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| RECORD
HEADLINE
EARNINGS |
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Record headline earnings were achieved in
2008. Market conditions and commodity prices
deteriorated materially in the latter part of 2008.
In response, Anglo Platinum has initiated
a range of cost-management
initiatives, including a reduction
in capital spend and in the
number of contract
employees. |
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| Ms Cordelia Vanda is the first female trainee section
manager at Union Mine. She joined Anglo Platinum
in October and was previously an Anglo American
trainee. Anglo Platinum has a number of Companywide
initiatives to promote women participation in
mining.. |
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FINANCIAL PERFORMANCE |
Anglo Platinum’s headline earnings for the year ended 31 December 2008 increased by 8% to
R13.3 billion. Factors contributing to this increase were higher US dollar prices realised on metals
sold, a rand/US dollar exchange rate that was on average weaker during 2008, and a lower effective
tax rate. Lower sales volumes, significant increases in key input costs and an increase in the cost of
purchasing metal from joint-venture partners adversely impacted headline earnings.
The high global demand for resources in 2007 continued to increase during the first nine months of
2008, resulting in abnormal increases in labour, contractor, raw materials, energy and other input
costs. Together with lower production, this increase in key input costs resulted in an increase of 41%
in the cash operating cost per refined platinum ounce to R11,445 in 2008.
The global financial crisis, partly caused by speculative disinvestment, experienced in the last quarter
of 2008 curbed demand for platinum group metals (PGMs) and prices declined significantly. Reduced
revenue and higher debt levels required immediate action to reduce capital spend in 2009, and also
significant cost-reduction interventions. |
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FINANCIAL RESULTS |
| Key financial indicators of performance included those shown in the table below: |
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2008
R million |
|
2007
R million |
%
change |
| Net sales revenue |
50,765 |
|
46,616 |
8.9 |
| Cost of sales |
33,682 |
|
27,519 |
22.4 |
| Gross profit on metal sales |
17,083 |
|
19,097 |
(10.5) |
| Headline earnings |
13,292 |
|
12,325 |
7.1 |
| Headline earnings per ordinary share (cents) |
5,609 |
|
5,239 |
8.4 |
| Gross profit margin (%) |
33.7 |
|
41.0 |
(17.8) |
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Net sales revenue increased by R4.1 billion, to R50.8 billion. The increase was the result of higher
US dollar metal prices achieved on all metals sold, contributing R4.2 billion of the increase and a
weaker average rand/US dollar exchange rate of R8.08, compared with R7.04 in 2007, increasing
revenue by R6.6 billion. This was offset by lower volumes of metals sold, which reduced revenue by
R7.0 billion.
Sales volumes for 2008 were 2.22 million platinum ounces, some 10% or 259,000 ounces less than in
2007. Sales volumes were lower as a result of a decrease in refined platinum production casused by
smelter outages and unsold metal at the end of the year.
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 sales terms for rhodium in the first quarter of 2008. As a result of revised contract
terms, the specific details of which are subject to contractual confidentiality, the sales price of rhodium
moved closer towards market prices during 2008. The average price achieved on rhodium sales for
the year was US$5,174 per ounce.
Net sales revenue has grown at an annual compounded rate of 27% over the past five years. This
upward trend in net sales revenue was strongly supported by the average rand basket price achieved,
which had an annual growth rate for the same period of 31%. The 2008 average rand basket price
achieved was R22,348 per platinum ounce.
Cost of sales increased by 22% or R6.2 billion to R33.7 billion as a result of the following: |
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The cost of purchases of metal increased by 62% to R9.0 billion owing to higher metal prices and an
increase in the volume of metals purchased. |
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Cash mining, smelting and refining costs rose by 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-inflation pressures experienced in key input costs, including labour,
diesel, chemicals, steel grinding media, explosives and cement, exacerbated by reduced production. |
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Depreciation increased by 20% to R3.3 billion as a result of the significant increase in capital
expenditure. |
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Other costs increased by 8%, or R140 million, to R1.8 billion. |
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These increases were partly offset by the increase in the net value of metals in inventory of
R3.5 billion in 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
inventory, which includes the impact of higher costs in respect of metals purchased. |
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| The Group’s taxation charge decreased to R4.5 billion reflecting a reduction in the effective tax rate
from 34.4% in 2007 to 23.4% in 2008. The reduction includes: |
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the reduction in the South African company tax rate from 29% to 28% (R144 million); |
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revaluation of the deferred tax liability owing to the above change (R318 million); |
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reduced STC on the lower dividends paid (R167 million); |
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reduction in the South African STC rate from 12.5% to 10.0% (R329 million); and |
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the election of an STC exemption in respect of the 2007 final dividend paid to Anglo American
(R877 million). |
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| Both headline earnings and headline
earnings attributable to ordinary
shareholders increased during 2008.
Headline earnings per ordinary share
increased by 7% to 5,609 cents. The
average number of ordinary shares in
issue for 2008 was 237.1 million shares
compared with 236.4 million in 2007. |
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| Split of gross sales revenue
by metal |
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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 these are metal prices,
foreign currency risk, liquidity risk and fiscal risk. |
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METAL PRICES |
| Metal price risk arises from uncertainty caused by fluctuations in metal prices which may have
adverse effects on current or future earnings. The ability to place forward contracts is restricted
owing to the limited size of the financial market in PGMs. Forward contracts enable the Group to
obtain a predetermined price for delivery at a future date. No such contracts existed at year end. |
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FOREIGN CURRENCY |
| Anglo Platinum operates in the global business
environment and many transactions are priced
in a currency other than the South African rand.
Accordingly, the Group is exposed to the risk of
fluctuating exchange rates, which can have a
significant impact on turnover, earnings, costs
and capital expenditure. At 31 December 2008,
the Group had R87 million of purchased forward
exchange contracts maturing within 12 months,
with a net fair value of R5 million. |
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LIQUIDITY RISK |
| Liquidity risk is the risk that the Group may not be
able to meet its liabilities as they fall due. The
Group’s policy on liquidity is to ensure that there
are sufficient committed facilities in place which,
when combined with cash resources, are to meet
funding requirements. At 31 December 2008, the
Group had R19.0 billion of committed facilities
and R2.0 billion of uncommitted facilities, callable
on demand, in place. During January 2009, Anglo
American extended committed facilities to the
value of R7.0 billion to Anglo Platinum. |
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FISCAL RISK |
Government fiscal policy will impact on Group
profitability. The Mineral and Petroleum
Resources Royalty Act will come into effect in
South Africa on 1 May 2009 and will have an
impact on the Group’s operating profit in 2009.
The Group’s exposure to these and other principal risks is discussed in more detail under Principal Risks and Uncertainties. |
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IMPACT OF CHANGES IN ACCOUNTING POLICIES AND
ESTIMATES |
| There were no changes in accounting policies or estimates in the current year. The Group adopted
various amendments and interpretations to International Accounting Standards during the year, but
none of these had any impact on the financial results for the current period. However, the early
adoption of the amendments to IAS 1 – Presentation of Financial Statements did have an impact on
the presentation of the financial statements. As a result, the Group has presented a ‘statement of
comprehensive income’ that replaces the income statement and also includes all non-owner
changes in equity. All changes in equity resulting from transactions with owners in their capacity as
owners are presented in the ‘statement of changes in equity’. |
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BLACK ECONOMIC EMPOWERMENT TRANSACTIONS |
On 4 September 2007, Anglo Platinum, Anooraq Resources Corporation (Anooraq) and Mvelaphanda
Resources Limited (Mvela) announced transactions that would result in the creation of two significant
and sustainable historically disadvantaged South African (HDSA) managed and controlled platinum
group metal producers.
Owing to the significant deterioration in global market conditions, coupled with a material decline
in platinum group metal (PGM) prices and constrained debt and equity capital markets, the
transaction with Anooraq has been under critical review. Anglo Platinum and Anooraq remain
committed to concluding the transaction as soon as possible. As this transaction was not yet
effective on 31 December 2008, IFRS 5 – Non-current assets/liabilities held for sale and discontinued
operations still applies to the assets of Lebowa Platinum Mine, Ga-Phasha, Boikgantsho and Kwanda.
Consequently, these assets and associated liabilities are disclosed as ‘non-current assets/liabilities
held for sale’ in the annual financial statements, requiring a change in the measurement basis for
these assets.
The sale of Anglo Platinum’s shares in Northam to Mvela was finalised in August 2008 and consequently
the profit after tax on this transaction of R1.0 billion has been recognised. The only remaining condition
for the final implementation of the disposal of Anglo Platinum’s interest in Booysendal to Mvela, is
consent from the Minister of Minerals and Energy, which is expected in the first half of 2009.
At 31 December 2008 Booysendal was reflected as an asset held for sale.
Shareholders voted on 31 March 2008 to implement the Anglo Platinum Kotula Employee Share
Participation Scheme (ESOP). The ESOP has been designed and structured in consultation with
Anglo Platinum’s unions. An independent trust, the Anglo Platinum Kotula Trust, effectively managed
by the unions, was set up to administrate the ESOP. The ESOP is broad-based and at its inception
included some 51,000 employees who had not been participating in any other company share
ownership scheme. In terms of value and number of beneficiaries, the scheme represented, at the
time it was approved, the largest ownership transaction facilitating broad-based employee share
participation in the mining industry at the time of implementation. All current beneficiaries were
paid their first dividend of R1,441 per Kotula share in November 2008.
In October 2008, Anglo Platinum and Royal Bafokeng Holdings (RBH), the investment arm of the Royal
Bafokeng Nation (RBN), agreed to restructure their 50:50 Bafokeng-Rasimone Platinum Mine Joint
Venture (BRPM JV), which includes the Styldrift Platinum project, to create an HDSA-controlled PGM producer. A new company, controlled by the RBH, will manage and assume control of the BRPM JV. This
new company will be listed within three years of closing the transaction, which closing is expected in
mid-2009. Prior to listing, Anglo Platinum will retain its effective 50% interest in the BRPM JV. |
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CAPITAL EXPENDITURE |
Total capital expenditure for 2008 was R14.4 billion, an increase of 35% or R3.8 billion over 2007.
Project capital expenditure amounted to R7.0 billion and expenditure to maintain operations was
R6.1 billion. Capitalised interest amounted to R1.3 billion. Capital expenditure during 2008 included
the Mogalakwena North expansion project, the Paardekraal 2 shaft replacement project, the
Amandelbult East Upper UG2 expansion project, the Base Metals Refinery’s 33,000 tonne nickel
project and the Lebowa Brakfontein Merensky replacement project.
The downturn being experienced in the world economy has impacted global demand for
commodities causing Anglo Platinum to reassess some of its planned capital expenditure going
forward. The availability of capital funding and the increased cost of capital finance have also been
taken into consideration when performing the capital expenditure review.
Consequently the total capital expenditure for 2009 has been reduced to R9.1 billion, including
R5.6 billion on projects, through deferral of expenditure on several major projects, including
Amandelbult No 4 Shaft, Twickenham, Styldrift and the Slag-Cleaning Furnace No 2 at Waterval, all of
which were approved during the year.
The Mogalakwena Mine North expansion project is progressing and commissioning of the
concentrator has been completed and the relocation of the neighbouring Ga-Puka and Ga-Sekhaolelo
communities from the Mogalakwena Mine proposed mining area is nearing completion. |
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CASH FLOWS |
| The Group’s net debt position at 31 December 2008 amounted to R13.5 billion, compared with 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 R14.4 billion (including capitalised interest
of R1.3 billion), taxation payments amounting to R4.5 billion and dividend payments of R14.3 billion.
Dividends paid consisted of R13.8 billion ordinary dividends and R8 million preference dividends.
In addition, cash distributions of R421 million were made to minorities. |
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SHAREHOLDING AND DIVIDEND |
SHAREHOLDER RETURNS |
The shareholders in Anglo Platinum consist of ordinary and preference shareholders. The shareholders
are companies, individuals, pension and provident funds, insurance companies, banks, nominees,
finance companies, trust funds, investment companies and other corporate bodies.
At 31 December 2008, the Company had 237,078,836 issued ordinary shares, of which resident
shareholders held 213,670,921 (90.13%) and non-residents held 23,407,915 (9.87%). The shareholding
of Anglo South Africa Capital (Proprietary) Limited increased to 79.64% from 76.53% in 2007.
Resident preference shareholders held 706,843 shares (78.41%) and non-resident preference
shareholders 194,599 shares (21.59%) of the Company’s issued 901,442 preference shares as at
31 December 2008.
During the preceding three years, shareholders in Anglo Platinum have enjoyed positive returns, both in
terms of dividends and share-price appreciation. During 2008, ordinary shareholders received an interim
dividend of R35 per ordinary share. Supported by buoyant markets throughout the first half of 2008, the
share price reached a 12-month high of R1,480 per share.
The sudden global economic downturn during the last quarter of 2008 resulted in the share price
falling substantially, and ending the year at R518 per share. |
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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 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 economic
climate and low to short-term recovery expectations, the Board has decided not to declare a final
ordinary dividend for 2008, resulting in a dividend cover ratio of 1.6 on full-year headline earnings. |
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