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AMS AMSP
ANANP
AMS - Anglo Platinum - Abridged Financial Report For The Year Ended 31
December 2008
Anglo Platinum Limited and its Subsidiaries
("Anglo Platinum")
(Incorporated in the Republic of South Africa)
(Registration number 1946/022452/06)
JSE Codes: AMS; AMSP & ISIN: ZAE000013181; ZAE000054474
A member of the Anglo American plc group
MAIN FEATURES
- Noticeable improvement in safety performance
- Record headline earnings, up 8% to R13.3 billion
- Produced 2.39 million refined platinum ounces
- Rand basket price per platinum ounce up by 23% to R22,348
- Implemented an Employee Share Ownership Plan
ABRIDGED FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2008
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year year
ended ended
R millions 31 Dec 2008 % change 31 Dec 2007
GROSS SALES REVENUE 51,118 46,961
Mined 40,183 40,749
Purchased metals 10,935 6,212
Commissions paid (353) (345)
NET SALES REVENUE 50,765 9 46,616
COST OF SALES (33,682) (22) (27,519)
GROSS PROFIT ON METAL SALES 17,083 (11) 19,097
Mined 15,401 18,470
Purchased metals 1,682 627
Other net 949 (119)
income/(expenditure)
Market development and (378) (324)
promotional expenditure
OPERATING PROFIT 17,654 (5) 18,654
Profit on disposal of 1,141 -
investment in Northam
Platinum Limited
Interest expensed (159) (182)
Interest received 277 403
Dividends received 55 -
Net income from associates 161 448
PROFIT BEFORE TAXATION 19,129 (1) 19,323
Taxation (4,470) 33 (6,656)
PROFIT FOR THE YEAR 14,659 16 12,667
OTHER COMPREHENSIVE INCOME
Deferred foreign exchange 4 (57)
translation gains/(losses)
TOTAL COMPREHENSIVE INCOME 14,663 12,610
FOR THE YEAR
PROFIT ATTRIBUTABLE TO:
Owners of the Company 14,243 16 12,330
Minority interest 416 23 337
14,659 12,667
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the Company 14,247 12,273
Minority interest 416 23 337
14,663 12,610
Number of shares in issue 237.1 236.4
(millions)
Weighted average number of 236.8 234.7
ordinary shares in issue
(millions)
Attributable earnings per
ordinary share (cents)
- Basic 6,011 15 5,241
- Diluted 5,985 15 5,203
RECONCILIATION BETWEEN PROFIT
AND HEADLINE EARNINGS
Profit attributable to 14,243 12,330
shareholders
Less: Deemed dividends to (5) (16)
preference shareholders
Less: Declared and undeclared (7) (15)
cumulative preference share
dividends and related STC
Basic earnings attributable 14,231 12,299
to ordinary shareholders
Adjustments (after tax where
applicable):
Profit on disposal of (1,002) -
investment in Northam
Platinum Limited (after tax
of R139 million)
Net loss/(profit) on disposal 51 (5)
and scrapping of property,
plant and equipment (after
tax of R19 million 2007: R2
million)
Headline earnings 13,280 8 12,294
attributable to ordinary
shareholders
Add: Deemed dividends to 5 16
preference shareholders
Add: Declared and undeclared 7 15
cumulative preference share
dividends and related STC
Headline earnings 13,292 12,325
Attributable headline
earnings per ordinary share
(cents)
- Headline 5,609 7 5,239
- Diluted 5,586 7 5,201
Dividends per ordinary share 3,500 5,200
(cents)
- Interim 3,500 2,900
- Final - 2,300
Dividends per preference 638 638
share (cents)
Dividend cover per ordinary 1.6 1.0
share (headline earnings)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency
Share Share translation
R millions capital premium reserve
Balance at 31 December 2006 23 5,568 -
Total comprehensive income for the (57)
year
Ordinary and preference dividends 1 3,627
Paid in cash
Dividends reinvested 1 3,627
Cash distribution to minorities
Ordinary share capital issued -* 853
Conversion of preference shares -* (753)
Equity-settled share based
compensation
Shares purchased for employees -
Balance at 31 December 2007 24 9,295 (57)
Total comprehensive income for the 4
year
Ordinary and preference
dividends paid in cash
Cash distribution to minorities
Unclaimed dividends
Ordinary share capital issued -* 192
Conversion of preference shares -* (114)
Issue of shares in respect of
Employee Share
Participation Scheme (Scheme) -* 1,954
Scheme shares reflected as treasury (-*) (1,954)
shares
Equity-settled share-based
compensation
Shares purchased for employees
Balance at 31 December 2008 24 9,373 (53)
Accumulated Minority
R millions profits interests Total
Balance at 31 December 2006 22,590 511 28,692
Total comprehensive income 12,330 337 12,610
for the year
Ordinary and preference dividends (15,904) (12,276)
Paid in cash (12,276) (12,276)
Dividends reinvested (3,628) -
Cash distribution to minorities (382) (382)
Ordinary share capital issued 853
Conversion of preference shares (753)
Equity-settled share based 57 57
compensation
Shares purchased for employees (28) (28)
Balance at 31 December 2007 19,045 466 28,773
Total comprehensive income for the 14,243 416 14,663
year
Ordinary and preference (13,816) (13,816)
dividends paid in cash
Cash distribution to minorities (421) (421)
Unclaimed dividends -* -
Ordinary share capital issued 192
Conversion of preference shares (114)
Issue of shares in respect of Employee
Share
Participation Scheme (Scheme) 1,954
Scheme shares reflected as treasury (1,954)
shares
Equity-settled share-based 262 262
compensation
Shares purchased for employees (43) (43)
Balance at 31 December 2008 19,691 461 29,496
* Less than R500,000.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
year year
ended ended
R millions 31 Dec 2008 31 Dec 2007
ASSETS
NON-CURRENT ASSETS 47,400 36,964
Property, plant and equipment 28,435 20,697
Capital work-in-progress 18,136 15,561
Investment in associates 530 391
Investments held by environmental trusts 66 120
Other financial assets 158 116
Other non-current assets 75 79
CURRENT ASSETS 18,715 14,832
Inventories 10,064 6,370
Trade and other receivables 3,941 4,246
Other assets 225 134
Other current financial assets 1,615 3
Cash and cash equivalents 2,870 4,079
Assets classified as held for sale 2,553 2,254
TOTAL ASSETS 68,668 54,050
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES
Share capital - ordinary and preference 24 24
Share premium - ordinary and preference 9,373 9,295
Foreign currency translation reserve (53) (57)
Accumulated profits 19,691 19,045
Minority shareholders` interest 461 466
SHAREHOLDERS` EQUITY 29,496 28,773
NON-CURRENT LIABILITIES 23,098 12,821
Interest-bearing borrowings 10,313 2,713
Obligations due under finance leases 509 490
Other financial liabilities 152 -
Environmental obligations 1,019 840
Employees` service benefit obligations 4 30
Deferred taxation 11,101 8,748
CURRENT LIABILITIES 15,328 11,509
Current interest-bearing borrowings 5,507 4,962
Trade and other payables 4,956 4,105
Other liabilities 1,807 1,615
Other current financial liabilities 2,388 -
Share-based payment provision 97 474
Taxation 573 353
Liabilities directly associated with 746 947
assets classified as held for sale
TOTAL EQUITY AND LIABILITIES 68,668 54,050
CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
year year
ended ended
R millions 31 Dec 2008 31 Dec 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers 52,855 46,380
Cash paid to suppliers and employees (33,612) (25,715)
Cash from operations 19,243 20,665
Interest (paid)/received (net of interest (99) 5
capitalised)
Taxation paid (1,799) (6,821)
Net cash from operating activities 17,345 13,849
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property, plant and equipment (14,388) (10,653)
(includes interest capitalised)
Proceeds from sale of plant and equipment 26 81
Investment in associates (22) (11)
Disposal of subsidiary (17) -
Proceeds on sale of investment in Northam 1,572 -
Platinum Limited
Investment of funds in escrow iro (542) -
Booysendal deal
Investment in rights in preferences (1,610) -
shares
Decrease/(increase) in investments held 54 (120)
by environmental trusts
Interest received 233 379
Growth in environmental trusts 36 24
Dividends received 132 279
Advances made (30) -
Net cash used in investing activities (14,556) (10,021)
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from the issue of ordinary share 78 100
capital
Proceeds on interest-bearing borrowings 8,145 7,575
Loan from Khumama Platinum (Proprietary) 2,356 -
Limited
Ordinary and preference dividends paid (13,816) (12,276)
Cash distributions to minorities (421) (382)
Net cash used in financing activities (3,658) (4,983)
Net decrease in cash and cash equivalents (869) (1,155)
Cash and cash equivalents at beginning of 4,079 4,988
year
Transfer to assets held for sale (340) 246
Cash and cash equivalents at end of year 2,870 4,079
MOVEMENT IN NET DEBT
Net (debt)/cash at beginning of year (4,086) 4,413
Net cash from operating activities 17,345 13,849
Net cash used in investing activities (14,556) (10,021)
Other (12,162) (12,327)
Net debt at end of year (13,459) (4,086)
NOTES TO THE ABRIDGED RESULTS
1. This abridged report complies IAS 34 - Interim Financial Reporting, as well
as with Schedule 4 of the South African Companies Act and the disclosure
requirements of the JSE Limited`s Listings Requirements.
2. The abridged report has been prepared using accounting policies that comply
with International Financial Reporting Standards and South African Statements
of Generally Accepted Accounting Practice. The accounting policies are
consistent with those applied in the financial statements for the year ended
31 December 2007, except for the following changes:
- Amendment to IAS 1 - Presentation of Financial Statements;
- IFRIC 12 - Service Concessions;
- IFRIC 13 - Customer Loyalty Programmes;
- IFRIC 14, IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction;
- IFRS 2 - Share Based Payment - Amendment relating to Vesting Conditions and
Cancellations;
- IFRS 5 - (Amendment) Non-Current Assets Held for Sale and Discontinued
Operations;
- IAS 32 - Financial Instruments: Presentation (Puttable Financial Instruments
and Obligations Arising on Liquidation); and
- IAS 39 - (Amendment) Eligible Hedged Items.
For the full impact of these changes, please refer to the annual report.
3. Taxation
A reconciliation of the standard rate of South African normal taxation
compared with that charged in profit/loss is set out in the following table:
2008 2007
% %
South African normal tax rate 28.0 29.0
STC 1.0 8.7
29.0 37.7
Foreign income (3.2) (3.3)
Capital profits (0.9) -
Change in corporate tax rate (1.7) -
Prior year overprovision (0.1) (0.1)
Other 0.3 0.1
Effective taxation rate 23.4 34.4
R millions R millions
4. Commitments
Mining and process property, plant and
equipment
Contracted for 5,062 4,224
Not yet contracted for 33,451 13,085
Authorised by the Directors 38,513 17,309
Allocated for expansion of capacity 15,309 6,281
- within one year 3,536 4,370
- thereafter 11,773 1,911
Maintenance of capacity 23,204 11,028
- within one year 5,577 5,787
- thereafter 17,627 5,241
Other
Operating lease rentals - buildings 647 575
Due within one year 95 47
Due within two to five years 238 213
More than five years 314 315
Information Technology Service Providers 679 569
Due within one year 174 147
Due within two to five years 505 411
More than five years - 11
These commitments will be funded from existing cash resources, future
operating cash flows, borrowings and any other funding strategies embarked on
by the Group, including an increase in the debt facility from the Company`s
major shareholder Anglo American from R6.5 billion at December 2008 to its
current level of R13.5 billion.
5. Contingent liabilities
Letters of comfort have been issued to financial institutions to cover certain
banking facilities. There are no encumbrances of Group assets, other than the
houses held under finance leases by the Group.
Aquarius Platinum (South Africa) (Proprietary) Limited holds a put option to
put their interest in the Kroondal pooling and sharing arrangement to the
Group in the case of termination of that relationship. The probability of the
option being exercised is considered remote. The amount of such an obligation
is dependant on a discounted cash flow valuation of their interest at that
point in time.
The Group is the subject of various claims, which are individually immaterial.
The expected outcomes of these individual claims are varied, but on a
probability weighting the amount is estimated at R82 million (2007: R70
million).
The Group has in the case of some of its mines provided the Department of
Minerals and Energy with guarantees that cover the difference between closure
cost and amounts held in environmental trusts. At 31 December 2008, these
guarantees amounted to R2,030 million (2007: R1,939 million).
The Group has provided Lexshell 36 General Trading (Proprietary) Limited (a
company owned by the Bakgatla-Ba-Kgafela traditional community) with a
facility that covers their debt repayments should that company not be able to
meet the repayments. The facility is limited to Union Section`s cash flows,
and a call on this facility is considered a remote possibility.
Rustenburg Platinum Mines Limited ("RPM") has granted a R2 billion loan
facility to Royal Bafokeng Resources (Proprietary) Limited ("RBR") for the
purpose of funding its contributions to the BRPM Joint Venture. The loan is
repayable in full on 11 August 2012. The RBR has ceded and pledged its
interest in the BRPM Joint Venture to RPM as security for the loan. RPM also
has the right to register a notarial bond and a mortgage bond over RBR`s
undivided share of the assets of the BRPM Joint Venture. No drawdowns have
been made against this facility at year end.
6. Change in accounting estimate
Metal inventories
During the year, the Group changed its estimate of the quantities of inventory
based on the outcome of a physical count of in-process metals. The Group runs
a theoretical metal inventory system based on inputs, the results of previous
physical counts and outputs. Due to the fact that in-process inventories are
contained in weirs, pipes and other vessels, physical counts only take place
once per annum, except in the Precious Metals Refinery which takes place once
every two years. This change in estimate has had the effect of increasing the
value of inventory disclosed in the financial statements by R200 million
(2007: R148 million). This results in the recognition of an after-tax gain of
R144 million (2007: R105 million). The amount of the effect in future periods
has not been disclosed because estimation is impracticable.
7. Revision of conversion price applicable to convertible preference shares
As the dividend cover in respect of the 2007 dividend was less than 1.4 times,
it was necessary, in accordance with the rights and privileges attaching to
the convertible perpetual cumulative preference shares ("convertible
preference shares"), to amend the conversion price to be used when the
convertible preference shares are converted into ordinary shares. The
conversion price was R284.24 or 35.18154 ordinary shares for each 100
convertible preference shares converted. Based on the volume weighted average
traded price of Anglo Platinum ordinary shares on the JSE Limited for the five
business days ended Friday, 7 March 2008 of R1,299.15 the conversion price was
amended to R281.05 or 35.58086 shares for every 100 convertible preference
shares converted.
This decrease in the conversion price has resulted in a deemed dividend for
the purpose of calculating earnings per share in terms of IAS 33 - Earnings
per share to the outstanding preference shareholders at the date of the
adjustment. Consequently, this deemed dividend of R3.19 (2007: R4.19) per
convertible preference share, amounting to R5 million (2007:R16 million) has
been taken into account when calculating the basic earnings attributable to
ordinary shareholders. This amount has been included with the preference
dividends due to preference shareholders of R7 million (2007: R15 million) in
the total amount attributable to preference shareholders.
8. Assets held for sale (BEE transactions)
Disposal of investment in associate - Northam and 50% interest in Booysendal
joint venture
In September 2007, the Board approved the disposal of Anglo Platinum`s 22.4%
interest in Northam and 50% stake in the Booysendal joint venture and a
portion of Der Brochen to Mvelaphanda Resources Limited (Mvela) for a purchase
consideration of R4 billion. The sale was subject to the finalisation of
binding legal agreements and certain regulatory and third party approvals at
31 December 2007. Subsequent to this, the transaction agreements were
concluded and all the conditions precedent, except for ministerial approval
pertaining to the transfer of control of New Order Booysendal prospecting
rights, were met. The parties subsequently restructured the agreements in
August 2008 to implement the Northam part of the transaction, as this portion
of the transaction did not require ministerial approval. That part of the
transaction then closed on 20 August 2008 with the funds flowing from Mvela to
Anglo Platinum and Anglo Platinum transferring ownership of the Northam shares
to Mvela.The funds received relating to the Northam transaction (R1.6 billion)
were utilised by Anglo Platinum whereas the remainder of the funds were put
into escrow (R542 million) and invested in rights to preference shares (R1,610
million). The funds relating to Booysendal will only be released to Anglo
Platinum upon receipt of ministerial approval. Consequently, the Booysendal
part of the transaction has not yet been implemented. Although the Northam
portion of the transaction has been implemented, it is still subject to unwind
if ministerial approval does not occur.
Disposal of 51% shareholding in Lebowa Platinum Mines (LPM) and 1% interest in
Ga-Phasha, Boikgantsho and Kwanda joint ventures
In September 2007, the Board approved the disposal of an effective 51% of LPM
(Richtrau 177 (Proprietary) Limited), a wholly owned subsidiary of Anglo
Platinum and an additional 1% of its interest in the Ga-Phasha, Boikgantsho
and Kwanda joint venture (50:50) projects, to Anooraq Resources Corporation
for a cash purchase consideration of R3.6 billion. In April 2008, a suite of
definitive legal agreements was entered into, which remained subject to
various suspensive conditions. Due to the significant deterioration in global
market conditions, coupled with a material decline in platinum group metal
prices and constrained debt and equity capital markets, in the fourth quarter
of 2008, the Lebowa mine plan and project pipeline, including the Middelpunt
Hill UG2 expansion project, were placed under critical review in conjunction
with Anooraq. Anglo Platinum and Anooraq remain committed to concluding the
transaction as soon as practically possible and have thus extended the date
for fulfilment of the conditions until 30 April 2009.
9. Implementation of the Kotula Trust
The shareholders of the company approved the implementation of the Group
Employee Share Participation Scheme ("the scheme") at a combined general
meeting on 31 March 2008. The conditions precedent were subsequently met and
the scheme was implemented on 16 May 2008. The Kotula Trust, which was
established to facilitate the implementation of the scheme on behalf of the
beneficiaries, was issued with 1,008,519 ordinary shares and 1,512,780 "A"
ordinary shares. The Kotula Trust is consolidated by the Group. As the scheme
is equity settled, the IFRS 2 - Share based payments charge determined on
grant date, i.e. 16 May 2008 amounted to R1,954 million. This charge is being
spread over the seven year vesting period of the scheme taking into
consideration the various tranches vesting in 2013, 2014 and 2015.
10. Contingent assets
Amandelbult insurance claim
Due to a flash flood on 21 January 2008, the water inflow from the storm
together with the water inflows from several days of abnormal rainfall,
exceeded the installed dewatering capacity of the Amandelbult number 1
vertical shaft and resulted in the flooding of the shaft bottom including the
pump station. This was recorded as a 1:200 year event. Production after the
flood event was reduced to around 25% of normal output. An emergency
dewatering program was implemented to return the shaft to normal production
levels as soon as possible.
The insurers were immediately advised and Anglo Platinum has submitted a
material damage claim together with the business interruption claim for the
period during which the mine was not at full capacity. However, the quantum
claimable in respect of the business interruption claim under this policy can
only be determined once the indemnity period of 24 months has lapsed. The
final quantum of the claim is dependent on a number of variables which can
only be determined during or at the end of the 24 month indemnity period.
Consequently, no compensation for lost revenue in respect of the business
interruption claim has been recorded due to the uncertainty around the quantum
of the claim.
Polokwane insurance claims
On 13 February 2008, a slag and matte run-out occurred at the Polokwane
Smelter, resulting in damage to both the furnace itself and ancillary
equipment. After a successful repair, the furnace resumed operation and
processed the majority of concentrate stocks that had accumulated during the
repair period. Insurers were notified of the incident, and a material damage
and business interruption claim is in preparation and at discussion with
insurers.
On 5 November 2008, a subsequent run-out (with a distinct failure mechanism)
resulted in a second shut-down of the smelter. Repairs have been successfully
concluded, and the smelter has resumed operation. Insurers have been notified
of the incident, and a material damage and business interruption claim is in
preparation.
The business interruption quantum of both events is to be assessed across a 24
month period, and is dependent on a number of variables which can only be
determined as the 24 month period progresses.
11. Comparative figures
The 2007 interest bearing borrowings have been reclassified between current
and non-current. As a result, the long term portion of R2,713 million has been
reclassified to non- current liabilities.
In addition, an amount of R210 million has been reclassified from 2007
liabilities directly related to assets held for sale to current interest
bearing borrowings. As a result of both reclassifications, current interest
bearing borrowings are now reflected at R4,962 million.
R597 million of accruals has been reallocated from other liabilities to trade
and other payables.
As a result of these changes, the prior year IFRS 7 disclosure has been
amended accordingly.
12. Corporate governance
The Board considers that the Company and its subsidiaries complied during the
financial year with the principles of the Code of Corporate Practices and
Conduct contained in the 2002 King Committee Report on Corporate governance
(King II), and that these have been applied appropriately and consistently,
except with regard to the composition of the Remuneration and Nomination
committees that comprise non-executive directors, not all of whom are
independent non-executive directors.
13. Audit opinion
The auditors, Deloitte & Touche, have issued their opinion on the Group`s
financial statements for the year ended 31 December 2008. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unqualified audit opinion. A copy of their audit report is available
for inspection at the Company`s registered office. These abridged financial
statements have been derived from the Group financial statements and are
consistent in all material respects, with the Group financial statements.
COMMENTARY
Introduction
High average dollar platinum, palladium and rhodium prices, supported by a
weaker exchange rate in 2008 contributed significantly to Anglo Platinum
achieving record headline earnings. Record prices for platinum and rhodium in
the first half of 2008 were followed by an unprecedented price collapse in the
second half of the year, associated with the global economic deterioration.
High levels of operating cost inflation, although at lower levels in the
latter part of 2008, contributed to the reduced operating margin for the year.
The significant reduction in metal prices as a consequence of reduced demand
in the last quarter of 2008 has put pressure on operating margins, and has
increased the level of borrowings required to fund capital expenditure. Anglo
Platinum, as a result, has taken immediate action to reduce the rate of
capital expenditure and has implemented cost reduction initiatives.
Financial results
Anglo Platinum`s operating profit for the year ended 31 December 2008 amounted
to R17.7 billion, a decrease of 5% when compared to 2007. The decrease was
driven by lower sales volume, significant increases in key input costs and an
increase in the cost of metal purchased. Headline earnings, however, increased
by 8% over 2007 to a record R13.3 billion as a result of the increased metal
prices, weaker exchange rate and lower taxation.
The average rand price realised for the basket of metals sold of R22,348 per
platinum ounce was 23% higher than in 2007. The average prices achieved on
platinum, palladium and nickel sales for the year were US$1,570 per ounce,
US$355 per ounce and US$9.79 per pound respectively. Anglo Platinum
successfully renegotiated the contract sales terms for rhodium resulting in
the sales price of rhodium moving closer to market prices during 2008. The
average price achieved on rhodium sales for the year was US$5,174 per ounce.
Net sales revenue increased by R4.1 billion to R50.8 billion. The increase was
primarily the result of higher US dollar metal prices achieved on metals sold
and a weaker average rand / US dollar exchange rate of R8.08 compared to R7.04
achieved in 2007 which increased revenue by R4.2 billion, and R6.6 billion
respectively, offset by lower metal sales volumes, which reduced revenue by
R7.0 billion.
Cost of sales increased by 22% or R6.2 billion to R33.7 billion as a net
result of:
- The cost of purchases of metal, primarily in concentrate from joint venture
partners and third parties, increased by 62% or R3.5 billion to R9.0 billion
due to higher metal prices and an increase in the volume of metals purchased.
- Cash mining, smelting and refining costs rose 24% to R23.0 billion with the
cash operating cost per equivalent refined platinum ounce rising by 36% to
R11, 093. The increase in unit costs is attributable primarily to above
inflationary pressures experienced in key input costs including labour,
diesel, chemicals, steel grinding media, explosives and cement, compounded by
reduced production from Anglo Platinum`s attributable share of mining
operations.
- Depreciation increased by 20% to R3.3 billion as a result of the significant
increase in capital expenditure.
- Other costs increased by 8% or R140 million to R1.8 billion.
- These increases were partly offset by the increase in the net value of
metals in inventory of R3.5 billion for 2008. This is attributed to an
increase in stocks within the process pipeline mainly associated with smelter
outages, higher refined stocks and an increase in the unit costs of metal
inventories which includes the impact of higher costs in respect of metals
purchased.
The Group`s taxation charge decreased from R6.7 billion to R4.5 billion,
reducing the effective tax rate from 34.4% in 2007 to 23.4% in 2008.
The reduction includes:
- The election of an STC exemption in respect of the 2007 final dividend and
2008 interim dividend paid to Anglo American (R877 million).
- Reduction in the South African STC rate from 12.5% to 10.0% (R329 million).
- Revaluation of the deferred tax liability due to the reduction in the South
African company tax rate from 29% to 28% (R318 million).
- Reduced STC on lower dividends paid (R167 million).
- Lower tax on current year profits resulting from the reduction in the South
African company tax rate from 29% to 28% (R144 million).
The Group`s net debt position at 31 December 2008 amounted to R13.5 billion,
compared to the R4.1 billion net debt position at 31 December 2007. Cash
generated from operations amounted to R19.3 billion, 7% below that recorded in
2007, mainly due to higher payments to suppliers and employees. Cash outflows
consisted of capital expenditure of R13.1 billion, capitalised interest of
R1.3 billion, taxation payments amounting to R1.8 billion and dividend
payments of R14.3 billion of which R13.8 billion were ordinary dividends and
R8 million were preference dividends. In addition, R421 million of cash
distributions were made minorities.
The combination of the reduction in capital expenditure and cost management
initiatives, at current price levels, are expected to maintain net debt within
the limits of the company`s existing credit facilities. During January 2009 an
increase of R7.0 billion in the Anglo American facility was agreed, and it is
our view that despite the poor economic outlook the company remains in a
position to meet its future approved capital commitments.
Markets
2008 was a year of unprecedented price volatility in the platinum market with
platinum reaching a record of $2,276 per ounce in March before collapsing in
the aftermath of the global economic crisis. In the second half of the year,
the global economic downturn reduced credit availability for vehicle
purchases. Anglo Platinum estimates that demand from the autocatalyst segment
decreased by more than 8% or 330 000 ounces, owing to the smaller number of
vehicles produced and a run-down of stock levels by the major auto companies.
Although not immune to the global recession, industrial demand held up
reasonably well in 2008 with demand increasing in some areas such as the
chemical sector as investment in new capacity reached a peak. High prices in
the first half of the year discouraged consumer purchases of jewellery and
increased the recycling of old jewellery which reduced demand for new metal.
In the second half of the year the declining price of platinum encouraged
purchases of metal by jewellers and investors alike.
The global supply of platinum has decreased by 11%, or 740,000 ounces, over
the past two years and is not expected to increase in the current global
economic environment. As a number of government support packages to stimulate
the world`s biggest economies start to have an impact, an increase in the
demand for PGMs is expected.
Anglo Platinum expects a balanced platinum market in 2009. It also anticipates
that the platinum price, which suffered `downside overcorrection` on negative
news flow in the second half of 2008, is likely to trade above $1,000 per
ounce on average during 2009.
Operational performance
Anglo Platinum`s focus on safety, based on zero harm and a change in safety
culture, has resulted in an improvement in the safety performance across the
operations with the `lost time injury frequency rate improving by 14% to 1.74
from 2.03 in 2007. Despite the improvement, 17 employees lost their lives at
Anglo Platinum`s managed operations during the year, compared to 25 in 2007.
Safety continues to be a focus area in our aspiration towards zero harm
through elimination of all unsafe incidents and conditions.
Refined platinum production for the year of 2.39 million ounces was 4% lower
than 2007 but in line with the Anglo Platinum mid year 2008 forecast.
Factors that negatively impacted production at operations include:
- Safety related stoppages;
- The suspension of operations to rehabilitate shaft steelwork at the
Turffontein shaft of Rustenburg Mine;
- The disruption of operations at the Amandelbult Mine as a result of a major
flood event;
- Electricity supply constraints in January and the associated ramp-up period
when supply resumed;
- Commissioning delays at Mogalakwena North concentrator and lower throughput
at the Mogalakwena South concentrator;
- The overall expected reduction in built-up head grade; and
- Smelter furnace run-outs at Polokwane and Waterval smelters.
The reduction in production resulting from the above disruptions were largely
offset by the increase in purchased ounces from Xstrata`s Eland Platinum mine
which commenced delivery to Anglo Platinum in December 2007, increased
production from the new Mogalakwena North pit and the Modikwa and Kroondal
Platinum mines.
One of the key initiatives currently under way is the restructuring of our
mining operations into more efficient stand-alone units. The new structures
will allow operational management to meet the safety, labour, and technical
challenges of the current mining environment. We will split our largest mines
into smaller new entities, to ensure the focused and value-based management of
our assets. These improvements will support a sustainable reduction in the
unit cost of production and will also underpin the company`s commitment to
extracting maximum value from its assets.
Organisational change
Anglo Platinum has embarked on an organisational change programme aimed
primarily at changing the Company culture. The initiative, based on Company
values, is focused on output and strives to integrate these values into daily
activities. It also supports the company`s unrelenting drive to achieve zero
harm in the workplace by changing attitudes to safety and enhancing clarity of
purpose. This will facilitate a management style that will ensure continued
operational efficiency and improved productivity.
Capital expenditure and Projects
The implementation of Anglo Platinum`s extensive portfolio of mining and
processing projects, in place to maintain and, potentially expand refined
platinum output in the long term, continued in 2008 with expenditure on
capital projects increasing 26% to R13.1 billion over 2007. Project capital
expenditure amounted to R7.0 billion while expenditure to maintain operations,
reported as stay-in-business capital, was R6.1 billion. Capitalised interest
amounted to R1.3 million (2007: R275 million) bringing total capital costs to
R14.4 billion for 2008. Major capital projects in 2008 included the
Mogalakwena North expansion project, the Paardekraal 2 shaft replacement
project, the Amandelbult East Upper UG2 expansion project, the Base Metals
Refinery expansion project and the Waterval Merensky Plant retrofit.
The rapid decrease in prices in the second half of 2008 led to declining
margins, reflecting how global economic events negatively influence short-term
demand. A review of the company`s capital expenditure programme was conducted,
as a result of which the total expected capital expenditure for 2009 has been
reduced to R9.1 billion through the deferral of expenditure across several
major and numerous smaller projects. This level of capital expenditure
supports the production level of 2.4 million ounces in 2009.
The criteria used to determine project expenditure deferral were to maximise
short-term reductions in expenditure and minimise the delay in reaching full
production. The expected reduction in short-term production arising from the
deferral of capital projects is largely expected to match the reduced demand.
The commissioning of the Mogalakwena North expansion project concentrator is
complete. Capital expenditure planned for the accelerated removal of
overburden at the new North pit has been deferred. As a result less ore will
be exposed, consequently reducing the level of mining output originally
planned for 2009.
Mining rights and transformation
Anglo Platinum received letters of grant in 2008 for new order mining rights,
for Rustenburg, Amandelbult, Union, Lebowa, Mogalakwena, Twickenham, Der
Brochen and BRPM mining areas from the Department of Minerals and Energy. Some
of these are conditional on the submission of revised Social and Labour Plans.
The application for conversion of mineral rights associated with our 50:50
joint venture with the African Rainbow Minerals consortium over Modikwa mine
is being prepared as a joint submission from both partners.
In September 2007, the company announced two major black economic empowerment
transactions, with Anooraq Resources and Mvela in respect of Anglo Platinum`s
Lebowa Platinum Mine and its investment in Northam Platinum Limited. Steady
progress is being made in concluding these transactions. The Mvela transaction
is almost complete, with final consent awaited from the Minister of Minerals
and Energy on the disposal of the Booysendal property. Owing to the global
economic slowdown, certain aspects of the Anooraq transaction are being re-
evaluated and the date for its fulfilment has been extended to 30 April 2009.
All parties remain committed to concluding the transaction during 2009.
During the year, the company reached agreement with our employees and labour
unions on the key terms and structure of the company`s broad-based employee
share ownership plan (ESOP). As a result the company established the Anglo
Platinum Kotula Trust to facilitate the scheme on behalf of the beneficiaries
and issued approximately 2.5 million shares to the trust, representing
approximately one per cent of the company`s issued ordinary share capital.
More than 90% of the beneficiaries of ESOP will be historically disadvantaged
South Africans. All current beneficiaries were paid a first dividend of R1,441
per Kotula share in November 2008.
In 2008 agreement was reached with Royal Bafokeng Holdings (RBH) to
restructure the Bafokeng-Rasimone Joint Venture. This includes the Styldrift
project, whereby Anglo Platinum will retain an effective stake of 43% in the
venture and receive payment for the transfer of control. The transaction will
result in the creation and listing of a black economic empowerment PGM
producer, controlled by RBH and independently managed. The transaction is
expected to take between one and two years to complete.
Dividends
Ordinary dividends are declared after considering current and future funding
requirements and are paid out of cash generated from operations.
Anglo Platinum paid an interim ordinary dividend of 3,500 cents per share and
a preference dividend of 320 cents per preference share during the second half
of 2008. Due to the current uncertainty and volatility in the global economy,
the Board has decided not to declare a final ordinary divided for 2008
resulting in a dividend cover ratio of 1.6 on the full year`s headline
earnings.
Outlook
Notwithstanding the current uncertainty in the global resources and platinum
sectors, the company`s long term strategy to develop the market for platinum
group metals, expand its production into that opportunity and to conduct its
business cost-effectively and competitively remains sound.
It is essential that we consider the long-term prosperity of the business when
taking short term-action. Nevertheless, Anglo Platinum intends to respond on
an ongoing basis to the challenges that face the platinum industry. While
Anglo Platinum`s planned level of refined platinum production of 2.4 million
ounces is currently expected to be appropriate for 2009, management will take
appropriate action should economic conditions affecting net platinum demand
deteriorate further. Management will continue to monitor production levels
against global economic developments and will provide revised production
guidance when appropriate.
To maintain positive operating margins at the planned production level of 2.4
million ounces of refined platinum in 2009 the Company needs to reduce the
current cost of production. This will be achieved by:
- Active management of the supply chain to realise, without delay, the
benefits of the significant reduction of input commodity prices and
rightsizing of stock levels;
- Safely reducing units of consumption where possible in the production line
by eliminating wastage and ensuring inventory management is optimal;
- Managing our labour more effectively to improve efficiencies through re-
skilling and re-deployment where required;
- Avoiding recruitment of non-critical positions; and
- Reducing the number of contract employees at operations.
Every effort will be made to avoid the retrenchment of permanent employees.
However, should PGM prices deteriorate further, this may become unavoidable.
The combination of the reduction in capital expenditure and cost-reduction
initiatives is expected to reduce the rate of increase in net debt in 2009.
Funding facilities in place are adequate for the company`s anticipated funding
requirements.
N F Nicolau B Nqwababa
(Chief Executive Officer) (Executive Director: Finance)
T M F Phaswana J D Meyer
(Chairman) (Group Company Secretary)
Johannesburg
9 February 2009
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of shareholders of the
company will be held in the Auditorium on the 18th Floor, 55 Marshall Street,
Johannesburg on Monday, 30 March 2009 at 14:00 to consider and if approved,
adopt the annual financial statements for the year ended 31 December 2008,
together with the report of the auditors, re-election of directors retiring by
rotation, appointment of auditors and designated auditor, passing of ordinary
resolutions placing the unissued ordinary shares under the control of
directors, approving non-executive directors` fees, adopting and implementing
the new Bonus Share Plan Incentive Scheme and passing a special resolution
permitting the company and/ or its subsidiaries to acquire shares in the
company. A detailed notice of AGM will be posted to shareholders.
SUPPLEMENTARY INFORMATION
CONSOLIDATED STATISTICS (UNAUDITED)
Year ended Year ended
TOTAL OPERATIONS 31 Dec 2008 31 Dec 2007
Marketing statistics
Average market prices
achieved
Platinum (US$/oz) 1,570 1,302
Palladium (US$/oz) 355 355
Rhodium (US$/oz) 5,174 4,344
Nickel (US$/lb) 9.79 17.04
US$ Basket price (Net (US$) 2,764 2,579
sales revenue
per refined Pt ounce
sold)
Platinum (R/oz) 12,640 9,149
Palladium (R/oz) 2,887 2,499
Rhodium (R/oz) 42,145 30,593
Nickel (R/lb) 77.30 121.13
R Basket price (Net (R) 22,348 18,167
sales revenue per
refined Pt ounce sold)
Average exchange rate (R : US$) 8.0850 7.0431
achieved on sales
Exchange rate at end of (R : US$) 9.2999 6.8360
period
Financial statistics and
ratios
Gross profit margin (%) 33.7 41.0
Earnings before (R millions) 21,206 21,946
interest, taxation,
depreciation
and amortisation
(EBITDA)
Operating profit to (%) 46.5 58.7
average operating assets
Return on average (%) 50.3 44.1
shareholders` equity
Return on average (%) 46.9 66.6
capital employed
Interest cover - EBITDA 15.2 54.6
Net asset value per (R) 124.4 121.7
ordinary share
Net debt to total (%) 31.2 13.1
capital employed
Interest-bearing debt to (%) 55.4 28.4
shareholders` equity
Cost of sales per total (R) 14,922 10,711
Pt oz sold
Cash operating cost per
equivalent Pt oz
(excluding ounces from (R) 11,093 8,181
purchased
concentrate and
associated costs)
Cash operating cost per (R) 11,445 8,129
refined Pt oz
Equivalent refined (thousands) 2,465.3 2,471.4
platinum production (oz)
Gain in smelting and (thousands) 46.8 9.8
refining pipeline (oz)
Refined platinum (thousands) (2,386.6) (2,474.0)
production (oz)
Mining (thousands) (1,946.8) (2,164.0)
(oz)
Purchase of concentrate (thousands) (439.8) (310.0)
(oz)
Platinum pipeline (thousands) 125.5 7.2
movement (oz)
REGISTERED OFFICE
55 Marshall Street, Johannesburg, 2001
(P.O. Box 62179, Marshalltown, 2107)
Facsimile +27 11 373-5111
Telephone +27 11 373-6111
SOUTH AFRICAN REGISTRARS
Computershare Investor Services (Pty) Limited
(Registration No. 2004/003647/07)
70 Marshall Street, Johannesburg, 2001
(P.O. Box 61051, Marshalltown, 2107)
Facsimile +27 11 688-5200
Telephone +27 11 370-5000
LONDON SECRETARIES
Anglo American Services (UK) Limited,
20 Carlton House Terrace, London, SW1Y 5AN, England
Facsimile +44 207 968-8755
Telephone +44 207 968-8888
UNITED KINGDOM REGISTRARS
Capita Registrars Limited
The Registry, 34 Beckenham Road
Beckenham, Kent, BR3 4TU, England
Facsimile +44 208 658-3430
Telephone +44 871 664-0300 (within UK)
Telephone +44 208 639-3399 (from outside UK)
Detailed results are available on the Internet at:
http://www.angloplatinum.com
E-mail enquiries should be directed to:
traymond@angloplat.com
DIRECTORS AND COMPANY SECRETARY
EXECUTIVE DIRECTORS: N F Nicolau (Chief Executive Officer), B Nqwababa (Chief
Financial Officer).
NON-EXECUTIVE DIRECTORS: T M F Phaswana (Chairman), C B Carroll (American), K
D Dlamini, R J King (British), R Medori (French).
INDEPENDENT NON-EXECUTIVE DIRECTORS: T A Wixley (Deputy Chairman), R M W Dunne
(British), Dr. B A Khumalo, M V Moosa, S E N Sebotsa.
ALTERNATE DIRECTORS: P G Whitcutt.
COMPANY SECRETARY: J D Meyer.
Sponsor in South Africa
Merrill Lynch South Africa (Pty) Limited
Date: 09/02/2009 09:00:04 Produced by the JSE SENS Department.
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