Delivering Change, Building Resilience

Positioning for the Future

Globally, the mining sector is facing unprecedented challenges. We are proving our resilience and ability to manage change through a focused strategy that is positioning our group for a sustainable future – driving the transformation that will make us more robust, responsive and competitive.

In this Annual Reporting centre, you can discover the highlights of our 2016 performance, download all of our reports and build your own report bundle.

Our Business

In this section, we examine our group performance and share our business model

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Group performance

Business Model

Business context and strategy

Conducting business according to our strategy and the external environment in which we operate is key for our success.

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Our strategy journey

Our external environment

Stakeholder engagement and issues

Direct value added to south africa

Performance review

An effective review of performance needs to include operational, financial and process data.

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Financial review

Operations review

Governance

Effective governance structures and processes ensure that our business runs efficiently.

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Our board

Remuneration report

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Our Business

Group performance

In this section, we provide an overview of both our financial and operational performance for 2016 across the business.

Financial Performance

Net debt

2016: R7.3bn

2015: R12.8bn

Headline earnings

2016: R1.9bn

2015: R0.1bn

Headline earnings per share

2016: 713 cents

2015: 48 cents

Total capital expenditure

2016: R5.0bn

2015: R5.1bn

Cash generated by operations

2016: R13.6bn

2015: R10.9bn

EBIT

2016: R4.4bn

2015: R[6.6bn]

Operational performance

Number of fatalities

2016: 7

2015: 2

Total recordable case frequency rate (TRCFR)

2016: 1.05

2015: 1.52

Energy consumption measured in terajoules

2016: 24,628TJ

2015: 25,178TJ

Total new water use (Mm3)

2016: 32.69Mm3

2015: 33.19Mm3

GHG emissions ktCO2 equivalent

2016: 5.58kt

2015: 5.362kt

Business Model

Our business model illustrates how we consider five key capitals – financial, human and intellectual, natural, manufactured and social – in creating value.

Anglo American Platinum’s core purpose, its risk and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value-creation process. In particular, our business model and review of our external environment elaborate on how we leverage opportunities to facilitate this process.

Our strategy journey

While the major transformation underway in our business is both an exciting opportunity and a challenge, the integrated effort of our people is proving our goals are attainable.

PRODUCTION INCREASE

Mogalakwena Mine exceeded 2015’s production by 5%. It produced:

412,000oz

Our progress

We have made good progress in all strategic priority areas:

  • Substantial improvements in operational performance across our assets.
  • Profitable investment in high-value, capital-light projects with short payback periods – such as the Amandelbult chrome recovery plant which was successfully commissioned.
  • Further restructuring was required, with the Twickenham project placed on care and maintenance.
  • The Kroondal JV was positioned for exit, but at value and at the right time.
  • A significant milestone in November 2016 was closing the Rustenburg sale.
  • Announced disposal of the Pandora JV.
  • Divestment process for Union and Bokoni mines continues in a difficult market to dispose of PGM assets.

What does this mean?

By restructuring the business and exiting certain mining assets, we will reduce our mines from 18 to five, resulting in a more focused and less complex business – one that can generate free cash flow in a weak price environment, be resilient to a deeper downturn in the market, or participate in an upswing.

Our external environment

We firmly believe the market for the long-term supply of PGMs remain attractive, despite current price levels. Rising demand from existing applications and those being developed, as well as stimulatory measures to market PGMs, will support sustainable demand and will in time foster supply growth.

The average prices of all three major platinum group metals (palladium, platinum and rhodium) declined in 2016 from the prior year, reflecting US dollar strength, concerns over possible interest rate rises in the USA and a potential economic slowdown in China.

Palladium was, nonetheless, in substantial deficit, largely due to strong Chinese car sales largely which provided some price support. Demand for platinum exceeded combined supply from mining and recycling, although this weakened in the second half, removing some support for prices. Rhodium was again in fundamental surplus, with vehicle manufacturers adding only marginally to the previous year’s demand.

Autocatalyst

Global light vehicle sales expanded by 4.6% in 2016 to a record of 93.2 million units. Sales were strong in Europe, North America and China, particularly where a cut in the purchase tax payable on the purchase of smaller vehicles drove overall light-duty vehicles sales over 12% higher. However, sales were weaker in a number of emerging economies, including Japan, Brazil and Russia.

Jewellery

Gross global jewellery-sector purchasing of platinum fell for a second year in 2016, dropping by 15.3% or 430koz. The major negative factor was slowing jewellery sales – for both gold and platinum – in China, the single-largest jewellery purchaser of platinum.

Industrial

Demand for platinum from other industrial applications was healthy in 2016, growing by 185koz or 9.7%, much faster than the pace of global economic growth. The glass-manufacturing sector again took more metal than a year earlier but other industries purchased more platinum too. Although still relatively small, demand for platinum in fuel cells continues to grow, exceeding the 50koz level last year.

Investment

Investment demand for PGMs includes physically-backed exchange- traded fund (ETF) holdings and the purchase of physical metal products such as bars and coins. Net investment demand for platinum was healthy, at close to its five-year average, and grew by 31.1% or 140koz compared to the prior year.

Market development, collaboration and beneficiation

Anglo American Platinum’s global PGM market development initiatives are focused on offsetting the risk of lower demand in existing segments through a mix of marketing efforts in existing or near-term applications and targeted market development in longer-term growth areas, such as fuel cells, hydrogen and clean energy.

Stakeholder engagement and issues

Engaging with stakeholders – those who may be affected by, or have a positive or negative effect on our company – is central to achieving our strategy.

Our stakeholders are diverse: investors, analysts, employees, trade unions, customers, business partners, municipalities, government, NGOs, educational institutions, local communities, communities in labour-sending areas, media, environmental groups, supply-chain partners and joint-venture partners. They also are at different scales: local, regional, national and international.

Effective stakeholder engagement across this spectrum is essential to our strategic objectives. Our business needs to connect with society at large and our host communities in particular if we are to succeed.

As reported last year, we have revised our social strategy to ensure we build lasting, mutually beneficial relationships and restore the trust between Amplats and certain stakeholders. One of the key value levers in this strategy is the quality of engagement and relationships.

Our stakeholder engagement strategy: In a nutshell

Direct value added to south africa

To support our BBBEE goals, we have entered into a number of empowerment transactions and joint ventures. One such initiative, project Alchemy, was designed to provide direct participation in the company by local communities.

Value added

We increased our value added to South Africa by 3.6% from 2015

R61,960 MIL

Value added to South Africa for 2016 amounts to R61,960 million, an increase of 3.6% when compared to 2015 [R59,815 million]. For a full detailed account of how we add value to South Africa, download the full section.

Value added statement for the year ended 31 December 2016
2016
R million
% 2015
R million
restated
%
Value added
Net sales revenue 61,960 59,815
Less: Purchase of goods and services needed to operate the mines and produce refined metal, including market development and promotional expenditure (34,346) (26,661)
Other net expenditure* (1,431) (11,460)
Value added by operations 26,183 109 21,694   148
Losses from investments net of interest received** (2,197) (9) (7,080)   (48)
  23,986 100 14,614 100
Value distributed
Salaries, wages and other benefits 13,825   58 15,539  106
Tax charges 3,594  15 3,545  24
Taxes borne and collected 3,749 3,476
Other tax costs (155)   69
Providers of capital 1,465   6 1,390 10
Interest paid 1,421 1,269
Dividends 44 121
Total value distributed 18,884 20,474
Reinvested in the group 5,102    21 (5,860)    (40)
Amortisation and depreciation 4,667 5,281
Accumulated profits/(losses) 435 (11,141)
  23,986  100 14,614 100

* Includes loss on scrapping of assets of R22 million (2015: R10,242 million).
** Includes impairments of investments and loans of R394 million (2015: R6,649 million).

To support our BBBEE goals, we have entered into a number of empowerment transactions and joint ventures. One such initiative, project Alchemy, was designed to provide direct participation in the company by local communities. For an overview of the progress of the project, see the timeline that follows.

Value distributed, value added

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Performance review

Financial review

We aim to be as competitive as possible by operating as efficiently as we can. Find out unit costs of production for each of our operations.

Annual run-rate saving for Q4 2016

Overhead reduced by R0.7 billion from 2015

R1.0 billion

Amplats has achieved significant key strategic successes in 2016 while operational performance continued to improve.

The repositioning and restructuring of the company continued in 2016 with the successful completion of the sale of Rustenburg mines to Sibanye Platinum on 1 November 2016, Twickenham project was placed on care-and-maintenance from 1 July 2016 while Modikwa JV and Bokoni, an associate, completed operational restructuring at their mines. Overhead reduced R0.7 billion from 2015 and an annual run-rate saving of R1.0 billion was achieved in the fourth quarter of 2016.

The key financial indicators underpinning our operating performance in the past year were:

R million 2016 2015 % change 2014
Net sales revenue 61,960 59,815 4 55,612
Cost of sales 56,096 54,584 (3) 53,320
EBITDA 9,096 (1,601) 668 5,394
EBIT 4,429 (6,882) 164 409
Headline earnings 1,867 (126) 1,582 492
Cash generated from operations 13,595 10,942 24 7,876
Capital expenditure excluding capitalised waste stripping and interest 3,398 3,747 (9) 5,754

Cost of sales, EBITDA, EBIT and headline earnings restated for 2015 and 2014.

Operations review

Discover production volumes for each operation in our portfolio.

Corporate social investment

*including Unki Mine

R354 Million

Our operations consist of managed mines, joint ventures and associate mines across South Africa and Zimbabwe. These mines extract ore from Merensky and UG2 reefs, the Platreef and Main Sulphide Zone.

The ore is milled and treated by own-managed, joint-venture and associate concentrators and further processed by our own smelters and refineries.

As social issues and risks constitute a substantial portion of our risk profile (more than half the elements underlying our material issues in 2016 relate to typical sustainability topics), we have included salient features in our integrated report for the first time.

Our board

Effective governance structures and processes ensure that our business runs efficiently. Meet our board.

The characteristics of our board and executive committee

View our board

Board characteristics

Board composition by race;Board composition by gender;Board skills and experience;Board compositionby age

Executive management characteristics

Composition by HDSA; Gender;Tenure

Remuneration report

Looking back over the last 12 months, the sustained commodity downturn and poor macro-economic conditions continued to create challenges for the business. Accordingly, we again had to make some tough decisions on remuneration levels for executive and senior managerial staff. As in 2015, no increases were awarded to executive directors, prescribed officers and non-executive directors. In addition, no increases were awarded to senior management in 2016 and we again reduced the quantum of future long-term incentive awards to senior management.

No increases were awarded to executive directors, prescribed officers senior management and non-executive directors in 2016.

We remain committed to ensuring a fair, living wage for all employees, while being mindful of our current strategy of cost conservation. As such, we awarded an inflation-linked increase to general staff and concluded our wage negotiation with organised labour successfully. This resulted in an above-inflation increase for employees in the bargaining unit. We are proud of the fact that our Gini coefficient1, down from last year, is the lowest in general industry in South Africa and the mining industry specifically.

Real Mining. Real People. Real Difference.
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