Anglo American Platinum delivers stable results despite challenging market conditions

The company delivered on its 2023 commitments despite an extraordinary correction in PGM basket prices, significant cost pressure and prevailing macroeconomic uncertainty. Anglo American Platinum also continues to extend its record fatality-free performance, in line with its purpose of re-imagining mining to improve people’s lives.

Highlights

Committed to zero harm:

• No work-related fatalities at managed operations for two consecutive years – the company’s longest fatality-free period on record.
• The company reached a record-low total recordable case frequency rate (TRCFR) of 1.61 per one million hours worked, which represents a year-on-year improvement of 31%.
• Mogalakwena, Mototolo and Unki operations have each achieved more than 11 years of fatality-free mining, with Amandelbult recording 9.6 million fatality-free shifts – an encouraging reminder that zero-harm mining is possible.

Progress on ESG:

• The company has taken further steps to implement carbon reduction projects to meet its 2030 and 2040 targets, including being at an advanced stage of the conclusion an energy offtake agreement with Envusa Energy to secure 460MW of clean energy from 2026, equating to ~35% renewable energy usage.
• Demonstrating the company’s leading position as a responsible miner and leader in ESG, Amandelbult has achieved an Initiative for Responsible Mining Assurance (IRMA) 50 rating while Mototolo achieved IRMA 75 and Unki retained its IRMA 75 following a surveillance audit.
• Our strong focus on sustainability was further operationalised through public-private partnerships and collaborations to support infrastructure delivery, including inputting into South Africa’s National Energy Crisis Committee (NECOM) that focuses on the expedited implementation of the Presidential Energy Action Plan.

Financial  performance:

• 2023 financial results are reflective of the weakness in the macro-economic environment and lower PGM prices. EBITDA was R24 billion, down 67% compared to 2022, with the main driver being a 35% decrease in the PGM dollar basket price, most notably palladium and rhodium. The lower prices also impacted the purchase of concentrate inventory measurement which resulted in a R10 billion increase in cost of sales compared to 2022. These headwinds were partially mitigated by a 2% increase in sales volumes.
• Profitability continues to be impacted by above-inflation cost increases in utilities and consumables.
• Headline earnings for the year was R14 billion, 71% lower than 2022.
• Ended the year in a net cash position of R15  billion
• M&C production was 5% down against 2022 at 3.8Moz, mainly due to infrastructure closures at Amandelbult, poor ground conditions at Dishaba and expected lower grades at Mogalakwena, further impacted by the ramp down at Kroondal operations, offset by increased production at Unki and Motololo production remaining flat.
• Our operational performance improved in H2  showing an improvement in stability.
• Completed the disposal of our 50% interest in Kroondal, effective 1 November 2023, resulting in Kroondal transitioning to a third-party processing arrangement.
• From this base, and in line with our disciplined capital allocation framework, the company has returned a total dividend of R 6 billion, or R 21.30 per share, to shareholders for 2023, representing a total payout ratio of 40% of headline earnings.

Significant contribution to society

• The company made a significant contribution of R85 billion to broader society, distributing value to stakeholders.
• R5 billion paid to the national fiscus in taxes and royalties.
• R 16 billion paid to employees in salaries and wages.
• Local procurement of R 30 billion.
• Social investment and community development spend of R700 million.

Operating performance

Total PGM production from own-managed mines decreased by 5% year-on-year, primarily due to planned infrastructure closures at Amandelbult, poor ground conditions at Dishaba and lower grade at Mogalakwena. This was marginally offset by increased production from Unki.

Refined production was 1% lower, primarily due to lower metal-in-concentrate production and the impact of Eskom load curtailment of c.82,000 PGM ounces, partially offset by the release of concentrate stocks. PGM metal in concentrate production decreased by 5% compared with 2022, to 3.8 million ounces for the year.

Mogalakwena production was down 5%, due to expected lower grades, resulting from mining extraction sequence changes. The combined breakdowns at the Baobab plant, as well as high-pressure grinding rolls (HPGR) breakdown at North concentrator, resulted in lower tonnes milled for the period. The stability challenges have been corrected and the HPGR circuit is running at full capacity. As mentioned, planned infrastructure closures and poor ground conditions at Amandelbult’s Dishaba mine resulted in a 11% decrease in production.   

Craig Miller, CEO of Anglo American Platinum, commented:

“Despite these operational challenges,  there were some noteworthy developments in 2023, including Unki’s 14% year-on-year improvement in concentrator throughput following the debottlenecking project, and Mototolo’s  improved concentrator throughput by 50% versus the prior year because of the debottlenecking interventions.”

Financial performance

Sales volumes increased by 2%, however the decline in price combined with higher costs reduced EBITDA by 67% to R24 billion and a mining EBITDA margin of 35%. Headline earnings for the year are R14 billion, 71% lower than the previous year. The company ended the year in a net cash position of R15.4 billion, including the customer prepayment of R11 billion.

“As was the case in 2022, our profitability continues to be impacted by lower PGM prices and above-inflation cost increases in utilities and consumables. As outlined in December’s investor update, in response to external pressures due to the low PGM basket price, we have embarked on an action plan of cost reduction measures targeting a R5 billion in operating cost saving and a further R5 billion saving in stay-in business capital spend by focusing only on critical work to ensure the integrity and reliability of our assets.

The action plan includes various measures, including an organisational restructure aimed at ensuring the delivery of an enhanced cost position, improved near-term cash flows and value focused capital allocation, protecting the company’s balance sheet while preserving long-term growth optionality. Additionally, there is an intentional strategy at the concentrators to produce higher grade concentrate. This produces the same PGM content at lower concentrate throughput volume which has the benefit of reducing required primary furnace capacity and allows us to place the Mortimer Smelter on Care and Maintenance, thereby reducing operating costs, capital expenditure and enhancing overall processing competitiveness.” said Miller.

The company has declared a total dividend of R5.7 billion, or R21,30 per share, for 2023. This represents a total pay-out ratio of 40% of headline earnings.

“The dividend demonstrates ongoing commitment to our dividend policy. The dividends we pay are key to the balance of how we allocate capital between shareholder returns and investing for the future – enabling us to invest for the long term and contribute to the economic prosperity of South Africa and benefit those millions of public and private sector workers whose pensions rely on dividends paid by companies like ours,” said Miller.

Commencement of Section 189A restructuring process

Taking into account the low PGM price environment, the 71% reduction in profit from 2022, ongoing macroeconomic pressures and the necessity to fortify the company’s competitive position and long-term sustainability, the company has had to take active steps and as a last resort commenced a restructuring process in terms of Section 189A of the Labour Relations Act 66 of 1995 (S189A). The process will involve a period of consultation with stakeholders including trade unions and other affected non-unionised employees and only once this has concluded will the final number of impacted jobs be known.

The restructuring is expected to impact a total of 3700 employees across the business. Additionally,  our contracts with 620 service providers are in scope for review.

“We have worked hard to address aspects in our business that are impacted by both the global and local challenges currently facing the PGM industry and have already implemented several key cost-saving initiatives. However, given the market outlook and protracted low-price environment due to structural changes in our markets further measures are required to build the resilience that will sustain this business. It is important to understand that this has been a decision taken as a last resort for the company. We fully acknowledge that this process, that will affect approximately 3700 (approximately 17%) of our employees and 620 contractors who are in scope, will have a socio-economic impact on them, their families and communities. These actions are necessary to continue the employ of thousands of workers and contractors who will continue to add value for our stakeholders – through salaries, taxes and royalties, as well as procurement of goods and services from local suppliers. We will approach and implement the process in line with our values and cultural commitments through centering our people and the impact this will have on them.” said Miller.

The company is committed to putting in place appropriate programmes to support the well-being of employees through this difficult process, as well as a comprehensive social impact mitigation programme.

“We are optimistic about the long-term demand for the PGMs we produce and the important role they play in creating a greener world. In uncertain times, the discipline of getting the basics right has helped us achieve record safety performance and deliver stable production. We will continue to take the steps necessary to ensure the long-term viability of the business and remain committed to our strategic priorities with an ongoing focus on safety, operational excellence and organisational effectiveness to position Anglo American Platinum for a sustainable future,” added Miller.

Outlook

The company expects metal-in-concentrate and refined production to be between 3.3 and 3.7 million PGM ounces in 2024, while unit cost is forecast between R16,500 and R17,500 per PGM ounce. Total capital expenditure of between R19.0 and R19.5 billion is expected. Anglo American Platinum is targeting a reduction in all-in sustaining cost (AISC) of below ~$1,050 per 3E ounce in 2024.

Anglo American Platinum continues to develop a diverse range of existing and new opportunity areas for PGM metals. Platinum is expected to remain in a small deficit over the next few years, as automotive demand remains robust and due to some ongoing substitution of palladium in gasoline catalysts.

Palladium should be in deficit again in 2024, but then move into a surplus from 2025 as automotive demand is curbed by the shift to BEVs and recycling volumes improve. Rhodium will also move into surplus from 2025.

Download the Annual Results for the year ended 31 December 2023 (1MB, opens in a new window)