Anglo American Platinum delivers strong financial performance in face of local and global headwinds
Highlights:
- Relentless focus on keeping our people and communities safe to mitigate the effects of ongoing market disruptions and deliver operational performance – tragically we lost one colleague in the 2nd quarter 2022 from the ACP following a slip-and-fall incident in November 2021, and one colleague from our independently managed Modikwa operation.
- Progress on our ESG journey:
- Protecting lives and livelihoods of employees and communities through our recovery and reconstruction programmes;
- Concluded a ground-breaking five-year wage agreement with unions and our employees;
- Implementation of Social Labour Plans and progressing livelihood initiatives; and
- Launched the nuGenTM hydrogen fuel-cell haul truck, key to our decarbonisation progress.
- R71 billion economic contribution to society including:
- R6.8 billion in salaries and wages;
- Increased local procurement to R15.3 billion, including R1.1 billion on doorstep community procurement;
- Community development spend and dividend pay-outs to community trusts of R350 million;
- Significant contribution to the fiscus, with R9.5 billion paid in taxes and royalties;
- R6.1 billion of capital invested into the business; and
- R33.1 billion in dividends paid to shareholders.
- Total platinum group metals (PGMs) production decreased by 4%, improvements expected in H2:
- Mogalakwena impacted by headwinds in H1. Growing confidence through higher-grade mining areas, increased truck fleet, improved P101 operational performance in mining and greater runtime at North Concentrator sets the mine up for a stronger H2.
- Amandelbult maintained production, despite infrastructure closures at Tumela at the end of 2021.
- Mototolo and Unki saw significant increases in production following the successful integration of the concentrator debottlenecking projects.
- Robust PGM basket price –$2,671 per PGM ounce, the second-highest on record as a result of strong underlying fundamentals for PGMs.
- Build-up in work-in-progress inventory from ACP largely released and processed in 2021, one year ahead of schedule – H1 2022 therefore shows more normalised refined production and sales volumes, and EBITDA generation.
- EBITDA of R43 billion, a 32% decrease due largely to exceptional built-up sales volumes in H1 2021, and strong EBITDA mining margin of 59%.
- Unit cost performance of R14,600 per PGM ounce, in line with expectations.
- Return on capital employed of 150%.
- Maintaining capital discipline and returns to shareholders in H1 2022:
- Stay-in-business capital investment focused on asset reliability to ensure stability.
- Base dividend of R10.9 billion or R41 per share, based on a pay-out ratio of 40% of headline earnings.
- Special dividend declared of R10.6 billion, or R40 per share.
- Total cash dividend declared of R21.5 billion or R81 per share, equating to an 80% pay-out ratio of headline earnings.
- Evaluating opportunities for growth and progressing the Future of Mogalakwena studies.
Natascha Viljoen, CEO of Anglo American Platinum, commented:
“The first half of 2022 has seen us largely mitigate the operational headwinds of Covid-19, global supply chain disruptions, security of electricity supply, as well as social and geopolitical complexities to deliver another strong financial performance, bearing in mind the record results of the first half of 2021 when we processed and sold much of our inventory that we had built up during the ACP rebuild in 2020. Our performance in the first half of this year represents more normalised levels of sales volumes and resulting EBITDA.
“I am sad to report that we tragically lost Julian Sesinyi, who was injured in November 2021 and passed away from complications linked to his slip and fall incident at the ACP. At our independently managed operation Modikwa, Rheina Malatji was fatally injured by a spare wheel that had rolled down a decline. We send our deepest condolences to their families, friends, and colleagues. Our relentless focus remains on eliminating fatalities and achieving zero harm across our operations.
“We are proud to have concluded a groundbreaking five-year wage agreement with our unions and employees, highlighting our constructive relationships and building of trust. This is a cost-to-company increase of 6.6% on average for five years and brings a firmer foundation to our business stability.”
Total PGM production was down 4%, with the majority of own-mine assets performing better than in H1 2021. Mototolo and Unki both experienced 21% increases as a result of the successful implementation of concentrator debottlenecking projects. Amandelbult maintained production, despite mined-out areas leading to infrastructure closures at Tumela at the end of 2021.
Mogalakwena experienced several headwinds – unprecedented rainfall at the start of the year as well as Covid-19-related supply chain disruptions led to delays in the delivery of drilling equipment. The business is also adjusting to longer haul distances as we incorporate community feedback regarding culturally significant heritage areas that has resulted in us diverting our waste dumping zone. Despite these challenges, the experienced management team at Mogalakwena is confident of improved performance in H2. There is a planned increase in the truck fleet to mitigate the longer haul distances; we have access to higher-grade mining areas in line with the mine plan; we see operational improvements through implementing the Operating Model and P101 operational excellence programmes; and greater runtime on the North Concentrator due to maintenance brought forward into H1.
Refined production was in line with metal-in-concentrate production, with all mined material processed. Sales volumes were in line with refined production. Work-in-progress volumes have returned to more normalised levels as the company processed the work-in-progress inventory that had built up in 2021 as a result of the temporary closure of the ACP.
While PGM basket prices decreased in the first half, the average price of $2,671 is the second-highest average price on record, illustrating the robust underlying market fundamentals for the suite of metals.
This contributed to another strong financial performance, with revenue of R86 billion, EBITDA of R43 billion, and an EBITDA mining margin of 59% achieved in the period. The 20% decrease in revenue and 32% decrease in EBITDA was a result of lower sales volumes compared to the prior period, mainly due to H1 2021 recording the benefit of increased refined production due to higher-than-normal work-in-progress inventory following the ACP Phase A rebuild.
This strong financial performance enabled Anglo American Platinum to continue to contribute to broader society, with R71 billion allocated in the first six months of 2022.
Our disciplined approach to capital allocation continues, taking into consideration the outlook for our operations and metals, sustaining capital requirements, returns to shareholders, and growth opportunities. As a result, the board has approved an interim dividend of R41 per share, or R10.9 billion, in line with our pay-out policy of 40% of headline earnings, as well as a special dividend of R40 per share, or R10.6 billion, bringing the total pay-out to 80% of headline earnings.
Outlook
Looking at the remainder of the year, inflationary pressures will continue to have an impact on commodity price increases, as well as tightening monetary policy. Full-year metal-in-concentrate production is expected to remain unchanged at between 3.9 - 4.3 million PGM ounces, and refined production will also remain at between 4 - 4.4 million ounces. Anglo American Platinum is confident that full-year guidance will be achieved; however, potential external headwinds exist, including further Covid-19-related disruptions and Eskom load-shedding.
Unit cost guidance remains between R14,000 to 15,000 per PGM ounce, based on an oil price of around $100 per barrel. Capital expenditure guidance for the full year has been reduced to between R16 billion and R17.5 billion.
In the PGM markets, the forecast is for platinum’s surplus to gradually move towards a deficit due to a significant increase in automotive platinum demand, as some platinum replaces palladium in gasoline catalysts. Palladium is likely to move into surplus for the opposite reason, though to what extent will depend on what happens to automotive production. Rhodium should head back into deficit after two years of surplus.
“Longer-term, we are excited with the momentum we are seeing in the development of the hydrogen economy – with more countries announcing hydrogen-specific strategies, there is more investment committed to broader hydrogen infrastructure and more green hydrogen production, which will enable us to unlock incremental PGM demand in new segments such as hydrogen production and storage, as well as mobility.
“Our market development efforts will continue to support both established demand segments and the discovery of new applications. One example is our recently launched nuGenTM hydrogen-fuelled haul truck at Mogalakwena, which has the potential to unlock new frontiers in decarbonising our operations, drive demand for PGMs, and support the building of a hydrogen economy in South Africa.
“We continue to be uncompromising in our focus on getting the building blocks for continued success in place, and ensuring that our operations are safe, stable and delivering to the expectations of our shareholders and stakeholders across society.
“None of this would be possible without our people, who are the lifeblood of our organisation, and I thank all our colleagues for your contributions.”
Download the 2022 Interim Report for the six months ended 30 June 2022 (5.8 MB, opens in a new window)