| Key risks affecting financial performance |
| Anglo Platinum's earnings and cash flows are affected by non-controllable external factors that have a material
impact on the financial performance of the business, the most significant of which are metal prices and the rand/
US dollar exchange rate. Management reviews market trends arising from these factors to understand their
implications on Anglo Platinum's financial performance and develop strategies to mitigate risks to the business
where possible. |
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| Anglo Platinum has a process to manage other operational risks, including safety, communities, skills shortages and
security of electricity supply. The impact of the constrained electricity supply by the national electricity supplier is a
risk area that could have a material financial effect in 2008 and beyond. |
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| METAL PRICES |
Metal price risk arises from the risk of an adverse effect on current or future earnings or uncertainty resulting
from fluctuations in metal prices. Anglo Platinum has not entered into any forward contracts, or contracts of a
similar nature to reduce the effect of metal price volatility.
The higher US dollar metal prices
achieved on all metals sold in 2007 of
US$2,579 per platinum ounce sold has
contributed to an increase in headline
earnings of R5.38 billion compared to
the same period in 2006. A 10%
increase in the US dollar basket price
in 2007 would be equivalent to
headline earnings increasing by a
further R2.42 billion. |
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| EXCHANGE RATE |
Anglo Platinum operates in the global
business environment and many
transactions are priced in a currency
other than South African rand.
Accordingly, the Group is exposed to
the risk of fluctuating exchange rates
which can have a significant impact on
turnover, earnings and capital
expenditure. As at 31 December
2007, the Group had R315 million of
purchased forward exchange contracts
maturing within 12 months with a net fair value of R3 million.
The average rand/US dollar exchange rate achieved on metal sales for the 12 months ended 31 December 2007
was weaker than 2006 at R7.04, contributing to an increase in headline earnings of R0.72 billion. A 10% weakening
of the average rand/US dollar exchange rate in 2007 would be equivalent to headline earnings increasing by a further
R2.69 billion. |
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| Impact of changes in accounting policies |
During the year, Anglo Platinum aligned its accounting policy for valuing stores and materials with that of Anglo
American plc. Stores and materials are now valued at cost on a first-in first-out basis. The impact of the change has
an immaterial effect on the earnings for the period.
In 2007, Anglo Platinum adopted IFRS 7 - Financial instruments: Disclosure. The impact of the new standard has
increased disclosure relating to the significance of financial instruments on the Group's position and performance and
the nature and extent of risks arising from these financial instruments to which the Group is exposed during the
period and at year end and the manner in which the Group manages these risks. Furthermore, additional disclosures
relating to the Group's objectives, policies and procedures, as well as some quantitative disclosures relating to the
management of capital, have been provided as required by the amendment to IAS 1. |
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| Black economic empowerment transactions |
On 4 September 2007, Anglo Platinum, Anooraq Resources and Mvela Resources announced transactions that
would result in the creation of two significant and sustainable historically disadvantaged South African-managed and
controlled platinum group metal producers, with critical mass and significant growth potential.
The key features of the announced transactions include: |
| • |
the sale by Anglo Platinum of an effective 51% of Lebowa Platinum Mines and an effective 1% of the Ga-Phasha
project for a total consideration of R3.6 billion to Anooraq; |
| • |
the purchase by Mvela Resources of Anglo Platinum's 50% interest in the Booysendal project and its 22.4% direct
interest in Northam Platinum for a total consideration of R4 billion; and |
| • |
the formation by Anglo Platinum of an employee share ownership plan benefiting more than 44,000 employees,
which will comprise up to 1.5% of Anglo Platinum's issued share capital. |
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As these transactions are not effective for the year ended 31 December 2007, IFRS 5 - Non-current Assets/Liabilities
Held for Sale and Discontinued Operations applies to the assets of Lebowa Platinum Mines, Ga-Phasha and Booysendal,
and the Group's investment in Northam Platinum. Consequently, these assets and associated liabilities are disclosed
as 'assets/liabilities held for sale' in the annual financial statements, which required a change in the measurement basis
for these assets.
On the date that the transaction with Anooraq becomes unconditional, which is expected during 2008, Anglo
Platinum will cease consolidating Lebowa Platinum Mines and Ga-Phasha. As significant influence will be exercised
over the new combined entity, it will be equity accounted as an associate.
Further details of the key terms of the transactions will be announced in 2008 once the agreements have been
finalised and funding arrangements are in place. |
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| Capital expenditure |
Total capital expenditure was R10.7 billion, an increase of R4.13 billion over 2006. Expansion expenditure was
R5.24 billion with expenditure to maintain operations at R5.14 billion. Capitalised interest amounted to R275 million.
Capital expenditure in 2007 included the PPRust North expansion project, the Paardekraal 2 shaft replacement
project, the Amandelbult East Upper UG2 expansion project, the Base Metals Refinery 33,000T Nickel project and
the Waterval Merensky plant retrofit. The actual capital expenditure for 2007 exceeds the original guidance provided
as a result of increased costs incurred on the Paardekraal 2 shaft replacement project and increased costs associated
with unexpected oxidised material at the PPRust North expansion project. The strong global demand for resources
is placing material inflationary pressure on capital expenditure and the ability to meet project schedules, the effect of
which was experienced in the latter part of 2007. These pressures are likely to continue in the foreseeable future.
Anglo Platinum continues to pursue mining and processing projects that maintain and expand production. The longterm
outlook for metal prices remains positive and consequently studies evaluating the ramping up of various projects
continue. Anglo Platinum expects capital expenditure for 2008 to be between R10.5 billion and R11.5 billion. |
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| Cash flows |
| The Group's net debt position at 31 December 2007 was R3.88 billion. Cash generated from operations was R20.7 billion. Cash outflows consisted of capital expenditure of R10.7 billion, taxation payments of R6.82 billion and dividend payments of R12.7 billion, of which R12.3 billion were ordinary dividends, R19.4 million preference dividends and R382 million paid to the 15% minority shareholders in Union's mining and concentrating business. |
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| Shareholding and dividend |
| SHAREHOLDER RETURNS |
 During 2007 there was a significant increase in trading activity in Anglo Platinum
shares with the number of ordinary shares traded rising to 92.2 million from
64.4 million in 2006. This translates to total value traded of R95.9 billion.
In 2007 Anglo Platinum shareholders obtained an increased return, both in the
form of share price appreciation and increased dividends. |
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| DIVIDENDS |
Ordinary dividends are declared after consideration of current and future
funding requirements and are paid out of cash generated from operations.
Anglo Platinum paid an interim ordinary dividend of 2,900 cents per share. The Board has declared a final ordinary
dividend of 2,300 cents per share resulting in a dividend cover ratio of 1 on full-year headline earnings. A preference
dividend of 318 cents and 320 cents per preference share was declared and paid in May 2007 and November 2007
respectively, maintaining the full-year preference share dividend of 638 cents per share. |
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