Anglo American Platinum makes a substantial economic contribution on back of record results

Highlights:

Committed to zero harm:

• No work-related fatalities at own-managed operations and non-managed joint-operation Modikwa. Tragically, two fatalities were recorded at non-managed joint venture operation Kroondal.

Progress on ESG:

• Increasing our efforts to address gender and domestic violence through our Living with Dignity programme
• Protecting the lives and livelihoods of employees and communities through our WeCare pandemic response programme and facilitating Covid-19 vaccination roll-out around operations in South Africa and Zimbabwe.
• Supporting our colleagues through embedding safety measures, increasing diversity and inclusion in the organisation, and embedding the right culture.
• Established the roadmap to reduce scope 1 and 2 emissions by 30% by 2030.

Operational highlights:

• Total platinum group metals (PGMs) production up 13% to 4.3 million ounces with solid production performance from all own-managed operations, despite operating under Covid-19 conditions (2020: 3.8 million ounces).
• Record refined production up 89% to 5.1 million ounces, due to continued operational stability at the ACP and strong performance across all processing assets (2020: 2.7 million ounces).
• Record PGM basket price – Rand basket price up 22% to R44,511 per PGM ounce due to robust underlying fundamentals for all the PGMs (2020: R33,320 per PGM ounce).
• Record EBITDA of R108 billion – strong contribution from all assets, optimising the benefits of world-class assets (2020: R41.6 billion).
• Return on capital employed increased to 183% (2020: 72%).

Significant economic contribution to society of R148 billion:

• Continuing to protect the lives and livelihoods of all employees with R14 billion paid in salaries and wages.
• Increased local BEE procurement to R28 billion
• Capital investment of R14 billion
• Social investment and community development spend, including Covid-19 support, of R2 billion
• Significant contribution to the South Africa and Zimbabwe fiscus with R35 billion paid in taxes and royalties.

Industry-leading returns to shareholders, with a total cash dividend declared of R125 per share, or R33.2 billion, for the second half. This equates to a pay-out ratio of 100% of headline earnings and brings the total dividend for the year to R300 per share. (2020 total dividend: R45.58 per share.)

Anglo American Platinum delivered a record financial performance in 2021, underpinned by safe production, record refined output and higher prices for its metals. The strong financial performance resulted in industry-leading returns to shareholders and a meaningful broader economic contribution to stakeholders, aligned with our Purpose to re-imagine mining to improve people’s lives. Natascha Viljoen, CEO of Anglo American Platinum, commented:

“Anglo American Platinum has once again delivered safe production and record operational and financial results, despite the ongoing effects of Covid-19 on our day-to-day operations. I am grateful that we completed the year without any fatal incidents at our own-managed operations or our non-managed joint-operation, Modikwa. This is an important milestone for us as we work tirelessly to keep our employees safe, and as we progress towards our ultimate aim of zero harm.

Regrettably, our non-managed joint operation, Kroondal, reported two fatalities during the year. We are increasing our collaboration with our joint operation partners and through the Minerals Council of South Africa, to help ensure safety learnings are shared and that safety is supported across the industry.

We are well aware of the societal challenges we face in our operating countries. That is why we are continuing to focus on factors within our control. This includes looking internally and deliberately working on our organisational culture through our Culture in Action work. This is a leader-led stand against inappropriate behaviours that also allows our leadership to take part in national and international debates around sustainability and other societal concerns such as gender based violence. Our ongoing focus is on strengthening the social compact by working together with business, government, and labour to address broader societal issues and bring about positive change.”

The Company reported a strong recovery at mining operations, with metal-in-concentrate production (M&C) increasing by 13% to 4.3 million PGM ounces. Taking into account depleted ore resources at Amandelbult and Kroondal, we maintained production in line with 2019, a non-Covid-19 impacted year.

We achieved record refined production from our processing assets, refining over 5.1 million PGM ounces, supported by a stable ACP performance and a consistent performance across all processing assets. As a result, we released most of our build-up work-in-progress inventory from 2020 by the year-end. This performance enabled us to increase our sales volumes by 82% to just over 5.2 million PGM ounces, despite rebuilding finished-goods inventory to normalised levels in the second half of the year.

As a result of the record operational performance, buoyed by an increase of 22% in the PGM Rand basket price over the period, we achieved a record set of financial results. However, we also saw an increase in unit costs of 9%, to R12,831 per PGM ounce (2020: R11,730 per PGM ounce), driven by price increases in fuel, electricity and consumables on the back of higher steel and oil price rises, as well as above-inflation wage increases.

Despite these challenges, we delivered a 161% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to R108.4 billion (2020: R41.6 billion). This, in turn, led to an increase in headline earnings to R79 billion. Return on capital employed increased to 183% (2020: 72%).

The Company’s balance sheet remains in a strong position, with net cash of R49.1 billion, after paying dividends of R55.7 billion and R34.8 billion in taxes and royalties.

In line with our disciplined capital-allocation framework supported by the strong balance sheet, improvement in refined production in 2021, continuation of relatively high PGM prices and the ability of the Company to withstand downside price risk and operational challenges, the Board has declared a second-half cash dividend of R33.2 billion, or R125 per share. This brings the total 2021 dividend to R79.6 billion, or R300 per share, equivalent to a 100% pay-out of full-year 2021 headline earnings.

“We are committed to being a good corporate citizen – and such a strong operational and financial performance has enabled us to make a significant total contribution to society of almost R150 billion for the year, benefiting broader stakeholders and society. Our broad-based contribution includes larger payments of taxes and royalties, purchasing local goods and services, continuing to protect the lives and livelihoods of all employees, making meaningful investments in communities, continuing our capital investment programme, and paying industry-leading returns to shareholders in the form of dividends,” said Viljoen.

Outlook
We expect market balances for platinum, palladium and rhodium (3E PGMs) to tighten in 2022. Demand will likely improve as automotive demand for PGMs increases on the back of a recovery in light-duty vehicle (LDV) production. Supply is set for a modest increase, primarily due to growth in autocatalyst recycling as more cars are scrapped. Refined mine production is likely to normalise following the build-up in work-in-progress inventory being largely refined in 2021.

In terms of market balance, we forecast platinum to be in surplus again in 2022, albeit a smaller one than in 2021. This will primarily be dependent on investment demand but would need to be nearer 2019 levels of 1 million ounces to push platinum back into deficit. In 2022, palladium is likely to be in a small deficit again, as the modest improvement in supply is offset by improving automotive demand. Rhodium should move back much closer to balance after 2021’s large surplus, as the increase in automotive demand is expected to outweigh any increase in supply.

Due to the strong refined production performance in 2021, refined production guidance for 2022 has been revised to 4.2‒4.6 million PGM ounces, to reflect the M&C production, the processing of the lower WIP inventory, and the scheduled Polokwane smelter rebuild.

M&C production in 2022 will be impacted by planned maintenance, particularly at the Mogalakwena South Concentrator, which is aligned with the downtime at the Polokwane smelter. As a result, M&C production for 2022 is expected to be in the region of 4.1‒4.5 million ounces.

Unit cost guidance for 2022 is between R13,800 and R14,500 per PGM ounce, reflecting ongoing inflationary pressures that are expected to materialise in 2022, as well as increased physical mining activities at Mogalakwena.

In conjunction with the Polokwane smelter rebuild in H2 2022, which will lead to a higher-than-normal ratio of base metal material to be processed from Mogalakwena in 2023, there will be a short-term constraint on the Anglo Converter Plant (ACP). This will result in a temporary build-up in PGM WIP inventory, resulting in lower refined PGM production in 2023 of 3.8‒4.2 million PGM ounces. Refined production in 2024 should recover to 4.1‒4.5 million PGM ounces.

The guidance for capital expenditure is between R18-18.5 billion, with total sustaining capital of between R14-14.5 billion. This includes stay-in-business capital of R9-9.5 billion focused on enhancing asset integrity, capitalised waste stripping of c.R3 billion, life extension capital of R2 billion and approved breakthrough capital and expansion capital of c.R4 billion.

“To live up to our Purpose and maximise value for all our stakeholders, we need to realise the full potential of our resources and operating assets. Anglo American Platinum has a large precious metals resource and our portfolio of tier 1 assets, which are diverse in location, product mix and mining methods, operate sustainably in the first half of the cost curve. We have the largest processing capability in the PGMs industry, and our integrated value chain creates optionality with significant potential. We will focus our capital decisions across the portfolio to ensure we maximise our full value potential, including progressing the Future of Mogalakwena work, which continues to develop as we progress.” concluded Viljoen.

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