Anglo American Platinum announces strong interim results with record performance from Mogalakwena

Outlines continued strategy to deliver next phase of value

Highlights

• Focus on elimination of fatalities – seeing improvements in overall safety performance
• Commitment to industry leading returns to shareholders
  • 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 for H1 2018
• Strong operational performance – produced Platinum Group Metals (PGMs) production up 4%
• Rigorous cost control – unit costs down 3%
• Moved to net cash of R0.5bn from R1.8bn net debt as at 31 December 2017
• Simplified and enhanced the portfolio further
• Continued strategy to deliver next phase of value:
  • Acquisition of Glencore’s 39% interest in Mototolo JV
  • Grow the market for PGMs – together with the PIC committed US$200m to AP Ventures
  • Extract the next phase of value at existing operations through global best practice operating methods and modernisation
  • Continued project studies to determine best value growth options at Mogalakwena and Der Brochen

Anglo American Platinum Limited (“the Company” or “Anglo American Platinum”) today reported another strong set of operational and financial results, reflecting management’s commitment to ensuring safe production and delivering value. Improved operational efficiencies across the own-managed mines portfolio, and strong performances from the joint ventures, generated a 4% increase in PGM production in the period, despite the closure of unprofitable production from Bokoni and Maseve.

Tragically there was one work related loss of life in the period. Mr Johannes Maimela died from multiple bee stings at Amandelbult mine in February 2018. Management has committed to maintaining safe operations and the benefits of the company-wide initiatives in pursuit of safe production are delivering 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).

Commenting on the results, Anglo American Platinum CEO Chris Griffith said: “Anglo American Platinum’s strategy to restructure and reposition the portfolio is essentially complete and has simplified and improved the business. The portfolio is now positioned with 70% of production in the first half of the cost curve, outperforming input cost inflation, improved operating free cash flows and delivering a return on capital employed of 22.4%. The balance sheet has been de-leveraged with net debt reducing from R14.8 billion in 2014, to a net cash position of R0.5 billion in H1 2018, and we are paying an interim cash dividend of R1.0bn.

Our focus remains on driving the value and earnings of the business by taking the performance of the operations to world best practice, investing in growth optionality across the portfolio, and developing the market for PGMs. We will continue to seek to deliver these strategic priorities in a safe, values driven and socially responsible way”.

Anglo American Platinum saw a strong performance from its operations, with the world-class Mogalakwena operation increasing production 19% in H1 2018. Mogalakwena contributed R2.1 billion in economic free cash flow, up from R812 million in H1 2017 and remains the world’s most significant PGM operation and the only major PGM open-pit operation globally. The mine is in the bottom quartile of the primary PGM producer cash cost-curve, and as a palladium-rich resource, will benefit from the structural deficits in the palladium market.

The turnaround plan at Amandelbult continues, showing early benefits: total PGM production at Amandelbult increased by 9% to 432,600 PGM ounces. Unki mine in Zimbabwe produced a record 92,600 PGM ounces, an increase of 9%. The Unki smelter, a project in execution, is expected to be completed in Q3 2018.

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. 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 H1 2017 (285 cents). The Company is pleased to declare an interim cash dividend of R1.0 billion equating to R3.74 per share, which is equivalent to a 30% headline earnings pay-out ratio.

Anglo American Platinum remains focused on the next phase of growth by simplifying its portfolio and building a platform for future value. In the period under review, the Company launched the new AP Ventures fund in conjunction with the Public Investment Corporation, which together have committed funds of $200m to grow demand for PGMs. The Fund is an exciting new development which is expected to support the growth of PGM technologies and increase PGM demand. The fund will facilitate the application of cutting-edge technological advances and broad innovative thinking to address the world’s major challenges.

In line with our strategy of owning and operating the best PGM assets, the acquisition of Glencore’s stake in the Mototolo joint venture, as announced today, unlocks the potential of the Der Brochen resource by utilising the immediately down-dip triangle and south of the Mototolo operations as a major long-life, low cost mechanised hub. In addition, the Company has simplified its portfolio through the sale of its equity holding in Royal Bafokeng Platinum, and the agreed sale of its stake in BRPM to Royal Bafokeng Platinum.

Griffith concluded by reiterating Anglo American Platinum’s differentiated value proposition: “We are proud of the quality of our long-life assets from which we continually strive to extract full value. We have also demonstrated capital discipline, resulting in balance sheet strength which enables flexibility to be responsive to opportunities through the cycle as well as withstand potential downward pressure.

Finally, we continue to ensure 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.”

Download the 2018 Interim Report for the six months ended 30 June 2018