Anglo American plc (LON:AAL) has noted Anglo American Platinum Limited’s announcement of its results for the year ended 31 December 2022, released this morning to the Johannesburg Stock Exchange.
Highlights:
Committed to zero harm:
- Zero work-related fatal incidents at managed operations were recorded in 2022, with the company’s zero harm focus resulting in the lowest-ever number of safety incidents.
Progress on ESG:
- Protecting the lives and livelihoods of employees – moved to a broader focus on employee well-being to include mental health support, as well as the successful implementation of a new employee share ownership plan (ESOP) “Thobo”, meaning “Harvest”.
- Established Scope 1 and 2 reduction pathways to meet carbon neutrality targets by 2040. This includes a partnership with Envusa Energy, fast-tracking 30% of total energy required, a first major step towards energy independence.
- Continued to support communities through innovative partnerships, including the Olifants River Management Model.
- Supporting the hydrogen economy through market development and advocacy, whilst policy in the US and Europe is accelerating hydrogen economy development.
Operational performance:
- Metal-in-concentrate (M&C) production of 4.0 million PGM ounces with strong performances from Unki and Mototolo offset by lower volumes at Mogalakwena due to grade, planned infrastructure closures at Amandelbult, and lower third-party receipts.
- Total refined production of 3.8 million PGM ounces, impacted by the delay in the completion of the Polokwane smelter rebuild due to the delivery of sub-standard materials, partially offset by improved utilisation at Waterval and Mortimer smelters.
- Year-end net build-up of work-in-progress inventory of c.100,000 PGM ounces.
Financial performance:
- Second-highest dollar basket price on record; moderated from record 2021 highs.
- Unit cost performance increased to c.R15,300 per PGM ounce due to above CPI inflationary increases in utilities and consumables and lower production.
- EBITDA of R74 billion – strong contribution from all assets, optimising the benefits of world-class assets with diversified metal prill splits. Mining EBITDA margin of 57%.
- Return on capital employed remained strong at 111%.
Significant economic contribution to society of R131billion:
- Significant contribution to the fiscus with R19 billion paid in taxes and royalties.
- Salaries and wages paid amounting to R15 billion.
- Local procurement of R25 billion.
- Social investment and community development spend, of R0.6 billion.
- Capital investment of R17 billion and dividends paid in the period of R55 billion.
Industry-leading returns to shareholders:
- Total cash dividend declared of R9 billion or R34 per share for H2 2022.
- Total 2022 dividend declared of R30 billion or R115 per share.
- Total pay-out ratio of 62% of headline earnings.
Anglo American Platinum has delivered safe production and a robust operational performance, resulting in a strong set of financial results for 2022.
Natascha Viljoen, CEO of Anglo American Platinum, commented:
“This financial year has seen us navigate a complex operating environment, with macro-economic challenges, supply chain disruptions, socio-economic unrest and electricity load-curtailment, as well as some operational headwinds of our own. However, we have seen good levels of resilience across our operations and a strong response from our team across our operations, working through these challenges to deliver our mined production, refined production and sales numbers for the year. The prior year benefited from an increase in refined production, which was due to a strong performance from the ACP Phase A unit following its rebuild and recommissioning in November 2020. This increase in refined metal in 2021 was a result of an additional drawdown of c.1.0 million PGM ounces from work-in-progress inventory in 2021.
“While we report no fatalities at own-managed operations for the year, I once again send my condolences to the family, friends and colleagues of Julian Sesinyi, who was injured in November 2021 at the ACP and passed away in April 2022 from complications linked to that slip and fall incident, and Rheina Malatji, from our independently managed operation Modikwa, who was fatally injured in a workplace incident. We continue to see strong improvements in our injury rates and reported the lowest recorded total recordable cases injury rate in the Company’s history in 2022. Our relentless focus remains on eliminating fatalities and achieving zero harm across our operations.”
Operating performance
Total PGM production (comprising platinum, palladium, rhodium, iridium, ruthenium and gold) decreased by 6% to 4,024,000 ounces, principally due to lower grade at Mogalakwena and the impact of planned infrastructure closures at Amandelbult, partially offset by increased production from Mototolo and Unki.
Total PGM production from own mined operations (comprising Mogalakwena, Amandelbult, Mototolo, Unki and our 50% share of Kroondal and Modikwa joint operations) decreased by 7% to 2,649,200 PGM ounces.
A delay in the completion of the rebuild of the Polokwane smelter because of substandard materials, as well as Eskom load-shedding, resulted in total refined production of 3.8 million PGM ounces, with sales in line with refined production.
Market overview
After reaching record highs in 2021, the PGM basket price sustained the second-highest average on record in 2022 of $2,551 (R41, 453) per PGM ounce. Palladium hit a record high in Q1 due to supply concerns following Russia’s invasion of Ukraine, while both palladium and rhodium traded in line with changing automotive production, which was up 7% in 2022. The price of platinum moved higher through 2022, after being negatively affected by a higher dollar price for much of the year.
Financial performance
A solid mining EBITDA margin of 57% was generated in 2022. Cost of sales decreased by 15% to R94 billion in 2022 as a result of lower purchases of concentrate cost due to lower prices and was partially offset by higher mining and processing costs, which were up 11% to R44.4 billion. This compares to the South African Producer Price Index for Mining for 2022 of 18%, reflecting our discipline in cost management.
Initiatives to reduce unit costs included a 5% reduction in energy consumed, 3% reduction in caustic consumption, 34% reduction in grinding media per tonne milled at Amandelbult and a 10% reduction in explosive costs per tonne at Amandelbult.
EBITDA was 32% lower than 2021 at R74 billion. The impact of lower prices reduced EBITDA by R14.3 billion, coupled with CPI inflationary impact of R3.2 billion. This was partially offset by R13.9 billion lower royalties and a weaker rand/dollar exchange rate. The prior year ACP matte stock release included EBITDA benefit from higher sales volumes of R27.0 billion. Headline earnings were R48.8 billion, or R185.42 per share.
From this base, we have provided industry-leading returns to shareholders, with a second-half dividend declared of R9 billion or R34 per share. This brings the total dividend of R30 billion, or R115 per share, representing a total pay-out ratio of 62% of headline earnings.
Cash generated from operating activities contributed R45.4 billion after paying taxes and royalties of R19.4 billion. The Company ended the year in a robust cash generation and resilient balance sheet, with a net cash position of R28 billion.
Outlook
Looking ahead, we expect metal-in-concentrate and refined production to be between 3.6 and 4 million ounces, while unit costs are forecast between R16,800 and R17,800 per PGM ounce. Total capital expenditure of between R22 and R23 billion is expected, which includes stay-in-business capital of between R10 and R11 billion and future growth investments of R4.4 billion.
In terms of market outlook, most analysts expect the dollar to weaken further in 2023, supporting PGM prices. A combination of pent-up demand, low inventories, strong labour markets and stimulus released into the Chinese economy should help the automotive recovery rally continue through the year. Market fundamentals for our metals remain robust, and we expect the supply/demand balances of the three main PGMs to be in small deficits in 2023.
Management changes
As announced on 15 February 2023, Natascha Viljoen has decided to take up her next career opportunity outside the Anglo American group. She will continue to serve as CEO and executive director of Anglo American Platinum throughout her notice period of up to 12 months.
The management team structure has been strengthened to enhance organisational effectiveness in order to execute against our strategic priorities and to create additional continuity. The following changes were approved by the board with effect from 1 March 2023:
- Riaan Blignaut, currently executive head of asset reliability and safety, health, environment, and energy (AR & SHEE), has been appointed chief operating officer. He will take full responsibility for operational delivery, including mining and processing.
- Wade Bickley, currently head of underground mining at Anglo American, has been appointed as the executive head mining technical, tasked with transforming the operational environment with responsibility for business improvement, integrated planning, and digital solutions to improve mining technical performance.
- Agit Singh, currently the head of human resources operations and previously general manager of the Precious Metals Refinery (PMR), has been appointed as the executive head processing technical. He will focus on technical processing aspects as well as technology and performance improvement across the value chain. Gary Humphries, after a career spanning 22 years with Anglo American Platinum, almost seven of which were as a member of the PMC, has decided to step away from the business. He has been an integral part of the executive team. The Board and Platinum Management Committee thank him for his significant contribution and dedicated years of service.
“I am fully committed to the team and the vital work we are busy with at Anglo American Platinum. As we continue to optimise the way we work, we also restructured the work of the executive team to increase the focus on operational delivery whilst steering through the fast-changing operating context. The changes have been underway for some time and will ensure continuity and stability in our leadership team. I am particularly pleased that all of these appointments were internal succession, reflecting the strength of our teams. We will continue to achieve so much together during this year and my focus and dedication is unabated. I have every confidence in the ability of our strong executive team to continue to shape the business to deliver on our strategic and operational priorities for the next stage of value delivery. We are building a purpose-led, values-driven and high-performance culture with stakeholders front of mind,” concluded Viljoen.
