Anglo American Platinum, delivering on strategy and managing the business for the current pricing environment

Anglo American Platinum Limited (‘Anglo American Platinum’ or ‘the Company’) today reported interim results for the six months ended 30 June 2016. Net sales revenue increased by 3% to R30.7 billion, EBIT increased 12 per cent to R1.5 billion, after normalising for the stock gains of R2.2 billion in H1 2015 and R0.6 billion in H1 2016 and net debt reduced by R2.9 billion to R9.9 billion. Headline earnings were R1.0 billion and headline earnings per share were R3.99

PGM pricing during the period remained weak, with the average US Dollar basket price per platinum ounce sold decreasing by 24% in H1 2016 to US$1,632, versus the US$2,157 achieved in 2015. The decline in US Dollar metal prices was partly offset by a weaker Rand resulting in the Rand basket price per platinum ounce ending 3% weaker at R25,100, compared to R25,748 in H1 2015.

Within this pricing environment, the Company continued to make progress in implementing its value driven strategy and improving its operational performance. Since 2013, the Company has reduced unprofitable platinum production by ~350koz. R1.0 billion of overhead cost savings have been identified through the reduction of 400 managerial roles and non-labour overhead savings, and R400 million of this has been achieved in H1 2016. The Company’s cash operating costs of R17.8 billion increased by 5%, below the level of mining inflation, and unit costs of R19,436 per platinum ounce increased by 1.8% over R19,095 achieved in H1 2015.

Platinum production (on a metal in concentrate basis) increased from 1,125 koz to 1,153koz, a 2% increase versus the comparative period. Retained own mine operations, excluding projects, saw an 8% improvement in platinum production to 458 koz.

Production from Mogalakwena increased to 208 koz, a 2% improvement, Amandelbult increased 15% to 217 koz and Unki increased 13% to 36 koz. Platinum production from joint ventures, inclusive of both mined and purchased production, increased by 8% to 388 koz. At non-core operations, production from Rustenburg, including the Western Limb Tailings Retreatment (WLTR), decreased by 10% to 219 koz, whilst production from Union increased by 15% to 75 koz.

Refined platinum production decreased by 9% to 1.0 Moz, owing to a section 54 safety stoppage at the Precious Metal Refinery (“PMR”) in Q1 2016 which stopped production for 12 days and impacted production for a further 37 days during build-up. The PMR had a stellar refining performance in Q2 and has recovered to steady state and made up most of the shortfall in production. The remainder of the shortfall in refined production is expected to be recovered in H2 2016. Refined platinum sales volumes increased by 5% to 1.2 Moz, supplemented by a drawdown in refined inventory and some market activities.

CEO, Chris Griffith said, “We are delivering on our promises and making progress on our value driven strategy. Despite the weak PGM pricing environment, operational excellence resulted in R3.2 billion of free cash flow generated across the portfolio and a net debt reduction of R2.9 billion. We remain focused on cash conservation and disciplined capital allocation, whilst continuing to prepare for the future through market development with our strategic partners, modernizing through innovation in mining and processing technology and we are ensuring a productive and engaged workforce that live in stable host communities. Our safety target remains one of zero harm, however tragically we had four losses of life due to work related incidents in the period. Our deepest condolences go to the families, friends and colleagues of Mr Kubheka, Mr Ntamehlo, Mr Henrico and Mr Ngqambiya.”

Outlook

Previous guidance on production remains in place, with platinum production expected to be towards the upper end of the guided range of 2.3 - 2.4 million ounces, and unit cash cost guidance is unchanged at between R19,250 and R19,750 per platinum ounce.

Direct overhead savings and indirect savings of R1.0 billion is targeted to be achieved by Q4 2016.
Capital investment decisions on all major projects have been delayed until after 2017, and then only if the market demands more metal and if our balance sheet allows will decisions on new projects be taken.  Capital expenditure guidance for the year has reduced to between R3.5 billion to R4.0 billion for 2016 (previously R3.7 billion to R4.2 billion). 

Net debt will reduce further at current spot and FX prices.  The Rand remained weak against the US Dollar during the first half of 2016, and our earnings remain highly geared to the Rand/US Dollar exchange rate.

Download the 2016 Interim Report for the six months ended 30 June 2016