Wrap Text
Summarised Preliminary Audited Consolidated Financial Results for the year ended 31 December 2017
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 2017
Anglo American Platinum Limited's summarised consolidated audited financial results for the year ended 31 December 2017
have been independently audited by the Group's external auditors. The preparation of the Group's audited results for the
year ended 31 December 2017 was supervised by the Finance Director, Mr I Botha.
KEY FEATURES
PGM production
(2016: 4.97)
5.0Moz
Free cash from operations
(2016: R2.2bn)
R2.4bn
ROCE
(2016: 9%)
18%
Net debt
(2016: R7.3bn)
R1.8bn
Dividend
(2016: Nil)
R0.9bn or R3.49 per share
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
2017 2016
Rm Rm
Gross sales revenue 65,688 61,976
Commissions paid (18) (16)
Net sales revenue 2 65,670 61,960
Cost of sales 3 (56,578) (56,096)
Gross profit on metal sales 3 9,092 5,864
Other net expenditure 5 (6) (600)
Loss on impairment and scrapping of property, plant and equipment 6 (1,699) (22)
Market development and promotional expenditure (813) (683)
Operating profit 6,574 4,559
Impairment of investments in associate - Bokoni Holdco (235) (130)
Impairment of investments in associate - Pandora Joint Venture - (153)
Impairment of investment in associate - Bafokeng-Rasimone Platinum Mine (BRPM) (1,910) -
Impairment of non-current financial assets (777) (111)
Profit on disposal of long-dated resources 1,066 -
Profit on disposal of associates 135 -
Share-based payment expense for facilitation of BEE investment in Atomatic - (156)
Loss on disposal of Rustenburg Mine - (1,681)
Interest expensed (1,219) (1,329)
Interest received 222 149
Remeasurements of loans and receivables 46 27
Losses from associates (net of taxation) (362) (115)
Profit before taxation 6 3,540 1,060
Taxation (1,616) (364)
Profit for the year 1,924 696
Other comprehensive income, net of income tax
Items that will be reclassified subsequently to profit or loss (416) (465)
Deferred foreign exchange translation losses (553) (769)
Actuarial loss on employees' service benefit obligation - (6)
Net losses on available-for-sale investments 137 310
Total comprehensive income for the year 1,508 231
Profit/(loss) attributed to:
Owners of the Company 1,944 632
Non-controlling interests (20) 64
1,924 696
Total comprehensive income/(loss) attributed to:
Owners of the Company 1,528 167
Non-controlling interests (20) 64
1,508 231
Earnings per share
Earnings per ordinary share (cents)
- Basic 741 241
- Diluted 739 240
Headline earnings 8 3,886 1,867
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2017
2017 2016
Notes Rm Rm
ASSETS
Non-current assets 48,938 51,662
Property, plant and equipment 36,597 38,574
Capital work-in-progress 5,361 4,892
Investment in associates 9 2,464 3,963
Investments held by environmental trusts 970 907
Other financial assets 10 3,507 3,326
Other non-current assets 39 -
Current assets 31,318 26,035
Inventories 11 18,489 16,369
Trade and other receivables 2,097 2,140
Other assets 1,075 1,554
Other financial assets 73 45
Taxation 469 470
Cash and cash equivalents 9,115 5,457
Non-current assets held-for-sale 12 558 -
Total assets 80,814 77,697
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 27 27
Share premium 22,673 22,498
Foreign currency translation reserve 1,764 2,317
Available-for-sale reserve 429 334
Retained earnings 16,634 14,840
Non-controlling interests (526) (234)
Shareholders' equity 41,001 39,782
Non-current liabilities 18,864 19,187
Interest-bearing borrowings 13 9,362 9,398
Obligations due under finance leases 98 96
Environmental obligations 1,693 1,938
Employee benefits 17 17
Other financial liabilities 239 219
Deferred taxation 7,455 7,519
Current liabilities 20,374 18,728
Interest-bearing borrowings 13 1,713 3,267
Obligations due under finance leases within one year 17 15
Trade and other payables 11,316 10,241
Other liabilities 6,691 4,623
Other financial liabilities 616 567
Share-based payment provision 21 15
Liabilities associated with non-current assets held-for-sale 12 575 -
Total equity and liabilities 80,814 77,697
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
2017 2016
Note Rm Rm
Cash flows from operating activities
Cash receipts from customers 65,993 61,783
Cash paid to suppliers and employees (50,126) (48,187)
Cash generated from operations 15,867 13,596
Interest paid (net of interest capitalised) (1,004) (1,071)
Taxation paid (1,742) (1,125)
Net cash from operating activities 13,121 11,400
Cash flows used in investing activities
Purchase of property, plant and equipment (includes interest capitalised) (4,969) (5,018)
Proceeds from sale of plant and equipment 17 140
Purchases of financial assets investments (68) -
Proceeds on sale of Rustenburg Mine (net of cash disposed of) - 1,356
Working capital support in respect of Rustenburg Mine (1,529) (1,418)
Proceeds on disposal of long-dated resources 1,066 -
Proceeds on disposal of associates 144 -
Shareholder funding capitalised to investment in associates (1,156) (448)
Acquisition of equity investment in Hydrogenious (13) (34)
Acquisition of available-for-sale investment in Greyrock - (36)
Acquisition of convertible notes in United Hydrogen (4) (39)
Redemption/(acquisition) of preference shares in Baphalane Siyanda Chrome Company 86 (84)
Advances made to Plateau Resources Proprietary Limited (708) (312)
Net increase in investments held by environmental trusts - 2
Interest received 143 95
Growth in environmental trusts 8 7
Other advances (135) (40)
Net cash used in investing activities (7,118) (5,829)
Cash flows used in financing activities
Purchase of treasury shares for the Bonus Share Plan (BSP) (155) (163)
Purchase of Anglo American plc shares for the Amplats share schemes - (7)
Repayment of interest-bearing borrowings (1,659) (1,668)
Repayment of finance lease obligation (17) (16)
Funding for non-controlling interest's 26% in subsidiary - 112
Cash distributions to non-controlling interests (272) (44)
Net cash used in financing activities (2,103) (1,786)
Net increase in cash and cash equivalents 3,900 3,785
Cash and cash equivalents at beginning of year 5,457 1,672
Cash and cash equivalents at end of year 9,357 5,457
Movement in net debt
Net debt at beginning of year (7,319) (12,769)
Net cash from operating activities 13,121 11,400
Net cash used in investing activities (7,118) (5,829)
Other (517) (121)
Net debt at end of year (1,833) (7,319)
Made up as follows:
Cash and cash equivalents 9,115 5,457
Cash and cash equivalents classified as held for sale 242 -
Non-current interest-bearing borrowings 13 (9,362) (9,398)
Obligations due under finance leases within one year (17) (15)
Current interest-bearing borrowings 13 (1,713) (3,267)
Obligations due under finance leases (98) (96)
(1,833) (7,319)
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Foreign
currency Available- Non-
Share Share translation for-sale Retained controlling
capital premium reserve reserve earnings interests Total
Rm Rm Rm Rm Rm Rm Rm
Balance at 31 December 2015 27 22,395 3,086 24 14,120 (408) 39,244
Total comprehensive (loss)/income 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
Total comprehensive (loss)/income for the year (553) 137 1,944 (20) 1,508
Deferred taxation charged directly to equity (42) 2 (40)
Cash distributions to minorities (272) (272)
Shares acquired in terms of the BSP - treated as treasury shares (-)* (155) (155)
Shares vested in terms of the BSP -* 330 (330) -*
Equity-settled share-based compensation 189 189
Shares purchased for employees (11) (11)
Balance at 31 December 2017 27 22,673 1,764 429 16,634 (526) 41,001
* Less than R500,000.
NOTES TO THE SUMMARISED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2017
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 2016.
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 2017
were supervised by the Finance director, Mr I Botha CA(SA).
The consolidated financial statements from which the summarised consolidated financial statements were 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. The consolidated financial statements are also available on the Company's website
www.angloamericanplatinum.com/investors/annual-reporting/2017.
Net sales revenue Operating contribution Depreciation
2017 2016 2017 2016 2017 2016
Rm Rm Rm Rm Rm Rm
2. SEGMENTAL INFORMATION
Segment revenue and results
Operations
Mogalakwena Mine 16,118 14,227 7,029 4,785 1,726 1,813
Amandelbult Mine 11,423 10,692 1,699 1,293 719 820
Unki Platinum Mine 2,489 2,227 369 22 356 424
Twickenham Project 21 215 (376) (448) 42 48
Modikwa Platinum Mine1 1,817 1,608 246 18 157 175
Mototolo Platinum Mine1 1,218 1,418 200 290 99 120
Kroondal Platinum Mine1 3,233 3,101 213 318 517 406
Rustenburg Mine2 - 9,307 - 410 - 299
Union Mine3 4,280 3,958 974 596 80 253
Other 14 16 10 80 2 3
Total - mined 40,612 46,769 10,363 7,364 3,699 4,361
Inter-segmental transaction (24) - - - - -
Purchased metals 25,082 15,191 2,104 1,319 375 268
65,670 61,960 12,467 8,683 4,074 4,629
Other costs (note 4) (3,375) (2,819)
Gross profit on metal sales 9,092 5,864
1 Amplats' share (excluding purchase of concentrate).
2 Effective 1 November 2016, Rustenburg Mine was disposed of.
3 Held-for-sale - refer to Note 12.
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:
Following the move to more detailed reporting on purchase of concentrate activities, Amandelbult has been changed to
exclude metal purchased from third parties. Also the results for toll refining activity has been moved from purchase
metal to other. These changes led to a corresponding change in the results for purchased metal.
This resulted in the following changes to the comparative figures:
Net sales revenue Operating contribution Depreciation
As reported Reclassified As reported Reclassified As reported Reclassified
Rm Rm Rm Rm Rm Rm
Amandelbult Mine 10,870 10,692 1,367 1,293 822 820
Other - 16 - 80 - 3
Purchased metal 15,029 15,191 1,325 1,319 269 268
25,899 25,899 2,692 2,692 1,091 1,091
2017 2016
Rm Rm
3. GROSS PROFIT ON METAL SALES
Net sales revenue 65,670 61,960
Cost of sales (56,578) (56,096)
Cash operating costs (30,642) (35,317)
On-mine (24,109) (29,615)
Smelting (3,363) (2,834)
Treatment and refining (3,170) (2,868)
Purchase of metals and leasing activities* (20,763) (13,518)
Depreciation (4,074) (4,629)
On-mine (2 823) (3,197)
Smelting (551) (681)
Treatment and refining (700) (751)
Increase in metal inventories 515 187
Increase in ore stockpiles (notes 11 and 17) 1,761 -
Other costs (note 4) (3,375) (2,819)
Gross profit on metal sales 9,092 5,864
* Consists of purchased metals in concentrate, secondary metals and other metals.
4. OTHER COSTS
Other costs comprise the following principal categories:
Overheads
Corporate costs 531 364
Royalties 653 493
Contributions to education and community development 372 419
Research 230 251
Exploration 105 95
Total exploration costs 157 162
Less: Capitalised (52) (67)
Other 423 367
2,134 1,989
Direct operating overheads
Transport of metals 856 565
Share-based payments 205 265
1,061 830
Total other costs 3,375 2,819
5. OTHER NET EXPENDITURE
Other net expenditure comprises the following principal categories:
Realised and unrealised foreign exchange loss (398) (150)
Fair value losses on cash and cash equivalents designated as a hedging instrument (383) (5)
Fair value gains on deferred income liability 422 63
Other foreign exchange losses (437) (208)
Project maintenance costs* (106) (233)
Restructuring and other related costs (11) (342)
Loss on disposal of plant, equipment, and conversion rights (16) (23)
Royalties received 27 16
Insurance proceeds 197 13
Proceeds realised on treasury bills 228 -
Other - net 73 119
(6) (600)
* 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.
2017 2016
Rm Rm
6. PROFIT BEFORE TAXATION
Profit before taxation is arrived at after taking account of:
Auditors' remuneration 14 15
Audit fees - current year 14 12
Other services - 3
Losses on financial instruments at fair value through profit or loss 709 21
Fair value changes on hedging accounting (39) -
Operating lease charges - buildings and equipment 40 11
Impairment of investments in associates 2,145 283
Impairment of non-current financial assets 777 111
Share-based payment expense for facilitation of BEE investment in Atomatic - 156
Loss on disposal of Rustenburg Mine - 1,681
Profit on disposal of associates 135 -
Loss on impairment, disposal and scrapping of property, plant and equipment 1,658 45
Loss on disposal of property, plant and equipment 7 23
Insurance proceeds realised on loss of assets (48)
Loss on impairment and scrapping of property, plant and equipment 1,699 22
Union Mine and Masa Chrome (note 12) 1,655 -
Various smaller assets scrapped 44 22
(Reversal)/write-down of inventories to net realisable value (198) 511
Mined* (310) 325
Purchased 112 186
* This reversal arises as a result of changes in prices of metal.
% %
7. 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 tax rate 28.0 28.0
Disallowable items that are individually immaterial 2.3 9.7
Share-based payment expense for facilitation of BEE investment in Atomatic - 4.1
Employee housing expenditure disallowed 1.1 4.3
Impairment of investments in associates 17.0 10.4
Impairment of non-current financial assets 6.1 -
Prior year (overprovision)/underprovision (1.7) 2.3
Effect of after-tax share of losses from associates 2.9 3.0
Difference in tax rates of subsidiaries (1.6) (3.1)
Impact of disposal of Rustenburg Mine - (27.5)
Zimbabwean Aids levy - 1.3
Profit on disposal of long-dated resources (8.4) -
Profit on disposal of associates (1.1) -
Taxation not raised on minority share of impairment of Union Mine 1.9 -
Other (0.9) 1.8
Effective taxation rate 45.6 34.3
2017 2016
Rm Rm
8. RECONCILIATION BETWEEN PROFIT AND HEADLINE EARNINGS
Profit attributable to ordinary shareholders 1,944 632
Adjustments
Net loss on disposal of property, plant and equipment 7 23
Tax effect thereon (2) (6)
Loss on impairment and scrapping of property, plant and equipment 44 22
Tax effect thereon (12) (6)
Profit on disposal of long-dated resources (1,066) -
Tax effect thereon - -
Impairment of investments in associates 2,145 283
Tax effect thereon - -
Insurance proceeds on loss of assets (48) -
Tax effect thereon 14 -
Profit on disposal of associates (135) -
Tax effect thereon - -
Impairment of Union Mine and Masa Chrome 1,655 -
Tax effect thereon (397) -
Non-controlling interest's share (263) -
Loss on disposal of Rustenburg Mine - 1,681
Tax effect thereon - (762)
Headline earnings 3,886 1,867
Attributable headline earnings per ordinary share (cents)
Headline 1,482 713
Diluted 1,476 710
9. INVESTMENT IN ASSOCIATES
Listed (market value: R75 million (2016: R113 million))
Investment in Atlatsa Resources Corporation - -
Unlisted 2,464 3,963
Bokoni Platinum Holdings Proprietary Limited (Bokoni Holdco)
Carrying value of investment - -
Bafokeng-Rasimone Platinum Mine (BRPM)
Carrying value of investment 2,333 3,665
Richtrau No. 123 Proprietary Limited
Carrying value of investment 5 5
Primus Power
Carrying value of investment 26 -
Peglerae Hospital Proprietary Limited
Carrying value of investment 57 56
Unincorporated associate - Pandora
Carrying value of investment (note 18) - 192
Hydrogenious Technologies GmbH
Carrying value of investment 43 45
2,464 3,963
2017 2016
Rm Rm
10. OTHER FINANCIAL ASSETS
Loans carried at amortised cost
Loans to Plateau Resources Proprietary Limited 201 201
Loan to ARM Mining Consortium Limited 52 65
Advance to Bakgatla-Ba-Kgafela traditional community 149 200
Convertible notes in United Hydrogen Group Inc. 30 33
Preference share investment in Baphalane Siyanda Chrome Company - 84
Other 100 103
532 686
Available-for-sale investments carried at fair value
Investment in Royal Bafokeng Platinum Limited 627 798
Investment in Wesizwe Platinum Limited 114 161
Investment in Altergy Systems 31 -
Investment in Ballard Power Systems Inc. 258 -
Investment in Greyrock Energy Inc. 93 34
Investment in Food Freshness Technology Holdings 77 49
1,200 1,042
Other financial assets at fair value through profit or loss
Deferred consideration on sale of Pandora Joint Venture (note 18) 115 -
Deferred consideration on sale of Rustenburg Mine 1,660 1,598
Total other financial assets 3,507 3,326
11. INVENTORIES
Refined metals 3,906 3,165
At cost 2,548 1,665
At net realisable values 1,358 1,500
Work in process 10,354 10,593
At cost 5,547 5,396
At net realisable values 4,807 5,197
Ore stockpiles (note 17) 1,761 -
Trading metal originating from third parties at fair value less costs of disposal* - 3
Total metal inventories 16,021 13,761
Stores and materials at cost less obsolescence provision 2,468 2,608
18,489 16,369
* 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.
12. NON-CURRENT ASSETS HELD FOR SALE
The Group concluded a binding sale agreement for its 85% ownership interest in Union Mine and its 50.1% ownership
interest in Masa Chrome Proprietary Limited (Masa) to a subsidiary of Siyanda Resources Proprietary Limited (Siyanda).
The agreement was signed on 14 February 2017 and most of the critical conditions precedent were met on 1 December 2017,
such that the sale was highly probable of being concluded within 12 months. Accordingly, the criteria for
reclassification as held for sale in terms of IFRS 5 Non-current Asset Held for Sale and Discontinued Operations were met
as of 1 December 2017.
The disposal was in accordance with the Group's portfolio repositioning strategy. The two ownership interests are
classified as a single disposal group in accordance with IFRS 5.
The fair value less cost to sell on reclassification was negative R259 million, and was determined using the upfront
consideration of R400 million receivable in cash, deferred consideration based on 35% of cumulative positive
distributable free cash flows paid annually discounted using a rate of 10% over a period of 11 years and a purchase of
concentrate (POC) liability of R931 million which comprises a purchase price adjustment. The deferred consideration
receivable is a level 3 fair value of nil. This resulted in an attributable, post-tax impairment loss of R996 million.
2017 2016
Rm Rm
Assets held for sale are made up of:
Non-current assets 221 -
Environmental assets 139 -
Deferred taxation 82 -
Current assets 337 -
Trade and other receivables 79 -
Taxation 16 -
Cash and cash equivalents 242 -
Total assets 558 -
Liabilities associated with assets held for sale are made up of:
Non-current liabilities 201 -
Environmental obligations 201 -
Current liabilities 374 -
Trade and other payables 188 -
Other liabilities 186 -
Total liabilities 575 -
Net liabilities held for sale 17 -
Facility Utilised Facility Utilised
amount amount amount amount
2017 2017 2016 2016
Rm Rm Rm Rm
13. INTEREST-BEARING BORROWINGS
Unsecured financial liabilities measured at amortised cost
The Group has the following borrowing facilities:
Committed facilities 22,254 9,397 22,286 9,430
ABSA Bank Limited 2,000 - 2,000 -
Anglo American SA Finance Limited 9,100 9,100 9,100 9,100
BNP Paribas 1,000 - - -
FirstRand Bank Limited 2,857 - 2,857 -
Nedbank Limited 4,297 297 4,329 330
Standard Bank of South Africa Limited 3,000 - 4,000 -
Uncommitted facilities 6,230 1,678 5,824 3,199
Anglo American SA Finance Limited 5,000 1,678 5,000 3,199
Nedbank London# 738 - 824 -
Standard Bank of South Africa Limited 492 - - -
Total facilities 28,484 11,075 28,110 12,629
Deferred income - top up - - - 36
Total interest-bearing borrowings 28,484 11,075 28,110 12,665
Current interest-bearing borrowings 1,713 3,267
Non-current interest-bearing borrowings 9,362 9,398
11,075 12,665
Weighted average borrowing rate (%) 8,59 8,80
# USD60 million uncommitted facility.
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 R18,657 million (2016: R19,657 million) of the facilities is committed for one to five years; R1,000
million (2016: R1,300 million) is committed for a rolling period of 364 days; R2,300 million (2016: R1,000 million)
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.
14. RELATED PARTY TRANSACTIONS
The Company and its subsidiaries, in the ordinary course of business, enter into various sale, purchase, service and
lease transactions with the ultimate holding company, Anglo American plc, its subsidiaries, joint arrangements and
associates, as well as transactions with the Group's associates. Certain deposits and borrowings are also placed with
subsidiaries of the holding company. The Group participates in the Anglo American plc insurance programme. These
transactions are priced on an arm's length basis. Material related party transactions with subsidiaries and associates of
Anglo American plc and the Group's associates and not disclosed elsewhere in the notes to the financial statements are as
follows:
2017 2016
Rm Rm
Compensation paid to key management personnel 81 81
Interest paid for the year1 1,068 1,111
Interest received for the year1 58 9
Insurance paid for the year1 447 347
Purchase of goods and services for the year2 5,936 6,209
Associates 5,310 5,566
Anglo American plc and other subsidiaries 626 643
Deposits1 7,246 1,684
Interest-bearing borrowings (including interest accrued)1 10,777 12,390
Amounts owed to related parties 1,434 1,427
Associates 1,423 1,388
Anglo American plc and other subsidiaries 11 39
1 Anglo American plc and other subsidiaries.
2 This includes purchase of concentrate from the Group's associates.
Trade payables
Trade payables are settled on commercial terms.
Deposits
Deposits earn interest at market-related rates and are repayable on maturity.
Interest-bearing borrowings
Interest-bearing borrowings bear interest at market-related rates and are repayable on maturity.
2017 2016
Rm Rm
15. COMMITMENTS
Mining and process property, plant and equipment
Contracted for 1,919 1,106
Not yet contracted for 4,302 5,649
Authorised by the directors 6,221 6,755
Project capital 2,040 3,114
- Within one year 799 408
- Thereafter 1,241 2,706
Stay-in-business capital 4,180 3,641
- Within one year 2,997 2,312
- Thereafter 1,183 1,329
Capital commitments relating to the Group's share in associates
Contracted for 337 167
Not yet contracted for 1,569 2,305
1,906 2,472
Other
Operating lease rentals - buildings and equipment 200 116
Due within one year 77 37
Due within two to five years 123 79
These commitments will be funded from existing cash resources, future operating cash flows, borrowings and any other
funding strategies embarked on by the Group.
16. FINANCIAL INSTRUMENTS
Categories of financial instruments
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.
31 December Fair value measurement
2017 at 31 December 2017
Level 1 Level 2 Level 3
Description Rm Rm Rm Rm
Financial assets through profit and loss
Investments held by environmental trusts 1,109 1,109 - -
Other financial assets 1,848 - 7 1,841
Available-for-sale assets at fair value through other comprehensive income
Other financial assets 1,200 741 - 459
Non-financial assets at fair value through profit and loss
Trading metal inventories originating from third parties - - - -
Total 4,157 1,850 7 2,300
Financial liabilities through profit and loss
Trade and other payables* (6,753) - (6,753) -
Other financial liabilities (547) - (4) (543)
Non-financial liabilities at fair value through profit and loss
Liabilities for return of metal (134) - (134) -
Total (7,434) - (6,891) (543)
31 December Fair value measurement
2016 at 31 December 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 through other comprehensive income
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 3,592 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)
* Represents payables under purchase of concentrate agreements.
Categories of financial instruments continued
Fair value disclosures continued
There were no transfers between the levels during the year.
Valuation techniques used to derive Level 2 fair values
Level 2 fair values for other financial liabilities relate specifically to forward foreign exchange contracts and fixed
price commodity 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. Fixed price commodity
contracts are valued with reference to relevant quoted commodity prices at period end.
Level 2 fair values for trade and other payables relate specifically to purchase of concentrate trade creditors which
are priced in US dollar. 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. The Level 2 fair value of liabilities for the return of metal is determined
by multiplying the quantities of metal under open leases by the relevant commodity prices and ZAR:USD exchange rates.
Level 3 fair value measurement of financial assets and financial liabilities at fair value
The Level 3 fair value of other financial assets comprises investments in unlisted companies Food Freshness Technology
Holdings, Ballard Power Systems Inc., Altergy Systems and Greyrock Energy Inc. All these investments are classified as
available-for-sale in terms of IAS 39 Financial Instruments: Recognition and Measurement. The deferred consideration on
the disposals of the Rustenburg Mine and Pandora Joint Venture are 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
Other Other Other Other
financial financial financial financial
assets assets liabilities liabilities
2017 2016 2017 2016
Rm Rm Rm Rm
Opening balance 1,725 19 (501) -
Disposal of Pandora and acquisition of investment 115 35 - -
Disposal of Rustenburg Mine - 1,615 - (494)
Interest included in profit or loss 115 27 (42) (7)
Payment received (31) - - -
Total gains included in other comprehensive income 393 35 - -
Foreign exchange translation (17) (6) - -
Closing balance 2,300 1,725 (543) (501)
115 35 - -
Level 3 fair value sensitivities - 1,615 - (494)
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 and a 0.5% change in the
discount rates would have the following impact:
Financial asset Financial liability
2017 2016 2017 2016
Rm Rm Rm Rm
10% change in expected cash flows
Reduction to profit or loss 23 28 54 -
Increase to profit or loss 23 28 54 -
0.5% change in discount rates
Reduction to profit or loss 54 51 2 4
Increase to profit or loss 56 53 2 4
10% change in market price of peer groups
Reduction to profit or loss 46 5 - -
Increase to profit or loss 46 5 - -
17. CHANGES IN ACCOUNTING ESTIMATES
Change in estimate of quantities of inventory
During the current year, the Group changed its estimate of the quantities of inventory based on the outcome of a
physical count of in-process metals. The Group runs a theoretical metal inventory system based on inputs, the results of
previous counts and outputs. Due to the nature of in-process inventories being contained in weirs, pipes and other
vessels, physical counts only take place once per annum, except in the Precious Metal Refinery, where the physical count
is usually conducted every three years.
This change in estimate had the effect of increasing the value of inventory disclosed in the financial statements by
R942 million (2016: increase of R618 million). This resulted in the recognition of an after-tax gain of R678 million
(2016: after-tax gain of R445 million).
Change in estimate of useful lives
The Group performed its annual comprehensive reassessment of useful lives of all assets. This process resulted in the
useful life of buildings increasing from a maximum of 20 years to a maximum of 50 years. The useful life in respect of
plant and equipment has not changed but the useful lives of individual assets within the category moved from the lower
to the higher bracket. Changes were accounted for prospectively. These changes have an effect on current and future
periods. The current year effect is a decrease in depreciation of R323 million and it is expected that the effect on
future periods will be similar to the current year.
Change in estimate of the discounting period for environmental liabilities
During the annual review of environmental liabilities, the discount periods were revised to more closely align to the
actual life of mine, limited to a period of 35 years to accommodate for estimation uncertainty beyond that point. This
resulted in an overall increase in discounting period for the purposes of determining the Group's environmental
obligations.
The decrease in the liability consequent on the overall extension of discount period was partly offset by increased
assumption of cost pertaining to ground water rehabilitation. This was accounted for as a change in accounting estimate
and therefore adjusted prospectively.
As this partly comprised a change in the timing of the rehabilitation of related assets being used, the decrease was
first recognised as a reduction in the related decommissioning asset in terms of IFRIC 1 Changes in Existing
Decommissioning, Restoration and Similar Liabilities.
This resulted in a decrease in the decommissioning asset by R152 million to reduce it to a nil balance. The remainder of
the reduction was recognised in profit or loss.
This is a once-off adjustment and it does not impact the future periods, except for the future depreciation on relevant
decommissioning assets being nil, giving rise to an increased future gross profit on metal sales and operating profit.
Change in estimate of the run-of-mine ore stockpile
During the second half of 2017, management allocated mining costs to ore stockpiles for the first time. Historically
these stockpiles had not been expected to be processed due to limited concentrator capacity within the period considered
by management for the determination of normal production capacity in terms of IAS 2 Inventories. Hence, all on-mine costs
were allocated to work-in-progress and refined metal inventory based on concentrator capacity. Primarily as a result of a
different mining profile that was fully implemented in the current year, a drawdown of stockpiles is anticipated within
the five-year period considered by management, hence it was appropriate to allocate production costs to run-of-mine ore
stockpiles to the value of R1.8 billion. Low grade ore was measured to the extent it was expected to be processed within
the next five years, this comprised 14% of total low grade ore. Very low grade ore is below the cut-off grade for
economic viability and was accordingly not measured. Owing to a consequential impact on the value of work-in-progress and
refined metal inventory, inventory as a whole increased by R1.3 billion, similarly gross profit on metal sales increased
by R1.3 billion, and profit after tax by R905 million, in the current year.
18. DISPOSAL TRANSACTIONS
Equity investments in Pandora
The Group entered into a conditional Sale and Purchase Agreement on 10 November 2016 with Eastern Platinum Limited, a
wholly owned subsidiary of Lonmin plc to sell its 42.5% interest in the Pandora Joint Venture. The sale was completed on
1 December 2017, when all the conditions precedent were met, for a deferred cash consideration of a minimum of R400
million and maximum of R1.0 billion over six years. The deferred consideration receivable is a level 3 fair value as
presented and disclosed in note 14.
Long-dated resources
On 11 November 2016 the Group announced the disposal of mineral resources within the Amandelbult Mining Right, and
surface properties above and adjacent to the resource, to Northam Platinum Limited for a consideration comprising R1.0
billion in cash 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 of the disposal of long-dated resources at Amandelbult to Northam
Platinum was completed on 6 December 2014 for a cash consideration of R1,066 million including interest. The full
proceeds was recognised as a profit on disposal, which was excluded from headline earnings.
19. IMPAIRMENT OF ASSETS AND INVESTMENTS
Equity investments in Atlatsa Resources and Bokoni Holdco and associated loans
The Group has a 22.76% shareholding in Atlatsa Resources Corporation (Atlatsa Resources) as well as a 49% shareholding
in Bokoni Holdco, which are equity accounted as associates.
On 21 July 2017 Atlatsa Resources announced the placement of Bokoni Platinum Mine on care and maintenance, which was
effected on 1 October 2017. The Group committed to support Bokoni Platinum Mine while on care and maintenance until the
end of December 2019. A total of R1.4 billion was advanced during the year ended 31 December 2017.
All funding advanced has been impaired to the extent that it comprises a loan to Plateau Resources (a wholly owned
subsidiary of Atlatsa Resources) for its 51% share of the funding requirements. The 49% effective shareholder
contribution to Bokoni Holdco was capitalised to the investment. Equity-accounted losses were applied thereto and the
balance recognised as an impairment.
In addition, a letter agreement was signed with Atlatsa Resources for the Group to acquire the Kwanda North and Central
Block Prospecting Rights for a cash consideration of R350 million. The transaction is still subject to DMR approval to
include the specified rights in the Group's adjacent mining rights. Should the acquisition be implemented the Group has
undertaken to waive the Atlatsa Holdings and Plateau indebtedness to Anglo American Platinum Limited of c.R3.7 billion.
Equity investments in Bafokeng Rasimone Platinum Mine
The share price of Royal Bafokeng Platinum (RB Plat), which holds as its primary mining asset a 67% share in BRPM,
indicated that the Group's investment in BRPM was impaired. An impairment test was performed as at 31 December 2017
resulting in an impairment loss of R1.91 billion for the year, using the implied value derived from RB Plat share price
of R 28.00 at December 2017. This is considered to be a level 2 fair value as defined in note 14. The impairment loss is
excluded from headline earnings.
20. UNKI PLATINUM MINE INDIGENISATION PLAN
The Zimbabwean Indigenisation and Economic Empowerment Act was promulgated in March 2008 and seeks to 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.
21. POST-BALANCE SHEET EVENTS
There are no post balance sheet events other than disclosed below.
Sale of Union Mine
The sale of the Group's interests in Union Mine and Masa Chrome became effective on 1 February 2018, when all
significant conditions precedent were met. The key commercial terms include:
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.
Including the already recognised impairment loss, the Group expects to realise an attributable, post-tax loss on
disposal of between R1.8 billion and R2.0 billion.
Dividends declared
A final dividend of R0.9 billion for the year ended 31 December 2017 was declared on Thursday, 15 February 2018, payable
on Monday, 12 March 2018 to shareholders recorded in the register at the close of business on Friday, 9 March 2018.
22. 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 and the Company's
website. 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
for the year ended 31 December 2017
SALIENT FEATURES
2017 2016 2015 2014 2013
Average market prices achieved
Platinum USD/oz 947 993 1,051 1,386 1,485
Palladium USD/oz 876 610 703 803 722
Rhodium USD/oz 1,094 680 958 1,147 1,053
Ruthenium USD/oz 864 563 526 528 784
Iridium USD/oz 72 40 46 61 65
Gold USD/oz 1,253 1,244 1,156 1,259 1,384
Nickel USD/tonne 10,314 9,611 11,726 17,034 14,503
Copper USD/tonne 6,221 4,761 5,180 6,912 7,100
Chrome USD/tonne 177 141 99 116 107
% contribution of net revenue
PGMs % 88.9 89.7 90.6 87.2 91.5
Platinum % 48.1 56.7 55.4 57.1 62.8
Palladium % 28.0 22.0 23.8 19.7 18.7
Rhodium % 6.5 4.9 6.3 5.2 5.6
Iridium % 2.1 2.3 1.9 2.1 1.0
Ruthenium % 1.2 0.5 0.4 0.7 0.8
Gold % 3.0 3.3 2.8 2.4 2.6
Nickel % 5.4 6.1 6.1 9.2 5.7
Copper % 2.0 1.6 1.9 2.4 1.6
Chrome % 3.3 2.3 1.1 0.8 1.0
Other metals % 0.4 0.3 0.3 0.4 0.2
Exchange rates
Average achieved on sales ZAR/USD 13.33 14.63 12.71 10.87 9.71
Closing exchange rate at end of year ZAR/USD 12.31 13.73 15.47 11.57 10.51
Basket prices achieved
Platinum - Dollar basket price USD/ Pt oz 1,966 1,753 1,905 2,413 2,326
PGM - Dollar basket price - Average USD/PGM oz 915 837 918 1,139 1,100
PGM - Dollar basket price - Mined volume USD/PGM oz 972 857 931 1,156 1,108
PGM - Dollar basket price - Purchased volume USD/PGM oz 835 781 879 1,107 1,073
Platinum - Rand basket price Rand/Pt oz 26,213 25,649 24,203 26,219 22,586
PGM - Rand basket price - Average Rand/PGM oz 12,198 12,249 11,667 12,378 10,685
PGM - Rand basket price - Mined volume Rand/PGM oz 12,965 12,541 11,831 12,563 10,768
PGM - Rand basket price - Purchased volume Rand/PGM oz 11,139 11,432 11,168 12,032 10,428
Total PGM ounces sold 5,382.2 5,058.1 5,126.7 4,479.4 4,904.5
Platinum 000 ounces 2,504.6 2,415.7 2,471.4 2,114.8 2,320.2
Palladium 000 ounces 1,571.7 1,532.1 1,597.6 1,256.9 1,412.5
Other PGMs+Gold 000 ounces 1,305.9 1,110.3 1,057.7 1,107.7 1,171.8
2017 2016 2015 2014 2013
Financials
Net sales revenue R million 65,670 61,960 59,815 55,612 52,404
from platinum R million 31,590 35,156 33,116 31,762 33,218
from palladium R million 18,421 13,644 14,222 10,966 9,898
from rhodium R million 4,242 3,062 3,772 2,902 2,961
from other PGMs and gold R million 4,089 3,781 3,072 2,885 2,274
from base and other metals R million 5,171 4,898 4,960 6,659 3,548
from chrome R million 2,157 1,419 673 438 505
EBITDA R million 11,985 9,096 8,641 5,807 9,125
EBITDA margin % 18.3 14.7 14.4 10.4 17.4
EBIT R million 7,892 4,429 3,360 822 4,197
ROCE % 17.6 8.9 5.8 1.3 6.9
Attributable operating free cash flow R million 5,095 5,385 5,972 4,198 1,516
Attributable net cash flow R million 4,471 4,785 4,774 2,342 (163)
Costs and unit costs
Cash operating costs R million 49,707 47,870 45,727 42,622 41,553
Cash on-mine cost per tonne milled R/tonne 753 729 751 770 675
Cash operating cost per PGM oz produced (mined volume) R/PGM oz 8,871 9,298 9,202 10,654 8,167
Cash operating cost per PGM oz produced (mined volume) USD/PGM oz 666 633 720 982 846
Stay-in-business capital R million 3,336 2,750 2,535 3,790 3,422
Capitalised waste stripping R million 784 1,297 999 561 692
All-in sustaining costs net of metal revenue credits other than Pt USD million 2,000 2,002 2,054 2,467 3,111
All-in sustaining costs per platinum ounce sold USD/Pt oz 826 860 887 1,240 1,438
Cash operating cost per platinum ounce produced (mined volume) R/Pt oz 19,203 19,545 19,266 22,574 16,797
Cash operating cost per platinum ounce produced (mined volume) USD/Pt oz 1,443 1,330 1,508 2,081 1,741
Reconciling items for AISC and free cash flow
Allocated marketing and market development costs USD/Pt oz sold 24 19 25 36 20
Abnormal income/(expense) included in operating and net cash flow
- Disposal of treasury bills R million 228
Head count (as at 31 December)
Total employees (AAP own and contractors excluding JVs) 28,692 28,250 45,520 49,295 50,800
Own enrolled 26,453 26,062 42,773 46,048 46,319
Contractors 2,239 2,188 2,747 3,247 4,481
Productivity
PGM ounces produced per employee per annum 94 81 74 53 64
REFINED PRODUCTION
2017 2016 2015 2014 2013
Total operations
Refined production from mining operations
Total PGMs 000 oz 2,975.5 3,482.9 3,766.2 2,715.9 3,494.4
Platinum 000 oz 1,419.5 1,688.4 1,836.9 1,323.8 1,772.7
Palladium 000 oz 1,035.3 1,090.6 1,238.2 921.1 1,055.9
Rhodium 000 oz 179.8 227.0 225.8 154.1 217.1
Other PGMs 000 oz 261.9 391.1 373.8 242.9 367.6
Gold 000 oz 79.0 85.8 91.5 74.0 81.1
Nickel 000 tonnes 18.9 21.0 21.9 23.9 18.8
Copper 000 tonnes 12.1 11.9 14.9 15.6 12.0
Chrome tonnes (100%) 000 tonnes 978.8 751.6 566.5 289.2 399.5
Refined production from purchases
Total PGMs 000 oz 2,140.7 1,304.3 1,215.2 1,114.5 1,170.5
Platinum 000 oz 1,092.4 646.3 621.9 565.7 606.8
Palladium 000 oz 633.1 373.6 356.7 304.3 324.9
Rhodium 000 oz 143.4 90.4 79.4 75.3 77.6
Other PGMs 000 oz 235.4 171.6 135.7 147.6 142.3
Gold 000 oz 36.4 22.4 21.5 21.6 18.9
Nickel 000 tonnes 7.2 4.4 3.9 4.3 3.8
Copper 000 tonnes 3.7 2.2 2.2 3.1 2.1
Chrome tonnes (100%) 000 tonnes - - - - -
Total refined production (including toll refined metal)
Total PGMs 000 oz 5,116.2 4,787.2 4,981.4 3,830.4 4,664.9
Platinum 000 oz 2,511.9 2,334.7 2,458.8 1,889.5 2,379.5
Palladium 000 oz 1,668.4 1,464.2 1,594.9 1,225.4 1,380.8
Rhodium 000 oz 323.2 317.4 305.2 229.4 294.7
Other PGMs 000 oz 497.3 562.7 509.5 390.5 509.9
Gold 000 oz 115.4 108.2 113.0 95.6 100.0
Nickel - Refined 000 tonnes 26.1 25.4 25.4 20.5 16.8
Nickel - Matte 000 tonnes - - 0.4 7.7 5.8
Copper - Refined 000 tonnes 15.8 14.1 16.8 12.5 8.3
Copper - Matte 000 tonnes - - 0.3 6.2 5.8
Chrome tonnes (100%) 000 tonnes 978.8 751.6 566.5 289.2 399.5
SPLIT OF TOTAL REFINED PRODUCTION
Platinum 49 49 49 49 51
Palladium % 33 31 32 32 30
Rhodium % 6 7 6 6 6
Other PGMs % 10 11 11 11 11
Gold % 2 2 2 2 2
Base Metals
Nickel % 61 63 59 59 60
Copper % 37 35 39 39 38
Other Base Metals % 2 2 2 2 2
PLATINUM PIPELINE CALCULATION
Own mined volume 000 oz 1,130.9 1,473.7 1,507.7 1,020.6 1,517.2
JV mined volume 000 oz 245.3 252.8 241.3 241.2 244.5
Projects mined volume 000 oz - 3.4 13.0 11.6 9.5
Purchase of concentrate 000 oz 1,021.2 651.9 575.2 601.9 584.5
M&C platinum production 000 oz 2,397.5 2,381.9 2,337.3 1,875.3 2,355.7
Pipeline stock adjustment 000 oz 77.2 59.9 133.3 26.9 50
Pipeline movement 000 oz 20.4 (111.7) (11.9) (14.9) (29.6)
Refined platinum production (excluding toll refined metal) 000 oz 2,495.0 2,330.1 2,458.7 1,887.2 2,376.3
2017 ANNUAL RESULTS COMMENTARY
BUILDING ON OUR FOUNDATIONS - POSITIONING FOR A SUSTAINABLE FUTURE
Tragic deaths of six colleagues during 2017
R2.4 billion free cash flow generated from operations
Return on capital employed doubled to 18%
Reintroduction of cash dividend of R0.9 billion or R3.49 per share for H2 2017
High quality earnings, with EBITDA of R12 billion and strong cash conversion of 0.58
Strong balance sheet with net debt further reduced to R1.8 billion from R7.3 billion
Repositioned the portfolio with 70% of production in the first half of the cost curve:
R1 billion sale of long-dated Amandelbult mineral resources completed
Pandora JV stake sale completed and operational control of Baobab concentrator secured for three years
Union mine divestment completed - R400 million upfront proceeds received (post year-end)
Bokoni placed on care and maintenance - 470,000 platinum ounces of loss making production removed since 2012
Total PGM production up 1% despite removing loss-making production from Bokoni and Maseve as well as the unplanned
stoppage at Mototolo to complete remedial work on the tailings facility
Record production from Mogalakwena and Unki - striving for operational excellence
Unit costs down 2% to R19,203 per platinum ounce through strict cost control and after measurement of ore stockpiles
Disciplined capital allocation - focused on sustaining capital and value enhancing, quick pay back projects
Positioning for the future - ongoing studies into high-margin, value enhancing projects, continued investment in market
development, mining innovation, people and communities
Chris Griffith, CEO of Anglo American Platinum commented:
"I am pleased to present a strong set of results for the 2017 financial year. We have delivered on our commitments of
improving operational performance, repositioning the portfolio, ensuring industry-leading cost-control and through
disciplined capital allocation.
Our fatality performance was both disappointing and unacceptable, we lost six of our colleagues last year in work related
incidents. We have already extended our deepest condolences to their families, friends and colleagues, and do so once
again. We have a turn-around programme in place to address this poor performance and we continue to strive towards
elimination of fatalities.
Our persistent focus on value, rather than volume has resulted in a 32% increase in EBITDA to R12 billion and improved
earnings. We generated R2.4 billion of operating free cash flow and materially improved our net debt position to R1.8
billion, with a net debt to EBITDA ratio of 0.2 times. The hard work of the past five years has enabled us to today
announce that we have reintroduced the dividend, establishing a pay-out ratio of 30% of headline earnings. This equates
to a dividend payment of R3.49 per share for 2017.
Anglo American Platinum is now a fundamentally different business, having restructured and repositioned the business. We
have seen our productivity increase by 58% since 2012, and now have 70% of our production in the first half of the cost
curve and generated an EBITDA margin and ROCE of 18% respectively. We are a more efficient and more competitive business,
generating better returns.
Looking forward, our focus will continue to be on operational excellence, and strengthening the underlying cash
generation of the business. We will maintain strict capital allocation discipline, whilst considering value-enhancing,
quick payback projects, and continue to progress the project studies at our world-class assets."
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; removing loss-making production; and investing for the future to create a
sustainable business.
Significant progress has been made in the repositioning of the portfolio, with the disposals of Rustenburg Operations (1
November 2016), the 42.5% interest in the Pandora joint venture (1 December 2017), the sale of the long-dated resources
at Amandelbult (6 December 2017), as well as the sale of our 85% interest in Union mine and 50.1% interest in Masa chrome
(1 February 2018). In addition, Atlatsa Resources placed the Bokoni mine joint venture operation on care and
maintenance, also removing loss-making production.
Disciplined capital allocation is driving decision-making and the Company has prioritised investment in stay-in-business
capital to maintain asset integrity, including scheduled heavy mining equipment (HME) replacements, smelter furnace
rebuilds and the unplanned ACP Phase A module rebuild. In addition, the Company continues to focus on high-value,
capital-light projects with short pay-back periods, such as the optimisation project at Mogalakwena concentrators,
developing Dishaba UG2 ore reserves and the Unki smelter. Overall, a combination of capital discipline, working capital
management and operational efficiencies resulted in the generation of R2.4 billion of free cash flow from operations,
which, combined with sale proceeds from divestments, contributed to a reduction of net debt by R5.5 billion to R1.8
billion.
The Company remains committed to investment across the business to create a sustainable future. Studies are currently
underway to assess future potential projects at Mogalakwena and Der Brochen. PGM market development continues across
several demand segments including jewellery, investment and industrial as well as supporting the widespread commercial
adoption of the hydrogen economy which will aid in the commercialisation of fuel cells in the transport and other
sectors. Anglo American Platinum is committed to advancing future technology to create a modernised business, while
investing in employees and the communities in which it operates.
SAFETY, HEALTH, ENVIRONMENT AND SOCIAL INVESTMENT
Safety
Tragically there were six fatalities due to work related incidents in 2017. Mr Nkoliseko Jikumlambo was seriously injured
in a fall of ground incident at Amandelbult's Tumela mine on 8 April 2017, and passed away on 21 April 2017. Mr Kagiso
Ramokgatla was fatally injured in a loader incident on 7 June 2017 at Amandelbult's Dishaba mine. Mr Douw Swart suffered
chemical burns in an incident on 21 August 2017 at the Precious Metals Refinery (PMR) and succumbed to his injuries on 5
September 2017. Mr Tlou Abel Keetse was fatally injured on 9 October 2017 in a winch-related incident at Amandelbult's
Dishaba mine. Mr Arlindo Sumbe was fatally injured in a fall-of ground incident on 31 October 2017 at Union mine.
Mr Samuel Jele was fatally injured in a surface transport related incident at Waterval smelter on 21 December 2017. Our
deepest condolences go to their families, friends and colleagues.
Although we have again improved our injury frequency rates, with Total recordable case frequency rate (TRCFR) down 14% to
0.90, and lost-time injury frequency rate (LTIFR) down 14% to 0.63, our fatality performance was both disappointing and
unacceptable. During 2017, we have developed a revised safety, health and environmental strategy, co-created with
management, unions and employees, to turn around this poor performance. Our safety aspiration is to eliminate fatalities.
Health
Anglo American Platinum has focused on the health and wellness of our employees, with significant reduction in
tuberculosis (TB) and HIV deaths thanks to our disease management programmes. Providing INH Prophalaxis to people
infected with TB has resulted in a significant reduction in TB related deaths from 63 in 2013, to only 4 in 2017. We have
also managed to reduce our TB incidence rate to 582 (per 100,000 people). This is below the South African national
average of 781.
We have committed to Voluntary Counselling and Testing (VCT) together with placing those infected with HIV/AIDS on
antiretroviral treatment and viral load suppression. Anglo American Platinum is targeting to achieve the UNAIDS
commitments of 90:90:90 by 2020 - where 90% of our employees know their status, 90% of those infected are on
antiretroviral treatment and 90% on viral load suppression. Towards achieving those goals by 2020, in 2017 we counselled
96% of our employees, 80% were voluntarily tested and 86% of those who are HIV positive are on antiretroviral treatment.
Environment
Anglo American Platinum has had no major or material environmental incidents (categorised as Level 3 to 5) since 2013. We
managed a significant High Potential Hazard (HPH) at Mototolo tailings facility that could have had material safety and
environmental consequences. Following an internal review of the stability of all tailings storage facilities in the
Company, the Helena tailings facility at. the Mototolo operation was identified as having an elevated risk of
instability. A decision was taken to temporarily halt operations at the Mototolo concentrator while addressing the risk
of seepage and instability. The intervention included the construction of a rock buttress wall around the facility to
improve stability.
Our refineries that are responsible for product delivery to customers maintained certification against the international
ISO14001 environmental standard. The Precious Metals Refinery was certified against the new ISO 14001:2015 standard in
October 2017, while the Base Metals Refinery had a surveillance audit to maintain its certification against
ISO14001:2004.
We continue to reduce both our fresh water and energy consumption as well as improving water and energy intensities. Due
to our reduced energy consumption, we are also reducing our greenhouse gas emissions through our focused carbon
management programme.
We have made considerable progress in the management of our hazardous and non-hazardous waste to landfill with programmes
and projects in place to achieve a zero waste to landfill ambition by 2020.
Social and community investment
Anglo American Platinum contributed R295 million to social labour plan (SLP) and CSI spend in 2017, equating to 6% of
normalised net operating profit after tax (NOPAT). The Mogalakwena and Twickenham next generation SLPs (SLP 2) were
approved by the DMR, and projects included developing and handing over 3 clinics in Limpopo, we expanded and upgraded 8
schools, and supported over 1400 matric learners in both Limpopo and North West with our Matric programme. Over 530
learners participated in the moral regeneration programme led by the Faith Groups in Mapela, and we have, in conjunction
with partners, installed solar street lights in eight villages and continue to deliver water to 42 villages in the Mapela
area.
In 2017, Anglo American Platinum launched the Atomatic Chrome Recovery Plant in Amandelbult which is a joint venture
between Anglo American Platinum, Siyanda Resources and the community of Mantserre. Due to the significant cash generation
of the chrome plant, a distribution of R140 million was paid to our BEE partners and community, of which R89 million was
used to settle the loan and interest and R51 million was distributed as a dividend. In addition, we have contributed to
economic development through job creation at the chrome plant.
STRIVING FOR OPERATIONAL EXCELLENCE
Operational performance
As a result of improved operational efficiencies across the portfolio, total platinum production exceeded revised market
guidance of 2.30-2.35 million platinum ounces, despite the removal of loss-making production from Bokoni and third-party
purchase of concentrate from Maseve and the unplanned stoppage at Mototolo for remedial work on the tailings facility.
Total PGM production (expressed as platinum, palladium, rhodium, gold, iridium and ruthenium metal in concentrate) was up
1% to 5,007,700 ounces in 2017 (2016: 4,973,700 ounces). Platinum production was up 1% to 2,397,500 ounces (2016:
2,381,900 ounces) while palladium increased 1% to 1,557,300 ounces (2016: 1,538,600 ounces).
The 4E built-up head grade of 3.46g/tonne was 10% higher due to higher grade from Mogalakwena, which mined through a
particularly high grade area at Zwartfontein pit, and Unki, due to improved mining reef cuts which eliminated waste. This
was partially offset by lower grade at Amandelbult due to a higher proportion of on-surface production which has lower
grade.
Own managed mines
Own managed mines (Mogalakwena, Amandelbult, Unki, Union) increased total PGM production by 5% to 2,431,000 ounces
(2016: 2,325,000 ounces). Platinum produced by own managed mines increased by 3% to 1,130,900 ounces (2016: 1,096,200
ounces) and palladium increased by 7% to 847,200 ounces (2016: 789,600 ounces).
Mogalakwena
Mogalakwena produced a record 1,098,500 PGM ounces up 12% (2016: 980,100 ounces), with platinum production up 13% to
463,800 ounces (2016: 411,900 ounces) and palladium up 13% to 508,900 ounces (2016: 452,000 ounces). Total production
included production from the Baobab concentrator plant of 83,500 PGM ounces (2016: 73,200 PGM ounces).
Mogalakwena increased production through mining a higher-grade area within the current mining cut as per the mine plan,
as well as optimisation of the North concentrator plant which led to improved concentrator throughput and recoveries.
Material was mined from the Zwartfontein pit which also contributed to higher grade, but at a lower recovery. The 4E
built-up head grade increased 2% to 3.09g/t from 3.02g/t in 2016. Tonnes milled increased 8%.
Mogalakwena contributed R4.0 billion in economic free cash flow, up from R3.2 billion in 2016. The mine delivered EBITDA
of R7.7 billion at a 48% margin, up from 41% in 2016. Return on Capital Employed increased to 32% from 22%.
Cash operating costs (costs after allowing for off-mine smelting and refining activities) decreased 4% or R0.3bn to
R7.3bn. Cash operating costs including capitalised waste stripping decreased by 9% to R8.1 billion from R8.9 billion.
Owing to a change in mining approach, which was fully embedded in our mine extraction strategy late in 2017, run-of-mine
ore stockpile material has been measured at the lower of cost and net realisable value. The total value of ore stockpiles
at 31 December 2017 was R1.6 billion. Consequent on the measurement of the ore stockpiles, the carrying value of refined
and work in progress metal inventory reduced by R500 million. Together this resulted in a net increase in EBITDA of R1.1
billion.
The consequent impact on unit cost was a reduction of R3,386 per platinum ounce bringing unit cost to R15,696 per
platinum ounce, down 15% (2016: R18,477). Excluding the ore stock measurement, Mogalakwena reported unit costs of R19,083
per platinum ounce, up 3% year-on-year. Cash operating costs per PGM ounce (metal in concentrate) was R6,628 against
R7,766 per ounce in 2016. Excluding the measurement of ore stock, the unit cost was R8,057 per ounce, up 4% year-on-year.
All-in sustaining costs (AISC) (includes operating costs as defined above, all sustaining capital expenditure,
capitalised waste stripping and allocated marketing and market development costs net of by product revenue) per Pt ounce
sold was USD340 per ounce, down from USD498 in the previous year mainly due to the benefit of increased by-product revenue.
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 Lonmin's Baobab concentrator which commenced on
completion of the transaction and became effective on 1 December 2017. This will allow Mogalakwena to mill additional
volume and generate incremental cash flow.
Total production from Mogalakwena in 2018 is expected to stay flat at between 1.0 to 1.1 million PGM ounces (c.440,000 to
460,000 platinum ounces).
Amandelbult
Total PGM production at Amandelbult decreased by 3% to 858,000 ounces (2016: 884,600 ounces). Platinum production
decreased 4% to 438,000 ounces (2016: 458,600 ounces) and palladium decreased 2% to 202,500 ounces (2016: 207,300
ounces). Production was largely impacted in the first quarter, when excessive rainfall constrained production from the
open pit operations. The transition of mining from Tumela Upper (which will reach end of life of mine in 2021) to Dishaba
Lower UG2 will result in minimal flexibility whilst the ore reserve development takes place. Production was further
impacted by the tragic fatalities and associated section 54 safety stoppages.
Tonnes milled were maintained at 7 million tonnes as underground tonnes were supplemented with increased tonnes from
surface sources. The increased surface sources in the ore mix reduced the 4E built-up head grade by 5% to 3.86 g/t (2016:
4.07 g/t).
Amandelbult successfully commissioned a new Chrome plant during 2016, and reached steady state in 2017. The chrome plant
is 74% owned by Anglo American Platinum and 26% owned by Baphalane Siyanda Chrome (owned by the community of Mantserre
and Siyanda Resources). Production from the chrome plant increased by 178%, yielding 654,400 tonnes of chrome concentrate
(2016: 234,700 chrome tonnes). Despite a fall in the chrome price during 2017, the low production cost enabled the
Amandelbult Chrome Operation to generate attributable economic free cash flow of R577 million (2016: R320 million).
Amandelbult delivered R91 million in economic free cash flow (excluding any proceeds from the sale of long-dated
resources), from its mining and chrome activities, down from R1.0 billion in 2016. The mine delivered EBITDA of R1.2
billion at a 10% margin, down from 13% in 2016. Return on Capital Employed decreased to 6% from 7%.
Cash operating costs increased by 10% to R9.3 billion (2016: R8.5 billion), mainly due to mining inflation, chrome plant
operational costs and costs relating to the future replacement of production from Tumela Upper to Dishaba Lower UG2. The
increase in costs and lower production volume resulted in cash operating costs per platinum ounce to increase 15% to
R21,246 from R18,438 in 2016.
Cash operating costs per PGM ounce (metal in concentrate) was R10,846 against R9,559 per ounce in 2016.
AISC per platinum ounce sold was USD955 per ounce, up from USD864 in the previous year due to increased costs.
As announced on 24 July 2017, Amandelbult has developed a strategy to improve the profitability of the mine by reducing
the AISC. The key steps include: operational turnaround of the asset by increasing immediately stopeable ore reserves
(IMS) at Dishaba and implementing productivity improvements; developing the Dishaba UG2 project to mine the UG2 reef at
Dishaba by utilising existing Merensky infrastructure at minimal capital investment; extracting the full value of metals
mined and expanding chrome production; and assessing two capital light replacement projects at Dishaba (15E and 62E). The
combination of these measures should enable Amandelbult to sustain production with no significant project capital
expenditure in the medium term and reduce the AISC to USD820 per ounce.
Total production from Amandelbult in 2018 is expected to increase to between 900,000 to 940,000 PGM ounces (c.450,000 -
480,000 platinum ounces).
Unki
Unki mine in Zimbabwe produced a record 165,900 PGM ounces, an increase of 2% (2016: 162,000 ounces). Platinum production
was relatively flat at 74,600 ounces (2016: 74,500 ounces) and palladium production increased 5% to 64,400 ounces (2016:
61,400 ounces).
Production increased due to an increase in tonnes milled, up 2% to 1.75 million due to improved underground productivity,
while the 4E built-up head grade increased marginally to 3.47g/t (2016: 3.46g/t)due to improved mining reef cut and
reducing waste tonnes mined.
Unki increased economic free cash flow to R0.6 billion from R61 million due to improved performance, the sale of treasury
bills of R228 million and export incentives of R63 million.
The mine delivered EBITDA of R0.8 billion at a 33% margin, up from 12% in 2016. Return on Capital Employed increased to
10% from negative 3% in 2016.
Cash operating costs were flat at R1.8 billion. The mine being a dollar denominated operation benefitted from the
strengthening of the rand which increased 9% to R13.33 from R14.63. Cash operating costs were further impacted by
measuring ore stockpiles at the mine to the value of R41 million. Ore stock ahead of the concentrator built-up during
maintenance at the concentrator. This ore stock will be depleted in full in 2018. The impact on unit cost was a reduction
of R555 per platinum ounce bringing unit cost to R23,387 per platinum ounce, down 3% (2016: R24,151). Excluding the ore
stock measurement, Unki reported unit costs of R23,942 per platinum ounce, down 1% year-on-year.
Cash operating costs per PGM ounce (metal in concentrate) was R10,519 against R11,109 per ounce in 2016. Excluding the
measurement of ore stock, the unit cost was R10,769 per ounce, down 3% year-on-year.
AISC (excluding the receipts of treasury bills) per platinum ounce sold was USD612 per ounce, down from USD959, due to the
benefit from increased by-product revenue and lower costs. The AISC including the receipt of treasury bills was USD397 per
platinum ounce sold.
The Unki smelter, a project in execution, is expected to be completed in H2 2018 at a total cost of R650 million, with
R306 million of the project capital incurred in 2017.
Total PGM production from Unki in 2018 is expected to remain at similar levels of 170,000 PGM ounces (c.75,000 platinum
ounces).
Union
Total PGM production from Union increased 3% to 308,600 ounces (2016: 298,300 ounces). Platinum production increased 2%
to 154,500 ounces (2016: 151,200 ounces) and palladium production increased 4% to 71,400 ounces (2016: 68,900 ounces).
Despite the fatal incident and associated section 54 safety stoppages, production increased due to improved stoping
efficiencies. This resulted in an increase in tonnes mined, and tonnes milled.
Masa Chrome produced 324,400tonnes of chrome concentrate (2016: 262,100 chrome tonnes).
Attributable economic free cash flow reduced to R211 million from R302 million in 2016 mainly due to the increase in
sustaining capex for mining from R59 million in 2016 to R161 million in 2017. The mine reported EBITDA of R612 million at
a 14% margin, up from 12% in 2016. Return on Capital Employed increased to 38% from 10% in 2016 mainly as a result of the
impairment of the asset ahead of its sale.
Cash operating costs rose 8% to R3.3 billion from R3.0 billion in 2016 resulting in a 5% increase in unit costs to
R21,109 per platinum ounce (2016: R20,016). Cash operating costs per PGM ounce was R10,567 against R10,145 per ounce in
2016.
AISC per platinum ounce sold was USD873 per ounce, down from USD877 in the previous year mainly due to the benefit from
increased by-product and chrome revenue.
Joint ventures (own-mined and purchase of concentrate)
Total PGM production from joint ventures was down 2% to 1,096,100 PGM ounces (2016: 1,124,100 ounces). Platinum
production was down 3% to 490,600 ounces (2016: 505,600 ounces) and palladium was down 1% to 323,100 ounces (2016:
327,800 ounces).
There was a strong production performance from Modikwa which produced 325,600PGM ounces, resulting in a 10% increase
(2016: 295,800 ounces). Despite a slow start to the year, due to a tragic fatality and associated section 54 stoppages,
Modikwa achieved an improved performance through increased underground efficiencies and improved concentrator recovery.
Platinum production from Modikwa was up 10% to 126,700ounces (2016: 114,800 ounces) and palladium production was up 9% to
124,700ounces (2016: 112,200 ounces).
Kroondal also had a strong performance, producing 585,800 PGM ounces (2016: 576,300 ounces) due to improved underground
efficiencies, and improved concentrator recoveries. Platinum production from Kroondal was up 2% to 278,600ounces
(2016: 274,100 ounces) and palladium production was up 2% to 147,900 ounces (2016: 144,900 ounces).
Production from joint ventures was impacted by the temporary closure of the Mototolo concentrator on 14 August 2017, to
conduct remedial work on the Helena tailings facility to restore it to required safety standards. PGM ounces totalling
78,500 were lost during the period (36,600 platinum ounces). As part of a remedial plan to toll treat Mototolo
concentrate, Bokoni concentrator treated 11,900 PGM ounces and Modikwa concentrator purchased mined tonnes and treated
9,700 PGM ounces. There are currently ore stockpiles built-up ahead of the concentrator, which will be depleted in full
in 2018.
Purchase of concentrate from associates
Total PGM purchase of concentrate from associates was down 7% to 484,000 ounces (2016: 517,900 ounces) due to the loss-
making Bokoni mine being placed on care and maintenance in Q3 2017. On an annualised basis, 190,000PGM ounces, including
115,000 platinum ounces, of production have been removed due to the closure. Production was offset by a strong
performance from BRPM as the Styldrift project ramps up, with PGM production up 8% to 367,200 ounces. In total, platinum
production from associates was down 5% to 265,500 ounces (2016: 279,300 ounces) and palladium production was down 10% to
127,900 ounces (2016: 141,700 ounces).
Purchase of concentrate from third parties
Total PGM purchase of concentrate from third parties increased substantially due to the sale of the Rustenburg mining and
concentrating operations to Sibanye. Production from Rustenburg has been purchased since 1 November 2016, when the
operation was sold to Sibanye. No further third-party purchase of concentrate is currently expected from the Maseve mine,
owned by Platinum Group Metals, following the mine being placed on care and maintenance.
Refined production and sales volume
Refined PGM production increased 7% to 5,116,200 ounces (2016: 4,787,200 ounces). Refined production was materially
affected by a Section 54 safety stoppage at the Precious Metals Refinery in 2016, as well as the run-out at the Waterval
smelter in September of that year. The recovery from these events was largely responsible for the increase in output in
2017. Refined platinum production increased by 8% to 2,511,900 ounces (2016: 2,334,700 ounces), and refined palladium
production by 14% to 1,668,400 ounces (2016: 1,464,200 ounces).
The planned rebuild of the Waterval Number 1 furnace in the first half of 2017, and a high-pressure water leak at the
Converter Plant in June 2017, delayed refining the 2016 backlog till the second half of 2017, with the full additional
200,000 PGM ounces, including 100,000 platinum ounces, refined by year-end.
Total PGM sales volumes increased by 6% to 5,382,200 ounces (2016: 5,058,100 ounces). Platinum sales volumes increased by
4% to 2,504,600 ounces (2016: 2,415,700 ounces), while palladium sales volumes increased by 3% to 1,571,700 (2016:
1,532,100), in line with the higher refined production.
FINANCIAL PERFORMANCE
2017 overview
The company has delivered a strong financial performance in 2017, despite subdued market conditions, by improving cost
structures, optimising working capital and through asset sales.
Headline earnings increased 108% to R3.9 billion (2016: R1.9 billion), with headline earnings per share (HEPS) of 1,482
cents (2016: 713 cents). Higher earnings reflect operating and overhead cost improvements and a higher dollar basket
price, offset by a stronger exchange rate compared to 2016 and measurement of ore stockpiles. Anglo American Platinum
recorded attributable post-tax impairments totalling R3.9 billion affecting basic earnings, of which R0.8 billion impacts
both basic and headline earnings. Impairments that affected only basic earnings included Union Mine and Masa Chrome
(R1.0 billion), equity interest in BRPM (R1.9 billion) and Bokoni Platinum Holdings (R0.2 billion) and the ACP plant
write-off (R16 million). In addition, we forewent term-loan facilities advanced to Atlatsa of R0.8 billion and a loan to
Bakgatla Ba-Kgafela of R69 million related to its interest in Union which has impacted headline earnings.
Owing to a change in mining approach, which was fully embedded in our strategy late in 2017, run-of-mine ore stockpile
material has been measured at the lower of cost and net realisable value. The total value of ore stockpiles at 31
December 2017 was R1.8 billion. Consequent on the measurement of the ore stockpile, the carrying value of refined and
work in progress metal reduced by R0.5 billion. Together, this results in a net increase in EBITDA of R1.3 billion.
The consequent impact on unit cost was a reduction of R1,280 per platinum ounce bringing unit cost to R19,203 per
platinum ounce, down 2% (2016: R19,545).
We have further strengthened the balance sheet, ending the year with net debt of R1.8 billion compared to R7.3 billion in
2016. This reduction was driven by higher underlying cash flow from operations, R1.2 billion net proceeds on asset sales
(including R1.1 billion proceeds received from the disposal of the long-dated resources at Amandelbult), as well as the
receipt of the remainder of the customer prepayment of R2.6 billion, bringing the total customer prepayment to R4.6
billion.
Sales revenue
Net sales revenue rose 6% to R65.7 billion from R62.0 billion in 2016 on the back of higher platinum, palladium and
chrome sales volumes due to the ramp-up of the new chrome plant at Amandelbult. It also reflects a marginally higher rand
basket price of R26,213 per platinum ounce sold (2016: R25,649), comprising of a US Dollar basket price of USD1,966 per
platinum ounce sold compared to USD1,753 in 2016, offset by a stronger rand of R13.33 (2016: R14.63). The average
US dollar sales price achieved on all metals improved, except for platinum at USD947 per ounce (2016: USD993). Palladium
was up 44%, rhodium up 61%, nickel up 7% and chrome up 25%.
Cost of sales
Cost of sales increased 1% from R56.1 billion in 2016 to R56.6 billion. Following the sale of Rustenburg operations in
November 2016, the Company now has higher purchase-of-concentrate costs and lower on-mine costs due to buying concentrate
from Sibanye.
On-mine costs (mines and concentrators) reduced by R5.9 billion to R26.9 billion due to lower mining costs after the
Rustenburg exit, partly offset by input cost inflation and increased volume at retained operations. Processing costs rose
9% or R0.6 billion to R7.8 billion on 7% higher refined volumes in 2017 and inflationary increases.
Purchase-of-concentrate costs rose to R20.9 billion (2016: R12.6 billion) on higher volumes from Sibanye, and a slightly
higher rand basket price than 2016.
Other costs increased 20% to R3.4 billion (2016: R2.8 billion), primarily due to higher costs of transporting metal (R0.3
billion) given the increased volume of chrome concentrate produced. The Company reduced overheads from R3.6 billion in
2016 to R3.3 billion in 2017. With the exit of Union, a further sustainable reduction in overhead of R0.3 billion per
annum is expected.
Through strict cost control and the benefits of exiting the Rustenburg operations, as well as the measurement of ore
stockpiles, unit costs are down 2% at R19,203 per produced platinum ounce (2016: R19,545). Before the measurement of ore
stockpiles, unit cost would have been R20,482 per platinum ounce, 5% higher than 2016, but below CPI of 5.4% and within
guidance. Lower capitalised waste production at Mogalakwena accounted for an increase in working cost of R373 per
platinum ounce, in line with accounting standards. Unit cost of PGM production was R8,871 per ounce, 5% lower than the
prior year (2016: R9,298 per ounce). AISC of USD826 per ounce (2016: USD860 per ounce) against an achieved platinum price
of USD947 per ounce reflects stringent cost management, operating model improvements and stay-in-business capital focused
on safety-critical and business continuity projects.
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Reported EBITDA increased 32% to R12.0 billion from R9.1 billion in 2016. The movements in EBITDA were due to:
Uncontrollable items, including inflation, US dollar metal prices and the rand/US dollar exchange rate, reduced earnings
by R1.3 billion, with inflation contributing R1.7 billion and a stronger rand R4.3 billion, partially offset by stronger
metal prices of R4.7billion.
Controllable items - volume and costs - contributed R4.5 billion, with higher sales volumes increasing earnings by R0.3
billion. Costs reduced by R4.2 billion, mainly due to cost improvements and overhead reductions, the ore stockpile
measurement which reduced cost by R1.3 billion, lower restructuring costs and the benefit of a R0.3 billion higher
stock-count gain compared to 2016. EBITDA was offset by higher losses from the non-managed Bokoni mine, up R0.3 billion,
as a result of once-off care and maintenance costs.
The EBITDA margin for own mining operations was 32% (2016: 28%), on mined portion of joint ventures 20% (2016: 19%),
while the margin on purchased concentrate was 9% (2016: 9%).
Capital expenditure
Disciplined capital allocation remains a priority, aimed at maintaining asset integrity and adding value, not additional
volume.
Capital expenditure for 2017, excluding capitalised interest and waste stripping, rose 18% to R4.0 billion from R3.4
billion in 2016. Stay-in-business capital expenditure increased by R0.6 billion to R3.3 billion, focused on safety-
critical and business continuity projects, including heavy mining equipment replacement and the Waterval smelter and ACP
rebuilds. Our focus is to invest in low-capex, fast-payback, value- accretive projects. Project capital was broadly flat
at R0.6 billion, relating to the Unki smelter and Mogalakwena concentrator optimisation.
Waste tonnes mined decreased from 78Mt in 2016 to 69Mt in 2017 and the cost of mining 23Mt was capitalised (2016:
capitalisation of 39 Mt). As a result, capitalised waste stripping reduced from R1.3 billion in 2016 to R0.8 billion in
2017.
For 2018, project and stay-in-business capex is forecast between R4.7 billion and R5.2 billion and capitalised waste
stripping is expected to be around R1.1 billion. The increase reflects a once-off stay-in-business project for SO2
abatement at the Polokwane and Mortimer smelters to be incurred between 2018 and 2020 (R2.5 billion) to achieve global
benchmark emissions standards.
Working capital
We continue to focus on optimising our working capital levels. Trade working capital has been actively managed down from
R13.3 billion (75 days) at the beginning of 2016 to R6.3 billion at 31 December 2017, representing a 26-day working
capital cycle. The R1.7 billion reduction in working capital from end 2016 is largely due to receipt of the remaining
customer prepayment of R2.6 billion, offset by an increase in stock from R16.4 billion at the end of 2016
to R18.5 billion, due to the ore stockpile measurement and increase in prices. Platinum and palladium work-in-progress
inventory has reduced from around 505,000 ounces and 410,000 ounces at end of 2016 due to the Waterval smelter furnace
run-out to more normalised levels of 467,000 ounces and 379,000 ounces respectively at the end of 2017. In 2017, we had
the benefit of a 76,000 platinum ounce stock-count gain valued at R0.9 billion (2016: 62,000 ounces, R0.6 billion).
Net debt and liquidity
During the year, we made significant progress in strengthening the balance sheet. The company ended with net debt of R1.8
billion compared to R7.3 billion at the end of 2016, supported by cash generated from operations of R11.2 billion, R2.6
billion from the customer prepayment, and R1.2 billion net proceeds on asset sales (including proceeds of R1.0 billion
from disposing of long-dated Amandelbult resources). These cash flows were used to fund capital expenditure and
capitalised waste stripping of R4.7 billion; pay taxation of R1.7 billion; settle interest of R1.2 billion to our debt
providers and contribute R1.8 billion to funding our joint venture and associate operations, of which R0.8 billion was in
respect of Bokoni.
Gearing has reduced to 4.3% and net debt to EBITDA has improved to 0.2. We have increased liquidity headroom to
R20.6 billion, comprising both undrawn committed facilities of R11.2 billion and cash of R9.4 billion, and are
comfortably within our debt covenants.
Dividend
The Board has adopted a pay-out ratio driven dividend policy, which is in accordance with the Company's capital
allocation framework and in line with our commitment to sustainably return cash to shareholders through the cycle, whilst
retaining a high level of balance sheet strength.
The Board's target is to distribute a base dividend of 30% of headline earnings for each reporting period. This dividend
policy will result in variability of dividend payments in respect of each six-month period, given that the industry faces
volatility in metal prices and exchange rates, amongst other factors. Additional returns to shareholders above the base
dividend will be considered in accordance with the Company's capital allocation framework.
On reviewing the current reporting period, the Board has declared a final cash dividend of R3.49 per share, which is
equivalent to a 30% headline earnings pay-out ratio. The dividend is applicable to shareholders on the register on 9
March 2018 and payable on 12 March 2018.
PGM MARKET REVIEW
Prices
The Dollar platinum price ended the year at USD928, up 2.7% from the beginning of the year, but the average price over the
year softened 4.6% to USD947 (2016: USD993). The Palladium price was up 44% to USD876 per ounce (2016: USD610 per ounce) and the
rhodium price up 61% to USD1,094 per ounce (2016: USD680 per ounce). In USD terms, the dollar basket price was up 12% year
on year to USD1,966 per platinum ounce (2016: USD1,753 per platinum ounce). The rand strengthened by 9%, leaving the rand
basket price up only 2% at R26,213 per platinum ounce (2016: R25,649 per Platinum ounce).
Platinum
Platinum underperformed the other platinum group metals (PGMs) due to increased negative sentiment against diesel fuelled
engines in Europe, and the tightening of monetary policy in the USA. Primary supply from mine production fell by 1.6% but
was compensated for by an increase in recycling from the automotive industry, while gross demand declined 4.5%.
Consequently, platinum moved into a small surplus in 2017.
Demand for platinum from the automotive sector softened by 1.2% as diesel sales in Western Europe were impacted by
negative consumer sentiment, although there was growing demand for platinum from the heavy-duty diesel sector. Industrial
demand for platinum remained robust in 2017 as the electrical, glass and petroleum industries all contributed to an
increase in demand.
The performance of the jewellery sector was mixed. China remains the largest consumer of platinum jewellery but gross
demand for new metal fell for the fourth consecutive year. This has been due to a mix of slowing growth, a struggling
wider jewellery retail sector, which has also affected gold, and a move by retailers towards higher margin jewellery
pieces which has hurt demand for plain metal jewellery. Net demand, however, fell less heavily as jewellery recycling
fell.
Elsewhere, demand for platinum jewellery is more positive. Indian demand grew strongly despite some uncertainty over new
tax regimes, and demand exceeded 2015 levels following the disruption caused by demonetisation and floods in 2016.
Net investment demand was again positive in 2017, totalling 350,000 ounces. Investment demand from Japan was lower at
145,000 ounces, as lower platinum price volatility in Yen terms meant that consumers had fewer opportunities to buy
platinum at attractive levels, reducing demand from a strong market in 2016. The reduction in platinum investment demand
movement from 620,000 ounces to 350,000 ounces in 2017 was responsible for the majority of the 4.5% reduction in 2017.
Palladium
Palladium performed strongly in 2017 with demand now significantly outweighing supply leading to a market deficit of
670,000 ounces. The palladium price hit a 16 year high at USD1,071 with the average price of USD871, 42% higher in 2017
(2016: USD615). On 27 September, the palladium price was at a premium to the platinum price for the first time in 16 years
and contributed 28% to revenue. The automotive industry remains the principal user of palladium and demand rose by 6.0%
in 2017, while industrial demand increased by 2.6%. In the investment sector, it was another year of net disinvestment
for palladium with net ETF selling of 365,000 ounces during the year.
Rhodium
Rhodium also performed extremely well in 2017 with the average price 60% higher at USD1,108 (2016: USD694). The price
finished 2017 at a six-year high and contributed 7% to revenue. The rhodium market was reasonably well supplied in 2017
although the surplus fell to 26,000 ounces in a relatively illiquid market. Tightening emission standards coupled with
strong sales of light duty gasoline vehicles globally led to an increase in automotive demand of 4.4%. Industrial demand
was robust in 2017, with the chemical and glass manufacturing sectors purchasing more metal than in the prior year.
Minor metals
The prices of both ruthenium and iridium increased in 2017 with ruthenium increasing to an average of USD75 per ounce
(2016: USD42) and iridium increased to an average of USD898 per ounce (2016: USD576). Demand for both metals is strong from
both the chemical and electrical sectors.
Automotive
Global light duty vehicle sales increased by 2.5% in 2017 to a record 94 million units (source: LMC Automotive Global
Light Vehicle Sales Update). Sales were strong in Argentina, Brazil, Europe and Japan. Sales growth in China was 2% in
2017, compared to a 12.3% increase in 2016. The slowdown in growth was in part due to an increase in the sales tax
payable on small vehicles which was halved from 10% to 5% in 2016 but increased again at the start of 2017. In the USA,
sales of light duty vehicles contracted by 1.9% but remained strong by historical standards.
Gross automotive demand for platinum fellby 40,000 ounces or 1.2%.Diesel's share of the light duty vehicle market in
Western Europe fell from 49.5% last year to below 45% in 2017. The diesel engine has been subject to significant negative
media coverage over the course of the year. Some governments in Europe have reacted by increasing taxes and penalties on
diesel vehicles, particularly in the larger cities such as London and Paris. As a result, consumers have become wary of
purchasing diesel cars and their residual values have fallen. That said, the decline in diesel's market share of light
duty vehicles sales in Western Europe was broadly aligned to forecasts and is expected to slow in 2018.
Diesel vehicles are expected to maintain a reasonable share of sales in Western Europe over the next five years. With its
relatively low CO2 emissions, diesel is still extremely important for light and heavy-duty vehicle manufacturers and
their ability to meet the stretching EU carbon-dioxide emission targets in 2021. Diesels are likely to retain a strong
position among larger vehicles, in particular. Economic growth and tightening emissions rules in China and India will
drive additional demand for platinum from the heavy duty diesel sector.
Globally, demand for palladium from the automotive sector grew by 6.0% while demand for rhodium increased by 4.4%. The
growth was predominantly driven by strong sales and tightening emissions legislation in China with the country consuming
130,000 ounces more palladium than in the previous year. In the USA, tightening emissions legislation and increasing
vehicle size led to higher PGM loadings on average for light duty vehicles and so demand for palladium and rhodium from
the USA grew, despite a fall in unit sales.
With the palladium price having sustained its position above that of platinum since September, the question of
substituting platinum for palladium in gasoline catalytic converters comes into play. While research suggests that
substitution in some of these catalysts is possible, automotive companies have yet to respond to the changing price
environment in this way. It is unlikely that there will be any meaningful progress in replacing palladium with platinum
in gasoline autocatalytic converters in 2018, although it is likely this will occur at some point.
Industrial
Industrial demand for platinum remained robust once again this year, growing by 125,000 ounces, or 6.7%, and so
outstripping global economic growth. Expansions in glass and petroleum production in China were the main contributor to
this growth. While still small, demand for platinum for use in fuel cells continues to grow. There are increasing numbers
of automotive producers looking at fuel cells for zero-emissions vehicles, in addition to battery electric vehicles. As
with battery electric vehicles, China is driving this move towards cleaner cars and its roadmap for the future targets
one million fuel cell vehicles on the road by 2030.
Industrial demand for palladium increased in 2017, by55,000 ounces. Demand from the chemical sector increased
significantly compared to 2016, which helped to compensate for a fall in demand from the dental and electrical sectors.
Jewellery
Gross global jewellery demand declined again in 2017, falling by 7.7% or 185,000 ounces to 2.23 million ounces. In China,
the largest market, gross platinum demand from the jewellery sector shrank by 14% or 200,000 ounces to roughly 1.3
million ounces in 2017, following the decline in volumes seen in 2016. Many of the same factors continue to weigh on the
wider jewellery sector and negatively affected both 24 carat gold and plain platinum jewellery sales. After several years
of strong expansion, profitability and volumes have declined across the wider jewellery retail sector in China. Retailers
have responded by moving their sales to higher margin pieces with sales of design-led or gem-set pieces performing well.
While platinum volumes have declined overall, some retailers who have adjusted their product offerings have achieved
sales growth.
Flows of unsold Chinese jewellery for recycling slowed markedly in 2017, following the previous year's destocking. As a
result, net demand declined at a slower rate than in the previous year.
Indian jewellery demand performed well in 2017, growing by 15% year-on-year in 2017, with platinum being sold in an
increasing number of stores and retail chains. Consumer interest in platinum's brand positioning is also very healthy,
with this impressive growth achieved against a backdrop of the introduction of a national sales tax and the aftereffects
of 2016's disruptive demonetisation experiment.
Japanese gross purchases of platinum for jewellery manufacturing were essentially level with previous year volumes
although lower recycling volumes meant that net demand increased. Demand in North America edged higher, with good online
sales of platinum jewellery and the early positive results of promoting platinum as a secure setting for diamonds more
than offsetting the effects of slowing economic growth. European platinum jewellery demand was little different from the
previous year.
Investment
Net investment demand for platinum remained positive in 2017 but fell significantly compared to the previous year. Net
demand totalled 350,000 ounces, compared to 620,000 ounces in 2016. ETFs saw net buying of 105,000 ounces once again,
encouraged at times by relative price weakness in US Dollar terms. The biggest contributor to the fall in platinum bar
and coin investment was Japan. Investment demand in 2017 was 145,000 ounces, compared to 545,000 ounces the year before.
In 2015 and 2016 the metal's continuing discount to gold, low absolute price in Yen and its price volatility meant that
consumers were very keen buyers. Despite the price in Yen terms being similar to 2016, it was less volatile and consumer
demand failed to materialise at the same level during 2017.
Work by the World Platinum Investment Council continues to improve availability and demand for physical products in a
number of countries. Partnerships with the likes of Bullion Vault and the Royal Mint have helped to stimulate additional
physical demand and, in the USA, the launch of the Platinum Eagle coin was well received.
It was another year of net disinvestment for palladium. ETF selling continued with 365,000 ounces sold during the year.
At the start of the year profit taking resulted in some heavy selling as the price hit highs last seen in 2014. The US
Palladium Eagle coins were well received and highlighted the potential for further physical investment demand.
STRATEGY
Repositioning the portfolio
Anglo American Platinum has achieved key strategic successes in 2017 in repositioning its portfolio. The Company aims to
own and operate the best assets in the PGM industry, consisting of Mogalakwena, Amandelbult, Unki, the joint venture
operations BRPM, Mototolo and Modikwa, and downstream processing assets.
The completion of the sale of the Rustenburg Operations in 2016, the sale of the Company's 42.5% stake in the Pandora
joint venture, and the disposal of Union mine and Masa Chrome, (post year-end), 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. The core
operations stand to benefit from dedicated management attention and technical expertise, as well asdisciplined capital
allocation.
Disposal of mineral resources within the Amandelbult mining right to Northam
The Company announced on 6 December 2017 that it had completed the disposal of mineral resources within the Amandelbult
mining right to Northam Platinum Limited. These resources were excluded from current life of mine plans and are long
dated. The upfront cash proceeds of R1 billion were received and used to reduce net debt.
Bokoni
As announced on 24 July 2017, shareholders were notified that Atlatsa Resources commenced the process to place Bokoni
mine on care and maintenance. This process was completed on 1 October 2017 and loss-making production ceased at the
operation.
Kroondal
The Company's stake in Kroondal is considered a non-core operation as it is not a long-life 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
Optimising existing assets
The Company remains committed to delivering operational excellence across the portfolio. There are initiatives underway
to mine the assets optimally, including the optimisation of the Mogalakwena North concentrator. Post the significant
improvements made at Mogalakwena over the past few years (2012: 300,000 platinum ounces, 2017: 460,000 platinum ounces),
the Amandelbult transition plan is now the biggest optimisation project in the portfolio and will reduce AISC by 24% by
2022 to USD820/platinum ounce and increase the profitability of the mine.
Disciplined capital allocation
Disciplined capital allocation remains on sustaining capital and business continuity and quick-payback value-enhancing
projects. Anglo American Platinum will continue to assess projects which meet these criteria, including expansions of the
Amandelbult chrome plant, the Dishaba UG2 transition, the Unki smelter as well as scheduled furnace rebuilds and heavy
mining equipment replacements.
Project studies
In line with the capital allocation framework, Anglo American Platinum is continuing the assessment of unlocking value
from the high-quality project optionality in the portfolio. The Company has several value-enhancing projects which are
currently in pre-feasibility study stage, including a Mogalakwena expansion, and developing the potential at Der Brochen.
These projects will be fully mechanised and low-cost, driving the ambition to ensure all new production is in the bottom
half of the cost curve, more productive and safer. Anglo American Platinum has the portfolio of projects and assets which
can drive margin expansion in the current PGM price environment.
Market development
Development of the global platinum jewellery market is carried out by Platinum Guild International (PGI), which is funded
by Anglo American Platinum and other primary PGM producers. The PGI is focused on the four major platinum jewellery
markets of China, Japan, India and the USA, where it promotes platinum jewellery directly to the consumer, and works in
partnership with designers, manufacturers and retailers. 2017 continued to see growth rates for platinum above those for
total jewellery in Japan, India and the USA. In China, the industry continues to adapt to a slowdown in overall jewellery
consumption as the economy adapts to a more sustainable growth path. However, in the Chinese bridal market, platinum has
made gains in both acquisition levels and absolute tonnage, especially in the faster growing Tier 2 and 3 cities.
Development of investment demand for platinum is led by the World Platinum Investment Council (WPIC), an industry body
funded by several platinum producers including Anglo American Plaitnum. Several new partnerships were added in 2017,
including with the UK's Royal Mint to deliver the Mint's first range of platinum products, as well as launching platinum
on the BullionVault's multi-regional online vaulting platform. The WPIC also substantially expanded both its monthly
investment research output and its direct investor development programme with institutions. A presence was established in
Shanghai to begin to unlock China's vast platinum investment demand potential.
As part of ongoing investments in securing future markets for its metals, Anglo American Platinum also operates the PGM
investment programme. This is a venture capital approach that provides start-up or early-stage capital to companies
working on commercialising technology that uses or enables the use of PGMs. These investments are primarily focused on
hydrogen, fuel cells, energy storage and the clean energy transition.
During 2017, our work to add value to our portfolio of investment companies included:
Successful raising of USD32 million from third parties for Primus Power and the successful awarding of a US Technology and
Development Agency grant to support an energy storage system for Eskom, South Africa's national electricity utility. This
project will demonstrate the capabilities and use cases for industrial and utility scale energy storage systems in South
Africa. Primus is partnering with Solafrica Energy, a Johannesburg-based developer of utility scale solar power plants.
As part of the program, Primus will deploy an array of four batteries capable of delivering 100 kW of power and 500 kWh
of energy. The system will initially be installed at Eskom's Large Scale Energy Storage Testing and Demonstration
Facility in Rosherville, South Africa.
Facilitation of German-based Hydrogenious Technologies' systems, a liquid carrier of hydrogen, into the US market, via
United Hydrogen Technology. In addition, Anglo American Platinum is helping secure additional funding and entry
opportunities to new markets for Hydrogenious.
Identification and development of a number of African and Asian opportunities for Greyrock Energy, a flare glass to
liquid fuel conversion unit.
We also continue 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
challenges through the PGM investment programme, to engaging with governments across the world to ensure a fair
regulatory environment for these technologies, and assisting in demonstration programmes where appropriate. Anglo
American was a founding member of the global Hydrogen Council, launched in Davos in 2017. Together with the Chinese
Ministry of Science and Technology, the Company was instrumental in establishing the International Fuel Cell and Hydrogen
Association in China this year.
Where possible, we aim to integrate this demand stimulation with developing skills and capacity building in South Africa.
In the jewellery sector, this year's 18th annual PlatAfrica competition again sought to provide opportunities for
successful South African jewellery designers to have their designs manufactured and sold in the Indian market. This year,
we announced a new partnership with Metal Concentrators, to continue to provide a metal financing scheme to local
jewellery manufacturers for working capital requirements. We also see an opportunity to position South Africa as a
manufacturing location for some of our portfolio companies and we continue to explore and develop such opportunities.
In addition, we contributed to the funding of hydrogen refueling stations to be built by Shell, in collaboration with
Honda and Toyota at seven Shell-branded retail stations across Northern California; three in the city of San Francisco,
and one in each of Berkeley, Sacramento, Citrus Heights and Walnut Creek. The hydrogen refueling stations will be
installed in strategic locations within the existing network of Shell-branded retail stations, offering existing and
future fuel cell electric vehicle drivers high-quality service with simple and straightforward car refueling in minutes.
California is a key early adopter market for fuel cell electric vehicles.
Technical innovation and modernisation
The Company has continued its journey of innovation and technology development to achieve safety, productivity and cost
benefits during 2017. Emphasis has been placed on modernisation (drill, blast and cleaning technologies) of underground,
in-stope operations at Amandelbult, automation of blast hole drilling at the Mogalakwena open pit operations and
productivity of trackless mining operations at Unki. The primary focus of modernisation across the concentrators and
Process division has been on throughput increases based on enhanced instrumentation and control systems coupled with
expanded asset management practice and integration with the Anglo American Operating Model.
We continue the trialling of new mining technology at Twickenham, and have made progress in rock cutting technology,
which eliminates the need for explosives, and increases stoping and development efficiencies. Significant progress has
been made with all elements of the narrow reef technology suite, such that deployment on a production basis at the
Amandelbult 15E section is currently being studied.
GOVERNMENT AND INDUSTRY POLICY
The Reviewed Mining Charter (MCIII)
On 15 June 2017, the South African Department of Mineral Resources (DMR) published its Reviewed Mining Charter 2017
(MCIII). Anglo American Platinum expressed its concern that the MCIII was not concluded through agreement between the DMR
and all relevant stakeholders, including the mining industry, despite the best efforts of those stakeholders over the
preceding year.
The Company is supportive of the legal action followed by the Chamber of Mines, with the ultimate objective of arriving
at a negotiated solution that is practical to implement, and which preserves and enhances investment in what is a
critically important industry for South Africa. Inthe absence of new investment, South Africa will fail to deliver the
economic growth required to create greater levels of employment and socio-economic upliftment for the benefit of all
South Africans. The Company is committed to meeting South Africa's transformation objectives and has been a longstanding
and major contributor to the country's transformation. The hearing on the Chamber of Mine's Declarator on the 'once
empowered always empowered' issue was heard in November 2017, with the outcome expected after 90 days. The hearing on the
review of Mining Charter has been set for 19, 20 and 21 February 2018.
Anglo American Platinum welcomed the DMR's written undertaking that the provisions of the MCIII will not be implemented
or applied in any way, pending judgment in the review application brought by the Chamber of Mines. We will continue to
engage through the Chamber of Mines.
Mineral and Petroleum Resources Development Act (MPRDA)
There was little progress in 2017 in respect of the finalisation of the draft Minerals and Petroleum Resources
Development Act (MPRDA Bill), following former President Jacob Zuma's recommendation in January 2015 that it be sent back
to Parliament for consideration, citing constitutional concerns and the lack of consultation with communities at
provincial level. In June 2017, the National Council of Provinces (NCOP) convened a series of public hearings across all
nine Provinces to meet the consultation obligations. During these public hearings, submissions were made by the Chamber
of Mines, amongst others, stating that the Bill as currently drafted is in contravention of South Africa's Constitution,
owing to breaches in the separation of powers between the legislature and the Minister of Mineral Resources. Subsequent
to this consultation process, no further engagement or draft amendments to the MPRDA Bill have been forthcoming from the
regulator.
MINERAL RESERVES AND RESOURCES STATEMENT
Reserves
The combined South African and Zimbabwean Ore Reserves have decreased 2.4 % from 170.2 4E million ounces to 166.2 4E
million ounces in the review period. This was primarily due to Bokoni Mine being placed on care and maintenance by
Atlatsa Resources and the sale of the interest in Pandora Mine to Lonmin. The reduction of Ore Reserves has been
partially offset by an increase in Ore Reserves at Mogalakwena, Tumela and Dishaba mines due to the additional conversion
of Mineral Resources to Ore Reserves.
At Mogalakwena Mine, a combination of enhanced geological resource modelling, pit shell optimisation, production and
stockpile movements resulted in the Mogalakwena Platreef Ore Reserves increasing by 2.5 4E million ounces from 124.1 4E
million ounces in 2016 to 126.6 4E million ounces in 2017. The combination of basket metal prices and exchange rate used
to optimise the Mogalakwena pit is based on long-term forecasts in a balanced supply/demand scenario.
At the Amandelbult mining complex, the continued execution of the Tumela and Dishaba UG2 strategy has an additional 1.3
4E million ounces being converted to Ore Reserves from the exclusive Mineral Resources.
Resources
The combined South African and Zimbabwean Mineral Resource, inclusive of Ore Reserves decreased by 3.7% from 831.7 4E
million ounces to 801.2 4E million ounces in the review period. This was primarily the result of the disposal of the
interest in Pandora Mine Mineral Resources to Lonmin (less 12.0 4E million ounces) and the sale of a long-dated portion
of the Tumela Mine inclusive Mineral Resource to Northam (less 17.5 4E million ounces).
The full reserves and resources statement will be available on 12 March 2018.
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 restructured the business and implemented the
repositioning of the portfolio, to become a resilient business despite an ongoing volatile PGM pricing environment.
Underlying cash-flow generation remains the 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 2018, although the
Company continues with study plans for potential future projects at Mogalakwena and Der Brochen, to position itself to
implement these should market conditions improve.
The Company is committed to maintaining a strong balance sheet through the cycle, only focussing on high-returning and
quick pay back projects, and therefore has committed to allocating capital to paying a sustainable dividend based on a
pay-out ratio of 30% of normalised headline earnings.
Market outlook
Independent forecasts suggest that the three major PGMs, platinum, palladium and rhodium, should collectively be in
deficit again in 2018. Rising vehicle production volumes and a healthy global economy should drive higher demand while
primary mine production is likely to be relatively unchanged compared to the previous year.
Platinum is likely to be in a small surplus again in 2018, with demand exceeded by overall supply. Gross automotive
demand may decline with diesel engines' share of new car sales in Europe set to fall, albeit at a lower rate than last
year. Heavy duty automotive demand is likely to strengthen, offsetting some of this weakness. The outlook for the
jewellery sector is mixed: a strong performance is expected in India where platinum has been successful in gaining share;
in China, gross platinum demand is more likely to decline as retailers search for higher margin jewellery opportunities,
potentially impacting sales of plain metal jewellery. A return to more normal retail recycling levels means that any
decline in gross demand would have a less marked impact on net platinum demand. Industrial demand should continue to grow
at growth rates greater than or equal to world GDP. Investment demand is dependent on price movements and on price
volatility but should be positive, aided by market development from the WPIC. Primary supply should remain flat and
limited potential for growth in recycling, leading to a small surplus.
The outlook for palladium is positive for 2018. With the number of vehicles produced likely to grow and with emissions
legislation tightening, palladium purchases by the global automotive industry are likely to rise once again. It is
unlikely that there will be any meaningful progress in replacing palladium with platinum in gasoline catalytic converters
this year, although it is likely this will occur at some point. Industrial demand will remain robust. As with platinum,
primary supply should remain relatively unchanged. In contrast to platinum, recycling volumes of spent catalytic
converters continues to rise as c.5% per annum. Nevertheless, palladium should remain in a substantial deficit even if
disinvestment of physical palladium continues.
Rhodium demand should continue to climb in 2018. Rising global vehicle production volumes and tighter emissions rules
should boost automotive demand. Supplies are likely to remain relatively flat and should move towards a balanced market.
Operational outlook
PGM production guidance (metal-in-concentrate) will be 4.75 - 5.0 million PGM ounces for 2018, including platinum outlook
of 2.3 to 2.4 million ounces. Refined production and sales volumes will be in line with production, but lower than 2017,
which had the Waterval smelter run-out backlog and 2017 stock count gain which equated to c.200,000 PGM ounces, including
100,000 platinum ounces. Unit cost guidance will be between R19,600 and R20,200 per produced platinum ounce (metal in
concentrate).
Financial outlook
The global economic outlook remains uncertain, with volatility in metal prices and exchange rates expected to continue.
Management's efforts to reposition the portfolio, taking out loss-making ounces, implementing strict cost control and
focussing on operational efficiencies should enhance margins and generate sustainable cash flow. Capital discipline will
continue, with capital expenditure projected at R4.7 billion to R5.2 billion, of which R3.9 billion to R4.2 billion will
be on sustaining capex to maintain asset integrity and meet compliance requirements.
Johannesburg, South Africa
15 February 2018
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)
S Pearce (Australian)
AM O'Neill (Australian)
AH Sangqu
Alternate director
PG Whitcutt (Alternate director to S Pearce)
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
Merrill Lynch South Africa (Pty) Ltd
The Place, 1 Sandton Drive, Sandton 2196
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
19 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: 19/02/2018 08:00:00 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
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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,
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