Anglo American Platinum delivers a strong safety, operational and financial performance

Highlights:

• Committed to zero harm
  • No work-related fatalities in the first half of 2021
• Covid-19 continues to impact on safety and productivity, and significant efforts are ongoing to keep employees healthy and safe
• Significant economic contribution to stakeholders of R39.2 billion, including:
  • R16.6 billion paid to the fiscus through taxes and royalties;
  • Continuing to protect livelihoods for all employees, including vulnerable employees not yet back at work, with R5.5 billion paid in salaries and wages;
  • Increased procurement from local and doorstep community suppliers of R2.2 billion;
  • Invested R5.2 billion on capital projects;
  • Community development initiatives spend of R300 million; and
  • Paid R9.4 billion in dividends in respect of the second half of 2020.
• Progress on ESG:
  • Protecting employees and communities during the Covid-19 pandemic;
  • Facilitating the Covid-19 vaccination rollout around operations in South Africa and Zimbabwe;
  • Progressing renewable energy and hydrogen options at Mogalakwena;
  • Ranking as the overall ESG leader in the Platinum and Precious Metals sector by FTSE Russell; and
  • Implementation of Social and Labour Plans and progressing education initiatives.
• Total PGM production up 28%, with a solid production performance from all own-managed mines
• Refined production up 128%, with the Anglo Converter Plant (ACP) performing ahead of plan
• Strong financial performance reported, underpinned by a 29% increase in the PGM basket price to R41,400 per ounce sold (H1 2020: R32,166)
• Record EBITDA of R63.3 billion, a 385% increase
• Return on capital employed increased to 207% (H1 2020: 48%)
• Net cash position of R57.6 billion (including the customer prepayment)
• Industry-leading returns to shareholders with an interim dividend declared of R175 per share, or R46.4 billion, equating to a 100% of headline earnings.
• Community share schemes to receive approximately R245 million in respect of H1 2021 dividends.

Anglo American Platinum reports a robust set of financial results, underpinned by high prices for its metals and a solid operational performance from its mining and processing assets.

Natascha Viljoen, CEO of Anglo American Platinum, commented:

“Anglo American Platinum delivered a strong safety, operational and financial performance in H1 2021. Such a performance directly benefits our wide range of stakeholders and translates into a larger contribution in taxes, royalties, and procuring from local and doorstep community suppliers, amongst others, of close to R40 billion in the first half of the year. This again demonstrates our commitment to being a good corporate citizen.

Our focus on the Elimination of Fatalities programme resulted in zero fatalities across all operations in the period. Despite this very significant achievement, the operations have undoubtedly been impacted by the effects of Covid-19, with disruptions to our routines and increased absenteeism due to infected employees in recovery all contributing to an increase in our injury frequency rate. A return to more normal operating circumstances should help safety performance and bring about greater stability.

With our Covid-19 protocols firmly embedded in the workplace, and with extensive physical and mental health support available to our teams and their families, we are doing everything possible to help keep our people safe. Our comprehensive WeCare pandemic response programme also continues to support our communities through the provision of food to vulnerable households, water supply to villages, support to schools, clinics and hospitals, and investments in centres for victims of gender-based violence.

As part of Anglo American, our vaccine support programme includes funding to purchase vaccines through the Solidarity Fund, logistics, training of community health workers, and the establishment of vaccine centres at most of our operations. In partnership with De Beers, we have also offered our support to the Limpopo department of health to assist with community outreach vaccination sites and cold chain equipment.

In light of the devastating impact of the virus and the recent unrest in parts of South Africa, we are adding an additional R400 million in funding to extend our WeCare programme. This will include mechanisms for financial assistance for employees who need additional support, food relief packages, other necessities for vulnerable employees and projects to stimulate economic recovery so that we can continue doing what is right for our employees, our communities and for South Africa.”

Despite the ongoing impact of Covid-19 and more rigorous protocols and testing requirements at site, our operations had a strong recovery in performance. Total PGM production from own mines (expressed as platinum, palladium, rhodium, gold, iridium and ruthenium metal in concentrate) increased by 29% year-on-year to 1,404,100 ounces (H1 2020: 1,084,800 ounces). All operations recorded higher production in the first half of 2021, as the previous corresponding period was materially affected by government-imposed lockdowns and the ongoing impact of Covid-19. Production levels during the period under review were constant with those achieved in the first half of 2019.

Total refined production, excluding tolling, increased by 128% to 2,326,700 PGM ounces, due to a strong performance from the ACP Phase A unit following its rebuild and recommissioning in 2020. As a result of the production challenges at ACP in 2020, the build-up in work-in-progress inventory was c.1 million PGM ounces at the end of last year. We remain on track to refine the remaining built-up work-in-progress inventory over the next 18 months. The rebuild of the ACP Phase B unit is making good progress and is on track to be completed in the third quarter of 2021.

Unit cost performance has been impacted by above CPI inflationary cost increases, in materials, utilities and consumables, which we flag as an ongoing risk into the second half of the year. In the first six months, the unit cost of production per PGM ounce was R12,572 (H1 2020: R12,555).

PGM prices were strong during the period under review, as a recovering global economy and firm automotive and industrial demand were aided by supply disruptions in Russia. In US dollar terms, the average achieved PGM basket price increased by 47% year-on-year to $2,884 per PGM ounce. Rhodium and palladium set new all-time highs of $30,000 and $3,000 per ounce, respectively, while platinum hit a six-year high above $1,300 per ounce. (2019: $1,347 per ounce), helped particularly by a strong rhodium price. The minor PGMs, iridium and ruthenium, also made positive contributions as strong industrial demand took iridium to an all-time high of $6,300 per ounce and ruthenium to a 14-year high of $800 per ounce. The rand strengthened against the dollar during the year, with the rand basket price rising by 29% to R41,400 per PGM ounce (H1 2020: R32,166 per ounce).

Net sales revenue increased by 155% to R107.5 billion (H1 2020: R42.2 billion), mainly driven by robust PGM prices, and higher production and sales. The Company delivered record EBITDA of R63.3 billion, an increase of 385% from H1 2020, an improvement in ROCE to 207%, and a net cash position of R57.6 billion.

Given the value distribution to other stakeholders, our strong balance sheet, robust market outlook and confidence in the underlying cash generation of the business, the board has approved a total dividend of R46.4 billion rand, or R175/share. This comprises of a base dividend of R70 per share, based on the pay-out policy of 40% of headline earnings, and a special dividend of R105 per share, bringing the total pay-out to 100% of first-half earnings.

Outlook

PGM production guidance (metal-in-concentrate) is tightened from 4.2-4.6 million PGM ounces, to between 4.2-4.4 million PGM ounces, due to lower third-party receipts and the continuing impact of Covid-19 infection rates on production. Refined PGM production (excluding tolling) is expected to reach 4.8-5 million ounces. PGM sales volumes are forecast to be in line with refined production.

Unit cost guidance for 2021 is revised to between R12,000 and R12,500 per PGM ounce, from the previous guidance of R11,000 to R11,500. The increase is due to the continued impact of Covid-19 on operations and the sharp rise in inflationary increases experienced during the first half of the year on consumables, which is expected to continue in H2 2021.

Total capital expenditure guidance, excluding capitalised waste stripping, remains unchanged at between R7 billion and R7.5 billion. Capitalised waste-stripping guidance is between R2.8 and R3.1 billion.

Platinum is likely to be in surplus in 2021, but will shift towards a deficit in the next few years, as substitution of palladium in gasoline catalysts will mean significant increases in automotive platinum demand. Palladium’s deficit, again substantial in 2021, will gradually shrink for the opposite reason. Rhodium, which is likely to be near to balance in 2021, looks set to have a widening deficit as automotive demand improves.

Said Natascha Viljoen: “Looking ahead, we will continue to focus on our four strategic priorities:

• Stimulating new markets and leveraging new capabilities through our market development activities, and capturing value from adjacent value chains;
• Building resilience across our business with the aim to increase our ability to handle and thrive through major disruptions;
• Maximising value from our core portfolio of mining and processing assets; and
• Building on our pockets of excellence to become a leader in ESG in the mining sector.

“These priorities have been designed to ensure we capture maximum value from our repositioned portfolio and integrated value chain to the benefit of our stakeholders, and to strengthen our resilience to thrive in a fast-changing, uncertain world.

“Inspired by our purpose of re-imagining mining to improve people’s lives, we will continue our work to transform the very nature of mining for a safer, cleaner and smarter future, to better connect precious resources in the ground to the billions of people who rely on them, and to find ways to use PGMs to create a better future for society.”

Board changes

The Board of Anglo American Platinum is pleased to announce the appointment of Ms Nolitha Fakude and Ms Anik Michaud as non-executive directors of the Company with effect from 26 July 2021.

Ms Fakude, age 56, is the Anglo American plc Group Director – South Africa and chairman of Anglo American’s South African management board. From April 2017 to August 2019 she served as a non-executive director of the Board of Anglo American plc. She is a former executive director and executive vice president of strategy and sustainability at Sasol Limited until 2016. She was recently appointed President of the Minerals Council of South Africa.

Ms Michaud, age 54, is the Anglo American plc Group Director – Corporate Relations and Sustainable Impact. Her remit includes corporate communication (including brand and employee engagement), international and government relations, social performance and engagement, sustainability integration to drive positive impact from the Group’s Sustainable Mining Plan.

Mr Stephen Pearce and Mr Tony O’Neill have stepped down as non-executive directors with effect from 26 July 2021.

“We welcome the appointments of Ms Fakude and Ms Michaud, and look forward to their contributions. We’d also like to thank Mr Pearce and Mr O’Neill for their leadership and contributions to the Board during their tenure,” said Natascha Viljoen.

Download the 2021 Interim Report for the six months ended 30 June 2021