Anglo American Platinum Limited (Anglo American Platinum) reported an operating profit of R7.97 billion for the year ended 31 December 2011, a 10% increase. Operating free cash flow increased by 21%, to R9.41 billion. Headline earnings per ordinary share decreased by 29% to R13.65, primarily due to the impact of once-off accounting charges. Headline earnings per ordinary share excluding the once-off accounting charge for the broad-based community economic empowerment transaction (R1.07 billion), the US$10 million donation to the Tongogara district community in Zimbabwe and other once-off costs increased by 8% to R20.94 from R19.35 in 2010.
An 8% increase in the US dollar realised price on the basket of metals sold and a 3% increase in platinum sales volumes both contributed to the operating profit increase. Refined platinum production for the year of 2.53 million ounces was only 2% lower than the prior year, despite a significant increase in the number of safety stoppages, in part due to the increased reliability and efficiency of the smelters which have operated for three years without a major incident. A 23% reduction in net working capital days was also a key contributor to the higher operating free cash flow.
Chief Executive Officer (CEO) Neville Nicolau said: “We are pleased with our strong financial performance, due primarily to a robust recovery in the basket price, particularly in the first half of 2011. Our operational flexibility and the increased reliability of our smelters enabled us to achieve increased sales volumes of 2.6 million ounces. We are particularly pleased to announce that our strong financial performance, improved capital discipline and cash generation, together with a positive outlook on the market, has enabled us to declare a final dividend of R532 million, or R2.00 per share.
I am, however, deeply saddened that 12 of our employees lost their lives during 2011. We extend our sincerest condolences to their families, friends and colleagues. The South African mining industry experienced a challenging year, with a marked increase in the number of safety stoppages. We were impacted by 81 safety stoppages at our own operations in 2011 compared to 36 in 2010. We are continuing to work with Government and our workforce to implement more effective means of addressing major risks and non-compliance to standards. The journey to zero harm remains our key strategic objective.”
Anglo American Platinum expects the platinum market to remain in balance in 2012 due to continued strengthening of autocatalyst demand, resilient jewellery markets and continued investor interest. Primary supply challenges are expected to escalate during 2012 with increased risk of supply disruptions from power shortages, industrial action and safety stoppages in South Africa. The ongoing constraint on capital investment posed by low prices continues to limit South African output growth and 2012 may exhibit the compounding effects of similar capital constraints in recent years. We believe these will be key drivers of the recovery in the platinum price in 2012.
CEO Neville Nicolau said: “We expect 2012 to be a strong year for Anglo American Platinum in which we build upon the momentum we have established between 2008 and 2010. Although 2011 was a particularly challenging year, the restructuring programme implemented in 2008 delivered the intended step change in our operational performance. We have reduced fatalities and LTIFR by 52% and 37% respectively since 2007 and kept our unit costs essentially flat in real terms, between R11,000 and R12,000, during the period 2008 to 2010. We reduced our labour force from over 85,000 employees and contractors in 2008 to 58,000 in 2011, an appropriate level for our production base.
We plan to refine and sell between 2.5 and 2.6 million ounces of platinum in 2012, subject to market conditions. We will monitor the situation during the year for both changes in demand and the opportunity to fill supply gaps created in the market. Our strategy of understanding the platinum market, growing into that market and doing so safely, cost effectively and profitability is well established.
We continue to manage costs as a priority. Our asset optimisation and supply chain activities are well embedded and continue to deliver value. We will continue with our reduction of redundant labour, preferably through mechanisms that avoid retrenchment. We will adjust overhead and shared services labour to the needs of the business. As a result of these swift actions, we aim to contain unit costs to between R14,000 and R14,500 per equivalent refined platinum ounce in 2012. This implies growth in cash operating cost per refined platinum ounce of between 3% and 7%, well below expected mining inflation. Capital expenditure excluding capitalised interest will be up to R8 billion in 2012.
Our safety improvement plan will ensure that we continue to demonstrate improvements on our journey to zero harm.”
Johannesburg, South Africa
13 February 2012