine to develop a new optimised mine plan. Following the closure of Vertical
and UM2 shafts and reducing headcount by a third, Bokoni is implementing this new optimised mine plan.
In light of the difficult market conditions and negative cash flows incurred by Bokoni Platinum Mine, Amplats impaired its equity interests in Atlatsa and
Bokoni Holdco in 2015. A further impairment of R130 million arose in 2016 with respect to the investment in Bokoni owing to the capitalisation of funding.
These write-offs are included in basic earnings but excluded from headline earnings, in terms of SAICA circular 2/2015.
Atlatsa's ability to service its debt obligations in the context of the current market conditions, where Bokoni Platinum Mine is its main source of
funding, is doubtful at current PGM price levels. In 2015 Amplats, therefore, for accounting purposes impaired the various loans extended to Atlatsa and
Atlatsa Holdings to the value of R1,792 million. A further impairment of R111 million was recognised in this regard during 2016. The impairment losses
arising from these loan write-offs are included in basic and headline earnings.
16. SCRAPPING OF ASSETS
During 2016 one of Amplats' furnaces suffered a leak of molten furnace matte from the Waterval furnace hearth. A preliminary
assessment of the damage to the furnace has shown that a rebuild of the furnace should be brought forward, as the most prudent means of mitigating future
potential operational risks.
The capital expenditure for the rebuild will be capitalised. The net book value of the affected assets scrapped was R7 million. The proceeds from the
insurance policy (cost incurred by Amplats less deductible) will be recognised as insurance income when received.
A claim for the rebuild has been submitted to the insurers. The insurance policy covers asset and business interruption including machinery breakdown. It
insures property against all risks of physical loss, destruction, damage and electrical or machinery breakdown and against losses resulting from
interruption with the business because of an insured property damage event and against extra expenses. The claim limit is USD1.5 billion.
17. BROAD BASED ECONOMIC EMPOWERMENT (BEE) TRANSACTION
A group subsidiary, Atomatic, holds a Chrome Processing Plant adjacent to the Amandelbult Mine. As part of Amplats' commitment to transformation, Atomatic
has issued 26% of its own shares to a BEE partner, Baphalane Siyanda Chrome Company Proprietary Limited (BSCC) which was primarily funded by way of
cumulative, non-convertible and redeemable preference shares by the Amplats group. For accounting purposes, the shares issued by
Atomatic have been treated as an option over its own equity, which resulted in a once-off share-based BEE expense of R156 million on initial recognition of
the transaction. The option was effectively granted in 2014 when the transaction was substantively agreed to by all parties as there were no
conditions which would have resulted in the deal subsequently being cancelled. The transaction, however vested in 2016 when the plant was commissioned and
transferred to Atomatic. The fair value was determined based on a discounted cash flow of the business at grant date using a risk adjustment discount rate.
18. DISPOSAL OF RUSTENBURG MINE
On 9 September 2015, Amplats entered into a sale and purchase agreement (SPA) with Sibanye Rustenburg Platinum Mines Proprietary Limited (a subsidiary of
Sibanye Gold Limited) (Sibanye) for the disposal of Rustenburg Mine.
Amplats considers its mining, smelting and refining operations as a single cash-generating unit. Following the announcement of the signing of the SPA with
Sibanye in 2015, the assets attributable to Rustenburg Mine were assessed separately within the cash-generating unit for impairment. As such, the
recoverable value of Rustenburg Mine was calculated as the fair value of the estimated proceeds less transaction costs, and amounted to R2,798 million. It
excluded 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. The recoverable amount comprised a Level 3 fair value in terms of the fair value hierarchy (as defined
in note 12). The fair value of the deferred consideration payable by Sibanye, and negative free cash flow funding payable by Amplats were determined based
on the projected cash flows for Rustenburg Mine. The relevant amounts were discounted at the cost of borrowing of Sibanye and Amplats respectively.
The net carrying value of Rustenburg Mine at 1 September 2015 was R7,274 million. The excess of the carrying value above the recoverable amount gave rise
to an impairment in 2015 of R6,216 million (R4,476 million net of tax). The entire impairment was attributable to property, plant and equipment. A
resulting impairment loss was recognised in the statement of comprehensive income and was separately presented. This impairment loss was included in basic
earnings but excluded from headline earnings.
Rustenburg Mine was sold as a going concern for an upfront cash consideration of R1,500 million and deferred consideration amounting to 35% of the
business's distributable free cash flow for six to eight years subject to a minimum of R3,000 million. These proceeds will be offset by funding to be
provided by Amplats in the event of the business having a negative free cash flow between the closing of the transaction and 31 December 2018. This funding
is limited to R267 million per annum and is pro-rated. Taking into account the most recent cash flow estimates for the business, the estimated fair value
of the total consideration amounts to R2,033 million. This 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. A conditional section 11 approval was received on 2
August 2016 and Rustenburg Mine was reclassified as held for sale at that stage. The final section 11 was granted during the course of October 2016.
Effective 1 November 2016, Amplats disposed of its Rustenburg Mine.
2016
Rm
18. DISPOSAL OF RUSTENBURG MINE continued
Consideration received (including purchase price adjustments)
Consideration received in cash 1,551
Purchase of concentrate adjustment (2,933)
Deferred sales proceeds (discounted)^ 676
Total consideration (706)
Analysis of assets and liabilities over which control was lost
Non-current assets
Property, plant and equipment 1,397
Capital work in progress 1,011
Environmental trust funds 281
Current assets
Trade and other receivables 46
Inventories 80
Other assets 13
Cash and cash equivalents# -
Non-current liabilities
Provision for decommissioning and restoration costs (736)
Deferred tax -
Current liabilities
Trade and other payables (677)
Provisions (635)
Net assets disposed of 780
Loss on disposal of Rustenburg Mine
Consideration (706)
Net assets disposed of (780)
Transaction costs directly attributable to disposal (195)
Loss on disposal before taxation effects (1,681)
Effects of taxation on consideration and release of unredeemed capex 762
(919)
The loss on disposal is included in profit for the year.
Net cash inflow on disposal of Rustenburg Mine
Consideration received in cash 1,551
Transaction costs (195)
Less: Cash and cash equivalents disposed of# -
1,356
Purchase of concentrate payments related to concentrate transferred (1,418)
^ Deferred consideration consists of the amounts payable to and due from Sibanye as part of the sales consideration. The amounts have been grouped as a
single item as they all relate to a single sales agreement and adjustment to the purchase price.
# Less than R500,000.
19. ADJUSTMENTS TO PRIOR PERIODS
Inventory error
The following errors were detected in respect of inventory:
A non-systemic error in the unit cost calculation to determine the value of work-in-process and finished goods metal inventory. This arose mainly in the
current year owing to the preparatory work in separating Rustenburg Mine. The balance, which was restated back to 2014, related to the effect of the
purchase of concentrate arrangement with Union Mine that has a 15% non-controlling interest.
An error in the determination of net realisable value. All stock is valued at the lowest of Cost or net realisable value. The net realisable value
equates to the market value at month end. When determining the net realisable value for the work in progress stock, the market value should have been
reduced with the outstanding down stream cost. I.e. the net realisable value for stock in the Smelter should be reduced with the applicable Rustenburg Base
Metals Refinery and Precious Metals Refinery unit costs. This has been corrected going back to 2011.
Certain consolidation adjustments, which have been corrected going back to 2011.
For the year ended December 2015 the adjustment comprised 2% of the inventory balance and for June 2016 it comprised 6%.
Translation error
During the year it was found that Unki Dollar depreciation was being incorrectly translated at the historic exchange rate, rather the average exchange
rate. The incorrect depreciation resulted from the SAP accounting system being configured with an incorrect rule during Unki's system implementation in
2011.
Joint venture elimination error
Amplats is party to a pooling and sharing arrangement (PSA) with Sibanye Platinum (previously Aquarius Platinum) - referred to as the Kroondal PSA. The
interest is accounted for as a joint operation and proportionately consolidated. In performing a review of intercompany balances, a receivable balance
brought forward from prior years had not completely eliminated.
The above errors were adjusted through a restatement of: opening balances at 1 January 2015, for the cumulative effect of prior periods, and earnings for
the year ended 31 December 2015.
Effect on 30 June 2016 interim results
The above errors had an impact on the 30 June 2016 published interim results. Accordingly the effect to the impact has been disclosed below.
19. ADJUSTMENTS TO PRIOR PERIODS continued
The following is the effect of the adjustments on the respective prior periods:
As previously As previously As previously
reported Restated* reported Restated reported Restated
30 June 30 June 31 December 31 December 1 January 1 January
2016* Adjustment 2016 2015 Adjustment 2015 2015 Adjustment 2015
Full effect of error Rm Rm Rm Rm Rm Rm Rm Rm Rm
IMPACT ON STATEMENT OF COMPREHENSIVE INCOME
Cost of sales (27,948) 977 (26,971) (54,544) (40) (54,584)
Gross profit on metal sales 2,707 977 3,684 5,271 (40) 5,231
Other net expenditure (213) (93) (306) (279) (235) (514)
Operating profit/(loss) 2,162 884 3,046 (6,050) (275) (6,325)
Profit before taxation 1,380 884 2,264 (14,139) (275) (14,414)
Taxation (459) (282) (741) 1,934 45 1,979
Profit/(loss) for the year 921 602 1,523 (12,205) (230) (12,435)
Total comprehensive income for the year 833 710 1,543 (10,615) (89) (10,704)
Profit attributable to:
Owners of the Company 938 602 1,540 (12,125) (233) (12,358)
Non-controlling interests (17) - (17) (80) 3 (77)
Total comprehensive income attributable to:
Owners of the Company 850 710 1,560 (10,535) (92) (10,627)
Non-controlling interests (17) - (17) (80) 3 (77)
Headline earnings 1,044 603 1,647 107 (233) (126)
Earnings per ordinary share (cents)
- Basic 358 231 589 (4,638) (90) (4,728)
- Diluted 357 230 587 (4,625) (89) (4,714)
STATEMENT OF FINANCIAL POSITION
Current assets 24,576 (99) 24,477 21,755 (1,090) 20,665# 23,313 (940) 22,373
Inventories 16,314 818 17,132 16,571 (266) 16,305 17,451 (351) 17,100
Trade and other receivables 2,235 (917) 1,318 2,585 (824) 1,761 3,220 (589) 2,631
Share capital and reserves 40,783 (69) 40,714 40,023 (779) 39,244 50,526 (690) 49,836
Foreign currency translation reserve 2,293 408 2,701 2,786 300 3,086 1,345 159 1,504
Retained earnings 15,981 (480) 15,501 15,202 (1,082) 14,120 27,598 (849) 26,749
Non-controlling interests (452) 3 (449) (411) 3 (408) (210) - (210)
Non-current liabilities 21,694 (200) 21,494 22,776 (212) 22,564 22,093 (246) 21,847
Deferred taxation 8,153 (200) 7,953 8,140 (212) 7,928 10,516 (246) 10,270
Current liabilities 14,251 170 14,421 11,161 (99) 11,062 17,380 (4) 17,376
Other liabilities 2,591 (18) 2,573 2,075 (17) 2,058 2,044 (1) 2,043
Taxation 29 188 217 32 (82) (50)# 1,296 (3) 1,293
RATIO ANALYSIS
Gross profit margin % 8.8 3.2 12.0 8.8 (0.1) 8.7 4.8 (0.7) 4.1
Operating profit as a % of average operating assets % 7.3 3.1 10.4 (9.6) (0.6) (10.2) 1.3 (0.7) 0.6
EBITDA R million 4,326 992 5,318 (1,467) (134) (1,601) 5,658 (218) 5,440
Return on average shareholders equity % 9.4 (1.8) 7.6 (27.0) (0.9) (27.9) 0.7 (0.6) 0.1
Return on average capital employed % 8.5 (2.5) 6.0 (11.2) (0.6) (11.8) 1.2 (0.7) 0.5
Return on average attributable capital employed % 8.7 3.6 12.3 (11.5) (0.7) (12.2) 1.3 (0.7) 0.6
Current ratio % 1.7:1 - 1.7:1 1.9:1 - 1.9:1 1.3:1 - 1.3:1
Debt:Equity ratio % 1:2.7 - 1:2.7 1:2.8 (0.1) 1:2.7 1:3.2 - 1:3.2
Interest cover - EBITDA times 5.9 1.3 7.2 (1.2) (0.1) (1.3) 5.3 (0.2) 5.1
Debt cover ratio times 0.4 - 0.4 0.8 - 0.8 0.5 - 0.5
Net debt to capital employed % 19.6 - 19.6 24.2 0.3 24.5 22.4 0.3 22.7
Interest-bearing debt to shareholders equity % 37.3 0.1 37.4 36.1 0.7 36.8 31.3 0.4 31.7
Net asset value as a % of market capitalisation % 41.2 (0.1) 41.1 80.1 (1.6) 78.5 54.9 (0.7) 54.2
Effective tax rate % 33.3 0.1 33.4 (13.7) - (13.7) 18.1 (3.8) 14.3
SHARE PERFORMANCE
Headline earnings/(loss) per ordinary share (cents) 399 230 629 41 (89) (48) - - -
Net asset value per ordinary share 152 - 152 149 (3) 146 189 (3) 186
* The 30 June 2016 interim results were reviewed but not audited by the external auditors
# R50 million tax balance reclassified to current assets, resulting in a restated
current assets balance of R20 715 million
19. ADJUSTMENTS TO PRIOR PERIODS continued
December
2014 and
June December prior periods
Effect per error 2016* 2015 effect
Inventory impact on earnings before tax 1,084 85 (351)
Royalties 1 16 1
Tax effects (308) (21) 84
Non-controlling interest - (3) -
Total inventory impact on earnings 777 77 (266)
Total depreciation impact on earnings (108) (141) (159)
Kroondal impact on earnings before tax (93) (235) (589)
Tax effects 26 66 165
Total Kroondal impact on earnings (67) (169) (424)
Total impact of errors on retained earnings 602 (233) (849)
Cumulative adjustment to retained earnings (480) (1,082) (849)
20. POST-BALANCE SHEET EVENTS
There are no post balance sheet events other than disclosed below.
Sale of Union Mine
As part of the Group's divesture initiatives, a binding sale and purchase agreement with Siyanda Resources (Siyanda) was signed on 14 February 2017 for
the Group's interest in Union Mine, which sets out the following key commercial terms:
Initial purchase price of R400 million
Deferred consideration of 35% of net cumulative positive free cash flow for 10 years (with an early settlement option)
Purchase of concentrate agreement for seven years with a toll arrangement from year eight onwards.
As a result of definitive agreements being signed, Union Mine will be considered separate from the Amplats single cash-generating unit as of this date and
will accordingly be separately assessed for impairment.
21. AUDIT BY COMPANY'S AUDITORS
The consolidated financial statements from which the summarised consolidated financial statements have been extracted have been audited by the Company's
auditors, Deloitte & Touche and are consistent in all material respects with the consolidated financial statements. The audit of the summarised
consolidated financial statements was performed in accordance with ISA 810 (Revised) , 'Engagement to Report on Summary Financial Statements'. The
auditor's 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 report together with the accompanying
financial information from the Company's registered office. The consolidated financial statements, their unmodified report on the consolidated financial
statements and the summarised consolidated financial statements are available for inspection at the Company's registered office, together with the
financial statements identified in the respective auditor's reports. Any reference to future financial performance, included in this announcement, has not
been reviewed or reported on by the Company's auditors.
GROUP PERFORMANCE DATA (UNAUDITED)
FOR THE YEAR ENDED 31 DECEMBER 2016
SALIENT FEATURES
2016 2015 2014 2013 2012
Average market prices achieved
Platinum USD/oz 993 1,051 1,386 1,485 1,532
Palladium USD/oz 610 703 803 722 640
Rhodium USD/oz 680 958 1,147 1,053 1,264
Gold USD/oz 1,244 1,156 1,259 1,384 1,669
Nickel USD/lb 4.36 5.32 7.73 6.58 7.76
Copper USD/lb 2.16 2.35 3.14 3.22 3.58
USD basket price - Pt (net sales revenue per Pt oz sold) USD/oz Pt sold 1,753 1,905 2,413 2,326 2,406
USD basket price - PGM (net sales revenue per PGM oz sold) USD/oz PGM sold 856 939 1,164 1,123 1,316
R basket price - Pt (net sales revenue per Pt oz sold) R/oz Pt sold 25,649 24,203 26,219 22,586 19,764
R basket price - PGM (net sales revenue per PGM oz sold) R/oz PGM sold 12,527 11,930 12,656 10,906 10,811
Exchange rates
Average exchange rate achieved on sales ZAR/USD 14.63 12.71 10.87 9.71 8.22
Exchange rate at end of year ZAR/USD 13.73 15.47 11.57 10.51 8.47
Unit cost performance
Cash on-mine cost/tonne milled R/tonne 729 751 770 675 625
Cash operating cost per Pt oz M&C1 R/oz 19,545 19,266 22,574 16,797 16,119
Cash operating cost per PGM ounce R/oz 9,298 9,202 10,654 8,167 7,876
Productivity
m2 per total operating employee per month2 6.85 6.71 6.46 6.57 6.05
Refined platinum ounces per employee3 34.7 33.2 23.3 30.0 29.3
1 Cash operating cost per produced ounce (metal in concentrate) comprises operating mines and excludes projects.
2 Square metres mined per operating employee including processing, but excluding projects, opencast and tailings retreatment employees.
3 Refined platinum ounces per employee: mined refined platinum ounces divided by own and attributable Amplats joint venture operational employees.
REFINED PRODUCTION
2016 2015 2014 2013 2012
Total operations
Refined production from mining operations
Platinum 000 oz 1,688.4 1,836.9 1,323.8 1,772.7 1,773.3
Palladium 000 oz 1,090.6 1,238.2 921.1 1,055.9 1,080.5
Rhodium 000 oz 227.0 225.8 154.1 217.1 240.3
Gold 000 oz 85.8 91.5 74.0 81.1 86.4
PGMs 000 oz 3,397.0 3,674.7 2,641.9 3,413.2 3,513.9
Nickel 000 tonnes 21.0 21.9 23.9 18.8 14.9
Copper 000 tonnes 11.9 14.9 15.6 12.0 9.9
Chrome 000 tonnes 685.6 566.5 289.2 399.5 352.4
Refined production from purchases inclusive of returns
Platinum 000 oz 646.3 621.9 565.7 606.8 605.3
Palladium 000 oz 373.6 356.7 304.3 324.9 315.4
Rhodium 000 oz 90.4 79.4 75.3 77.6 70.4
Gold 000 oz 22.4 21.5 21.6 18.9 18.8
PGMs 000 oz 1,282.0 1,193.7 1,092.9 1,151.7 1,126.7
Nickel 000 tonnes 4.4 3.9 4.3 3.8 2.8
Copper 000 tonnes 2.2 2.2 3.1 2.1 1.5
Chrome 000 tonnes - - - - -
Total refined production
Platinum 000 oz 2,334.7 2,458.8 1,889.5 2,379.5 2,378.6
Palladium 000 oz 1,464.2 1,594.9 1,225.4 1,380.8 1,395.9
Rhodium 000 oz 317.4 305.2 229.4 294.7 310.7
Gold 000 oz 108.2 113.0 95.6 100.0 105.2
PGMs 000 oz 4,679.0 4,868.4 3,734.8 4,564.9 4,640.6
Nickel - Refined 000 tonnes 25.4 25.4 20.5 16.8 17.7
Nickel - Matte 000 tonnes - 0.4 7.7 5.8 -
Copper - Refined 000 tonnes 14.1 16.8 12.5 8.3 11.4
Copper - Matte 000 tonnes - 0.3 6.2 5.8 -
Chrome 000 tonnes 685.6 566.5 289.2 399.5 352.4
PLATINUM PRODUCED (M&C)1
2016 2015 2014 2013 2012
Total operations 000 oz
Mogalakwena Mine 411.9 392.5 370.0 340.9 304.7
Amandelbult Mine 466.5 437.5 218.6 372.6 380.6
Unki Platinum Mine 74.5 66.5 62.3 64.1 63.1
Twickenham Mine 3.4 13.0 11.6 9.5 -
Joint ventures 505.6 482.7 482.4 489.0 485.3
Rustenburg Mine 377.5 478.1 280.7 570.3 545.9
Union Mine2 151.2 141.1 88.2 181.1 198.6
Purchases from third parties and associates 391.3 325.9 356.1 328.2 274.7
M&C platinum production 2,381.9 2,337.3 1,869.9 2,355.7 2,252.9
Pipeline stock adjustment 59.9 133.3 26.9 50.2 140.0
2,441.8 2,470.6 1,896.8 2,405.9 2,392.9
Refined platinum production (excl. toll refined metal) 2,330.1 2,458.7 1,887.2 2,376.4 2,329.1
1 Platinum in concentrate produced and purchased.
2 Includes slag tailings at Mortimer Smelter (closed Q3 2015).
RESULTS COMMENTARY
DELIVERING CHANGE, BUILDING A RESILIENT BUSINESS AND POSTIONING FOR THE FUTURE
- Key strategic success in repositioning the portfolio:
- Rustenburg Operations divestment completed, with R1.5 billion upfront proceeds received
- Sales and purchase agreement (SPA) signed for sale of mineral resources to Northam
- SPA signed for sale of Pandora stake to Lonmin
- SPA signed for sale of Union and Masa Chrome operations to Siyanda (post year end)
- Operational improvements at all mines, with record production from Mogalakwena
- Unit cost increase of 1.4%, below South African CPI, with strict cost discipline mitigating mining inflation
- Delivered R700 million overhead cost reduction, with full run rate of R1 billion achieved in Q4 2016
- Capital discipline remains a priority - focus on value enhancing, quick pay back projects such as successful commissioning of Amandelbult chrome plant
- Generated R3.5 billion free cash flow from operations
- Reduced net debt by R5.5 billion to R7.3 billion
- Positioning for the future - retaining optionality in the portfolio and committed to market development, innovation, people and communities
ANGLO AMERICAN PLATINUM - DELIVERING ON OUR COMMITMENTS
Anglo American Platinum is delivering against its key strategic objectives by substantially improving operational performance across the portfolio,
repositioning the portfolio to own and operate the highest margin assets in the platinum group metals (PGM) industry to a create a value-optimised
portfolio, and investing in developing of the PGM market. Significant progress has been made in divesting of assets which are not strategic to the Company
and deemed to be non-core including:
- Completion of the sale of the Rustenburg Operations to a subsidiary of Sibanye Gold Limited (Sibanye) on 1 November 2016
- An SPA was entered into with Northam Platinum Limited (Northam) to divest of resources within the Amandelbult mining right
- An SPA was entered into with Eastern Platinum Limited, a subsidiary of Lonmin plc (Lonmin), to divest of Anglo American Platinum's 42.5% stake in the
- Pandora joint venture
- Post year end, an SPA was entered into with a subsidiary of Siyanda Resources Limited (Siyanda), divesting of the Company's interest in the Union mine
joint venture and Masa Chrome
- The process of the sale of the Company's interest in the Bokoni joint venture is ongoing
Disciplined capital allocation remains key, and the Company has prioritised investment in high-value, capital-light projects with short pay-back periods,
such as the Amandelbult chrome plant, which was successfully commissioned in 2016 at a cost of R415 million and has delivered an attributable R320 million
in additional operating cash flow. Overall, a combination of capital discipline, working capital management and operational efficiencies resulted in the
generation of free cash flow from operations, which, combined with sale proceeds for divestments, contributed to a reduction of net debt of R5.5 billion to
R7.3 billion.
The Company remains committed to investing in PGM market development across a number of demand segments including jewellery, investment and industrial as
well as areas supporting the widespread commercial adoption of fuel cells and hydrogen in the transport and other sectors.
OPERATIONAL EXCELLENCE
Safety, health and environment
Tragically, there were seven fatalities due to work related incidents in 2016. Mr Mlamuli Cornelius Kubheka and Mr Mveliso Ntamehlo were fatally injured
in a winch-related incident at Amandelbult (Tumela Mine) on 26 April 2016. Mr Pieter Henrico was injured after being struck by a rock conveyance at
Rustenburg (Thembelani Mine) on 31 March 2016 and passed away on 9 July 2016. Mr Tamsanqa Ngqambiya sustained fatal injuries in a fall-of-ground at
Rustenburg (Thembelani Mine) on 3 June 2016. Mr Amos Mataboge was fatally injured in a fall-of-ground incident at Rustenburg (Siphumelele Mine) on 5 August
2016, and Mr Nekisile Zibhonti died after drilling into explosives at Rustenburg (Thembelani Mine) on 18 August 2016. Mr Peter Leshoella was fatally
injured in a conveyor-belt incident at Union Mine on 24 October 2016. Deepest condolences go to their families, friends and colleagues.
This increase in work-related fatalities is particularly disappointing given the steady improvement in underlying safety performance indicators in 2016.
The lost-time injury frequency fate (LTIFR, a lagging indicator) declined 26% from 0.98 in 2015 to 0.73, while the total recordable case frequency rate
(TRCFR, a leading indicator) improved 31% from 1.52 in 2015 to 1.05 in 2016. These rates include the Rustenburg Operations until 31 October 2016.
The Company's safety strategy, based on zero harm, embeds continuous improvement and review processes to incorporate lessons and to evaluate the
effectiveness of strategic focus areas. This enables the Company to continue learning from each incident, and implement measures to prevent repeats. The
priority remains further improving safety strategy and supporting employees to ensure they remained focused and consistent in applying safety measures at
all times. Particular focus will be placed on ensuring unconditional and consistent adherence to critical controls.
Significant efforts have been made to improve disease awareness and the availability of prevention programmes with a significant increase in employee
participation in disease management programmes. The encouraging uptake of anti-retroviral treatment continued to increase during the year, with a
significant reduction (48%) of HIV/Aids and tuberculosis-related deaths reported in 2016.
Operational performance
Total platinum production both mined and purchased increased 2% to 2.38 million ounces (on a metal-in-concentrate basis), towards the top end of guidance
of 2.3 million to 2.4 million ounces. Platinum produced by own managed mines, including Twickenham project which is now on care-and-maintenance, increased
5% to 956,000 from 909,000 ounces in 2015. 4E built-up head grade of 3.38g/t was 2% lower than 2015 due to lower grade from Mogalakwena and Amandelbult,
partly offset by increased grade at Unki.
Mogalakwena
Production from Mogalakwena mine increased 5% to a record 412,000 ounces (including ounces from the Baobab concentrator plant). Total tonnes mined rose 4%
to 96 million tonnes in 2016, supported by improved equipment efficiencies and increased maintenance reliability. Tonnes milled increased 8% on higher
throughput while 4E built-up head grade returned to a more normalised level of 3.02g/t from 3.09g/t in 2015.
Platinum production from Baobab rose to 31,000 ounces. As part of the transaction terms to sell the Company's stake in the Pandora joint venture to Lonmin,
a three-year contract was secured for the sole use and operational control of the Baobab concentrator.
Amandelbult
Amandelbult production increased 7% to 467,000 ounces, despite safety stoppages, following a double-fatal incident. Higher production reflects mining from
increased mineable ore reserves and improved panel-to-crew ratios. This was supported by higher tonnes milled, which rose 9% to 7.1 million tonnes. Tonnes
from surface sources were up 0.9 million tonnes due to opencast operations producing for 12 months in 2016 compared to six months in 2015. Increased
surface sources in the ore mix reduced the 4E built-up head grade by 2% year-on-year to 4.07 g/t in 2016. The 4E built-up head grade from underground
sources at 4.46g/t is 3% higher than 2015.
Amandelbult successfully commissioned a new chrome plant at the mine in 2016 with steady-state production expected from 2017. The chrome plant was built at
a capital cost of R415 million, on schedule and on budget. The plant is 74% owned by Anglo American Platinum and 26% by the Baphalane Siyanda Chrome
Company Proprietary Limited in which the Baphalane-Ba-Mmantserre community owns 75% and Siyanda Chrome Investments Proprietary Limited owns 25%. The chrome
plant produced 2.8 million tonnes of UG2 tailings, yielding 235,000 tonnes of chrome concentrate for 2016.
Unki
Unki increased production by 12% to 75,000 ounces, driven by higher productivity and improved mining reef cut, resulting in more quality-grade ore being
delivered to the concentrator and the 4E built-up head grade rising to 3.46g/t from 3.22g/t.
Twickenham project
Twickenham produced 3,000 ounces, 10,000 ounces less than 2015 as the loss-making project was placed on care-and-maintenance during the year.
Joint ventures and third parties
Platinum production from joint ventures, including both mined and purchased production, increased 2% to 785,000 ounces. Production was strong from all
operations, with Modikwa up 10% to 115,000 ounces reflecting an effective productivity improvement plan; BRPM up 9% due to increased mining of the higher-
grade Merensky reef from North Shaft Phase 3; Kroondal up 4%, the best performance since inception on improved stoping efficiencies; and Mototolo up 2% on
increased throughput. Bokoni was up 4%, after normalising for the closures of the unprofitable UM2 and Vertical shafts.
Platinum ounces from third parties rose 179% to 112,000 ounces after including Rustenburg purchase of concentrate from 1 November 2016. Excluding
Rustenburg, third-party purchase of concentrate decreased 26% from 40,000 to 30,000 ounces due to terminating some contracts at the end of 2015.
Non-core operations - Rustenburg
Total production from Rustenburg, including the Western Limb Tailings Retreatment, decreased 4% from 478,000 to 460,000 in 2016, impacted by fatal
incidents and operational difficulties. Operational improvements were evident in Q4 2016 as the mine was unaffected by safety issues. The sale of
Rustenburg was completed on 1 November 2016, from which point its production is recognised as third-party purchase of concentrate and excluded from own
production. Production from the Platinum Mile tailing retreatment is a retained third party contract and has been reported as part of third party purchase
of concentrate.
Non-core operations - Union
Union production increased 7% to 151,000 platinum ounces through higher stoping efficiencies and an increase in low grade surface ore, despite a
significant reduction in labour after restructuring that was completed in June 2016 and the impact from the fatal incident. The mine also reduced its total
injuries by 40% and improved its cash on-mine costs per platinum ounce by 14% year-on-year.
Refined production and sales volume
Total refined platinum production of 2,335,000 ounces decreased 5% compared to 2,459,000 ounces in 2015, mainly due to a smelter run-out at Waterval
smelter in September 2016. This affected refined production by 65,000 ounces in 2016, and has increased the work-in-process inventory which is expected to
be refined in full in 2017. The decrease in refined inventory also reflects a lower stock gain in 2016 than 2015 of 70,000 ounces. The lower pipeline
inventory resulted in less material to refine.
Refined platinum sales declined by 2% to 2,416,000 ounces, of which 2,400,000 ounces were sales from refined metal and the balance from market activities.
Sales were higher than refined production which was supplemented by a drawdown in refined inventory. Lower PGM sales volumes reflect lower refined
production after the Waterval smelter run-out in September and subsequent rebuild in Q4 2016. Sales of refined palladium and rhodium declined 4% and 1%
respectively while sales of nickel increased 7%.
FINANCIAL PERFORMANCE
2015 and H1 2016 restatement
Shareholders are advised that the Company has released restated group financial results for the year ended 31 December 2015 and half year ended 30 June
2016. The restatement arose from a correction of the exchange rate used for the translation of Unki mine's depreciation from US dollars into South African
rand, a correction of the valuation of work-in-process and finished goods metal inventory and a correction of the proportionate consolidation of a joint
venture. Anglo American Platinum corrected these as material prior period errors on the basis of the aggregated impact, and restated the comparative period
financials.
Restated basic earnings and earnings per share (EPS) for 2015 are a loss of R12,358 million (R12,125 million previously) and a loss of 4,728 cents (4,638
cents previously). Restated headline earnings and headline earnings per share (HEPS) for 2015 are a loss of R126 million (R107 million profit previously)
and 48 cents loss (41 cents profit previously).
2016 overview
Headline earnings increased to R1.9 billion in 2016 from the restated loss of R126 million in 2015. This reflected favourable foreign exchange movements,
operating and overhead cost reduction, lower restructuring costs and the impact of impairments in the comparative period. As a result, headline earnings
per share rose to 713 cents in 2016 from a loss of 48 cents in 2015.
The group effective tax rate for the year ended 31 December 2016 was 34.3% (2015: 13.7%). This increase is partly due to changes in Controlled Foreign
Company (CFC) legislation, which results in the profits of the marketing companies in the United Kingdom and Singapore being taxed at 28%. In addition, the
effective tax rate is impact by the impairment of loans and investments which do not have an associated tax effect.
Sales revenue
Net sales revenue rose 4% to R62.0 billion from R59.8 billion in 2015, due primarily to the weakening of the rand/US dollar exchange rate. This was partly
offset by reduced sales volumes and the decline in metal prices, particularly platinum and palladium.
The average US dollar basket price per platinum ounce sold decreased 8% in 2016 to USD1,753 from USD1,905 in 2015. This was driven by the decrease in
prices for all metals other than gold and iridium. The average US dollar sales price achieved on most metals declined, with platinum down 6% to USD993 per
ounce, palladium down 13%, rhodium down 29%, nickel down 18% and copper down 8%.
The average rand/US dollar exchange rate weakened by 15% to R14.63 from the R12.71 average in the comparative period. After including the effect of the
weakening rand against the US dollar, the average realised rand basket price per platinum ounce was 6% stronger at R25,649.
Customer prepayment
As part of the Company strategy to strengthen its balance sheet, the marketing function engaged a key customer to advance a prepayment for future
guaranteed delivery of metal. The contract is structured over five years with an initial payment of USD250 million. Of the full amount, USD153 million
(R2.0 billion) was paid in the last quarter of 2016 and contributed significantly to reduced net debt at year end. The remainder of the prepayment will be
received in Q1 2017. The transaction is cost neutral to the Company.
Working capital
The Company has actively managed down its working capital. Trade working capital decreased by R5.3 billion to R8.0 billion as at 31 December 2016 while
days decreased to 49 compared to 75 in 2015. This reflects a number of initiatives including creditor payment terms, where large creditor terms have been
extended from 30 to 60 days, materials inventory management where store areas have been consolidated, and minor metal sales programmes realising cash and
operational initiatives facilitating early settlement.
The increase in trade creditors was mainly due to higher expenditure, particularly the purchase of concentrate following the sale of the Rustenburg
Operations, and deferred revenue arising from the customer prepayment.
Cost of sales
Cost of sales rose by 3%, from R54.6 billion in 2015 to R56.1 billion. Following the sale of Rustenburg operations in November 2016, the Company will have
higher purchase of concentrate costs and lower on-mine costs due to the purchase of concentrate from Sibanye.
Cash on-mine costs (mines and concentrators) reduced by R1.1 billion to R32.8 billion due to lower mining costs as a result of the Rustenburg exit partly
offset by input cost inflation and increased volume at retained operations. Processing costs rose 5% or R350 million to R7.1 billion which was below input
cost inflation.
Purchase of concentrate costs increased to R13.5 billion from R10.2 billion in 2015 due to higher volume which now includes two months of Rustenburg
production as purchased metal, higher rand basket price compared to 2015 and R0.4 billion of metals purchased through marketing activity.
Other indirect costs increased 8% to R2.8 billion from R2.6 billion in 2015. The increase in costs was primarily due to higher transport of metal costs of
R247 million and additional royalty expenses of R188 million partly offset by lower expenditure on corporate office, share based payments and research.
The cash cost of the Company comprises labour, stores, electricity, water, contractors and other costs.
Cash operating cost per platinum ounce rose 1.4% to R19,545 from R19,266 in 2015 which is significantly below mining inflation and the South African
Consumer Price Index. This reflects the benefit of cost reductions, operating efficiencies and overhead reductions.
Overheads
The Company started an overhead reduction programme to reduce the 2015 overhead of R5.4 billion to R3.4 billion, of which R700 million was through the exit
of Rustenburg and R300 million will be through the exit of Union. Of the remaining R1.0 billion, the Company has delivered R700 million, with the full run
rate of R1.0 billion achieved in Q4 2016. The Rustenburg exit reduced overhead cost by R500 million. Expectations are that the Union exit will complete in
2017 and result in an additional R300 million overhead reduction.
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Reported EBITDA rose by R10.7 billion to a profit of R9.1 billion from a loss of R1.6 billion in 2015 due to the prior period impairment and write-off of
assets totalling R12.0 billion. Normalised for the 2015 impairments, EBITDA increased from R8.6 billion to R9.1 billion. Stock-count gains and
restructuring costs were once-off items in both years. The 2016 stock count gain was some R0.6 billion compared to the abnormally high R2.1 billion in 2015
while restructuring costs decreased by R654 million year on year to R342 million.
Uncontrollable items which include inflation, metal prices and the rand/dollar exchange rate, reduced earnings by R1.8 billion, with inflation
contributing R2.5 billion, weaker metal prices R4.3 billion, partly offset by the weaker rand of R5.0 billion. The company's earnings are very sensitive to
price movements in the commodities sold and to the ZAR:USD exchange rate. Every R100 change in the rand basket price realised equates to R0.2 billion of
EBITDA.
Controllable items - volume and costs - contributed R3.1 billion, with lower sales volumes than 2015 reducing earnings by R300 million. Costs, after
adjusting for volume, inflation and forex, declined R3.0 billion from 2015, including lower operating costs, overhead, marketing costs and cash on-mine
costs after the Rustenburg sale, supported by higher income from associates of R427 million.
The Company's return on capital employed (ROCE) was 8.9% compared to restated 2015 ROCE of 5.8%, after adjusting for scrapping.
Cash flow
The Company generated R13.6 billion in cash from operations, including the R2.0 billion customer prepayment. Underlying cash from operations therefore was
R11.6 billion, including R342 million in restructuring costs. These cash flows were used to fund capital expenditure of R4.7 billion (excluding capitalised
interest, including capitalised waste); pay taxation of R1.1 billion; settle net interest of R1.4 billion to our debt providers and contribute R1.0 billion
to funding our joint venture and associate operations in 2016.
Capital expenditure
Capital expenditure for 2016, excluding capitalised interest, declined 9% to R3.4 billion from R3.7 billion in 2015. Stay-in-business capital expenditure
increased by R0.2 billion to R2.8 billion in 2016, focused on safety-critical, business continuity, value-accretive projects.
Project capital expenditure decreased by R0.6 billion from R1.2 billion to R0.6 billion in 2016. This was focused on Unki smelter and housing, phase 5
expansions at Bathopele Mine and Rustenburg ore replacement projects.
Interest capitalised during the period decreased to R323 million from R406 million in 2015 due to lower assets qualifying for capitalisation of interest.
The Company capitalised costs of R1.3 billion (2015: R1.0 billion) for waste stripping at Mogalakwena mine as part of the life-of-mine plan. Waste tonnes
mined increased from 77.0Mt in 2015 to 77.6Mt in 2016. In 2016, the cost of mining 38.5Mt was capitalised against a capitalisation of 32.0Mt in 2015.
In addition, during 2016, the Company concluded a Broad Based Black Economic Empowerment (BBBEE) transaction with regards to its Amandelbult chrome plant,
granting 26% of the equity of the plant to its BBBEE partners. An upfront consideration was received by Anglo American Platinum, which is less than the
fair value of the equity granted. The remaining consideration was settled through vendor financing assistance provided by the Company. This transaction
therefore resulted in the Company recognising a once-off IFRS2 charge (share based payment) of R156 million.
Net debt and dividend
The Company's net debt at 31 December 2016 was R7.3 billion, R5.5 billion lower than the R12.8 billion reported in 2015, representing gearing of 18% (31
December 2015: 32%). This was supported by a cash receipt of R1.5 billion for the sale of Rustenburg, partly offset by R0.1 billion transaction costs and
the R2.0 billion customer prepayment.
Owing to the net debt position of the Company and uncertain macroeconomic environment, the Board has decided not to declare a dividend in 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
The Company has a strict capital allocation policy to ensure the best use of capital to achieve the highest returns. The first priority is to maintain the
core current operations and ensure they are equipped to achieve operational excellence. Stay-in-business capital and business continuity remain the
priority with capital and the exit of Rustenburg, Pandora and now Union will enable the Company to focus its capital on its best assets.
The next priority of the Company is to deleverage the balance sheet so that it is strong enough to manage through the cycle. Net debt was reduced by R5.5
billion during the year, and the focus remains on reducing net debt further. One-off disposal proceeds from the sale of resources to Northam, and the sale
of Union to Siyanda should further contribute to a decline in net debt. In addition, the balance of the customer prepayment will be received in Q1 2017.
Thereafter the Company would like to introduce a sustainable dividend based on a pay-out ratio once the balance sheet has strengthened.
In the current environment, the decision has been taken to delay any major growth projects until the market demands more metal and the balance sheet
allows, and not until post 2017. The operating free cash flow of own operations has been improved by reducing the capital intensity of stay in business
capital, without increasing operational risk in future.
If there is any further capital to be allocated, the Company will consider a reiterative cycle of allocation between further debt reduction, capital
projects if the market needs the ounces and a further dividend distribution.
MARKETS
Platinum
Although the platinum price ended 2016 above where it began the year in US dollar terms, it declined 6% on average compared to 2015, underperforming many
commodities due to a mix of expected tightening of monetary policy in the USA and modest fundamentals for platinum. While total supply of platinum from
mine production and recycling increased, and gross demand for this metal declined marginally in the year, platinum remained in deficit for the fifth
consecutive year.
Industrial demand was the strongest performing sector for platinum as industries - from glass manufacturing to chemicals purchased more metal than a year
earlier. Demand for platinum from the automotive sector also edged 1% higher. Net investment demand was again positive in 2016 outpacing demand a year
earlier as Japanese buying continued and Exchange Traded Fund (ETF) selling slowed.
The performance of the jewellery sector was more disappointing, with demand slowing noticeably. Although there were bright spots elsewhere, Chinese
consumers bought less jewellery - both platinum and gold - than a year earlier and demand fell sharply.
Palladium
Following its weak performance in 2015, the palladium price improved in 2016 but still recorded a lower average price (a fall of 13%) than a year earlier.
In contrast to platinum, demand performed well and outweighed overall supplies. The automotive industry remains the principal user of this metal and demand
rose 3%, while industrial demand fell slightly. In the investment sector, it was another year of net disinvestment in palladium. ETF net selling was
slightly less intense than a year earlier but accelerated in the final quarter when over 300,000 ounces of metal were sold as the price rallied to highs
for the year.
Rhodium
The rhodium market was again well-supplied in 2016 despite some growth in automotive demand for this metal. Tightening emission standards in various
countries forced the fitment of catalysts with higher rhodium content and strong sales in China and, to a lesser extent, the USA and Europe contributed
additional rhodium demand. Industrial demand for rhodium edged higher, with additional buying for capacity additions in the glass sector a major factor.
The average rhodium price was 29% lower than 2015, but ended 2016 close to its yearly high.
Automotive
Global light-vehicle sales expanded 4.6% in 2016 to a record 93.2 million units. Sales were strong in Europe, North America and, particularly, China where
a cut in the tax payable on the purchase of smaller vehicles drove light-duty vehicle sales 12.3% higher. Demand for all three major PGMs grew as a result
of this strong performance.
Gross automotive demand for platinum rose 30,000 ounces or 1%, its highest level since 2008. The standout performance was in Europe, where strong demand
for new vehicles more than offset a slight decline in the share of the diesel engine. In fact, the number of diesel cars sold in Europe climbed while
loadings increased too. More negatively, diesel's share of the Indian car market fell while North American heavy-duty diesel demand for platinum was weaker
than expected.
The outlook for the diesel engine remains a key factor, after the emissions scandal of 2015. Diesel share has fallen in Europe, but only in line with prior
expectations as the smallest vehicles move away from this technology where it is least economically attractive. Catalyst loadings edged higher in 2016 but
could fall in 2017 before rising again as the later stages of the new, tougher European emissions rules, Euro 6, are phased in. While electric vehicles of
all types - both battery electric vehicles and their fuel cell equivalents - are receiving extensive media coverage, their market share remains small.
Diesel is therefore still extremely important for light and heavy-duty vehicle manufacturers and their ability to meet carbon-dioxide emission targets, and
is likely to retain a strong position among larger vehicles.
Automotive demand for palladium climbed again to 7.8 million ounces as higher vehicle production outweighed the ongoing effects of thrifting. Strong growth
in Chinese car sales, driven by domestic stimulus efforts, was a factor. In fact, despite some growth in palladium demand in Europe and Japan, China alone
took 300,000 ounces more metal than the prior year. Gross automotive rhodium demand edged 2.0% higher, with higher global car production outweighing the
impact of slowing thrifting.
Industrial
Demand for platinum from other industrial applications was healthy in 2016, growing 185,000 ounces or 9.7%, much faster than the pace of global economic
growth. The glass manufacturing sector took more metal than a year earlier and other industries purchased more platinum too. Although still small, demand
for platinum for use in fuel cells continues to grow and exceeded the 50,000 ounce level last year. In the short term, much of this demand is from using
fuel cells in niches such as telecommunications back-up power or fork-lift trucks. However, there are also positive signs of increasing demand from the
transport sector, including the launch of a number of semi-commercial fuel cell vehicle models.
Industrial demand for palladium fell slightly in 2016, by 50,000 ounces or 2.5%, partly due to thrifting in electronic applications. Higher demand for
rhodium from the glass sector helped boost industrial and other demand for rhodium by 20,000 ounces to 185,000.
Jewellery
Gross global jewellery purchases of platinum fell for a second year in 2016, dropping 15.3% or 430,000 ounces. The major negative factor was slowing
jewellery sales - both gold and platinum - in China, which is the largest jewellery purchaser of platinum. A decrease in the availability of credit to
jewellery retailers and manufacturers combined with relatively weak consumer confidence to send retail purchasing of all types of jewellery lower.
Additionally, instead of the stockbuilding over 2010-2013, there was some destocking across the industry due to store closures and lower sales. There may
be scope for a rebound in demand in 2017, but we do not anticipate a rapid return to 2012-2014 levels.
Outside China, there were some positives for jewellery demand. In India, the platinum Evara brand continues to perform well, demonstrating the success of
the Platinum Guild International's approach to marketing in this country, although sales were affected at the end of the year by the decision to withdraw
some high-denomination bank notes from circulation. We see considerable potential for further demand growth here, driven by these market developments,
although the recent demonetisation process could pose a short-term headwind. Elsewhere, North American demand expanded, reflecting strong economic growth
and returning consumer confidence in the USA in particular. European jewellery demand was stable.
Investment
Net investment demand for platinum was healthy, at close to its five-year average, and grew by 31% or 140,000 ounces from the prior year. ETF liquidation
slowed and even reversed at times: US dollar strength meant that the platinum price provided some interesting buying opportunities in many currencies. Just
as significantly, Japanese investors bought approximately 500,000 ounces of platinum: the metal's continuing discount to gold and low absolute price in yen
meant that consumers were very keen buyers for a second successive year. Work by the World Platinum Investment Council has helped to improve availability
and demand for physical products in a number of countries.
ETF flows were the dominant factor in palladium investment demand. As the palladium price firmed in US dollar terms, and even more in other currencies,
this provided an opportunity for profit-taking and ETF investors reduced their holdings by a net 590,000 ounces over the year. Investment demand for
rhodium and the minor metals was boosted by improved product availability, although rhodium investment flows were negative on a net basis.
STRATEGY
Restructuring
Anglo American Platinum continues to make progress in implementing its value-driven strategy through restructuring. Since 2013, the company has reduced
unprofitable platinum production by some 400,000 ounces after placing Marikana on care-and-maintenance; consolidating Rustenburg mines from five to two
mines; consolidating Union from two to one mine and closing the declines; restructuring Bokoni to place the unprofitable Vertical and UM2 shafts on care-
and-maintenance; and placing Twickenham project on care-and-maintenance in 2016.
Significant headcount reductions have occurred since the start of the restructuring in 2013, ensuring that the Company is appropriately sized to service a
smaller and less complex organisation. Operational efficiencies have enabled production volumes to be sustained with fewer employees and without the need
for capital.
Repositioning the portfolio
Anglo American Platinum has achieved key strategic successes in 2016 in repositioning its portfolio, announced in 2014. The Company aims to own and operate
the best assets in the PGM industry, consisting of Mogalakwena, Amandelbult, Unki, and our JV operations, BRPM, Mototolo and Modikwa and the processing
assets.
The completion of the sale of the Rustenburg Operations in 2016, and the SPA's announced for the sale of the Company's 42.5% stake in the Pandora joint
venture, and the disposal of Union mine and Masa Chrome, (both of which are anticipated to complete during 2017), allow the Company to focus on the most
competitive assets, consisting of largely open-pit and more mechanised operations which will result in higher margin production, a smaller and more highly
skilled workforce, safer operations and a less complex organisation. As a result, the core operations stand to benefit from dedicated management attention
and technical expertise, as well as disciplined capital allocation.
Disposal of Rustenburg Operations to Sibanye
The Company announced on 1 November 2016 that it had completed the disposal of Rustenburg Operations to Sibanye Rustenburg Platinum Mines Proprietary
Limited, a subsidiary of Sibanye Gold Limited (Sibanye). The upfront proceeds of R1.5 billion were paid in cash and used to reduce net debt. The Company
will also receive a deferred consideration of R3.0 billion over six to eight years in the form of 35% of distributable free cash flow from the Rustenburg
Operations. The Company has also entered into a purchase of concentrate and tolling agreement, to purchase concentrate for two years (to 2018) and to then
toll treat the material for up to eight years. The transaction is cashflow, earnings and ROCE accretive for the Company.
Disposal of mineral resources within the Amandelbult mining right to Northam
The Company announced on 11 October 2016 that it had signed a SPA to dispose of mineral resources within the Amandelbult mining right and surface
properties above and adjacent to Northam's resource. These resources are excluded from current life of mine plans and are long dated. The consideration
comprises cash of R1 billion and an ancillary mineral resource within Northam's Zondereinde mining right that borders Amandelbult's mining right, that can
provide the Company with flexibility for the placement of future mining infrastructure. It is envisaged that the transaction will complete in 2017 and the
cash proceeds be used to reduce net debt.
Disposal of Anglo American Platinum 42.5% stake in Pandora to Lonmin
The Company announced on 11 November 2016 that it had entered into a conditional Sales and Purchase agreement to dispose of its 42.5% stake in the Pandora
Joint Venture, to Lonmin plc (Lonmin). The consideration will comprise of a deferred cash element of a minimum of R400 million and a maximum of R1.0
billion over six years and a rental agreement for the use of and full operational control of Lonmin's Baobab concentrator for a three year period
commencing on completion of the Transaction. It is envisaged that the transaction will complete in 2017.
Disposal of Union mine and Masa Chrome to Siyanda
Anglo American Platinum announces that it signed an SPA on 14 February 2017 to sell its 85% interest in Union mine and 50.1% interest in Masa Chrome
Company Proprietary Limited to Siyanda Resources (Siyanda). The consideration comprises an initial purchase price of R400 million in cash, as well as a
deferred consideration based on 35% of cumulative distributable free cash flow paid annually as an earn-out, for a period of ten years from the date of
completion of the transaction. The Company has no obligation to pay towards any negative cash flow generated by these assets.
In addition to the initial and deferred consideration, Anglo American Platinum has entered into a purchase of concentrate agreement for seven years and
thereafter an agreement to toll treat the 4E metals (platinum, palladium, rhodium and gold) until the end of life of mine. The transaction is subject to
conditions precedent typical of a transaction of this nature, which include the granting of the Section 11 consent from the Department of Mineral Resources
(DMR) and the approval of the transaction by the competition authorities of the Republic of South Africa. The transaction is expected to complete during
2017.
Bokoni
Technical work to review the mine extraction strategy and to develop a path towards a sustainable and optimised operation was completed in collaboration
with our JV partner. Following the closure of Vertical and UM2 shafts and reducing headcount by a third, Bokoni is implementing its new optimised mine
plan, and will close the open pit operations. Discussions on the most appropriate exit for Anglo American Platinum are ongoing.
Kroondal
The Company's stake in Kroondal is considered a non-core operation. However, as the operation generates attractive cash flow for the Company it will only
be disposed for value. No formal discussions have commenced.
POSITIONING FOR THE FUTURE
Market development
Anglo American Platinum's global PGM market development initiatives are focused on offsetting the risk of lower demand in existing demand segments using a
mix of marketing initiatives in existing or near-term applications and targeted development in longer-term growth areas, such as fuel cells, hydrogen and
clean energy generally. South African beneficiation objectives form part of our broader market development activities.
The Company invests in market development and beneficiation across a number of demand segments, using a range of approaches that are appropriate for each:
- Global and local development of platinum jewellery markets is carried out through the Platinum Guild International (PGI) which is funded by Anglo American
Platinum and some of the other primary PGM producers. The PGI is focused on a number of important countries, including China, India, Japan and the USA,
where it promotes platinum as a jewellery material by working with designers, manufacturers and retailers
Further development of investment demand for platinum is led by the World Platinum Investment Council (WPIC), an industry body funded by a number of
platinum producers including Anglo American Platinum. 2016 achievements include partnering with Valcambi, a Swiss refiner, to increase the availability of
physical investment products, the UK's BullionVault to offer vaulted products, and Mitsubishi UFJ to stimulate further Japanese demand for platinum through
an Exchange Traded Fund or ETF
- The Company also operates a PGM investment programme. This uses a venture capital-type approach to provide start-up or early stage capital to companies
working on the commercialisation of technology that utilises one or more of the platinum group metals. Many of the investments have focused on hydrogen,
fuel cells and clean energy such as the 2016 investments in Greyrock, which is developing and commercialising technology used to produce clean fuels from
flare gas, and in United Hydrogen Corporation, which is working on low cost hydrogen, a key issue for the adoption of fuel cell vehicles. In addition, we
sponsor academic research into the use of the PGMs at a number of universities in South Africa and elsewhere
- The Company also continues to work on areas aiding the widespread commercial adoption of fuel cells and hydrogen in the transport sector and other sectors.
This involves a range of activities from investing in companies that address specific market development opportunities through the PGM investment
programme, to engaging with government to ensure equitable regulatory terms for these technologies, and assisting in demonstration programmes where these
are appropriate
Mining innovation
Anglo American Platinum initiated a new innovation strategy in 2011 to find alternatives for conventional mining and, in 2013, changed strategy to aim for
70% mechanised production from the core retained portfolio. The move to mechanisation will ensure that these alternative mining methods will be safer and
more productive, as well as ultimately more cost effective for the Company.
The Company is focused on finding alternative ways to modernise mining in narrow tabular orebodies in the platinum industry by using different equipment,
layouts and techniques that will change the conventional way of mining. In 2016, testing for this technology moved to Twickenham from Bathopele mine as
this mine was exited with the sale of the Rustenburg Operations.
Anglo American Platinum has developed a number of new technologies and equipment, including electro-hydraulic hand-held drills; extra-low profile fleet of
drill rigs and bolters; ultra-low profile drill rig, bolter, dozer and sweeper units; cutting technologies that include the rapid mining development
system; continuous conveyor belts and more. In addition, significant progress has been made with fuel cell technologies and, within the Company's fleet, a
dozer and two locos are now running on hydrogen fuel. Assistance has also been given at Mogalakwena mine, with developments in autonomous drilling,
blasting fragmentation and anti-collision devices on vehicles.
Social and labour plan investment
In 2016, the pace of delivering on social and labour plan (SLP) commitments normalised after accelerated investment in 2015 to counter prior delays. In
South Africa, the Company invested R337 million (2015: R547 million) in community development, in line with mining charter requirements. Since 2010, 114
SLP projects have been initiated. By the end of 2016, 107 projects had been completed with the remaining seven due for completion in 2017.
With the official completion of the first phase of SLPs, known as SLP1 (2011-2016), we were required to develop, submit and implement SLP2 for all
operations. A total of 96 projects were identified in consultation with communities, local municipalities and ratified by relevant provincial departments.
Implementation is under way, with six already completed.
Wage negotiations
The Company signed a three year wage agreement on 27 October 2016 with the Association of Mineworkers and Construction Union (AMCU), retrospectively
applied from 1 July 2016 when the previous agreement concluded. This agreement was extended to the National Union of Mineworkers (NUM), United Association
of South Africa (UASA) and non-union affiliated employees in terms of section 23 of the Labour Relations Act, Act 66 of 1995.
The agreement followed a constructive and collaborative negotiation process, resulting in a cost-to-company increase of 6.71% in year 1, 6.56% in year two
and 6.96% in year three, or 6.74% on average over the three-year period - an outcome deemed fair to employees and one that ensures a sustainable future for
the business.
GOVERNMENT AND INDUSTRY POLICY
Mining Charter III
Anglo American Platinum recognises the invaluable contribution that mining has made, and continues to make, to South Africa's economic and social
landscape. The Mining Charter provides important guidelines in advancing the transformation of the mining industry, covering a range of transformation
pillars-from ownership, mine community development, employment equity, housing, to living conditions and procurement. The Company is confident that it has
met its targets, in accordance with the current Mining Charter.
A proposed Draft Reviewed Mining Charter was published on 15 April 2016 in the Government Gazette. Anglo American Platinum-through a submission by Anglo
American plc-has voiced its serious concerns regarding the Draft Reviewed Mining Charter, and called amongst others for a regulatory impact assessment to
be conducted by the Government to determine the potential consequences of the Draft Reviewed Mining Charter on the mining industry and South African
economy. The Company believes that were a Draft Reviewed Mining Charter to result from an agreement between Government and industry (as was the case
previously in 2004 and 2010), the effect would be greatly enhanced regulatory certainty and investor confidence.
The Company remains committed to working with the Department of Mineral Resources (DMR), through the Chamber of Mines, to ensure the industries concerns
are appropriately addressed.
Mineral and Petroleum Resources Development Act (MPRDA)
Amendments to South Africa's MPRDA, which have been under parliamentary review for nearly two years, have recently been sent to the National Council of
Provinces (NCOP) for approval, after a favourable National Assembly vote on the bill being referred to the NCOP, the upper house in parliament and the
final step before promulgation. Minister Zwane has publicly stated he believes the bill will pass constitutional muster.
Some of the mining industry's concerns on the MPRDA amendment relate to the status of the mining charter in the bill, capping exports of strategic minerals
(still to be defined by the minister, a level of discretion that concerns the industry) and the fact that the minster has discretion on pricing minerals to
local users to encourage beneficiation.
The Company continues to engage the minister and DMR, via the Chamber of Mines, on these aspects of the proposed bill, in an attempt to find a resolution
before promulgation which, from DMR indications, is likely to happen in the first half of 2017.
Unki indigenisation in Zimbabwe
After approval of its indigenisation plan, Anglo American Platinum signed a heads of agreement with the government of Zimbabwe in November 2012 that set
out key terms of the approved indigenisation plan for Unki mine investment. The proposed transaction would have resulted in the disposal of up to 51% of
the equity in Unki, facilitated through a notional vendor-funded transaction.
The plan has not yet been implemented as the government of Zimbabwe has been refining its position on indigenisation. In April 2016, President Mugabe
issued a press statement that sought to clarify the government's position on the indigenisation and economic empowerment policy. In terms of the statement,
existing mining companies such as Unki would achieve compliance with indigenisation requirements by ensuring that at least 75% of gross sales proceeds are
spent and retained in Zimbabwe. The statement concluded by noting that President Mugabe had directed that indigenisation legislation be amended to comply
with this latest position. Amendments to the Indigenisation Act are yet to be made.
MINERAL RESERVES AND RESOURCES STATEMENT
The combined South African and Zimbabwean Ore Reserves decreased from 184.6 4E Moz to 170.2 4E Moz in the review period. This was primarily as a result of
the sale of the Rustenburg Operations to Sibanye Gold Ltd. The reduction of Ore Reserves associated with the sale of the Rustenburg Operations has been
partially offset by an increase in Ore Reserves at Mogalakwena and Amandelbult's Dishaba mine due to the additional conversion of Mineral Resources to Ore
Reserves. At Mogalakwena Ore Reserves increased significantly due to pit shell design changes and at Amandelbult's Dishaba mine, Ore Reserves increased
materially due to a revised UG2 extraction strategy.
The South African and Zimbabwean Mineral Resource, inclusive of Ore Reserves decreased by 9.2% from 916.4 4E Moz to 831.7 4E Moz equivalent in the year
under review. This was primarily the result of the disposal of the Rustenburg Mineral Resource, inclusive of Ore Reserves to Sibanye. This disposal has
been partially offset by the increase in Mineral Resource, inclusive of Ore Reserves at Mogalakwena mine due to the pit shell design changes.
Anglo American Platinum maintains an industry leading Mineral Resource and Ore Reserve status, even after the sale of the Rustenburg operations, and after
revisions to future economic assumptions.
OUTLOOK
In view of the current and expected market conditions for PGMs, Anglo American Platinum remains focused on its strategy to deliver change and build a
resilient business. The Company has positioned itself to manage through the current environment. Stringent cost controls have been implemented,
restructuring completed at Union and unprofitable production at Twickenham placed on care and maintenance which will deliver cost savings in 2017.
Restructuring the business has resulted in a further R700 million of overhead savings.
Underlying cash-flow generation remains a focus, and project capital will therefore be prioritised on quick-return projects that generate meaningful
incremental value. No major project capital will be committed in 2017, although the Company continues with study plans for potential future replacement and
growth projects to position itself to implement these should market conditions improve. The Company aims to strengthen the balance sheet to manage through
the cycle and execute on high-returning projects when market conditions require additional production. Given project capital expenditure will be limited in
the current environment, and in keeping with capital-allocation policy, the Board will continue to monitor the potential to reinstate a dividend in 2017.
Market outlook
Anglo American Platinum expects the economic environment to remain challenging for PGMs in 2017, with relatively low prices.
Although there were numerous positives for platinum demand last year, in the form of investment, automotive and industrial demand, there were some notable
challenges, particularly in the jewellery sector. These headwinds suggest that overall demand will change little in 2017. A combination of limited capital
expenditure in recent years and the ageing of some older mines across the industry means that mine supply is more likely to decline than increase over the
medium term. Even limited growth in existing applications would therefore be expected to support the platinum price to some extent. If the industry's
market-development initiatives in investment, jewellery, fuel cells and hydrogen are successful, these should result in fundamental deficits.
In contrast, palladium is expected to remain in substantial deficits over the next five years, as growth in autocatalyst demand drives overall demand
higher. The outlook for rhodium is less positive: although there are signs of additional demand developing, this metal is currently in surplus and is
unlikely to move into deficit rapidly.
The outlook for platinum demand in 2017 is largely neutral compared to 2016. Automotive demand is expected to contract marginally as the diesel engine
continues to lose market share in smaller cars in Europe, although the introduction of tighter emissions rules involving real-world driving could boost
individual catalyst loadings. Industrial platinum buying should remain strong in many sectors, with the chemical and glass sectors set to buy more metal.
While investment demand is difficult to forecast, the current metal price and initial success of some of the industry's market-development work suggests
that demand in this sector could again be relatively strong. In the short term, however, the area of greatest concern is the performance of the jewellery
sector. The Chinese jewellery sector contracted for a variety of reasons in 2016, with platinum suffering too. Some of these factors may be one-offs but,
given lower prevailing economic growth, we anticipate at best a modest recovery in demand here. The Indian jewellery sector continues to show great promise
but its performance in 2017 is likely to be hampered by the ongoing effects of the recent demonetisation programme.
Macroeconomic and political factors, such as US interest rate hike expectations, impact of the new Republican government under Donald Trump, and further
information on Brexit, among others, will probably affect sentiment and therefore price as much as supply and demand fundamentals.
Operational outlook
Platinum production guidance (metal-in-concentrate) will be 2.35-2.40 million ounces for 2017, driven by increased purchase-of-concentrate from third
parties. Own mine and managed production will remain constant year on year.
Financial outlook
The Company recorded input cost inflation of around 7.5% in 2016. Cost inflation is likely to remain a challenge in 2017. While some costs have been
mitigated by restructuring the Company and implementing various initiatives, inflationary pressures from wages and electricity remain.
The decrease in capitalised waste costs in 2017 at Mogalakwena will add around R400 per ounce to unit costs for 2017 as overall volume is maintained at 99
million tonnes, and a lower amount of volume is capitalised (in line with IFRIC 20), however there will be no cash-flow impact. Further initiatives have
been identified to reduce the impact of cost escalations and we expect the unit cost per platinum ounce produced to be between R20,350 and R20,850, an
increase of 2% to 5% excluding Mogalakwena capitalised waste costs.
There are no significant restructuring activities envisaged for 2017 as all operational restructuring is complete.
The sale of out-of-plan resources at Amandelbult to Northam for R1 billion in cash, the upfront proceeds from the sale of Union mine of R400 million and a
second customer prepayment for USD100 million will be used to reduce debt in 2017.
Johannesburg, South Africa
14 February 2017
Any forecast information included in this announcement has not been reviewed and reported on by the company's external auditors.
For further information, please contact:
Investor relations
Emma Chapman
+27 (0) 11 373 6239
emma.chapman@angloamerican.com
Media
Mpumi Sithole
+27 (0) 11 373 6246
mpumi.sithole@angloamerican.com
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 (Australian)
AH Sangqu
Alternate director
PG Whitcutt (Alternate director to R Medori)
COMPANY SECRETARY
Elizna Viljoen
elizna.viljoen@angloamerican.com
Telephone +27 (0) 11 638 3425
Facsimile +27 (0) 11 373 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 +27 (0) 11 373 6111
Facsimile +27 (0) 11 373 5111
+27 (0) 11 834 2379
SPONSOR
Rand Merchant Bank
a division of FirstRand Bank Limited
REGISTRARS
Computershare Investor Services Proprietary Limited
Rosebank Towers, 51 Bierman Avenue
Rosebank 2196
PO Box 61051
Marshalltown 2107
Telephone +27 (0) 11 370 5000
Facsimile +27 (0) 11 688 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 +27 (0) 11 373 6239
FRAUD LINE - SPEAKUP
Anonymous whistleblower facility
0800 230 570 (South Africa)
angloplat@anglospeakup.com
15 February 2017
DISCLAIMER
Certain elements made in this annual report constitute forward looking statements. Forward looking statements are typically identified by the use of
forward looking terminology such as 'believes', 'expects', 'may', 'will', 'could', 'should', 'intends', 'estimates', 'plans', 'assumes', or 'anticipates'
or the negative thereof or other variations thereon or comparable terminology, or by discussions of, e.g. future plans, present or future events, or
strategy that involve risks and uncertainties. Such forward looking statements are subject to a number of risks and uncertainties, many of which are beyond
the company's control and all of which are based on the company's current beliefs and expectations about future events. Such statements are based on
current expectations and, by their current nature, are subject to a number of risks and uncertainties that could cause actual results and performance to
differ materially from any expected future results or performance, expressed or implied, by the forward looking statement. No assurance can be given that
such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the company and its
subsidiaries.
Date: 15/02/2017 09:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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