Wrap Text
Reviewed Condensed Consolidated Interim Financial Results for the six months ended 30 June 2018
ANGLO AMERICAN PLATINUM LIMITED
Incorporated in the Republic of South Africa
Registration number: 1946/022452/06
Share code: AMS
ISIN: ZAE000013181
(Amplats, the Company, the Group or Anglo American Platinum)
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 30 June 2018
Anglo American Platinum Limited's condensed consolidated reviewed interim financial results for the six months ended 30 June 2018 have been independently reviewed
by the Group's external auditors. The preparation of the Group's reviewed interim results for the six months ended 30 June 2018 was supervised by the Finance
Director, Mr I Botha, CA(SA).
KEY FEATURES
PGM production
(2017: 2.48)
2.6 Moz
Net cash
(2017: R1.8bn net debt)
R0.5bn
EBITDA margin
(2017: 15%)
21%
Free cash from operations
(2017: -R1.0bn)
R1.3bn
Dividend
(2017: Nil)
R1.0bn or
R3.74 per share
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2018
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 % 2017
Notes Rm Rm change Rm
Gross sales revenue 5 33,491 27,313 65,688
Commissions paid - (8) (18)
Net sales revenue 33,491 27,305 23 65,670
Cost of sales 6 (28,581) (24,489) 17 (56,578)
Gross profit on metal sales 6 4,910 2,816 74 9,092
Other net income/(expenditure) 9 524 (263) (6)
Loss on impairment and scrapping of property, plant and equipment (16) (1,520) (1,699)
Market development and promotional expenditure (306) (349) (813)
Operating profit 5,112 684 647 6,574
Impairment of investments in associates 27 (1,098) (997) (2,145)
Impairment of non-current financial assets 27 (52) (283) (777)
Profit on disposal of associates - - 135
Loss on disposal of Union Mine and Masa Chrome 26 (850) - -
Profit on disposal of long-dated resources - - 1,066
Interest expensed 10 (364) (564) (1,219)
Interest received 431 148 222
Remeasurement of loans and receivables 3 31 46
Gains/(losses) from associates (net of taxation) 21 (179) (362)
Profit/(loss) before taxation 3,203 (1,160) 376 3,540
Taxation 11 (923) (150) (1,616)
Profit/(loss) for the period 2,280 (1,310) 274 1,924
Other comprehensive income/(loss) 370 (308) (416)
Items that will be reclassified subsequently to profit or loss
Deferred foreign exchange translation gains/(losses) 643 (230) (553)
Items that will not be reclassified subsequently to profit or loss
Net (losses)/gains on equity instruments at FVTOCI (273) (78) 137
Total comprehensive income/(loss) for the period 2,650 (1,618) 1,508
Profit/(loss) attributable to:
Owners of the Company 2,179 (1,187) 284 1,944
Non-controlling interest 101 (123) (20)
2,280 (1,310) 1,924
Total comprehensive income/(loss) attributable to:
Owners of the Company 2,549 (1,495) 271 1,528
Non-controlling interest 101 (123) (20)
2,650 (1,618) 1,508
Earnings per share
Earnings/(loss) per ordinary share (cents)
- Basic 12 831 (453) 284 741
- Diluted 12 828 (452) 284 739
Headline earnings 12 3,363 747 350 3,886
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
Reviewed Audited
six months as at as at
30 June 30 June 31 December
2018 2017 2017
Notes Rm Rm Rm
ASSETS
Non-current assets 49,509 48,993 48,938
Property, plant and equipment 37,041 36,478 36,597
Capital work-in-progress 6,390 4,995 5,361
Investments in associates 13 1,952 3,210 2,464
Investments held by environmental trusts 1,117 1,063 970
Other non-current assets 27 - 39
Other financial assets 14 2,982 3,247 3,507
Current assets 33,849 29,065 31,318
Inventories 15 20,968 19,314 18,489
Trade and other receivables 1,907 1,474 2,097
Other assets 978 936 1,075
Other current financial assets 88 49 73
Taxation 741 220 469
Cash and cash equivalents 16 9,167 7,072 9,115
Non-current assets held for sale - - 558
Total assets 83,358 78,058 80,814
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 27 27 27
Share premium 22,743 22,667 22,673
Foreign currency translation reserve 2,407 2,087 1,764
Equity investments irrevocably designated at fair value 228 256 429
Retained earnings 17,709 13,410 16,634
Non-controlling interest 259 (481) (526)
Shareholders' equity 43,373 37,966 41,001
Non-current liabilities 17,757 18,728 18,864
Non-current interest-bearing borrowings 17 8,356 9,380 9,362
Obligations due under finance leases 18 99 97 98
Environmental obligations 1,724 1,993 1,693
Employees' service benefit obligations 17 17 17
Other financial liabilities 19 - 229 239
Deferred taxation 7,561 7,012 7,455
Current liabilities 22,228 21,364 20,374
Current interest-bearing borrowings 17 218 3,491 1,713
Obligations due under finance leases within one year 18 17 16 17
Trade and other payables 14,497 10,824 11,316
Other liabilities 20 6,732 6,417 6,691
Other financial liabilities 19 752 603 616
Share-based payment provision 12 13 21
Liabilities associated with non-current assets held for sale - - 575
Total equity and liabilities 83,358 78,058 80,814
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2018
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Rm Rm Rm
Cash flows from operating activities
Cash receipts from customers 33,735 27,763 65,993
Cash paid to suppliers and employees (25,710) (21,196) (50,126)
Cash from operations 8,025 6,567 15,867
Interest paid (net of interest capitalised) (355) (510) (1,004)
Taxation paid (1,069) (383) (1,742)
Net cash from operating activities 6,601 5,674 13,121
Cash flows used in investing activities
Purchase of property, plant and equipment (includes interest capitalised) (2,792) (1,779) (4,969)
Proceeds from sale of plant and equipment 21 9 17
Purchase of financial asset investments (54) (21) (72)
Net proceeds on disposal of Union Mine and Masa Chrome 414 - -
Purchase of concentrate pipeline (974) (1,529) (1,529)
Receipt of deferred consideration 64 - -
Proceeds on the sale of long-dated resources - - 1,066
Net proceeds on sale of Royal Bafokeng Platinum shares (RB Plat) 387 - -
Net proceeds on the disposal of associates - - 131
Insurance proceeds for damage to assets 333 - -
Shareholder funding capitalised to investment in associates (552) (424) (1,156)
Redemption of preference shares in Baphalane Siyanda Chrome Company - 39 86
Advances made to Plateau Resources Proprietary Limited (63) (214) (708)
Interest received 93 59 143
Growth in environmental trusts - - 8
Other advances (3) (122) (135)
Net cash used in investing activities (3,126) (3,982) (7,118)
Cash flows used in financing activities
Purchase of treasury shares for the Bonus Share Plan (BSP) (140) (150) (155)
(Repayment of)/proceeds from interest-bearing borrowings (2,493) 205 (1,659)
Repayment of finance lease obligation (9) (8) (17)
Dividends paid (928) - -
Cash distributions to minorities (95) (124) (272)
Net cash used in financing activities (3,665) (77) (2,103)
Net (decrease)/increase in cash and cash equivalents (190) 1,615 3,900
Cash and cash equivalents at beginning of period 9,357 5,457 5,457
Cash and cash equivalents at end of period 9,167 7,072 9,357
Movement in net cash/(debt)
Net debt at beginning of period (1,833) (7,319) (7,319)
Net cash from operating activities 6,601 5,674 13,121
Net cash used in investing activities (3,126) (3,982) (7,118)
Other (1,165) (285) (517)
Net cash/(debt) at end of period 477 (5,912) (1,833)
Made up as follows:
Cash and cash equivalents 9,167 7,072 9,115
Cash and cash equivalents classified as held-for-sale - - 242
Non-current interest-bearing borrowings (8,356) (9,380) (9,362)
Obligations due under finance lease (99) (97) (98)
Current interest-bearing borrowings (218) (3,491) (1,713)
Obligations due under finance lease within one year (17) (16) (17)
477 (5,912) (1,833)
* Less than R500 000.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2018
Equity
Foreign investments
currency irrevocably Non-
Share Share translation designated Retained controlling
capital premium reserve at fair value earnings interests Total
Rm Rm Rm Rm Rm Rm Rm
Balance as at 31 December 2016 (audited) 27 22,498 2,317 334 14,840 (234) 39,782
Total comprehensive loss for the period (230) (78) (1,187) (123) (1,618)
Deferred tax charged directly to equity (-)* -
Cash distributions to minorities (124) (124)
Shares acquired in terms of BSP - treated as treasury shares (-)* (150) (150)
Shares vested in terms of the BSP -* 319 (319) -
Equity-settled share-based compensation 80 80
Shares purchased for employees (4) (4)
Balance as at 30 June 2017 (reviewed) 27 22,667 2,087 256 13,410 (481) 37,966
Total comprehensive (loss)/income for the period (323) 215 3,131 103 3,126
Deferred tax charged directly to equity (42) 2 (40)
Cash distribution to minorities (148) (148)
Shares acquired in terms of BSP - treated as treasury shares (-)* (5) (5)
Shares vested in terms of the BSP -* 11 (11) -
Equity-settled share-based compensation 109 109
Shares purchased for employees (7) (7)
Balance as at 31 December 2017 (audited) 27 22,673 1,764 429 16,634 (526) 41,001
Total comprehensive income/(loss) for the period 643 (273) 2,179 101 2,650
Deferred tax charged directly to equity 20 (2) 18
Transfer of reserve upon disposal of shares in RB Plat 52 (52) -
Cash distributions to minorities (95) (95)
Shares acquired in terms of BSP - treated as treasury shares (-)* (140) (140)
Shares vested in terms of the BSP -* 210 (210) -
Equity-settled share-based compensation 99 99
Disposal of business 779 779
Shares forfeited to cover tax expense on vesting (11) (11)
Dividends paid (928) (928)
Balance as at 30 June 2018 (reviewed) 27 22,743 2,407 228 17,709 259 43,373
* Less than R500 000.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2018
1. The condensed consolidated interim financial statements are prepared in accordance with and contain the information required by IAS 34 Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and the requirements of the Companies Act of South Africa.
The preparation of the Group's reviewed consolidated interim results for the six months ended 30 June 2018 was supervised by the Finance Director, Mr I Botha CA
(SA).
2. The accounting policies applied in the preparation of these condensed consolidated interim financial statements are in terms of International Financial Reporting
Standards and are consistent with those applied in the financial statements for the year ended 31 December 2017, except as set out in note 3 below.
3. ACCOUNTING POLICIES
Impact of new standards issued and amendments to existing standards not yet effective
At 30 June 2018, the following new accounting standards and amendments to existing standards were in issue but not yet effective:
Effective for annual periods
New standards and amendments commencing on or after:
IFRS 16 Leases - removes the classification of leases as operating or finance leases and requires all 1 January 2019
leases to be brought onto companies' balance sheets. (early application permitted if IFRS 15 is also applied)
IFRIC 23 Uncertainty over Income Tax Treatments - addresses the determination of taxable profit 1 January 2019
(tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty
over income tax treatments under IAS 12 Income Taxes. It specifically considers:
Whether tax treatments should be considered collectively.
Assumptions for taxation authorities' examinations.
The determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The effect of changes in facts and circumstances.
Annual improvements to IFRS 2015 - 2017 cycle makes the following amendments: IFRS 3 Business Combinations- requiring 1 January 2019
the remeasurements of a previously held interest in a joint operation where control is obtained; IFRS 11 Joint
Arrangements- clarifying that there is no remeasurement of previous interests upon obtaining joint control of a
business that is a joint operation; IAS 12 Income Taxes- clarifying that all income tax consequences of dividends
should be recognised in profit or loss regardless of how the tax arises; and IAS 23 Borrowing Costs- clarifying
that a specific borrowing that remains outstanding after the related asset is ready for use, becomes part of general
borrowings for purposes of interest capitalisation.
IFRS 17 Insurance Contracts - requires insurance liabilities to be measured at a current fulfilment value and 1 January 2021
provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are
designed to achieve the goal of consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes
IFRS 4 Insurance Contracts as of 1 January 2021.
Amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments In Associates and Joint Ventures - To be determined
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture deal with situations where
there is a sale or contribution of assets between an investor and its associates or joint ventures.
The above standards and amendments are not expected to have a material impact for the Group, except IFRS 16 which is addressed below.
Impact of standards issued, effective and adopted by the Group
The Group adopted IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on 1 January 2018. As reported previously, the adoption of these
standards has an immaterial impact for the Group. The IFRS 9 impact was the reclassification of one financial asset, with a value of R30 million on 1 January 2018,
from loans and receivables, along with all available-for-sale investments, to equity instruments irrevocably designated as at fair value though other
comprehensive income (FVTOCI) per note 14. There is no reclassification of fair value changes on available-for-sale investments as these are already in equity. The
IFRS 15 impact was only on reclassifying the deferred income liability to contract liability per note 20. Prior years were also reclassified, albeit with an
immaterial impact.
3. ACCOUNTING POLICIES
Impact of new standard issued and neither effective nor adopted by the Group
IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance
leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions
are short-term and low-value leases.
The standard will affect primarily the accounting for the Group's operating leases and embedded leases in service contracts. The Group has decided to adopt the
modified retrospective transition approach such that the cumulative effect of transition to IFRS 16 will be recognised in retained earnings and the comparative
period will not be restated.
As at the reporting date, 30 June 2018, the Group has non-cancellable operating leases with a net present value of approximately R0.2 billion and embedded leases
with an estimated net present value of approximately R0.2 billion, which will be capitalised together with any new leases entered into post the reporting period.
Capitalisation will result in an increase in net debt and property, plant and equipment on 1 January 2019.
The standard is mandatory for first interim periods within annual reporting periods beginning on or after 1 January 2019. The Group does not intend to adopt the
standard before its effective date.
4. SEGMENTAL INFORMATION
Net sales revenue Operating contribution
Reviewed Audited Reviewed Audited
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2018 2017 2017 2018 2017 2017
Rm Rm Rm Rm Rm Rm
Operations
Mogalakwena Mine 8,624 6,450 16,118 3,288 2,022 7,029
Amandelbult Mine 5,936 4,760 11,423 1,142 394 1,699
Unki Mine 1,270 1,038 2,489 185 84 369
Twickenham Project - 15 21 (164) (169) (376)
Modikwa Mine1 922 672 1,817 91 48 246
Mototolo Mine1 738 590 1,218 277 127 200
Kroondal Platinum Mine1 1,637 1,329 3,233 346 110 213
Union Mine2 275 1,814 4,280 65 416 974
Other - 20 14 (1) (12) 10
19,402 16,688 40,612 5,229 3,020 10,363
Inter-segmental transactions (49) - (24) - - -
Purchased metals 12,718 10,617 25,082 1,260 1,064 2,104
Trading 1,420 - - 1
33,491 27,305 65,670 6,490 4,084 12,467
Other costs (1,580) (1,268) (3,375)
Gross profit on metal sales 4,910 2,816 9,092
1 Anglo American Platinum Limited's share (excluding purchase of concentrate).
2 Effective 1 February 2018, Union Mine was disposed of.
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 have been moved from purchased 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:
30 June 2017 30 June 2017
Net sales revenue Operating contribution
As reported Reclassified As reported Reclassified
Rm Rm Rm Rm
Amandelbult Mine 4,846 4,760 422 394
Other - 20 - (12)
Purchased metals 10,551 10,617 1,024 1,064
15,397 15,397 1,446 1,446
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Rm Rm Rm
5. GROSS SALES REVENUE
Sales revenue emanated from the following principal regions:
Precious metals 29,675 24,303 58,400
Asia 10,703 9,287 20,950
Europe 14,994 10,975 27,494
South Africa 2,836 2,215 4,970
North America 1,142 1,826 4,986
Base metals 2,757 2,018 5,010
South Africa 426 345 784
Rest of the world 2,331 1,673 4,226
Other 1,059 992 2,278
South Africa 53 91 107
Rest of the world 1,006 901 2,171
33,491 27,313 65,688
Gross sales revenue by metal:
Platinum 13,659 14,181 31,590
Palladium 9,807 6,584 18,421
Rhodium 3,468 1,530 4,242
Nickel 2,020 1,493 3,566
Other 4,537 3,525 7,869
Gross sales revenue 33,491 27,313 65,688
6. GROSS PROFIT ON METAL SALES
Net sales revenue 33,491 27,305 65,670
Cost of sales (28,581) (24,489) (56,578)
Cash operating costs (14,662) (14,573) (30,642)
On-mine (11,252) (11,529) (24,109)
Smelting (1,710) (1,526) (3,363)
Treatment and refining (1,700) (1,518) (3,170)
Purchase of metals and trading activities (12,917) (9,640) (20,763)
Depreciation (note 7) (1,964) (1,975) (4,074)
On-mine (1,348) (1,397) (2,823)
Smelting (269) (209) (551)
Treatment and refining (347) (369) (700)
Increase in metal inventories 2,470 2,967 515
Increase in ore stockpiles 72 - 1,761
Other costs (note 8) (1,580) (1,268) (3,375)
Gross profit on metal sales 4,910 2,816 9,092
Gross profit margin (%) 14.7 10.3 13.8
7. DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Depreciation comprises the following categories:
Operating assets 1,964 1,975 4,074
Mining 1,348 1,397 2,823
Smelting 269 209 551
Treatment and refining 347 369 700
Depreciation included in other costs 21 9 19
1,985 1,984 4,093
8. OTHER COSTS
Other costs comprise the following principal categories:
Overheads
Corporate costs 243 223 531
Research 78 71 230
Exploration 32 27 105
Other 190 163 423
543 484 1,289
Direct overhead costs
Royalties 393 209 653
Share-based payments 97 88 205
Contributions to education and community development 106 143 372
Transport of materials 441 344 856
1,037 784 2,086
1,580 1,268 3,375
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Rm Rm Rm
9. OTHER NET INCOME/(EXPENDITURE)
Other net income/(expenditure) comprises the following principal categories:
Net realised and unrealised foreign exchange gains/(losses) 70 (258) (398)
Project maintenance costs1 (70) (70) (106)
Restructuring and other related costs (15) (8) (11)
Profit/(loss) on disposal of property, plant and equipment and conversion rights 33 (4) (16)
Insurance proceeds received2 356 - 197
Proceeds realised on treasury bills 100 34 228
Other - net 50 43 100
524 (263) (6)
1 Project maintenance costs comprise costs incurred to maintain land held for future projects
and costs to keep projects on care and maintenance. It also includes the costs of the operations
put onto care and maintenance once the decision was made.
2 For the period ended, includes R333 million in respect of damage to property
(31 December 2017: R48 million).
10. INTEREST EXPENSED
Interest expensed (363) (519) (1,004)
Interest paid on financial liabilities classified as liabilities at amortised cost1 (479) (620) (1,229)
Less: capitalised 116 101 225
Time value of money adjustment to environmental obligations (1) (45) (215)
Decommissioning - (33) (129)
Restoration (1) (12) (86)
(364) (564) (1,219)
1 Includes interest paid to Anglo American SA Finance Limited of R423 million at 30 June 2018 (30 June 2017: R545 million; 31 December 2017: R1,068 million).
11. TAXATION % % %
A reconciliation of the standard rate of South African normal
taxation to that charged in the statement of comprehensive
income is as follows:
South African normal tax rate 28.0 (28.0) 28.0
Disallowable items that are individually immaterial (0.5) 1.6 2.3
Employee housing expenditure disallowed - - 1.1
Impairment of investments in associates (5.1) 24.1 17.0
Impairment of non-current financial assets 0.5 6.8 6.1
Loss on disposal/impairment of Union Mine and Masa Chrome 6.4 5.4 1.9
Prior year underprovision/(overprovision) - (1.5) (1.7)
Effect of after-tax share of (income)/losses from associates (0.2) 4.3 2.9
Interim effective tax rate adjustment (0.6) (1.2) -
Difference in tax rates of subsidiaries 1.0 1.9 (1.6)
Zimbabwean AIDS levy (0.1) - -
Profit on disposal on long-dated resources - - (8.4)
Other (0.6) (0.5) (2.0)
Effective tax rate 28.8 12.9 45.6
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Rm Rm Rm
12. RECONCILIATION BETWEEN PROFIT/(LOSS AND HEADLINE EARNINGS
Profit/(loss) attributable to owners of the Company 2,179 (1,187) 1,944
Adjustments - -
Net (profit)/loss on disposal of property, plant and equipment (36) 5 7
Tax effect thereon 6 (1) (2)
Asset scrappings 16 30 44
Non-controlling interest share (1) - -
Tax effect thereon (4) (8) (12)
Profit on sale of long-dated resources - - (1,066)
Tax effect thereon - - -
Impairment of investment in associates (Note 27) 1,098 997 2,145
Tax effect thereon (470) - -
Loss on disposal/impairment of Union Mine and Masa Chrome (Note 26) 850 1,490 1,655
Tax effect thereon (32) (355) (397)
Non-controlling interest share (3) (224) (263)
Insurance proceeds for damage to assets (333) - (48)
Tax effect thereon 93 - 14
Profit on sale of associates - - (135)
Tax effect thereon - - -
Headline earnings 3,363 747 3,886
Shares
Number of ordinary shares in issue (millions) 268.7 268.5 268.5
Weighted average number of ordinary shares in issue (millions) 262.3 262.2 262.2
Weighted average number of diluted ordinary shares in issue (millions) 263.0 262.9 263.2
Earnings/(loss) per ordinary share (cents)
- Basic 831 (453) 741
- Diluted 828 (452) 739
Attributable headline earnings per ordinary share (cents)
- Basic 1,282 285 1,482
- Diluted 1,279 284 1,476
13. INVESTMENTS IN ASSOCIATES
Unlisted 1,952 3,210 2,464
Bafokeng-Rasimone Platinum Mine (BRPM)1 1,762 2,929 2,333
Richtrau No 123 Proprietary Limited 5 5 5
Peglerae Hospital Proprietary Limited 57 56 57
Primus Power 29 - 26
Hydrogenious Technologies GmbH 99 41 43
Unincorporated associate - Pandora - 179 -
1,952 3,210 2,464
1 The equity investment in BRPM was partially impaired during the six months ended 30 June 2018. Refer note 27.
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Rm Rm Rm
14. OTHER FINANCIAL ASSETS
Loans carried at amortised cost
Loans to Plateau Resources Proprietary Limited (Plateau)1 211 201 201
Loan to ARM Mining Consortium Limited 52 65 52
Advance to Bakgatla-Ba-Kgafela traditional community 149 140 149
Preference share investment in Baphalane Siyanda Chrome Company - 47 -
Other 100 100 100
512 553 502
Equity instruments at fair value through other comprehensive income2
Investment in Royal Bafokeng Platinum Limited (RBPlat) 101 766 627
Investment in Wesizwe Platinum Limited 93 116 114
Investment in Altergy Systems Inc. 21 - 31
Investment in Ballard Power Systems Inc. 186 - 258
Investment in Greyrock Energy Inc. (Greyrock) 104 53 93
Investment in Hyet Holdings B.V. 36 - -
Investment in Food Freshness Technology Holdings 86 50 77
Convertible notes in United Hydrogen Group Inc.3 51 35 30
Convertible notes in Primus Power Corporation 6 - -
684 1,020 1,230
Investments carried at fair value through profit or loss
Deferred consideration on the sale of Rustenburg Mine 1,653 1,674 1,660
Deferred consideration on the sale of Pandora Joint Venture 133 - 115
Total other financial assets 2,982 3,247 3,507
1 Loans to Plateau were partially impaired during the six months ended 30 June 2018.
Refer note 27.
2 Change in category from available-for-sale investments to equity instruments
at fair value through other comprehensive income (OCI) on adoption of IFRS 9
Financial Instruments on 1 January 2018. These are irrevocably designated at fair
value and there is no recycling of the reserve to profit or loss but within equity.
3 Change in classification from loans and receivables to equity instruments fair value
through other comprehensive income (FVTOCI) on adoption of IFRS 9 Financial Instruments
on 1 January 2018.
15. INVENTORIES
Refined metals 3,244 3,401 3,906
At cost 2,539 2,062 2,548
At net realisable value 705 1,339 1,358
Work-in-process 13,490 13,326 10,354
At cost 9,537 5,939 5,547
At net realisable value 3,953 7,387 4,807
Ore stockpiles 1,832 - 1,761
Total metal inventories 18,566 16,727 16,021
Stores and materials at cost less obsolescence provision 2,402 2,587 2,468
20,968 19,314 18,489
16. CASH AND CASH EQUIVALENTS
Cash on deposits and on hand 9,167 7,072 9,357
Reclassified as held-for-sale - - (242)
9,167 7,072 9,115
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Rm Rm Rm
17. INTEREST-BEARING BORROWINGS
The Group has the following borrowing facilities:
Committed facilities 22,597 22,271 22,254
Uncommitted facilities 6,373 5,785 6,230
Total facilities 28,970 28,056 28,484
Less: Facilities utilised1 (8,454) (12,871) (11,075)
Non-current interest-bearing borrowings (8,356) (9,380) (9,362)
Current interest-bearing borrowings (98) (3,491) (1,713)
Available facilities 20,516 15,185 17,409
Non-current interest-bearing borrowings 8,356 9,380 9,362
Current borrowings 218 3,491 1,713
Interest-bearing borrowings 98 3,491 1,713
Contract liability top-up 120 - -
Total interest-bearing borrowings 8,574 12,871 11,075
Weighted average borrowing rate (%) 8.44 8.74 8.59
1 Includes R7,928 million (30 June 2017: R9,100 million; 31 December 2017: R9,100 million) and Nil (30 June 2017: R3,491 million; 31 December 2017: R1,713 million)
owing to Anglo American SA Finance Limited on the committed and uncommitted facilities respectively as at 30 June 2018.
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 R18,517 million (30 June 2017: R20,157 million; 31 December 2017: R18,657 million) of the facilities is committed for one to five years; R280 million
(30 June 2017: R314 million; 31 December 2017: R297 million) is committed for more than five years; R2 300 million (30 June 2017: Nil; 31 December 2017: R2,300
million) is committed for a rolling period of 18 months; R1,000 million (30 June 2017: R1,300 million; 31 December 2017: R1,000) committed for a rolling period of
364 days, while the rest is committed for less than 364 days. The Company has adequate committed facilities to meet its future funding requirements.
18. OBLIGATIONS DUE UNDER FINANCE LEASES
The Group holds, under finance lease, an energy recovery plant at the Waterval Smelter site in terms of an agreement assessed to be a lease in terms of IFRIC 4
Determining whether an Arrangement contains a Lease. The lease term is for a period of 15 years, whereafter the Group has the option to purchase the plant at fair
value. The interest rate implicit in the lease amounts to 17.74%.
Finance lease obligations 116 113 115
Less: Short-term portion included in current liabilities (17) (16) (17)
Long-term portion included in non-current liabilities 99 97 98
19. OTHER FINANCIAL LIABILITIES
Financial liabilities carried at fair value
Deferred consideration payable on sale of Rustenburg Mine (Note 25) - 229 239
Non-current - 229 239
Financial liabilities carried at amortised cost
Platinum Producers' Environmental Trust payable to Sibanye and Siyanda1 450 295 308
Financial liabilities carried at fair value
Fair value of forward foreign exchange contracts 6 2 4
Fair value of commodity contracts 2 13 -
Deferred consideration payable on sale of Rustenburg Mine 294 293 304
Current 752 603 616
Total other financial liabilities 752 832 855
1 Investments held in the Platinum Producers' Environmental Trust attributable to Rustenburg Mine, and Union Mine awaiting transfer to Sibanye and Siyanda as a
result of their respective purchases of the indicated mines.
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Rm Rm Rm
20. OTHER LIABILITIES
Accrual for leave pay 841 905 965
Liabilities for the return of metal1 145 233 134
Contract liabilities 2 5,727 4,336 4,623
Other 19 943 1,155
Reclassified as held for sale - - (186)
6,732 6,417 6,691
1 Liabilities for the return of metal comprise provisions arising from metal leasing transactions, the best estimate of which is determined with reference to the
spot metal price at the end of the reporting period applied to the ounces of metal obtained under such leasing arrangements.
2 The contract liability represents a payment in advance for metal to be delivered in six months time. An amount is received monthly on a rolling six-month basis
over five years of the contract ending in March 2023. Cash and cash equivalents are held as a hedging instrument in respect of the foreign exchange risk of this
liability. This was previously a deferred income liability and has now been reclassified as a contract liability on adoption of IFRS 15 on 1 January 2018.
21. COMMITMENTS
Mining and process property, plant and equipment
Contracted for 1,899 1,770 1,919
Not yet contracted for 3,562 5,987 4,302
Authorised by the directors 5,461 7,757 6,221
Allocated for:
Project capital 1,909 2,687 2,040
- within one year 1,223 498 799
- thereafter 686 2,189 1,241
Stay-in-business capital 3,551 5,070 4,180
- within one year 3,339 2,005 2,997
- thereafter 212 3,065 1,183
Capital commitments relating to the Group's share in associates
Contracted for 508 733 337
Not yet contracted for 1,962 1,529 1,569
Authorised by the directors 2,470 2,262 1,906
These commitments will be funded from existing cash resources, future operating cash flows, borrowings and any other funding strategies embarked on by the Group.
22. 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 (as set out
in note 13) and not disclosed elsewhere in the notes to the financial statements are as follows:
Reviewed Audited
six months ended Year ended
30 June 30 June 31 December
2018 2017 2017
Description Rm Rm Rm
Compensation paid to key management personnel (including share-based payments) 99 83 108
Interest paid 423 545 1,068
Interest received 66 21 58
Insurance paid 223 174 447
Insurance received 356 - 197
Purchase of goods and services 2,533 2,922 5,936
Associates 2,160 2,608 5,310
Anglo American plc and other subsidiaries 373 314 626
Deposits 8,060 5,167 7,246
Interest-bearing borrowings (including interest accrued) 7,989 12,647 10,777
Amounts owed to related parties 1,656 1,385 1,434
Associates 1,633 1,360 1,423
Anglo American plc and other subsidiaries 23 25 11
23. FAIR VALUE DISCLOSURES
This announcememt does not include information required pursuant to paragraph 15A(j) of IAS 34. The full interim report is available on the Company's website, at
the Company's registered office and upon request.
24. CONTINGENT LIABILITIES
Letters of comfort have been issued to financial institutions to cover certain banking facilities. There are no encumbrances over Group assets.
The Group is the subject of various claims, which are individually immaterial and are not expected in aggregate, to result in material losses.
The Group has provided guarantees to certain financial institutions to cover various metal borrowing facilities. At 30 June 2018 these guarantees amounted to
R1,235 million (30 June 2017: R1,177 million; 31 December 2017: R1,108 million).
The Group has, in the case of some of its mines, provided the Department of Minerals Resources with guarantees that cover the difference between the closure costs
and amounts held in the environmental trusts. At 30 June 2018, these guarantees amounted to R2,450 million (30 June 2017: R2,619 million; 31 December 2017: R2,398
million).
25. CHANGES IN ACCOUNTING ESTIMATE
Inventory
During the current period, the Group changed its estimate of the quantities of inventory based on the outcome of a physical count of in-process metals. The Group
runs a theoretical metal inventory system based on inputs, the results of previous counts and outputs. Due to the nature of in-process inventories being contained
in weirs, pipes and other vessels, physical counts only take place once per annum, except in the Precious Metals Refinery where the physical count is usually
conducted every three years. The Precious Metals Refinery physical count was conducted by exception in 2016 and is due to be performed again in 2019.
This change in estimate has had the effect of decreasing the value of inventory disclosed in the financial statements by R485 million (30 June 2017: increase of
R942 million; 31 December 2017: increase of R942 million). This results in the recognition of an after tax loss of R349 million (30 June 2017: after-tax gain of
R678 million; 31 December 2017: after-tax gain of R678 million).
Rustenburg deferred consideration
The Group's sale of the Rustenburg Mine completed on 1 November 2016. The present value of the deferred consideration was recognised as a level 3 financial asset
at fair value through profit or loss. Remeasurements arising from changes in estimates of cash flows and discount rate as well as the unwinding of the discount are
included in interest income and expense. The estimated cash flows were revised in June 2018 after the finalisation of relevant financial information by the
purchaser. This has given rise to an increase of R268 million (post-tax) in the present value of the deferred consideration, and the recognition of a gain in profit
or loss which is included in headline earnings.
26. DISPOSAL TRANSACTIONS
Union Mine and Masa Chrome
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 to
Siyanda Resources. The agreement was signed on 14 February 2017 and most of the critical conditions precedent were met on 1 December 2017. As of this date, it was
highly probable that the sale would be concluded within 12 months, such that the criteria for reclassification as held for sale, in terms of IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations, were met. An attributable post-tax impairment loss of R996 million was recognised for the year ended 31 December
2017. A further attributable post-tax impairment loss of R12 million was recognised in January 2018, presently partly in scrapping of assets and partly in the loss
on disposal in the statement of comprehensive income.
The sale was effective as of 1 February 2018. A post-tax loss on disposal of R811 million was recognised, and is excluded from headline earnings. This brings the
total loss, including previously recognised impairments to R1.8 million.
Royal Bafokeng Platinum Limited
On 24 April 2018 the Group conducted an accelerated book build in respect of its shares in Royal Bafokeng Platinum Limited (RB Plat). 17 million shares were sold
at a price of R22.50 per share, which was at a discount to market price. The investment was irrevocably designated as at fair value through other comprehensive
income in terms of IFRS 9 Financial Instruments such that all gains and losses are recognised directly in equity and never recycled. This transaction consequently
had no earnings impact.
27. IMPAIRMENT OF ASSETS AND INVESTMENTS
Bokoni Holdco and associated loan
The Group has a c.23% shareholding in Atlatsa as well as a 49% shareholding in Bokoni Holdco. Both investments are equity accounted, with the investment in
Atlatsa previously fully impaired and subsequently reporting losses which have not been equity accounted.
In light of the difficult market conditions and negative cash flows incurred by Bokoni Platinum Mine. The Group's equity interest continues to be fully impaired to
the extent that the balance is not otherwise reduced through equity accounted losses. During the first half of 2018, 49% of the funding provided to Bokoni mine for
care and maintenance (R50 million) was capitalised to the investment and reduced by equity accounted losses of an equal amount.
Atlatsa's ability to service its debt obligations in the context of the current market conditions, where Bokoni Platinum Mine is its main source of funding, is
doubtful. The Group has impaired all but R211 million in funding provided to Atlatsa. This resulted in an impairment loss for the period of R52 million, which is
included in headline earnings.
Bafokeng Ras'mone Platinum Mine (BRPM)
Due to a binding sale agreement that was signed on 4 July 2018 for the disposal of the Group's 33% interest in BRPM, see note 28, the equity-accounted BRPM
investment was impaired to the fair value of the transaction price (level 1 fair value) per the binding sale agreement. A post-tax impairment of R628 million
has accordingly been recognised, and excluded from headline earnings.
28. POST-BALANCE SHEET EVENTS
Disposal of 33% equity-accounted interest in the Bafokeng Rasimone Platinum Mine
On 4 July 2018, the Group entered into a binding sale and purchase agreement (SPA) with a subsidiary of RB Plat for the sale of the Group's 33% interest in the
unincorporated BRPM joint venture. Owing to the signature of the SPA after the balance sheet date and the fact that certain approvals remain outstanding, the
investment was not classified as held for sale in terms of IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations. The salient transaction terms are as
follows:
Initial purchase price to be settled in cash arising from a 5% capital raise by RB Plat, plus any capital contributions made by the Group to BRPM between the SPA
signature date and completion date. Deferred consideration for the remainder of the agreed R1.863 billion transaction price to be settled in three equal tranches
1.5; 2.5 and 2.5 years after the effective date, with early settlement permitted. The deferred consideration will escalate at the RB Plat cost of borrowing plus a
premium of 2%. RB Plat has the option of settling the deferred consideration either in cash or by the issue of additional RB Plat shares to the Group at each
payment date.
Anglo Platinum ventures with Public Investment Corporation
On 17 July 2018, AP Ventures (APV) was launched as an independent venture capital fund to invest in Platinum Group metals (PGMs). AP Ventures is backed by Anglo
American Platinum Limited and South Africa's Public Investment Corporation (PIC) who have committed a total of USD200 million, USD100 million each, as joint
partners. AAPL will sell its current Platinum Group Metals investments, valued at USD60 million, to APV as part of its contribution. APV is a joint venture, as the
parties require 75% of the voting power for decision making, and will be equity-accounted when the agreement becomes effective with AAPL's share of profit or loss
of APV recognised in profit or loss.
Dividend
The Board approved a dividend of R3.74 per share on 19 July 2018.
29. AUDITOR'S REVIEW
These condensed consolidated interim financial statements have been reviewed by the Group's auditors, Deloitte & Touche. The review of the condensed consolidated
interim financial statements was performed in accordance with ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity.
The auditor's review report does not necessarily report on all the information contained in these interim results. Shareholders are advised that in order to obtain
a full understanding of the nature of the auditor's engagement they should read the auditor's review report and obtain the accompanying financial information from
the registered office.
Any reference to future financial performance, included in these interim results, has not been reviewed or reported on by the Group's auditors.
The unmodified review report on the Group's condensed consolidated interim financial statements is available for inspection at the Company's registered office.
GROUP PERFORMANCE DATA
for the six months ended 30 June 2018
SALIENT FEATURES
Six months ended Year ended
30 June 30 June 31 December
2018 2017 % change 2017
Average market prices achieved
Platinum USD/oz 932 957 (3) 947
Palladium USD/oz 1,005 780 29 876
Rhodium USD/oz 1,938 911 113 1,094
Iridium USD/oz 1,054 804 31 864
Ruthenium USD/oz 221 48 360 72
Gold USD/oz 1,312 1,235 6 1,253
Nickel USD/tonne 13,633 9,660 41 10,314
Copper USD/tonne 6,776 5,859 16 6,221
Chrome USD/tonne 196 198 (1) 177
% contribution of net revenue
PGMs % 88.6 88.9 - 88.9
Platinum % 40.8 51.9 (11) 48.1
Palladium % 29.3 24.1 5 28.0
Rhodium % 10.4 5.6 5 6.5
Iridium % 2.2 2.9 (1) 2.1
Ruthenium % 3.4 1.0 2 1.2
Gold % 2.5 3.4 (1) 3.0
Nickel % 6.0 5.5 1 5.4
Copper % 2.0 1.6 - 2.0
Chrome % 3.0 3.5 - 3.3
Other metals % 0.4 0.5 - 0.4
Exchange rates
Average achieved on sales ZAR/USD 12.38 13.24 (6) 13.33
Closing exchange rate at end of year ZAR/USD 13.73 13.08 5 12.31
Basket prices achieved - excluding trading
Platinum - Dollar basket price USD/Pt oz 2,318 1,843 26 1,966
PGM - Dollar basket price - Average USD/PGM oz 1,032 848 22 915
PGM - Dollar basket price - Mined volume USD/PGM oz 1,111 905 23 972
PGM - Dollar basket price - Purchased volume USD/PGM oz 932 771 21 835
Platinum - Rand basket price Rand/Pt oz 28,695 24,400 18 26,213
PGM - Rand basket price - Average Rand/PGM oz 12,777 11,227 14 12,198
PGM - Rand basket price - Mined volume Rand/PGM oz 13,753 11,981 15 12,965
PGM - Rand basket price - Purchased volume Rand/PGM oz 11,543 10,211 13 11,139
Total PGM ounces sold - excluding trading 2,508.8 2,432.6 3 5,382.2
Platinum 000 ounces 1,117.1 1,119.3 - 2,504.6
Palladium 000 ounces 733.5 636.2 15 1,571.7
Other PGMs+Gold 000 ounces 658.2 677.1 (3) 1,305.9
Total PGM ounces sold - trading 120.1 - - -
Platinum 000 ounces 65.6 - - -
Palladium 000 ounces 53.0 - - -
Gold 000 ounces 1.5 - - -
Financials - excluding trading
Net sales revenue R million 32,071 27,305 17 65,670
from platinum R million 12,901 14,181 (9) 31,590
from palladium R million 9,168 6,584 39 18,421
from rhodium R million 3,468 1,530 127 4,242
from other PGMs and gold R million 2,685 1,980 36 4,089
from base and other metals R million 2,851 2,079 37 5,171
from chrome R million 998 951 5 2,157
Total operating costs (25,283) (23,310) 8 (53,685)
EBITDA R million 6,788 3,995 70 11,985
EBITDA margin % 21.2 14.6 7 18.3
EBIT R million 4,802 2,011 139 7,892
ROCE % 22.4 8.8 14 17.6
Six months ended Year ended
30 June 30 June 31 December
2018 2017 % change 2017
Costs and unit costs
Cash operating costs R million 13,371 13,446 (1) 26,427
Cash on-mine cost per tonne milled R/tonne 770 781 (1) 742
Cash operating cost per PGM oz produced (mined volume) R/PGM oz 8,954 9,265 (3) 8,871
Cash operating cost per PGM oz produced (mined volume) USD/PGM oz 728 701 4 666
Stay-in-business capital R million 1,772 1,106 60 3,336
Capitalised waste stripping R million 635 376 68 784
All-in sustaining costs net of metal revenue credits other than Pt USD million 901 1,133 (21) 2,000
All-in sustaining costs per platinum ounce sold USD/Pt oz 829 1,036 (19) 826
Cash operating cost per platinum ounce produced (mined volume)* R/Pt oz 19,571 20,105 (3) 19,203
Cash operating cost per platinum ounce produced (mined volume) * USD/Pt oz 1,591 1,522 5 1,443
Reconciling items for AISC and free cash flow
Allocated marketing and market development costs USD/Pt oz sold 21 24 (13) 24
Abnormal income/(expense) included in operating and net cash flow
- Disposal of treasury bills R million 100 34 194 228
Financial statistics
Gross profit margin % 14.7 10.3 4 13.8
Operating profit as a % of average operating assets % 15.9 7.5 8 14.0
EBITDA excluding trading1 R million 6,788 3,995 70 11,985
Return on average capital employed1 (ROCE) % 22.4 8.8 14 17.6
Return on average attributable capital employed2 % 24.9 41.9 (17) 19.0
Current ratio 1.5:1 1.4:1 7 1.5:1
Interest cover - EBITDA times 14.2 6.4 120 9.8
Debt cover ratio times 0.9 0.5 80 1.4
Dividend cover times 3.3 - 100 -
Gearing ratio (net debt to total capital) % (1.1) 13.5 (15) 4.3
Interest-bearing debt to shareholders' equity % 20.0 34.2 (14) 27.3
Net asset value as a % of market capitalisation % 45.0 47.2 (2) 43.2
Effective cash tax paid rate % 33.4 (33.0) 66 45.6
Market information and share statistics
Total shares in issue millions 268.7 268.5 - 268.5
Weighted average number of shares in issue millions 262.3 262.2 - 262.2
Treasury shares held millions 1.0 1.2 (20) 1.2
Market capitalisation R billion 96.5 80.5 20 94.9
Closing share price cents 35,900 29,975 20 35,346
Headcount (as at period ended)
Total employees (AAP own and contractors, excluding JVs) 23,146 28,411 (19) 28,692
Own enrolled 21,613 25,986 (17) 26,453
Contractors 1,533 2,425 (37) 2,239
Productivity
PGM ounces produced per employee per annum 110 92 20 94
* 2017 unit cost restated to include third-party tolling cost.
1 Earnings adjusted for asset scrapping, Union impairment and insurance receipt for damage to assets.
2 Basis of calculation amended for current and prior period to fully exclude capital and earnings attributable to non controlling interest.
REFINED PRODUCTION
Six months ended Year ended
30 June 30 June 31 December
2018 2017 % change 2017
Total operations
Refined production from mining operations
Total PGMs 000 oz 1,251.0 1,304.6 (4) 2,975.5
Platinum 000 oz 589.9 615.6 (4) 1,419.5
Palladium 000 oz 441.7 436.6 1 1,035.3
Rhodium 000 oz 71.5 86.0 (17) 179.8
Other PGMs 000 oz 111.7 130.0 (14) 261.9
Gold 000 oz 36.2 36.4 (1) 79.0
Nickel 000 tonnes 8.0 8.2 (2) 18.9
Copper 000 tonnes 5.8 5.2 12 12.1
Chrome tonnes (100%) 000 tonnes 430.0 430.0 - 978.8
Refined production from purchases
Total PGMs 000 oz 926.2 989.5 (6) 2,140.7
Platinum 000 oz 485.4 490.0 (1) 1,092.4
Palladium 000 oz 244.8 289.9 (16) 633.1
Rhodium 000 oz 64.8 70.5 (8) 143.4
Other PGMs 000 oz 117.1 121.6 (4) 235.4
Gold 000 oz 14.1 17.5 (19) 36.4
Nickel 000 tonnes 2.8 2.9 (3) 7.2
Copper 000 tonnes 1.4 1.5 (7) 3.7
Chrome tonnes (100%) 000 tonnes - - - -
Total refined production (including toll refined metal)
Total PGMs 000 oz 2,177.2 2,294.1 (5) 5,116.2
Platinum 000 oz 1,075.3 1,105.6 (3) 2,511.9
Palladium 000 oz 686.5 726.5 (6) 1,668.4
Rhodium 000 oz 136.3 156.5 (13) 323.2
Other PGMs 000 oz 228.8 251.6 (9) 497.3
Gold 000 oz 50.3 53.9 (7) 115.4
Nickel - Refined 000 tonnes 10.8 11.1 (3) 26.1
Copper - Refined 000 tonnes 7.2 6.7 7 15.8
Chrome tonnes (100%) 000 tonnes 430.0 430.0 - 978.8
SPLIT OF TOTAL REFINED PRODUCTION
Platinum 49 48 1 49
Palladium % 32 32 - 33
Rhodium % 6 7 (1) 6
Other PGMs % 11 11 - 10
Gold % 2 2 - 2
Base Metals
Nickel % 59 61 (2) 61
Copper % 40 37 3 37
Other Base Metals % 1 2 (1) 2
PLATINUM PIPELINE CALCULATION
Own mined volume 000 oz 546.0 545.5 - 1,130.9
JV mined volume 000 oz 137.2 123.3 11 245.3
Purchase of concentrate 000 oz 550.2 520.3 6 1,021.2
M&C platinum production 000 oz 1,233.4 1,189.1 4 2,397.5
Pipeline stock adjustment 000 oz 26.3 77.2 (66) 77.2
Pipeline movement 000 oz (184.4) (172.3) (7) 20.4
Refined platinum production (excluding toll refined metal) 000 oz 1,075.3 1,094.0 (2) 2,495.0
COMMENTARY
Key Messages
- Focus on elimination of fatalities - seeing improvements in overall safety performance and a 42% reduction in total recordable case frequency rate (TRCFR)
- Commitment to industry leading returns to shareholders
- Cash from operations of R5.9 billion, resulting in an 87% cash conversion ratio
- EBITDA growth of 70% to R6.8 billion
- Return on capital employed (ROCE) increased from 9% to 22% (annualised)
- Interim dividend declared of R1.0bn or R3.74 per share for H1 2018
- Strong operational performance - metal in concentrate PGM production up 4%
- Record performance from Mogalakwena and Unki
- Turnaround plan in action at Amandelbult
- Supported by strong production across all joint venture operations
- Scheduled rebuild of Mortimer smelter and other maintenance resulted in a temporary build-up of work-in-progress inventory, resulting in lower refined production
- Strong cost control continues - unit costs down 3% to R19,571 per platinum ounce
- Balance sheet re-built to net cash of R0.5bn from R1.8bn net debt as at 31 December 2017
- Simplification of the portfolio:
- Commercial terms agreed with Royal Bafokeng Platinum to sell AAP's 33% interest in BRPM
- Sold down equity ownership of Royal Bafokeng Platinum from 11.4% to 2.6% with view to exit
- Conclusion of disposal of Union to Siyanda Resources
- Strategy to deliver next phase of value -
- Growing demand for PGMs - USD200m committed to launch of the AP Ventures funds together with the PIC
- Work underway to extract the next phase of value at existing operations through best operating practices and modernisation, through people and innovation
- Project studies to determine best value growth options at Mogalakwena continues
- Commercial terms agreed with Glencore for the acquisition of Glencore's 39% interest in Mototolo JV
- Project studies underway assessing value-enhancing growth optionality between Mototolo and adjacent 100% wholly-owned Der Brochen
Chris Griffith, CEO of Anglo American Platinum commented:
"Anglo American Platinum has produced another strong set of operational and financial results. Our commitment to ensuring safe production has delivered value and
the Company continues to improve more profitable own-mine production, with total PGM production up 4%. We did however lose one of our colleagues to multiple bee
stings and again have sent our condolences to the friends, family and colleagues of Mr Maimela. Our focus will remain on the elimination of fatalities.
We've seen strong production from our operations, with the world-class Mogalakwena operation increasing production 19% in H1 2018. The turnaround plan at
Amandelbult is progressing and the joint venture portfolio had a strong performance, with record production from Mototolo and Kroondal. This strong production
performance, combined with strict cost control led to a further 3% decrease in unit costs.
Despite the temporary build up in work in progress inventory, due to maintenance and the scheduled Mortimer smelter rebuild in Q2, the Company generated operating
free cash flow of R1.3 billion, reducing net debt by R2.3 billion and moving to a net cash position of R0.5 billion.
We have been busy and in the last six months, announced a number of transactions. As part of the simplification of the portfolio, we have sold 8.8% of our equity
holding in Royal Bafokeng Platinum, and agreed the sale of our 33% interest in BRPM to them. In support of our strategic objective of growing demand for PGM's, we
have supported the launch of AP Venture funds, with the PIC, together committing USD200 million to stimulate demand for PGMs. Finally, to own and operate the best
assets, we have signed an SPA to acquire Glencore's 39% stake in the Mototolo JV, which will unlock significant synergies with Der Brochen.
Work is underway to extract value at existing operations through world best operating practices and modernisation, through people and innovation; and finally,
project studies continue to assess how to unlock the most value from Mogalakwena.
Anglo American Platinum remains committed to delivering PGM industry leading returns, and has increased EBITDA by 70% to R6.8 billion, resulting in an increase in
EBITDA margin to 21%; an increase in ROCE to 22% and the Board has declared an interim dividend of R1.0 billion. This is very much a stronger business today as a
result of the actions we have taken in recent years and I'm pleased to say that we see even more value that we can unlock ahead of us."
STRATEGY
Anglo American Platinum's strategy over the past five years has focused on restructuring and repositioning the portfolio in response to structural changes in the
platinum group metals (PGM) industry. The execution of this strategy is essentially complete and has simplified and improved the business by reducing its operating
mines from eighteen to seven, decreased overheads by 50% and headcount by 60%, whilst maintaining PGM production. The portfolio is now positioned with 70% of
production in H1 of the primary industry cost curve (excluding BRPM), with PGM industry leading cost control outperforming input cost inflation, improved operating
free cash flows and delivering a return on capital employed of 22%. The balance sheet has been de-levered with net debt reducing from R14.8 billion in 2014, to a
net cash position of R0.5 billion in H1 2018, and a base dividend was reintroduced in 2017.
The next chapter of the strategy has been formulated with the view to maximise margins, returns and cash flows within a changing market and competitor landscape. We
continue to see material upside value in the Company, with work underway to quantify the potential from existing operations, and growth options of our world class
resources.
Value proposition
Anglo American Platinum has a differentiated value proposition through:
- The quality of our long-life assets from which we continually strive to extract full value;
- Demonstrated capital discipline that has resulted in balance sheet strength which enables flexibility to be responsive to opportunities through the cycle and
withstand potential downward pressure; and
- Ensuring the long-term sustainability of the business by leading market development to grow demand for PGMs, progressing select prioritised project studies to
ensure optionality is maintained, and by modernising our organisation.
The Company's focus is on driving the value and earnings of the business, by taking the operational performance of the operations to world best practice, investing
in growth optionality across the portfolio, and developing the market for PGMs.
Anglo American Platinum seeks to deliver these strategic priorities in a safe, values driven and socially responsible way.
Simplified mining portfolio
The quality and long life of our mineral assets are the foundation of our leadership position in the industry. We focus on operating and investing in the assets
that offer the most attractive long-term value creation potential, that are positioned in the lower half of the cash cost curve and that are, or have potential to
be mechanised.
We have further simplified the ownership structure of our mining portfolio, with greater direct influence over the asset operational performance as well as being
able to focus capital allocation to these assets. This will be achieved as the sales and purchase agreement was signed to acquire Glencore's interest in Mototolo,
enabling a seamless transition into Der Brochen. In addition, Anglo American Platinum has signed an SPA to dispose of the 33% stake in the BRPM JV to our joint
venture partners Royal Bafokeng Platinum. The non-strategic minority interest in the remaining 2.6% of the listed shares of Royal Bafokeng Platinum Limited will be
sold following the sale of 8.8% in April 2018, which generated gross proceeds of R390 million.
Disciplined capital allocation
Our value-focused approach to capital allocation underpins our preferred portfolio by prioritising the following:
- Maintaining asset integrity, ensuring a strong balance sheet and paying base dividends to our shareholders;
- Discretionary capital allocation to the best value outcome, by investing in fast pay-back projects and profitable growth;
- Thereafter, capital will be allocated between further increasing balance sheet strength or additional returns to shareholders; and
- Disciplined value-added growth projects to enhance margins and additional returns
Anglo American Platinum has rebuilt its balance sheet to a net cash position, supported by strong underlying cash generation, despite the current pricing and global
economic environment. In line with the capital allocation framework, Anglo American Platinum continues to progress project studies to assess the expansion potential
at our key operations, Mogalakwena and Der Brochen and determine how we extract the most value from these assets, considering market and capital constraints.
Mogalakwena expansion
Mogalakwena remains the world's most significant PGM operation and the only major open-pit operation globally. The mine is in the lowest quartile of the primary PGM
producer cash cost curve, and as a palladium-rich resource, will benefit given the current and medium term structural deficits in the palladium market.
The project opportunity studies have identified that a third concentrator expansion at Mogalakwena will significantly improve the NPV of the asset, has value-
enhancing returns, with optimal value being achieved with a concentrator size of between 9-12 million tonnes per annum. This would lead to an incremental c.270,000
palladium ounces and c.250,000 platinum ounces. The concept and prefeasibility studies have commenced and the capital expenditure will be quantified once the
project studies have advanced further.
Mototolo / Der Brochen
As announced on SENS, Anglo American Platinum has signed an SPA with Glencore to purchase its 39% interest in the Mototolo joint venture.
The acquisition enables significant synergies between Mototolo and the adjacent Der Brochen resource, with project studies underway to assess the most valuable
options which could include both replacement and growth options, creating a major PGM hub for the Company. By combining the Mototolo JV area with the downdip and
adjacent Der Brochen resource, the life-of-mine is also significantly extended from the current c.five-year life of mine, to beyond a thirty-year life of mine.
Extracting full value from our assets
We are working to reset operational performance benchmarks across our business, recognising the further latent potential that exists in our operations,
notwithstanding the material improvements we have made over the last few years. Whether it's the hours one gets out of a truck or shortening the lost time between
shift changes or failures, or to completely re-think long established practices, Anglo American Platinum believes there is substantial additional value to be gained
by focussing on best practice benchmarks and further improvements through modernisation and technical innovation.
Developing the market for PGMs
Market development is a key priority where latent demand across jewellery, investment and industrial segments remains a large and growing opportunity.
The Company's Platinum Group Metals Development Fund has enjoyed great success and built a strong track record. We have now taken the decision to separate the
fund's activities into an independent structure, AP Ventures, which will attract additional outside investment allowing it to increase the scale of its activities.
The launch of AP Ventures is an exciting development which will support the growth of PGM technologies and is expected to increase PGM demand from the industrial
segment. Through this transaction, we are hoping to facilitate the application of cutting-edge technological advances and broad innovative thinking to address the
major global challenges. It is a clear example of the use of collaborative partnerships to connect people for the betterment of the industry and we are grateful to
have had the support of the Public Investment Corporation in bringing the Funds to fruition.
In addition, we continue to also drive PGM demand through:
Engaging and collaborating in the shaping of the strategy and activities of the Platinum Guild International (PGI), focusing on jewellery demand creation, and the
- World Platinum Investment Council (WPIC), focusing on investment demand creation;
- Spearheading new initiatives which fall outside the mandates of the industry funded entities, by expanding and formalising an approach to primary R&D with the
intention of developing PGM based solutions to global issues; identifying bottlenecks and barriers to increased use/sales of PGMs and developing solutions in
partnership with AP Ventures funds, the PGI & WPIC; and
- Focus on fuel cell development and the hydrogen economy through advocacy, investment in refuelling infrastructure and anti-diesel lobbying.
SAFETY, HEALTH, ENVIRONMENT & SOCIAL INVESTMENT
Safety
Tragically there was one work related loss of life in H1 2018. Mr Johannes Maimela died of multiple bee stings at Dishaba Mine in March 2018, and our deepest
condolences go to Mr Maimela's family, friends and colleagues.
Management has committed to maintaining safe operations and the benefits of safe production are producing results. Safety indicators highlight the significant
improvements that have been made, with total recordable injury frequency rate (TRCFR) the lowest on record, down 42% to 2.93 per one million hours worked (H1 2017:
5.08). This can be attributed to the implementation of the revised safety, health and environment strategy and the focus on reporting and learning from high
potential incidents.
Health
Anglo American Platinum remains committed to the fight against HIV, tuberculosis (TB) and the wellness of employees. The Company aspires to the UN targets of
90:90:90 with respect to HIV. These targets aim at diagnosing 90% of all HIV-positive persons, provide antiretroviral therapy (ART) for 90% of those diagnosed, and
achieve viral suppression for 90% of those treated. AAP achieved 80% "know-your status" and 86% on ART in 2017. The Company remains confident that by intensifying
efforts and encouraging the participation of employees at all levels of the organisation, these levels can further improve. Our HIV interventions, together with
parallel proactive TB interventions are contributing to a consistent reduction in TB incidence rates - reducing 53% to 271 per 100,000 and well below the national
average of 781 per 100,000. These efforts highlight the significant reduction in TB related deaths - reducing from over 60 in 2013 to 3 so far in 2018.
Environment
Anglo American Platinum has again had no major or material environmental incidents (categorised as Level 4 to 5), and has had no Level 3 incidents since 2013.
Through applying an operational risk management process and identifying critical controls to manage priority unwanted environmental events, the Company ensures that
environmental risk is appropriately managed. Minor environmental incidents are analysed and investigated to learn from, and implement remedial actions to prevent
repeats.
Rustenburg Base Metals Refinery (RBMR) and Precious Metals Refinery (PMR) are the key operations to remain ISO14001 certified as they are responsible for product
delivery and complying with external requirements. As a result, PMR was certified against the new ISO 14001:2015 standard in October 2017 and RBMR was certified in
June 2018. All other operations will focus on implementing the new ISO14001:2015 standards and best practice.
The Company continues to focus on reducing demand for fresh water and energy. Improving energy efficiency also drives reduced carbon emissions. The focus on water
efficiency depends on two key measures: technology to reduce total water demand; and reduced dependency on potable water to ensure water availability for
surrounding stakeholders. To minimise water usage at operations, non-potable or effluent water is the priority source.
Anglo American Platinum continues to make considerable progress in the management of hazardous and non-hazardous waste sent to landfill as a result of several
reduce, re-use and recycling activities. For the five months to end-May there was a 64% reduction in the total tonnes of waste to landfill compared to the same
period last year.
Social and community investment
We continue to engage with stakeholders as part of our mandate to enhance the social license to operate and endeavor to make a lasting positive contribution to
communities in which we operate. Several projects have been implemented as part of our commitment to social labour plans, including the signature of a service level
agreement with Hall Core Mapela to supply water to 42 villages of Mapela, which will deliver potable water to over 70,000 people. We are constructing administration
blocks and additional classrooms in four schools, completed water and sanitation facilities in eight schools, with another three schools under construction.
Food production remains a focus, and the communities in which we are delivering water projects are also encouraged to start food gardens. The Amandelbult, St George
and Kalkfontein farming projects are thriving and over 30 jobs are sustained on these farms. All our initiatives are contributing towards the achievement of the
National Development Plan of our Country and the Integrated Development Plans of the host Municipalities and are done in partnership with our stakeholders.
The Company has spent R86 million so far in H1 2018 on Social Labour Plan projects, equating to 2% of NOPAT, and in line with plan. This spend will more than double
by the year end.
Environmental, social and governance (ESG) awards
The Company continues to operate as a sustainable and socially responsible business. The metals that are mined are utilised to enable solutions to some global
problems such as air quality, growing resource scarcity and improving wellness through medication and technology. As a result, the Company is gaining global
recognition for its ESG practices:
- Second mining company globally in the ISS oekom Corporate Responsibility Review 2018;
- Top 30 in the JSE Responsible Investment Index since inception;
- Inclusion in the FTSE4Good index since June 2015; and
- Third in the Institutional Investor EMEA Executive Team 2018 awards for best ESG SRI metrics
JOURNEY TO OPERATIONAL EXCELLENCE
Operational performance
As a result of improved operational efficiencies across the own-managed mine portfolio, and strong performances from the joint venture portfolio, PGM production for
H1 2018 increased, despite the closure of unprofitable production from Bokoni and Maseve in H2 2017, which does not form part of H1 2018 production.
Total PGM production (expressed as platinum, palladium, rhodium, gold, iridium and ruthenium metal in concentrate) was up 4% to 2,583,800 ounces in H1 2018 (H1
2017: 2,484,300 ounces). Platinum production was up 4% to 1,233,400 ounces (H1 2017: 1,189,100 ounces), while palladium increased 5% to 813,200 ounces (H1 2017:
774,900 ounces).
The 4E built-up head grade of 3.52g/tonne was 2% higher due to higher grade from Mogalakwena, which targeted a particularly high grade area at Zwartfontein pit, as
well as higher underground grades at Amandelbult.
Own managed mines
Own managed mines (Mogalakwena, Amandelbult and Unki) increased total PGM production by 14% to 1,166,700 ounces (H1 2017: 1,021,100 ounces). Platinum production by
own-managed mines increased 14% to 534,500 ounces (H1 2017: 467,900 ounces) and palladium increased by 15% to 434,600 ounces (H1 2017: 377,800 ounces).
Mogalakwena
Mogalakwena produced a record 641,400 PGM ounces up 19% (H1 2017: 538,600 PGM ounces), with platinum production up 21% to 272,900 ounces (H1 2017: 225,800 ounces)
and palladium up 18% to 295,500 ounces (H1 2017: 251,200 ounces). Total production included production from the Baobab concentrator plant of 48,700 PGM ounces (H1
2017: 39,100 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. Total tonnes mined remained constant year-on-year, but tonnes milled increased 6% and the 4E built-up head grade increased 10% to
3.39g/t from 3.07g/t in H1 2017.
Mogalakwena contributed R2.1 billion in economic free cash flow, up from R812 million in H1 2017. The mine delivered EBITDA of R3.9 billion at a 45% margin, up from
37% in H1 2017. Return on Capital Employed increased to 29% from 16% (on an annualised basis).
Cash operating costs (costs after allowing for off-mine smelting and refining activities) increased 9% to R4.7 billion. Cash operating costs including capitalised
waste stripping increased by 14% to R5.4 billion from R4.7 billion.
Cash operating costs per platinum ounce decreased 10% to R17,224 from R19,122 in H1 2017 owing to increased mining volume. Cash operating costs per PGM ounce (metal
in concentrate) was R7,328 against R8,018 per ounce in H1 2017.
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 platinum ounce sold was USD253 per platinum ounce, down from USD687 per platinum ounce in the previous
period.
During 2018, improvements in mining efficiencies and concentrator performance resulted in mine plan changes, causing differences between the sequencing of ore and
waste mining. Improvements in shovel and truck performances resulted in an increase in waste tonnes mined, the bulk of which was capitalised waste. This led to a
decrease in ore mined over the period and coupled with higher milled volumes, resulted in the drawdown from ore stockpiles (which were previously guided to
increase). The net impact from these changes for H1 2018 was a 6% increase in unit costs for Mogalakwena.
The current mining profiles are expected to continue in H2 of 2018 which will result in an overall higher unit cost for the mine for 2018 compared to 2017, which
was lower due to the benefit of measuring R1.6billion of ore stockpiles. The revised medium term mine plan will enable greater minng of ore and will reduce overall
unit costs in future years.
Mogalakwena targeted a high-grade area in the Zwartfontein pit, which led to an increase in grade in H1 2018. This will normalise in H2 2018 which will result in an
annual average of grade 3.18g/t. High grade production was planned for H1 2018, to get early ounces prior to the planned smelter rebuilds in Q2 and Q3 2018. Total
production from Mogalakwena in 2018 is expected to be approximately 1.15 million PGM ounces (around 480,000 platinum ounces).
Amandelbult
Total PGM production at Amandelbult increased by 9% to 432,700 PGM ounces (H1 2017: 397,500 PGM ounces). Platinum production increased 8% 220,200 ounces (H1 2017:
203,700 ounces) and palladium production increased 10% to 102,900 (H1 2017: 93,600 ounces).
Production increased due to the implementation of the operational turnaround of the asset. The immediately stopeable ore reserves (IMS) at Dishaba have increased
and productivity improvements have been implemented.
As development at Dishaba continues, surface tonnes supplement underground production, and led to a 5% increase in tonnes milled. Despite the increased surface
sources in the ore mix, the 4E built-up head grade increased 3% to 3.91 g/t (H1 2017: 3.81 g/t) due to increases in both underground reef ore sources (UG2 and
Merensky) and as a result of reduced dilution.
Production from the chrome plant increased by 46%, yielding 403,000 tonnes of chrome concentrate on a 100% basis (H1 2017: 276,000 chrome tonnes). This is in part
due to 8% increase in plant feed as well as the chrome interstage implementation, increasing the plant yield to 16%. (H1 2017: 12%). Amandelbult is moving towards
a primarily UG2 mine. The chrome recovery capacity is being extended to the Merensky Concentrator by construction of two further modules at a capex cost of R530
million, which will be commissioned in July 2019, and will result in an incremental 360,000 tonnes of chrome production per annum.
Despite a fall in the chrome price during H1 2018 to an average of USD200/tonne, from an average of USD242/tonne in the comparative period, the increased volume and low
production cost enabled the Amandelbult chrome operation to generate attributable economic free cash flow of R409 million (H1 2017: R261 million).
Amandelbult delivered R159 million in economic free cash flow from its mining and chrome activities, up from negative R541 million in H1 2017. The mine delivered
EBITDA of R1.0 billion at a 17% margin, up from 3% in H1 2017. Return on Capital Employed increased to 16% from negative 5%.
Cash operating costs increased by 10% to R4.8 billion (H1 2017: R4.4 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. Cash operating costs per platinum ounce was flat year-on-year at R21,701 (H1 2017
R21,596) owing to higher volume. The measurement of run-of-mine ore stockpiles at Amandelbult as at 30 June 2018, resulted in a 2% reduction in unit cost for the
mine.
Cash operating costs per PGM ounce (metal in concentrate) was R11,041 against R11,070 per ounce in H1 2017. AISC per platinum ounce sold was USD891 per ounce, down
from USD1,183 in the previous year.
Total production from Amandelbult in 2018 is expected to increase to between 900,000 to 9 240,000 PGM ounces (c.460,000 - 470,000 platinum ounces).
Unki
Unki mine in Zimbabwe produced a record 92,600 PGM ounces, an increase of 9% (H1 2017: 85,100 ounces). Platinum production increased 8% to 41,400 ounces (H1 2017:
38,400 ounces) and palladium production increased 10% to 36,200 ounces (H1 2017: 33,000 ounces).
Production increased due to an increase in tonnes milled, up 6% due to improved throughput and recovery. The 4E built-up head grade stayed relatively flat at
3.47g/t (H1 2017: 3.48g/t).
Unki increased economic free cash flow to R311 million from R85 million due to improved performance and the sale of treasury bills of R100 million.
The mine delivered EBITDA of R424 million at a 33% margin, up from 21% in H1 2017. Return on Capital Employed increased to 11% from 2% in H1 2017.
Cash operating costs were up 6% to R0.9 billion. The mine, being a dollar denominated operation, benefitted from the strengthening of the rand which increased 6% to
R12.38 from R13.24. Cash operating costs increased by R35 million as ore stock ahead of the concentrator, which was built-up during maintenance at the concentrator
in H2 2017, was depleted in full in H1 2018. Cash operating cost per platinum ounce rose 2% to R23,477 from R22,967 in H1 2017.
Cash operating costs per PGM ounce (metal in concentrate) was R10,511 against R10,360 per ounce in H1 2017. AISC (excluding the receipts of treasury bills) per
platinum ounce sold was USD272 per ounce, down from USD808 in H1 2017.
The Unki smelter, a project in execution, is expected to be completed in Q3 2018 at a total cost of R650 million, with R162 million of the project capital incurred
in H1 2018.
Total PGM production from Unki in 2018 is expected to increase slightly to 180,000 PGM ounces (previously 170,000 PGM ounces) including c.80,000 platinum ounces
(previously 75,000 ounces).
Joint ventures (own-mined and purchase of concentrate)
Total PGM production from joint ventures (Mototolo, Modikwa and Kroondal inclusive of both own-mined and purchase of concentrate production) increased 10% to
607,200 PGM ounces (H1 2017: 550,100 PGM ounces). Platinum production increased 11% to 274,300 ounces (H1 2017: 246,600 ounces) and palladium production increased
10% to 177,000 ounces (H1 2017: 161,500 ounces).
Mototolo PGM production increased 26% to 157,200 PGM ounces (H1 2017: 124,800) due to higher built-up head grade and additional production rolled over from H2 2017
which was toll-treated at Bokoni due to the tailings dam rehabilitation. Platinum production increased 25% to 72,600 ounces (H1 2017: 57,800 ounces) and palladium
production increased 30% to 45,500 ounces (H1 2017: 35,100 ounces).
Modikwa PGM production increased 6% to 158,000 PGM ounces (H1 2017: 149,700 ounces) due to additional ore purchased from Mototolo. Platinum production increased 9%
to 62,800 ounces (H1 2017: 57,800 ounces) and palladium production increased 2% to 58,100 ounces (H1 2017: 56,700 ounces).
Kroondal PGM production increased 6% to 292,000 PGM ounces (H1 2017: 275,700 ounces), due to an increase in underground production efficiencies as well as improved
concentrator throughput. Platinum production increased 6% to 138,900 ounces (H1 2017: 131,000 ounces) and palladium production increased 5% to 73,500 ounces (H1
2017: 69,700 ounces).
Purchase of concentrate from associates
PGM production from associates decreased by 28% to 183,100 PGM ounces (H1 2017: 254,800 ounces), largely due to the removal of unprofitable production from Bokoni
which was placed on care and maintenance in Q3 2017. Platinum production from associates decreased by 22% to 106,500 ounces (H1 2017: 137,200 ounces) and palladium
production decreased 37% to 43,800 ounces (H1 2017: 69,400 ounces).
BRPM PGM production increased 6% to 183,100 PGM ounces (H1 2017: 173,000) following improved underground mining efficiencies and the ongoing ramp up of the
Styldrift project. Platinum production increased 7% to 106,500 ounces (H1 2017: 99,300 ounces), and palladium production increased 5% to 43,800 ounces (H1 2017:
41,500 ounces).
On 5th July 2018, Anglo American Platinum announced it had entered into an agreement to sell its 33% interest in the BRPM JV to RB Plat. When conditions precedent
are complete, material from BRPM will be treated as third party purchase of concentrate and not as a purchase of concentrate from associates.
Purchase of concentrate from third parties
Union mine was sold to Siyanda Resources ("Siyanda") on 1 February 2018, from which date Union production was treated as third party purchase of concentrate. As a
result, PGM production decreased 85% to 23,100 PGM ounces, and platinum and palladium decreased by 85% to 11,600 ounces and 5,200 ounces respectively.
Purchase of PGM concentrate from third parties increased by 20% to 603,800 PGM ounces (H1 2017: 503,300 PGM ounces) due to an increase in purchased production from
Union mine. This is despite a reduction in production from Sibanye Stillwater down 5% to 445,100 PGM ounces and a reduction in production from Maseve which was
placed on care and maintenance in Q4 2017. Platinum purchase of concentrate increased 18% to 306,500 ounces (H1 2017: 259,800 ounces) and palladium purchase of
concentrate increased 17% to 152,600 ounces (H1 2017: 130,300 ounces).
Refined production & sales volume
Refined PGM production decreased by 5% to 2,177,200 PGM ounces (H1 2017: 2,294,100 PGM ounces). Platinum refined production decreased 3% to 1,075,300 ounces (H1
2017: 1,105,600 ounces), and palladium refined production decreased 6% to 686,500 ounces (H1 2017: 726,500 ounces).
Refined production in H1 2018 was lower due to the removal of unprofitable production from Bokoni and Maseve, which were both placed on care and maintenance in H2
2017 (H1 2017: 84,600 PGM ounces and 41,000 platinum ounces).
In addition, refined PGM production for H1 2018 was lower than M&C production (including c.140,000 platinum ounces) as work-in-progress inventory was built up. This
was due to the planned rebuild of Mortimer smelter which was completed during H1 and scheduled maintenance on the processing assets. It is expected that the backlog
of work-in-progress inventory will largely be processed by the year end despite the planned partial rebuild of Polokwane Smelter in Q3 2018, the commissioning of
the Unki smelter in Q3 2018, which will marginally increase pipeline inventory, and commissioning of the Convertor Plant Phase A module (ACP).
As per normal practices, the annual stock count was completed in H1 2018 which resulted in the first net stock loss since 2010, impacting mainly palladium and
rhodium. As a result, PGM refined production for 2018 will be lower than metal in concentrate production.
PGM sales volumes from mining increased by 3% to 2,508,800 PGM ounces (H1 2017: 2,432,600 PGM ounces). Platinum sales volumes (excluding trading activities) were
constant at 1,117,100 ounces (H1 2017: 1,119,300 ounces) and palladium sales volumes increased by 15% to 733,500 ounces (H1 2017: 636,200 ounces).
Total sales volumes were made up of refined production, supplemented by drawing down on refined inventory levels of c.41,000 platinum and 47,000 palladium ounces.
In addition to sales from mining activities, trading activities of c.66,000 platinum ounces and 53,000 palladium ounces took place during the period. Refined
inventory is expected to be built up in H2 2018 and return to normalised levels which will impact sales volumes.
FINANCIAL PERFORMANCE
H1 2018 overview
The Company has had a strong financial performance in H1 2018 with a 70% increase in EBITDA to R6.8 billion with group EBITDA margin increasing to 21% (H1 2017:
15%). Headline earnings increased to R3.4 billion from R0.7 billion reported in H1 2017 and headline earnings per share (HEPS) of 1,282 cents increased 350%
compared to H1 2017 (285 cents) due to the Company's improved operational performance and improvement in the rand basket price for the period.
The balance sheet position has strengthened substantially, with a net cash position of R0.5 billion at 30 June 2018, a R2.3 billion improvement from a net debt
position of R1.8 billion at 31 December 2017. The improvement was after a cash dividend to shareholders of R0.9 billion and was driven by free cashflow from
operations of R1.3 billion, as well as R0.9 billion of net proceeds on asset sales (including R0.4 billion from the disposal of Union mine and R0.4 billion from the
sale of shares in RB Plat). The customer prepayment increased by R1.1 billion due to the impact of a weaker rand at the end of H1 2018 compared to 31 December 2017
as well as higher palladium and rhodium prices, bringing the total customer prepayment to R5.7 billion.
Disposals and acquisitions
On 1 February 2018, the sale of the Company's 85% interest in Union Mine to Siyanda Resources became effective. The Group realised an attributable, after tax loss
on disposal of R0.8 billion, which together with prior impairments recognised brings the total attributable, after tax loss on divesting from this operation to R1.8
billion. The loss on disposal is excluded from headline earnings.
Anglo American Platinum continues to fund Bokoni mine's care and maintenance expenditure. R52 million in impairment losses were recognised in respect of funding
Atlatsa's 51% share and is thus not an impairment of assets but a loan write off, which is included in basic and headline earnings.
On 24 April 2018, the Company disposed of 17.3 million shares in RB Plats for R0.4 billion. There was no earnings impact as the investment was classified at fair
value through other comprehensive income.
On 6 July 2018, Anglo American Platinum entered into a binding sale and purchase agreement with RB Plat for the sale of the Company's 33% interest in the BRPM JV.
The sale is inter alia subject to RB Plat shareholder and lender approval, and the investment was accordingly not classified as held-for-sale at 30 June 2018.
Approximately R0.2 billion of the transaction price will be settled in cash, upfront, with the remainder to be settled in three equal tranches, attracting interest,
and commencing 18 months after the effective date. The deferred amount may be settled in cash or in the equivalent value of RB Plat shares. Owing to the signing of
the binding sale and purchase agreement, the Group impaired its equity-accounted investment in BRPM by R0.6 billion (post-tax) to bring it in line with the
transaction price. This impairment is excluded from headline earnings.
Sales revenue
Net sales revenue rose 23% to R33.5 billion from R27.3 billion in the first half of 2017 on the back of higher palladium, rhodium and chrome sales volumes due to
the ramp-up of the new chrome plant at Amandelbult. The US dollar basket price was 26% higher at USD2,318 per platinum ounce sold compared to USD1,843 in
H1 2017. The sales price achieved on all metals improved, except for platinum at USD932 per ounce (H1 2017: USD957). Palladium was up 29%, rhodium up 113%, nickel
up 41% and copper up 16%. The rand strengthened to an average of R12.38 (H1 2017: R13.24), eroding some of the price benefit, which resulted in a 18% higher rand
basket price of R28,695 per platinum ounce sold (H1 2017: R24,400).
Cost of sales
Cost of sales increased by 17%, from R24.5 billion in H1 2017 to R28.6 billion mainly due to higher purchase of concentrate costs, driven by higher prices as well
as the purchase of metals for trading activities, while the planned rebuild and maintenance of processing assets takes place. Following the sale of Union operations
in February 2018, the Company has higher purchase of concentrate costs and lower on-mine costs due to the purchase of concentrate from Siyanda.
Cash on-mine costs (mines and concentrators) decreased by R0.3 billion mainly due to the Union exit, partly offset by input cost inflation and higher tonnes milled
at Mogalakwena. Processing costs rose R0.4 billion to R3.4 billion, a 12% increase due to inflationary increases, higher insurance costs and coal price increases.
Costs for the purchase of concentrate increased to R12.9 billion from R9.6 billion, principally due higher metal prices and additional volumes purchased from
Siyanda following the sale of Union, offset by no volumes from Bokoni since being placed on care and maintenance.
Other costs increased 24% to R1.6 billion (H1 2017: R1.3 billion), primarily due to higher costs of transporting metal (R0.1 billion) given the increased volume of
chrome concentrate produced and increased royalties as a result of higher revenue (R0.2 billion).
Owing to a change in mining approach, run-of-mine ore stockpile material to the value of R1.8 billion was measured at 31 December 2017. The ore stockpile material
has increased marginally at 30 June 2018, impacting cost of sales by R0.1 billion.
Through higher production, especially from Mogalakwena, unit costs are down 3% at R19,571 per produced platinum ounce (H1 2017: R20,105). Unit cost of PGM
production was R8,954 per ounce, 3% lower than the prior year (H1 2017: R9,265 per ounce). AISC of USD829 per ounce (H1 2017: USD1,036 per ounce) against an
achieved platinum price of USD932 per ounce reflects stringent cost management, higher by-product revenue and operational efficiencies.
Earnings before interest, taxation, depreciation and amortisation (EBITDA)
Reported EBITDA increased 70% to R6.8 billion from R4.0 billion in the first half of 2017. The movements in EBITDA were due to:
- Uncontrollable items, including inflation, US dollar metal prices and the rand/US dollar exchange rate, improving earnings by R2.0 billion, with stronger metal
prices of R3.6 billion, partially offset by inflation contributing R0.6 billion and a stronger rand R1.0 billion.
- Controllable items - volume and costs - contributed R0.6 billion. Costs reduced mainly due to the disposal of Union, partially offset by the impact of a R0.5
billion stock-count loss compared to a R0.9 billion stock count gain in H1 2017. EBITDA further benefitted from Bokoni being placed on care and maintenance and the
disposal of Pandora both in Q4 2017 resulting in lower cost incurred for associates (R0.2 billion).
The Company EBITDA margin was 21%, up from 15% in H1 2017. The EBITDA margin for own mining operations was 34% (H1 2017: 22%), on mined portion of joint ventures
23%, normalised for the Helena tailings dam flow through from 2017 (27% actual) (H1 2017: 23%), while the margin on purchased concentrate was 11% (H1 2017: 11%).
Capital expenditure
Disciplined capital allocation remains a priority, aimed at maintaining asset integrity and adding value, not additional volume.
Capital expenditure for the first half of 2018, excluding capitalised interest and waste stripping, rose by R0.5 billion to R1.8 billion (after adjusting for the
ACP insurance proceeds of R0.3 billion) from R1.3 billion in the first half of 2017. Stay-in-business capital expenditure increased by R0.2 billion to R1.4 billion,
focused on safety-critical and business continuity projects, including heavy mining equipment replacement and the planned maintenance of processing assets,
including the Mortimer Smelter rebuild. Our focus is to invest in low capex, fast-payback, value-accretive projects. Project capital was R0.2 billion higher at R0.4
billion, relating to the Unki smelter, Amandelbult chrome plants and Mogalakwena concentrator optimisation project.
Waste tonnes mined decreased from 34Mt in H1 2017 to 33Mt in H1 2018 and the cost of mining 15Mt was capitalised (H1 2017: capitalisation of 10Mt). As a result,
capitalised waste stripping increased from R0.4 billion in H1 2017 to R0.6 billion in H1 2018.
Project and stay-in-business capex is forecast to be within 2018 guidance of between R4.7 billion and R5.2 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 2023 (R2.5 billion) to achieve global benchmark emissions
standards and South African legal requirements. Capitalised waste stripping is expected to be around R1.4 billion, above previous guidance of R1.1 billion as a
result of increased waste tonnes mined due to improved truck and shovel efficiencies.
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 R6.2 billion at the end of 2017, representing a 26-day working capital cycle. Trade working capital at 30 June 2018 was R5.4 billion (33 days), a R0.8
billion decrease due to improved debtors collection (R0.3 billion) and higher trade creditors (R1.9 billion) due to purchases of concentrate from Siyanda and the
impact of higher prices on purchases of concentrate cost and an increase in customer prepayment of R1.1 billion. This was partially offset by a build-up in work-
in-progress material as planned maintenance takes place at processing assets, partially offset by a reduction in refined metal.
Platinum and palladium work-in-progress inventory has increased from around 467,000 ounces and 379,000 ounces at end of 2017 to levels of 628,000 ounces and 467,000
ounces respectively at the end of the first half of 2018. In H1 2018, we had a stock count loss of R0.5 billion (H1 2017: stock count gain of R0.9 billion), with
the benefit of a 26,000-ounce platinum stock count gain valued at R0.2 billion, being offset by stock count losses of 16,000 palladium ounces, 19,000 rhodium ounces
and 3,000 tonnes of nickel valued at R0.7 billion.
Net debt and liquidity
During the first half of the year, we made further progress in strengthening the balance sheet. The Company ended with a net cash position of R0.5 billion compared
to R1.8 billion net debt at the end of 2017, after the payment of a R0.9 billion dividend and despite the work-in progress build-up. The reduction was supported by
free cash flow from operations of R1.3 billion, R1.1 billion from the customer prepayment and R0.9 billion net proceeds on asset sales, including R0.4 billion from
the disposal of Union operations and R0.4 billion from the sale of the Company's 8.8% shareholding in RB Plat.
Excluding the customer prepayment of R5.7 billion (which is settled in metal), net debt is R5.2 billion and net debt to EBITDA is 0.4. Liquidity headroom is at
R22.5 billion, comprising both undrawn committed facilities of R13.3 billion and cash of R9.2 billion, and the Company is very comfortably within its debt
covenants.
Dividend
In accordance with the Company's capital allocation framework to distribute a base dividend of 30% of headline earnings for each reporting period, the Board has
declared an interim cash dividend of R3.74 per share, which is equivalent to a 30% headline earnings pay-out ratio or 3.3x dividend cover. The dividend is
applicable to shareholders on the register on 10 August 2018 and payable on 13 August 2018.
PGM MARKET REVIEW
Prices
The USD-based market platinum price ended H1 2018 at USD849 per ounce, down 8% year-on-year (H1 2017: USD921). The market palladium price was up 11% to USD953 per ounce
(H1 2017: USD858) and the market rhodium price up 117% to USD2,250 per ounce (H1 2017: USD1,035).
Platinum
The average achieved platinum price in H1 2018 declined by 3% compared to H1 2017 in US Dollar terms. Platinum underperformed the other platinum group metals due to
a modest surplus and weak sentiment driven by a soft Chinese jewellery market and a decrease in the share of the diesel engine in Europe's light duty vehicle
market.
Total platinum supply is expected to remain largely unchanged year-on-year in 2018. Primary production of platinum is forecast to decline marginally in 2018 to 6.05
million ounces, partly driven by the impact of mine closures in South Africa during 2017. Secondary supply of platinum is forecast to increase by 80,000 ounces due
to growth in autocatalyst recycling volumes, although this will be partially offset by lower volumes of platinum jewellery recycling in China.
Platinum demand is expected to fall slightly in 2018. Investment demand is predicted to fall by about 100,000 ounces to more normal levels of 250,000 ounces in 2018
and autocatalyst demand is forecast to weaken by the same amount. This will be driven by lower platinum demand from the European diesel light-duty vehicle sector,
where the diesel engine's share in new vehicle sales is declining markedly. However, this will be partially offset by higher demand from the global heavy duty
diesel vehicle sector. Platinum demand from the glass, petroleum and chemical sectors should increase year-on-year in 2018. This combination of slightly lower
demand, modestly lower primary production and a marginal increase in secondary supply should see a small surplus of 315,000 ounces.
Palladium
The average palladium market price in H1 2018 of USD1,005 per ounce was over USD200 higher than the average price in H1 2017. Growing demand for palladium from the
automotive sector has tightened the market over the past couple of years and known inventories of palladium have fallen. The market deficit was estimated at 800,000
ounces in 2017 and palladium is expected to remain in a deficit of around 250,000 ounces in 2018.
Palladium supply from the largest producer of the metal, Russia, is expected to increase year-on-year in 2018 as sales more closely match overall mine production.
Global primary palladium supply may be augmented by additional Russian material and could increase 500,000 ounces to 6.9 million ounces in 2018. Secondary supply
from autocatalyst recycling is anticipated to increase by about 200,000 ounces year-on-year.
Palladium demand is strong with particularly firm growth from the autocatalyst sector, which accounts for approximately 80% of global palladium demand. Demand from
this sector is expected to increase 175,000 ounces year-on-year to 8.6 million ounces in 2018, largely offsetting the increased recycling volumes. However, ETF and
other investment flows were negative in 2017 and are forecast to be negative again in 2018.
The tight market, with deficits of supply versus demand, should continue to support higher palladium prices. The impact of US and China trade tariffs and sentiment
may result in some volatility in the price.
Rhodium
Rhodium has performed very strongly in H1 2018, with the average market price rising by 103% to a 7-year high of USD1,938 per ounce (H1 2017: USD911). Both primary and
secondary production of the metal are expected to increase slightly in 2018. Speculative investment demand for rhodium has driven a higher price in 2018 and
stronger automotive demand is likely to support a higher price going forward.
Minor metals
Ruthenium and iridium prices increased to multi-year highs in H1 2018. Ruthenium climbed to an average of USD221 per ounce (H1 2017: USD48) and iridium rose to an
average of USD1,054 per ounce (H1 2017: USD804), with the prices of each metal driven higher by strong industrial demand in Asia.
Automotive
Global light duty vehicle (LDV) sales are forecast to grow by 2.3% year-on-year to 98 million units in 2018 (source: LMC Automotive Global Light Vehicle Sales
Update). Modest year-on-year growth is forecast in Europe and China, and a small decline is expected in North America. Palladium and rhodium are used in the
catalytic converters of gasoline vehicles and will benefit from global vehicle growth, while platinum is the dominant PGM in exhaust after treatment for diesel
vehicles.
The diesel engine's share of LDV sales in Europe has fallen from an average of nearly 45% in H1 2017 to under 40% in H1 2018, driven primarily by concerns over
potential banning of older diesel vehicles in European cities. However, platinum demand from the automotive sector worldwide is only expected to fall by 100,000
ounces between 2017 and 2018. Offsetting the decline in light vehicles in Europe, diesel LDV sales outside of Europe are expected to increase by 200,000 units;
strong demand is also expected from the heavy-duty vehicle sector (HDV). Globally, the share of HDVs fitted with PGM containing catalyst systems is expected to rise
above 60% and grow rapidly over the medium term as increased emissions legislation in China and India encourages the fitment of more PGM containing catalysts.
The outlook for palladium and rhodium demand is quite positive for the next few years, despite only moderately strong vehicle sales growth. Tighter emissions
standards and higher light duty vehicle production are forecast to support palladium and rhodium demand from 2019 onwards. With the palladium price having traded
above that of platinum since September 2017, the question of substituting platinum for palladium in gasoline or three-way 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 before 2020, although it is
likely this will occur at some point.
Battery electric vehicles make up less than 2% of light vehicle sales in most countries and have made only nominal inroads on PGM demand. However, while still
small, the electric vehicle sector continues to grow and increasing numbers of automotive producers are looking at introducing electric options for vehicles they
sell. It is estimated that demand for platinum from the fuel cell electric vehicle sector was less than 20,000 ounces in 2017 but this will continue to grow. As
with battery electric vehicles, China is leading the way in developing the fuel cell electric vehicle sector and is aiming to have 50,000 fuel cell vehicles on the
road by 2025 and one million vehicles by 2030.
Hybrid electric vehicle sales are growing more rapidly than battery electric or fuel cell electric vehicle sales. PGM loadings on hybrid vehicles are currently
about the same as their internal combustion engine equivalents and so a shift to hybrid powertrains does not represent a negative impact on PGM demand.
Industrial
Gross industrial demand for platinum is expected to increase by about 60,000 ounces in 2018. This will be driven by stronger demand from the chemical and electrical
sectors.
In contrast, gross industrial demand for palladium is expected to fall back by about 2%, or 50,000 ounces this year. This will be led by weaker demand from the
chemical industry as well as further thrifting of palladium in the dental and electronic sectors. Industrial demand for rhodium is also expected to fall this year
due to lower purchases of the metal by the glass and chemical sectors.
Jewellery
Global gross demand for platinum from the jewellery sector fell slightly in 2017. This decline was driven by weak demand from China, where platinum jewellery
manufacturing fell approximately 10% in 2017, the fourth consecutive year of falling demand. Platinum jewellery demand in China has come under pressure from slower
economic growth and a move to higher margins at a retail level. Nevertheless, platinum gem-set and bridal jewellery sales are still strong in the country. Demand
for platinum from the Chinese jewellery sector is forecast to fall again in 2018 but there is scope for it to stabilise from 2019 onwards, driven by growth in Tier
3 and 4 cities and continuing work on improving retail margins.
There were more positive performances elsewhere, for instance from a strengthening Indian market. In contrast to China, Indian platinum jewellery demand underwent
robust growth in 2017, with demand 15% higher year-on-year and further growth should be seen this year. Elsewhere, modest growth is expected in the European and US
platinum jewellery sectors.
Investment
Net investment demand for platinum is expected to be 250,000 ounces in 2018, about 100,000 ounces lower than in 2017. There were net inflows of metal into ETFs in
2017, encouraged by periods of relative price weakness in US Dollar terms. So far this year, ETF flows have been close to neutral but the US Mint has sold 23,000
ounces of platinum Eagles, suggesting that underlying demand for platinum as an investment continues. Work by the WPIC continues to improve availability and demand
for physical products. Partnerships with the likes of Bullion Vault and the Royal Mint have helped to stimulate additional physical demand in a number of countries.
Net disinvestment of palladium occurred in 2017 and this is expected to occur again in 2018 despite the metal's healthy fundamentals as investors continue to sell
into price strength. At the start of 2018, profit taking resulted in some heavy selling by ETFs as the palladium price moved above USD1,000 per ounce. Palladium ETF
holdings have fallen by roughly 300,000 ounces year-to-date to only 950,000 ounces.
Market outlook
The platinum market is likely to remain in a small surplus in the next few years, with supply outweighing demand. In contrast, the palladium market will probably
remain in a deficit, primarily as a result of strong demand from the automotive sector, potentially supporting a strong palladium price.
Automotive platinum demand looks set to remain weak, and this is not expected to be completely offset by rising industrial demand for the metal. Investment demand
is dependent on price movements and on price volatility but should be positive, aided by market development. Primary supply of platinum is expected to decline
modestly and there is only limited potential for growth in recycling of platinum from the autocatalyst, electrical and jewellery sectors.
The number of gasoline vehicles produced is expected to grow and, in conjunction with tighter emissions legislation, this means that palladium demand from the
automotive industry is likely to rise again year-on-year in 2018 and in the following few years. It is unlikely that there will be any meaningful progress in
replacing palladium with platinum in gasoline catalytic converters in the next 24 months, although it is likely this will occur at some point. As with platinum,
mine production of palladium should stay relatively unchanged year-on-year in 2018 and in the next few years, although some previously-mined material may come to
market this year. There will be about 8% growth in secondary supply of palladium from greater volumes of catalytic converter recycling, but nevertheless, palladium
should remain in a deficit even if disinvestment of physical palladium continues.
Growing demand from the automotive sector will support higher demand for rhodium going forward in a relatively illiquid market. Ruthenium and iridium demand is also
likely to remain healthy.
GOVERNMENT AND INDUSTRY POLICY
The Reviewed Mining Charter (MCIII)
Anglo American Platinum notes the publication of the draft 2018 Mining Charter by the Minister of Mineral Resources on 15 June 2018. All parties have until the end
of August to respond to the draft, following the decision by the Minister of Mineral Resources to extend the public consultation period. Anglo American is preparing
its submission in respect of the draft 2018 Mining Charter.
Anglo American Platinum shares the acknowledgement made by the Minerals Council that the draft 2018 Mining Charter is an improvement on the draft 2017 Mining
Charter. However, Anglo American Platinum has concerns surrounding several significant issues in the draft charter that it believes may affect the sustainability of
the mining industry in South Africa, should they not be reconsidered.
Anglo American Platinum has consistently affirmed its support for the Government's national transformation objectives in relation to the mining industry and
acknowledges its role in promoting transformation in South Africa. Correspondingly, Anglo American Platinum has a longstanding track record of driving and
supporting transformation in the mining industry and beyond, while contributing significantly to South Africa's economic growth and development.
Anglo American Platinum believes that more work needs to be done, in consultation with all stakeholders, to create a Mining Charter that promotes both investment
for the long term and transformation. We look forward to the ongoing discussions with the Minister, the Department of Mineral Resources and other industry
stakeholders to work towards this.
MINERAL RESERVES AND RESOURCES STATEMENT
During this period, the sale of the Company's 85% attributable interest in Union was finalised, and as a result there will be a decrease in the Inclusive Mineral
Resource estimates as disclosed in the 2017 integrated report.
MANAGEMENT CHANGES
Indresen Pillay has resigned as Executive Head of Projects and Safety, Health and Environment as of August 2018. A process is underway to find his successor.
Vishnu Pillay will retire as Executive Head of Joint Ventures and Exit Operations as of 31 December 2018.
OUTLOOK
Operational outlook
Due to a strong operational performance in H1 2018, Anglo American Platinum revises up its production outlook for the full year. PGM production guidance (metal in
concentrate) will be 4.85 - 5.10 million PGM ounces (from 4.75 to 5.00 million ounces), including platinum ounces of 2.40 - 2.45 million ounces (from 2.35 - 2.40
million ounces).
Mogalakwena production increased in part due to the high-grade area mined in H1 2018. This will normalise to an annual average of 3.18g/t, resulting in a forecast
production for 2018 of 1.15 million PGM ounces (around 480,000 platinum ounces).
Platinum refined production and sales volumes will be in line with production as the backlog of work-in-progress inventory built up will be refined by year end. PGM
refined production and sales volumes will however be lower than production overall, as the 2018 stock count identified a loss of work-in-progress inventory,
particularly impacting palladium and rhodium.
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. Unit cost is expected to be inline with previous market guidance of R19,600-R20,200 per platinum ounce produced. Capital discipline will continue, with
capital expenditure guidance remaining between 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
19 July 2018
For further information, please contact:
Investors:
Emma Chapman
Head of Investor Relations
+27 (0)11 373 6239
emma.chapman@angloamerican.com
Media:
Mpumi Sithole
Media Relations
+27 (0)11 373 6246
mpumi.sithole@angloamerican.com
ADMINISTRATION
EXECUTIVE DIRECTORS
CI Griffith (Chief executive officer)
I Botha (Finance director)
INDEPENDENT NON-EXECUTIVE DIRECTORS
MV Moosa (Independent non-executive chairman)
RMW Dunne (British)
NP Mageza
NT Moholi
D Naidoo
JM Vice
NON-EXECUTIVE DIRECTORS
M Cutifani (Australian)
R Medori (French)
AM O'Neill (Australian)
AH Sangqu
Alternate director
PG Whitcutt (Alternate director to R Medori)
COMPANY SECRETARY
Elizna Viljoen
elizna.viljoen@angloamerican.com
Telephone +27 (0) 11 638 3425
Facsimile +27 (0) 11 373 5111
FINANCIAL, ADMINISTRATIVE, TECHNICAL ADVISERS
Anglo Operations Proprietary Limited
CORPORATE AND DIVISIONAL OFFICE, REGISTERED OFFICE AND BUSINESS AND POSTAL ADDRESSES OF THE COMPANY SECRETARY AND ADMINISTRATIVE ADVISERS
55 Marshall Street, Johannesburg 2001
PO Box 62179, Marshalltown 2107
Telephone +27 (0) 11 373 6111
Facsimile +27 (0) 11 373 5111
+27 (0) 11 834 2379
SPONSOR
Merrill Lynch South Africa Proprietary Limited
REGISTRARS
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg 2001
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
23 July 2018
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: 23/07/2018 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.