Anglo American Platinum delivers sound financial results against a backdrop of weaker PGM prices

Key features:

Commitment to zero harm:

• Continued initiatives to improve safety, with no fatalities for the period.
• Achieved a record low total recordable case frequency rate (per million hours) of 1.58.

Strong progress on ESG; focus on public-private partnerships and collaborations to support infrastructure delivery:

• We continue to support initiatives and working groups within South Africa’s National Energy Crisis Committee (NECOM) to focus on the expedited implementation of the Presidential Energy Action Plan.
• The Olifants Management Model Public-Private Partnership to implement a ‘source-to-tap’ water solution to deliver significant value for our operations and host communities.

Total platinum group metals (PGM) production decreased by 7%; full-year guidance maintained:

• Mogalakwena’s production was impacted by the expected lower grade and the unplanned maintenance shut at the Baobab plant, though this was mitigated by higher run-time and reliability at the North concentrator.
• Amandelbult’s production was affected by 2022 mining area and infrastructure closures, poor ground conditions at Dishaba and short-term operational challenges at Tumela.
• Mototolo and Unki maintained stable production for the period.
• Refined production (excluding toll refining) declined 13% to 1.7 million PGM ounces.

Load curtailment:

• Impacted concentrators and smelters, which resulted in an increased work-in-progress inventory of c.66,400 PGM ounces.

Declining PGM basket price:

• PGM prices were weaker in the first half of 2023, driven by an uncertain macro-economic environment and specific PGM market factors.
• The average realised PGM dollar basket price decreased by 29% in the period to $1,885 per PGM ounce.

EBITDA of R13 billion and a solid EBITDA mining margin of 42%.

Unit cost performance of R18,076 per PGM ounce. Full-year unit cost guidance of between R16,800 and R17,800 maintained.

Return on capital employed of 30%.

Maintained capital discipline and returns to shareholders in H1 2023:

• Stay-in-business capital investment focused on asset reliability to ensure safe, stable and capable operations.
• Base dividend of R3 billion, or R12 per share, based on a payout ratio of 40% of headline earnings.

Natascha Viljoen, CEO of Anglo American Platinum, commented:

In the first half of 2023, and despite the challenging global macro-economic and operating environment, we have achieved results in line with expectations following the change in guidance, disclosed in 2022.

Safety has always been our most fundamental value and is embedded in everything we do. Our safety performance in the half-year demonstrates the outcome of constantly working towards safe, stable, and capable operations, as this is a critical foundation for zero-harm production.

We have reported a decline in metal-in-concentrate and refined PGM production in the half-year. Despite lower production and a 29% decrease in the PGM dollar basket price, we have delivered a robust mining EBITDA margin of 42% and EBITDA of R13 billion.

We have diversified uses for our metals which include industrial, automotive, technology, battery storage, food preservation, investments, and jewellery. Additionally, we see many other emerging uses including the development of green hydrogen technology, which is PGM intensive.

Our four strategic priorities have positioned us to be agile in a fast-changing and complex world.

First, we continue to build on our existing areas of excellence to become a leader in ESG in the mining sector. Our ESG plan is deeply integrated into everything that we do, and it is pleasing to see external recognition for our focus on this critical work. I’d like to thank all our stakeholders, whose contributions have been invaluable in achieving these results.

Second, we are building resilience across our business, with the aim of increasing our ability to thrive through major disruptions. These initiatives are helping us facilitate the successful execution of our strategy.

Third, we will maximise value from our core portfolio of mining and processing assets. This means investing in and deploying innovative technologies to drive efficiencies and value, with targeted investments that define the future of our world-class assets.

Lastly, our market development work is fundamental to ensure our products have a sustainable and positive impact on the world. We are leveraging capabilities through these activities and capturing value from adjacent value chains.

Operating performance

Total PGM production decreased by 7% to 1,844,300 PGM ounces. This was primarily due to expected lower grade at Mogalakwena, 2022 mining area and infrastructure closures, poor ground conditions and (now resolved) short-term operational challenges at Amandelbult, and the ramp-down of Kroondal. Mototolo and Unki increased production, which marginally offset the decrease from other mining operations.

Refined PGM production (excluding toll-treated metal) decreased by 13% to 1,699,800 PGM ounces. This was attributable to the ramp-up at Polokwane smelter in January following its rebuild, scheduled annual maintenance and asset integrity work at the other processing operations, and Eskom load curtailment, which resulted in deferred production.

Despite being impacted by 42 days of load curtailment in the half-year, our mining operations were not impacted. The models we have built allow us to align our maintenance days with the curtailment days. As a result, we have incurred minimal losses in terms of mined ounces and reported an increase in work-in-progress of 66,400 PGM ounces.

PGM sales volumes (excluding trading) decreased by 12% to 1,807,300 PGM ounces, in line with lower refined production. PGM trading volumes increased by 214% to 2,065,200 PGM ounces, in line with the strategy for greater participation in the market.

Market overview

PGM prices were mostly weak in the first half of 2023, as an uncertain macro-economic backdrop was overlaid with metals-specific negative factors. The PGM average realised basket price was $1,885 per ounce, 29% lower than in the same period of 2022. This weak performance was due to sizeable declines seen in rhodium and palladium, taking both to multi-year lows.

Rhodium averaged $8,957 per ounce (Johnson Matthey base price), an historically high figure but one that was 48% lower than in the same period of 2022. It was also 35% lower than in H2 2022. Palladium averaged $1,505 per ounce (London settlement price), 32% lower than in the same period of 2022, and 25% down on H2 2022. In contrast, platinum’s H1 2023 average of $1,009 per ounce (London settlement price) was 1% higher year on year, and a 9% increase on the second half of 2022. The minor PGMs, iridium and ruthenium, saw little price change, remaining at elevated historical levels.

PGM demand is set to rise modestly in 2023, supported by ongoing capital projects in China. Rhodium industrial demand, however, has been hit by disposals from the fibreglass industry. Platinum jewellery demand is forecast to stabilise, though much will depend on the Chinese market.

On the supply side, underlying PGM mine production in South Africa was lower than in the same period of 2022, but not significantly so, with the industry coping well with challenges caused by a shortage of electricity. Over the full-year, supply may rise marginally. Russian PGM output is expected to be weaker in 2023, as Norilsk begin delayed maintenance, but so far this year actual flows of metal from that country have risen as trade routes adjust to the various restrictions imposed after Russia’s invasion of Ukraine.

Financial performance

EBITDA was 69% lower year-on-year at R13.4 billion, mainly due to the impact of significantly lower prices, lower sales volumes, and higher costs. A solid mining EBITDA margin of 42% was generated in the first half of the year.

Headline earnings were R7.9 billion (H1 2022: R26.7 billion), resulting in headline earnings per share (HEPS) of R29.84 per share (H1 2022: R101.40 per share). The Company’s balance sheet remains strong, with net cash of R23.9 billion.

The Board declared an interim dividend of R12 per share or R3.1 billion for the first half of 2023, in line with the company's dividend policy of a 40% payout of headline earnings.

Outlook

Our guidance for the year remains unchanged. We expect metal-in-concentrate production of between 3.6 – 4.0 million PGM ounces. Refined PGM production is also expected between 3.6 - 4.0 million PGM ounces, subject to the impact of Eskom load curtailment. Unit cost guidance for 2023 remains between R16,800 - R17,800 per PGM ounce and is expected to be at the upper range of guidance. In 2023, total capital expenditure is expected to remain within the market guidance of c.R22 billion. 

In terms of market outlook, we expect platinum to remain in deficit over the next few years, as automotive demand gains from ongoing substitution of palladium in gasoline catalysts. We forecast palladium to move into surplus for the opposite reason, though to what extent will depend on what happens to automotive production and BEVs’ share of it. Rhodium will remain in a small surplus, assuming further disposals from the fibreglass industry.

Emissions legislation around the world, the growing hydrogen economy and demand for PGMs in industrial applications should see global demand grow in future. We continue to invest in our assets and our market development efforts to ensure we are well-positioned to take advantage of future demand.

I want to express my heartfelt gratitude to all my colleagues for their hard work and dedication. Together, we have delivered incredible results during particularly challenging times, from safety and operational efficiency to environmental stewardship and community relationships. We continue to build a high-performance culture rooted in our values, ensuring that our workplaces are physically and psychologically safe for every team member. I am immensely proud of the work we have done, the partnerships we have built, and the significant difference we will continue to make in people’s lives. Our purpose and the work we do matters,” concluded Viljoen.

Download the 2023 Interim Report for the six months ended 30 June 2023 (PDF, 5.5MB, opens in a new window)