Anglo American Platinum announces another strong financial and operational performance

Key features

• Tragic death of two colleagues.  34% improvement in injury rates
• Continued industry leading returns to shareholders – generating 55% total shareholder return
  • Headline earnings per share increased by 95% to R28.93 per share
  • EBITDA growth of 21% to R14.5 billion
  • Return on capital employed (ROCE) increased to 24%
  • Dividend pay-out ratio increased to 40% of headline earnings
• Strong operating performance
  • Record production from Mogalakwena, Unki and Kroondal contributed to a 4% increase in total PGM production
  • Free cash flow from operations increased by 60% to R5.6 billion
• Strong balance sheet: net cash of R2.9 billion
• Upgraded portfolio: increasing ownership of Mototolo to 100%; sale of Union, BRPM and holding in Royal Bafokeng Platinum Limited
• Well positioned to deliver the next phase of value, in line with a clear strategy

Anglo American Platinum today announces another strong financial and operational performance for the 12 months ended 31 December 2018.

Commenting on the results, Anglo American Platinum CEO Chris Griffith said, “The fact that two of our colleagues died at work in 2018 is deeply tragic and felt by every one of us. Notwithstanding the significant improvement in the number of fatalities and injury rates, these tragic deaths have heightened our resolve and efforts to eliminate fatalities.

“Operationally and financially, we had a very strong year. Record production performances from Mogalakwena, Unki and Kroondal saw total platinum group metal production increasing by 4%. We increased our free cash flow by 60% and reduced net debt by R4.7 billion turning to a net cash position of R2.9bn at the end of 2018. I am pleased to report that, given this performance and the improving market outlook for PGMs, Anglo American Platinum was the best-performing share on the JSE All Share Index in 2018 delivering a total shareholder return of 55%.

Whilst the platinum price remained subdued, the price of our basket of metals increased by 13%, with our diversified PGM proposition delivering significant value for shareholders.”

There were two work-related fatalities in 2018, both at the Amandelbult mine. Anglo American Platinum expresses its deepest condolences to the family, friends and colleagues of Mr Johannes Maimela and Mr Emmanuel Segale. These fatal incidents are especially disappointing against the backdrop of our other improved safety indicators. The Company’s total recordable case injury-frequency rate (TRCFR) improved by 34%, and the lost-time injury-frequency rate (LTIFR) improved by 42%. The management team’s approach to safety is guided by a revised safety, health and environmental strategy which was co-created between management, unions and employees in 2017, Anglo American Platinum will continue to work to improve its safety performance to achieve zero harm.

Anglo American Platinum further upgraded its portfolio in 2018 and advance delivery on the next phase of value creation. During the year, the disposals of Union Mine, the equity holding in Royal Bafokeng Platinum, and the 33% interest in BRPM were concluded. At the same time, the Company completed the acquisition of Glencore’s and Kagiso Platinum Venture’s stakes in the Mototolo JV, making it a wholly owned operation. Furthermore, in support of the objective of growing demand for PGMs, the launch of AP Ventures was concluded, committing US$200 million together with the Public Investment Corporation. Anglo American Platinum continues to advance project studies to evaluate the optimal expansion plan at Mogalakwena and assess the potential synergies at Mototolo and Der Brochen.

Production
Mogalakwena had another record production year of 1,170,000 PGM ounces, up 7%. Total PGM production at Amandelbult increased by 1% to 868,800 ounces, due to increased underground production delivered to the concentrator, primarily from Dishaba. Unki mine in Zimbabwe remains a strategic asset and had a record performance in 2018, producing 192,800 PGM ounces, an increase of 16%. Mototolo had an improved performance in 2018 increasing production by 56% to 287,700 PGM ounces, which include some production overflow from 2017 toll concentrated at Bokoni. Total production from joint venture mines, on a like for like basis, increased 5% to 477,000 PGM ounces, and purchase of concentrate ounces were up 13% to 2,291,900 PGM ounces.

Refined production was, however, lower than mined production due to the temporary build-up of work-in-progress inventory. The planned rebuilds of Mortimer smelter in Q2, and Polokwane smelter in Q3, the commissioning of the Unki smelter in Q3 and other maintenance on processing assets resulted in the inventory build, which the Company expects will be fully processed in 2019.

Sales volumes of 5,224,900 PGM ounces, were 3% down on last year’s owing to the lower refined production, which was partially offset by a draw down in refined inventory.

Market development
Anglo American Platinum continues to pursue multiple marketing streams for PGMs. This is undertaken globally through a mix of marketing efforts in existing or near-term demand segments, such as jewellery and investment; and targeted market development in longer-term growth areas, such as fuel cells, hydrogen and clean energy. Importantly, where possible, the Company aims to integrate demand stimulation with developing skills and building capacity in South Africa.

Commenting on the next phase of the Company’s strategy, Griffith added, “We have evolved our strategy to deliver the next phase of value. We have a clear strategic focus on three components i.e. achieving operational excellence; investing in our portfolio of operations; and facilitating the development of global demand for PGMs. The first will allow us to realise the full value of our operations through our people and innovation, by operating beyond current world benchmark levels of performance. At our operations, we will continue to pursue low capital fast-payback and high-margin projects, invest in technology and innovation, as well as progressing the studies for expansion of Mogalakwena. Lastly, facilitating the development of demand for PGMs remains a key priority. We expect this series of strategic actions to increase cash flows and returns and reinforce the sustainability of the Company for the benefit of all our stakeholders.”

Dividend
Given the Company’s strong balance sheet, and greater confidence in the underlying cash-generating capability of the business, the Board has increased the dividend pay-out ratio from 30% to 40% of headline earnings due to the strong balance sheet and management’s confidence in the underlying cash-generating capability of the business. This results in an H2 2018 cash dividend of R2.0 billion or R7.51/share, and a total 2018 distribution of R3.0 billion or R11.25 per share.

Discover more information in our Annual Results Booklet.