(2008: $2,169 m)
Share of Group operating
profit (2008: 22%)
(2008: $2,675 m)
|$ million (unless otherwise stated)||2009||2008|
|Net operating assets||12,141||9,045|
|Share of Group operating profit||1%||22%|
|Share of Group net operating assets||31%||27%|
Anglo Platinum, based in South Africa, is the world's leading primary producer of platinum, accounting for around 40% of global output. It mines, processes and refines the entire range of platinum group metals (PGMs): platinum, palladium, rhodium, ruthenium, iridium and osmium. In addition to the PGMs, base metals such as nickel, copper and cobalt sulphate are important secondary products and are significant contributors to earnings.
Anglo Platinum's operations exploit the world's richest reserve of PGMs, known as the Bushveld Complex, which contains PGM-bearing Merensky, UG2 and Platreef ores. The company's access to an excellent portfolio of ore reserves ensures that it is well placed to be the world's major platinum producer for many years to come.
Anglo Platinum wholly owns nine mining operations currently in production, a tailings re-treatment facility, three smelters, a base metals refinery and a precious metals refinery. It also has 100% ownership of the Unki project in Zimbabwe. Each of its mines operates its own concentrator facilities, with smelting and refining of the output being undertaken at Rustenburg Platinum Mines' metallurgical facilities.
A restructuring of mining operations into more efficient, stand-alone units involved the splitting of the largest mines into smaller new mining entities so as to ensure a sustainable reduction in the unit cost of production and to extract maximum value from the assets employed. Rustenburg Section was divided into five new mines - Khomanani, Bathopele, Siphumelele, Thembelani and Khuseleka - while Amandelbult Section was split into the Tumela and Dishaba mines. Three high cost shafts, namely Siphumelele 3 and 2 shafts (formerly known as Bleskop and Brakspruit) and Khuseleka 2 shaft (formerly known as Boschfontein), were also placed on care and maintenance. The company's 100% owned mining operations now consist of the five mines at Rustenburg Section and the two mines at Amandelbult Section, as well as Mogalakwena and Twickenham mines. Union Mine is 85% held, with a black economic empowerment (BEE) partner, the Bakgatla-Ba-Kgafela traditional community holding the remainder.
Anglo Platinum also has 50:50 joint ventures with: a BEE consortium, led by African Rainbow Minerals, at Modikwa platinum mine; BEE partner Royal Bafokeng Resources over the combined Bafokeng-Rasimone platinum mine (BRPM) and Styldrift properties; and XK Platinum Partnership in respect of the Mototolo mine. In addition, Anglo Platinum has 50:50 pooling and sharing agreements with Aquarius Platinum covering the shallow reserves of the Kroondal and Marikana mines and portions of the reserves at Anglo Platinum's Thembelani and Khuseleka mines.
During 2009, Anglo Platinum successfully completed three BEE transactions:
Mvela: All of the conditions precedent in respect of the disposal of Anglo Platinum's 50% interest in the Booysendal project and of its 22.4% interest in Northam Platinum Limited to Mvela, for a total consideration of R3.7 billion, were fulfilled, with the final part of the transaction becoming effective in June 2009.
Anooraq: All of the conditions precedent to the acquisition by Anooraq of an effective 51% interest in Lebowa Platinum Mine and 1% interest in the Ga Phasha, Boikgantsho and Kwanda projects have been fulfilled and the transaction became effective on 30 June 2009. The transaction facilitated Anooraq's strategy of becoming a major historically disadvantaged South African (HDSA) managed and controlled PGM producer and illustrates Anglo Platinum's commitment to broad based BEE as a strategic transformation initiative. Anooraq now controls the third largest PGM resource base in South Africa, with a combination of high quality exploration, development and production mineral properties.
Royal Bafokeng Resources (RBR): The transaction whereby RBR obtained a majority interest in the Bafokeng-Rasimone Platinum Mine Joint Venture became unconditional and, therefore, effective 7 December 2009.
PGMs have a wide range of industrial and high technology applications. Demand for platinum is driven by its use in autocatalysts to control emissions from both petrol and diesel engine vehicles, and in jewellery. These uses are responsible for 70% of net total platinum consumption. Platinum, however, also has an enormous range of lesser known applications, predominantly in the chemical, electrical, medical, glass and petroleum industries.
The platinum jewellery market requires constant promotion and development. Anglo Platinum is the major supporter of the Platinum Guild International (PGI), which plays a key role in encouraging demand for platinum and in establishing new platinum jewellery markets. China has been the leading platinum jewellery market since 2000, followed by Europe, Japan and North America.
Industrial applications for platinum are driven by technology and, especially in the case of autocatalysts, by legislation. With the rapid spread of exhaust emissions legislation, more than 94% of new vehicles now have autocatalysts fitted. The intensifying stringency of emissions legislation will drive growth in PGM demand.
Palladium's principal application is in autocatalysts (around 45% of net demand). It is also used in electronic components, in dental alloys and, more recently, as an emerging jewellery metal in markets such as China. Palladium demand is expected to rebound in 2010, together with supply that is expected to increase from recycling of spent autocatalysts.
Rhodium is an important metal in autocatalytic activity, which accounts for nearly 80% of net demand. With the global economic slowdown depressing production of new vehicles, demand for rhodium declined in 2009. Declining demand in the autocatalyst sector, coupled with increased supplies from South Africa, are likely to keep the market in surplus in the short to medium term.
Anglo Platinum's objective is to maintain its position as the leading primary producer of platinum. In order to do this, the company aims to be a highly cost effective producer, to develop the market for PGMs and to expand production into that growth opportunity.
In the second half of 2008 and in 2009, in response to the unprecedented rapid decline in PGM prices caused chiefly by rapidly slowing vehicle sales in North America, Europe and Japan, the company implemented a number of initiatives to reduce costs and improve operational productivity and also undertook a critical examination of capital expenditure. Project capital spend is now directly related to Anglo Platinum's long term ounce requirements and the reduction in the rate of spend resulted in a number of projects being delayed, including Tumela (Amandelbult) 4 Shaft, Twickenham Platinum Mine and the Styldrift Merensky phase 1 project. However, the Thembelani 2 Shaft (formerly Paardekraal 2), Dishaba (formerly Amandelbult) East Upper UG2 and Khuseleka 1 Shaft (formerly Townlands Ore Replacement) projects are all progressing without delay.
Anglo Platinum is involved in developing mining activity for PGMs on the Great Dyke of Zimbabwe, the second largest known repository of platinum after the Bushveld Complex. Development and exploration work is focused on new projects in the area, including Unki, as well as establishing extensions to the resource base for future projects.
In February 2010, Anglo Platinum announced a rights offer of R12.5 billion (approximately $1.6 billion) which will be used to repay long term debt, therefore securing future financial and operational flexibility and creating capacity for growth. Anglo American announced its intention to subscribe in full to its entitlement to the rights offer.
Anglo Platinum generated an operating profit of $32 million, a 99% decrease compared with 2008. Key contributory factors included a 38% reduction in the dollar price realised on the basket of metals sold, offset by higher sales volumes and proceeds received from a business interruption insurance claim at Amandelbult.
The average dollar price achieved for platinum was $1,199 per ounce for the year, a 24% decrease compared with $1,570 in 2008. The average prices achieved for palladium and rhodium sales for the year were $257 per ounce (2008: $355) and $1,509 per ounce (2008: $5,174) respectively. The average price achieved on nickel sales for 2009 was $6.54 per pound (2008: $9.79). The overall basket price achieved for the year of $1,715 per platinum ounce sold compared with $2,764 achieved in 2008.
|Average market prices ($/oz)||2009||2008|
The unprecedented volatility in platinum demand and price experienced in 2008 was followed by a period of consolidation in 2009. The inherent strength in the structure of the platinum business saw the platinum market return to balance during 2009, as jewellery and investment demand increased, reacting to lower price levels in the first half of the year, and as investor sentiment improved. These increases offset lower demand for use in autocatalysts and from the industrial sector.
Developments in 2009 again highlight the importance of Anglo Platinum's continued commitment to market development which supports the maintenance of existing, and the development of new, industrial (including autocatalyst) applications, and the maintenance of healthy jewellery markets. Market development for by-product metals, most specifically palladium and rhodium, maximises the contribution to the total revenue from the basket of metals sold.
Demand for PGMs in the autocatalyst industry declined in 2009 due to lower levels of automobile production. The reduction in metal purchased by auto manufacturers was exacerbated, in the first half of the year, by their need to decrease vehicle inventory levels, therefore restricting production and selling from available stock. Some rebuilding of these inventories, together with widespread government incentive schemes, saw a firming in PGM demand in the second half of 2009. Incentive schemes resulted in an increase in the sale of smaller gasoline vehicles and a consequent reduction in diesel vehicle demand in Europe.
Demand for platinum in the industrial sector reduced in line with the global economic decline in 2009. Low utilisation rates in the chemical and petroleum sectors further reduced demand for new metal as companies reduced inventory levels. Glass demand was negatively affected by excess capacity and a return of metal from decommissioned plants.
As expected, demand for platinum jewellery fabrication responded quickly and strongly to the lower platinum prices in the latter part of 2008 and the first half of 2009. The increased demand was most notable in the unsaturated Chinese market. Total demand for jewellery in 2009 was 70% higher than in 2008.
Investor inflow into the platinum and palladium Exchange Traded Funds (ETFs) continued strongly throughout the year. Platinum holdings increased by just over 380 koz to 680 koz and palladium by just over 500 koz to 1,170 koz in 2009. The expected launch of the US based ETFs supported firm investment demand towards the end of 2009.
Anglo Platinum makes use of its extensive knowledge of the PGM market to form the basis of its operating strategy, thereby enhancing the company's ability to forecast the market's needs and, consequently, the level of production required to ensure long term market sustainability.
Anglo Platinum achieved a significant milestone in January 2010 when it recorded four consecutive months without a fatal incident at its operations, including the entire fourth quarter of 2009. Anglo Platinum's continued focus on safety also resulted in a further 21% improvement in its lost time injury frequency rate to 1.37, from 1.74 in 2008. Despite these improvements, sadly 13 employees lost their lives at Anglo Platinum's managed operations during the year.
The major restructuring of mining operations announced early in 2009 was completed by the end of the year. The two largest operations, Rustenburg and Amandelbult, were split into more efficient stand-alone units, of five and two mines respectively. This new structure ensures a sustainable reduction in the unit cost of production and underpins the commitment to extracting maximum value from the assets. As part of the restructuring process, the source of ounces across the portfolio was optimised, including placing three high cost shafts on to care and maintenance indefinitely: Siphumelele 3 shaft and Siphumelele 2 shaft in April and August respectively; and Khuseleka 2 shaft at Khuseleka Mine in August. Union and Mogalakwena remain untouched by these changes.
Refined platinum production for the year was 3% higher at 2.45 million ounces, in line with the company's 2009 target. Equivalent refined platinum production (equivalent ounces are mined ounces expressed as refined ounces) was 2.46 million ounces. Sales of refined platinum for the year were 2.57 million ounces compared with 2.22 million ounces in 2008, an increase of 16%. This increase was due to unsold metal at the end of 2008 being available for sale in 2009 and the achievement of higher refined production volumes.
Costs were tightly controlled during 2009. The focus on cost management, inbound supply chain projects and asset optimisation initiatives began to bear fruit and resulted in the cash operating cost per equivalent refined platinum ounce remaining flat at R11,236. This was achieved despite upward inflationary pressure caused by wage and electricity tariff increases in excess of consumer price inflation.
Cost increases were curbed through improved productivity and numerous cost management initiatives, including:
Anglo Platinum reduced its head office and regional office headcount by 724 people in 2009, bringing the total reduction since July 2008 to 1,150. Overall headcount was reduced by 15,752 during the year, and by 18,786 since October 2008. Productivity levels increased by 13% compared with 2008, to 6.33 m2 per total operating employee on average per month.
Capital expenditure for 2009, excluding capitalised interest, was 26% lower at $1,150 million, of which $708 million was spent on projects and $442 million on stay-in-business capital.
Total expected capital expenditure for 2010 has been reduced to approximately $1 billion, excluding capitalised interest.
The 65 kozpa Unki platinum project in Zimbabwe is progressing towards the commissioning of its concentrator in the fourth quarter of 2010. The development of the underground declines is 64% complete and the supporting infrastructure is 80% complete.
Anglo Platinum expects the platinum market in 2010 to return to a position of deficit as a result of a moderate increase in supply but a significant recovery in demand. South African production is expected to remain constrained as producers adapt to a safer working environment and because lower rand metal prices resulted in production in 2009 being restricted at high cost operations across the industry.
Vehicle sales in 2010 are expected to be similar to those seen in 2009, though production is likely to increase as fewer sales from stock are expected in 2010. Higher sales of larger sedan vehicles are expected as diesel fleet purchases recover.
While demand for industrial products is expected to recover slowly, platinum demand is expected to be enhanced by a substantial element of restocking.
Another good year is expected from the investment segment, particularly following the launch of the US ETF.
Jewellery demand is expected to decrease in 2010 in the absence of the extra demand that rebuilt supply chain inventory levels in 2009. While the higher price may discourage new jewellery demand in mature markets, the Chinese jewellery market continues to react positively to gradual price increases and remains the largest market for platinum jewellery.
The platinum price in 2010 is expected to remain above $1,500 per ounce on average as improvements in the global economic recovery and restocking are likely to further increase the expected demand recovery in 2010.
Firm investment demand for palladium and the strong reliance by gasoline engines, more typical in smaller engines and in the growing Chinese market, are likely to see the price of metal strengthen. Rhodium remains in demand for its particular catalytic properties, but suffered a reduction in demand owing to thrifting at the very high prices during 2008.
Given the prevailing market conditions, the company has targeted 2010 production of 2.5 million ounces of refined platinum and to produce this volume at a unit cost marginally above R11,000 per platinum ounce, the same level as in the preceding two years.
Hydropower equipment (HPE) raise rig drill at Twickenham Mine. HPE forms part of Anglo Platinum's mechanisation programme which is leading to higher quality raise development than through using conventional drilling and blasting, and faster rates of development, as well as safety benefits as fewer employees are needed in the critical drilling areas.