Anglo Plats Interim Results
Anglo American PLC
27 July 2004
News Release
27 July 2004
Anglo American plc ("Anglo American") notification:
Anglo Platinum interim results 2004
Anglo American wishes to draw attention to Anglo Platinum's announcement of
their results for the 6 months to 30 June 2004, attached hereto.
Anglo American will report headline earnings in respect of Platinum of US$139
million for the 6 months to 30 June 2004, which takes into account certain UK
GAAP adjustments.
Anglo American will report results for the 6 months to 30 June 2004 on 5 August
2004.
The above figures are unaudited.
Anglo American Platinum Corporation Limited ("Anglo Platinum")
(Incorporated in the Republic of South Africa)
(Registration number 1946/022452/06) JSE Codes: AMS; AMSP
ISIN: ZAE000013181; ZAE000054474
• Equivalent refined Pt production# increases by 7,8%
• Headline earnings## per share up 32%
# Mines' production and purchases of metal in concentrate converted to
equivalent refined production using Anglo Platinum standard smelting and
refining recoveries.
## Before the adoption of AC 501 - Accounting for Secondary Tax for Companies
Consolidated Income Statement
Reviewed Reviewed
Six months Six months Audited Year
ended ended ended 31
30 June 30 June % December
R millions Notes 2004 2003 Change 2003
Gross sales revenue 9 589,5 7 349,6 16 508,6
Commissions paid (172,7) (203,5) (408,2)
Net sales revenue 9 416,8 7 146,1 32 16 100,4
Cost of sales (6 936,9) (5 266,6) (32) (12 190,5)
Gross profit on metal 2 479,9 1 879,5 32 3 909,9
sales
Other net (expenditure)/ 4 (150,2) 25,5 (269,3)
income
Market development and (94,5) (129,4) (257,5)
promotional expenditure
Operating profit 2 235,2 1 775,6 26 3 383,1
Net interest paid 5 (179,8) (19,5) (236,9)
Income from associates 37,7 12,8 35,0
Profit before taxation 2 093,1 1 768,9 18 3 181,2
Taxation (642,0) (657,6) 2 (1 089,3)
Net profit 1 451,1 1 111,3 31 2 091,9
Headline earnings 6 1 530,8 1 044,2 2 091,7
Adjustment for the adoption of 13 (27,8) 71,7
AC 501
Headline earnings before 1 503,0 1 115,9 35 2 091,7
adoption of AC 501
- Attributable to ordinary 1 479,0 1 115,9 33 2 091,7
shareholders
- Attributable to preference 24,0
shareholders
Number of ordinary shares in 217,1 215,1 215,4
issue (millions)
Weighted average number of 215,9 215,0 215,1
ordinary shares in issue
(millions)
Attributable earnings per
ordinary share (cents)
- Basic 661,0 516,9 28 972,5
- Headline - before AC 501 685,0 519,0 32 972,4
- Headline - after AC 501 697,9 485,7 972,4
- Diluted (basic) 658,6 516,4 28 971,2
- Diluted (headline) 695,3 485,2 971,1
Dividends per ordinary share 400 370 8 640
(cents)
- Interim 400+ 370 370
- Final 270
Dividend cover (attributable
headline
earnings per share) 1,7 1,3 1,5
+ Proposed ordinary dividend
Segmental Information+
Purchased
metals in
R millions Notes Mined concentrate Total
For the six months ended 30 June
2004 (reviewed)
GROSS SALES REVENUE 9 278,4 311,1 9 589,5
Commissions paid (166,9) (5,8) (172,7)
Net sales revenue 9 111,5 305,3 9 416,8
Sales of refined metal 8 895,5 305,3 9 200,8
Sales of metals in concentrate ++ 216,0 - 216,0
COST OF SALES (6 660,4) (276,5) (6 936,9)
On-mine (5 504,0) - (5 504,0)
Cash operating costs (4 904,7) - (4 904,7)
Amortization 3 (599,3) - (599,3)
Purchase of metals in concentrate - (412,4) (412,4)
Smelting (523,7) (29,8) (553,5)
Cash operating costs (428,8) (24,4) (453,2)
Amortization 3 (94,9) (5,4) (100,3)
Treatment and refining (414,6) (15,8) (430,4)
Cash operating costs (366,8) (13,9) (380,7)
Amortization 3 (47,8) (1,9) (49,7)
Increase in metal inventories 154,7 182,3 337,0
Other costs (372,8) (0,8) (373,6)
GROSS PROFIT ON METAL SALES 2 451,1 28,8 2 479,9
Gross profit margin (%) 26,4 9,3 25,9
Cost of sales per Pt ounce sold 5 880 7 139 5 922
(Rand)
For the six months ended 30 June
2003 (reviewed)
GROSS SALES REVENUE 7 210,4 139,2 7 349,6
Commissions paid (199,5) (4,0) (203,5)
NET SALES REVENUE 7 010,9 135,2 7 146,1
Sales of refined metal 7 010,9 135,2 7 146,1
Sales of metals in concentrate ++ - - -
COST OF SALES (5 166,3) (100,3) (5 266,6)
On-mine (4 594,1) - (4 594,1)
Cash operating costs (4 165,5) - (4 165,5)
Amortization 3 (428,6) - (428,6)
Purchase of metals in concentrate - (126,3) (126,3)
Smelting (451,9) (13,3) (465,2)
Cash operating costs (405,0) (11,9) (416,9)
Amortization 3 (46,9) (1,4) (48,3)
Treatment and refining (409,4) (7,1) (416,5)
Cash operating costs (372,3) (6,4) (378,7)
Amortization 3 (37,1) (0,7) (37,8)
Increase in metal inventories 612,9 53,0 665,9
Other costs (323,8) (6,6) (330,4)
GROSS PROFIT ON METAL SALES 1 844,6 34,9 1 879,5
Gross profit margin (%) 25,6 25,1 25,6
Cost of sales per Pt ounce sold 5 304 6 507 5 323
(Rand)
For the year ended 31 December
2003 (audited)
GROSS SALES REVENUE 16 161,3 347,3 16 508,6
Commissions paid (399,2) (9,0) (408,2)
NET SALES REVENUE 15 762,1 338,3 16 100,4
Sales of refined metal 15 762,1 338,3 16 100,4
Sales of metals in concentrate ++ - - -
COST OF SALES (11 923,1) (267,4) (12 190,5)
On-mine (9 968,9) - (9 968,9)
Cash operating costs (9 027,1) - (9 027,1)
Amortization 3 (941,8) - (941,8)
Purchase of metals in concentrate - (291,6) (291,6)
Smelting (1 015,9) (21,2) (1 037,1)
Cash operating costs (891,5) (18,6) (910,1)
Amortization 3 (124,4) (2,6) (127,0)
Treatment and refining (857,2) (16,9) (874,1)
Cash operating costs (781,1) (15,2) (796,3)
Amortization 3 (76,1) (1,7) (77,8)
Increase in metal inventories 511,0 73,9 584,9
Other costs (592,1) (11,6) (603,7)
GROSS PROFIT ON METAL SALES 3 839,0 70,9 3 909,9
Gross profit margin (%) 23,8 20,4 23,7
Cost of sales per Pt ounce sold 5 305 5 735 5 313
(Rand)
+ The Group produces PGMs in South Africa. The risks and rewards associated with
the individual operations are not sufficiently dissimilar to warrant
identification of separate geographical segments. Therefore, only business
segments are reported.
++ Sale of metal in concentrate attributable to Anglo Platinum from the Kroondal
Pooling and Sharing Agreement (KPSA). The metal was sold to Impala in terms of
an off-take agreement that was in place when the KPSA commenced. Metal in
concentrate surplus to the volumes stipulated in the off-take agreement will be
refined by Anglo Platinum.
Group Statement of Changes in Equity
Unrealized
Share Share hedging Accumulated
R millions capital premium deficit profits Total
Balance as at 31 21,5 754,0 - 12 408,6 13 184,1
December 2002
(audited)
Net profit 1 111,3 1 111,3
(restated)
Dividends paid in (1 935,4) (1 935,4)
cash
Ordinary share -* 13,5 13,5
capital issued
Balance as at 30 21,5 767,5 - 11 584,5 12 373,5
June 2003 (reviewed)
Net profit 980,6 980,6
(restated)
Dividends paid in (796,2) (796,2)
cash
Ordinary share -* 28,8 28,8
capital issued
After-tax changes in (164,0) (164,0)
forward metal price
Balance as at 31 21,5 796,3 (164,0) 11 768,9 12 422,7
December 2003
(audited)
Net profit 1 451,1 1 451,1
Final dividend no. 0,2 481,4 (581,5) (99,9)
102
Dividends paid in (99,9) (99,9)
cash
Dividends reinvested 0,2 481,4 (481,6) -
Preference share 0,4 3 923,9 3 924,3
capital issued (Note
9)
Proceeds on issue 0,4 3 999,6 4 000,0
Less: Share issue (75,7) (75,7)
expenses
Ordinary share -* 6,0 6,0
capital issued
After-tax changes in 105,5 105,5
forward metal price
(Note 10)
Balance as at 30 22,1 5 207,6 (58,5) 12 638,5 17 809,7
June 2004 (reviewed)
* Less than R50 000.
Consolidated Balance Sheet
Reviewed Reviewed Audited
as at as at as at
30 June 30 June 31 December
R millions Notes 2004 2003 2003
ASSETS
Non-current assets 23 577,4 18 760,3 22 493,9
Property, plant and equipment 18 425,4 14 355,6 14 550,8
Capital work-in-progress 3 882,3 3 718,5 7 249,2
Platinum Producers' 118,9 95,1 113,4
Environmental Trust
Investment in associates 7 476,3 492,5 484,0
Non-current accounts receivable 674,5 98,6 96,5
(S)
Current assets 5 247,6 4 632,0 5 295,7
Inventories 2 774,6 2 537,8 2 439,6
Accounts receivable 1 720,5 1 452,7 2 286,7
Other financial assets 10 19,9 - -
Cash and cash equivalents 732,6 641,5 569,4
Total assets 28 825,0 23 392,3 27 789,6
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 22,1 21,5 21,5
Share premium 5 207,6 767,5 796,3
Unrealized hedging deficit (58,5) - (164,0)
Accumulated profits before 12 638,5 11 584,5 11 768,9
proposed ordinary dividend and
related STC
Accumulated profits after 11 661,3 10 689,1 11 114,6
proposed ordinary dividend and
related STC
Proposed ordinary dividend 868,6 795,9 581,6
STC in respect of proposed 108,6 99,5 72,7
ordinary dividend
Shareholders' equity 17 809,7 12 373,5 12 422,7
Non-current liabilities 6 069,0 5 126,7 5 560,8
Deferred taxation 4 903,4 4 198,0 4 438,9
Environmental obligations 321,2 207,5 308,7
Employees' service benefit 477,0 459,4 488,9
obligations
Obligations due under finance 367,4 261,8 324,3
leases
Current liabilities 4 946,3 5 892,1 9 806,1
Interest bearing borrowings 8 2 378,8 3 553,2 7 168,1
Accounts payable 2 088,8 1 795,0 1 903,4
Other financial liabilities 10 113,1 58,9 336,2
Taxation 365,6 485,0 398,4
Total equity and liabilities 28 825,0 23 392,3 27 789,6
(S) The increase in this balance is mainly attributable to the amount owing to
Anglo Platinum as a result of the disposal of 50% of the Bafokeng-Rasimone
Platinum Mine to Royal Bafokeng Resources (Pty) Ltd on formation of the BRPM
Joint Venture.
Consolidated Cash Flow Statement
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
R millions 2004 2003 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 9 744,9 7 187,1 15 476,5
Cash paid to suppliers and employees (6 289,9) (5 550,8) (12 117,2)
Cash from operations 3 455,0 1 636,3 3 359,3
Interest paid (231,8) (79,8) (277,4)
Taxation paid (238,1) (1 277,3) (1 474,9)
Net cash from operating activities 2 985,1 279,2 1 607,0
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property, plant and equipment (2 015,8)## (3 053,9) (7 423,6)
To maintain operations (1 065,4) (1 482,7) (3 952,7)
To expand operations (877,0) (1 519,8) (3 270,4)
Interest capitalized (73,4) (51,4) (200,5)
Proceeds from sale of plant, equipment and 16,2 76,3 134,8
mineral rights
Investment in associates - * (1,4) (1,5)
Interest received 64,8 66,5 106,7
Growth in Platinum Producers' Environmental 5,5 5,9 11,2
Trust
Capital reduction by Northam Platinum - 10,3 28,7
Limited
Dividends received from associates 23,4 47,3 47,3
Net cash used in investing activities (1 905,9) (2 849,0) (7 096,4)
CASH FLOWS (USED IN)/FROM FINANCING
ACTIVITIES
Proceeds from the issue of preference share 0,4 - * - *
capital
Increase in share premium 3 929,9 13,5 42,3
(Decrease)/increase in interest bearing (4 746,4) 3 553,2 7 168,1
borrowings
Dividends paid (99,9) (1 935,4) (2 731,6)
Net cash (used in)/from financing activities (916,0) 1 631,3 4 478,8
Net increase/(decrease) in cash and cash 163,2 (938,5) (1 010,6)
equivalents
Cash and cash equivalents at beginning of 569,4 1 580,0 1 580,0
the year
Cash and cash equivalents at end of the 732,6 641,5 569,4
period/year
MOVEMENT IN NET DEBT
Net (debt)/cash at beginning of year (6 923,0) 1 443,6 1 443,6
Net cash from operating activities 2 985,1 279,2 1 607,0
Net cash used in investing activities (1 905,9) (2 849,0) (7 096,4)
Net cash from/(used in) financing
activities,
excluding movements in debt 3 830,2 (2 047,3) (2 877,2)
Net debt at end of the period/year (2 013,6) (3 173,5) (6 923,0)
Made up as follows:
Cash and cash equivalents 732,6 641,5 569,4
Interest bearing borrowings (2 378,8) (3 553,2) (7 168,1)
Obligations due under finance leases (367,4) (261,8) (324,3)
(2 013,6) (3 173,5) (6 923,0)
## The Group concluded the following non-cash transactions during the period:
- The exchange of 50% of Bafokeng-Rasimone Platinum Mine for mineral rights and
a non-current receivable on formation of the BRPM Joint Venture.
- The exchange of 50% of certain mineral rights for mining infrastructure on
formation of the Pandora Joint Venture.
* Less than R50 000.
Notes
1. This interim report complies with International Accounting Standard 34 -
Interim Financial Reporting and South African Statement of Generally Accepted
Accounting Practice, AC127, with the same title as well as with Schedule 4 of
the South African Companies Act and the disclosure requirements of the JSE
Securities Exchange's listings requirements.
2. The interim report has been prepared using accounting policies that comply
with South African Statements of Generally Accepted Accounting Practice and
International Financial Reporting Standards. The accounting policies are
consistent with those applied in the financial statements for the year ended 31
December 2003, except for the change discribed in Note 13.
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
R millions 2004 2003 2003
3. Amortization and depreciation of
property, plant and equipment
Amortization and depreciation of mining and
process property, plant and equipment
consists of the following categories:
Operating assets 749,3 514,7 1 146,6
Mining 599,3 428,6 941,8
Smelting 100,3 48,3 127,0
Treatment and refining 49,7 37,8 77,8
Amortization included in other costs 10,9 - 38,2
Depreciation - non-mining assets 22,8 9,7 41,8
783,0 524,4 1 226,6
4. Other net (expenditure)/income
Other net (expenditure)/income consists
of the following principal categories:
Realized and unrealized foreign exchange (36,4) (198,2) (417,2)
losses
Restructuring costs ***** (18,5) (111,4)
Profit on commodity contracts 1,7 156,3 157,3
Profit on disposal of mineral rights 1,7 64,6 64,6
Impact of assets exchanged (97,6) - -
Property, plant and equipment 93,4 - -
Mineral rights (191,0) - -
Other (1,1) 2,8 37,4
(150,2) 25,5 (269,3)
***** Restructuring costs mainly relate to
costs incurred as a result of the slow-down
of expansion projects.
5. Net interest paid
Net interest (paid)/received consists of the
following principal categories:
Interest expensed (231,8) (79,8) (286,9)
Interest paid (305,2) (131,2) (487,4)
Less: capitalized 73,4 51,4 200,5
Time value of money adjustment to (18,3) (12,5) (68,3)
environmental obligations
Decommissioning (15,9) (11,0) (62,9)
Restoration (2,4) (1,5) (5,4)
Interest received 64,8 66,5 106,7
Growth in Platinum Producers' Environmental 5,5 5,9 11,2
Trust
Dividends received - 0,4 0,4
(179,8) (19,5) (236,9)
6. Reconciliation between net profit and
headline earnings
Net profit 1 451,1 1 111,3 2 091,9
Less: Undeclared cumulative preference share (24,0)
dividend and related STC
Basic earnings attributable to ordinary 1 427,1 1 111,3 2 091,9
shareholders
Profit on disposal of mineral rights (1,7) (64,6) (64,6)
Impact of assets exchanged (after tax) 68,3 -
Property, plant and equipment (65,4) - -
Mineral rights 133,7 - -
Net goodwill amortization 0,8 (2,5) 1,5
Scrapping of capitalized development cost 12,3 62,9
(after tax)
Headline earnings attributable to ordinary 1 506,8 1 044,2 2 091,7
shareholders
Undeclared cumulative preference share 24,0
dividend and related STC
Headline earnings 1 530,8 1 044,2 2 091,7
Reviewed Reviewed Audited
as at as at As at
30 June 30 June 31 December
R millions 2004 2003 2003
7. Investment in associates
Listed - Ordinary shares (Market value:
R453,2 million
(Jun 2003: R643,4 m; Dec 2003: R515,8 m)) 251,4 224,7 240,6
Unlisted (Directors' valuation: R224,9
million
(Jun 2003: R267,8 m; Dec 2003: R243,4 m)) 224,9 267,8 243,4
Ordinary shares 145,9 181,2 159,8
Redeemable preference shares 79,0 86,6 83,6
476,3 492,5 484,0
8. Borrowing facilities
The Group has the following borrowing
facilities:
Bank overdrafts utilized 2 378,8 3 553,2 7 168,1
Available facilities 10 673,6 4 900,0 10 173,6
Weighted average borrowing rate (%) 8,8 12,8 8,7
Borrowing powers
The borrowing powers in terms of the
Articles of Association of the Company and
its subsidiaries are unlimited.
9. Preference share capital
On 31 May 2004 the Company issued 40 000 000
convertible perpetual cumulative preference
shares, with a par value of one cent each,
at R100 per share, giving rise to an
increase of R3 923,9m in share premium,
after share issue expenses of
R75,7m. Dividends, if declared, are paid
six-monthly in arrears at 6,38% per annum.
The dividend dates are 31 May and 30
November. The preference shares are
convertible into ordinary shares, at the
election of the shareholder, at any time on
or before the final conversion date, being
the fifth anniversary of the issue date,
31 May 2009. Thereafter, the preference
shares are callable, by the Company, either
through redemption or acquisition
into perpetuity. Preference shares which are
not converted nor called by the Company will
continue to exist as preference shares.
10. Other financial assets/liabilities
Other financial assets
Fair value of foreign exchange options ! 19,9 - -
Other financial liabilities
Fair value of forward foreign exchange 25,5 58,9 90,4
contracts !!
Fair value of forward metal contracts
designated
as cash flow hedges !!! 87,6 - 245,8
113,1 58,9 336,2
! Foreign exchange options:
The fair value of foreign exchange options
represents the value derived using option
valuation techniques. These movements are
recognized in the income statement.
!! Forward foreign exchange contracts
(FEC's):
The fair value of FEC's represents the
movement between contracted rates and
forward rates at 30 June 2004. These
movements are recognized in the income
statement.
!!! Forward metal contracts:
Changes in the value of forward metal
contracts caused by movement in forward
prices since inception of the contracts are
recognized in the unrealized hedging
deficit. The net amount of R105,5 million
credited to the unrealized hedging deficit
since the last balance sheet date is made up
of R150,7 million less a deferred taxation
movement of
R45,2 million. R41,0 million of this
movement was recognized in the income
statement. Changes in the value caused by
translating the value of the forward
contracts to Rand are recognised in the
income statement. This amounts to a gain of
R13,4 million less taxation of R4,0 million
for the six months ended 30 June 2004.
At 30 June 2004 the Group held forward
contracts to fix the US$ price of future
sales relating to a nickel supply agreement.
The objective is to hedge the Group against
variability in future cash flows. The terms
of the outstanding forward contracts are to
sell a further 5 544 tons of nickel at US$
12 540 per ton. The forward metal contracts
are valued using forward metal prices that
match the contractual maturity dates.
11. Commitments
Mining and process property, plant and
equipment
Contracted for 1 569,8 2 776,8 1 800,0
Not yet contracted for 9 701,0 12 548,3 11 943,4
Authorized by the directors 11 270,8 15 325,1 13 743,4
Allocated for:
Expansion of capacity 5 775,8 8 689,3 7 424,8
- within remainder of year/one year 1 077,0 2 334,7 2 844,3
- thereafter (within 5 years) 4 698,8 6 354,6 4 580,5
Maintenance of capacity 5 495,0 6 635,8 6 318,6
- within remainder of year/one year 1 921,7 1 686,9 3 457,9
- thereafter (within 5 years) 3 573,3 4 948,9 2 860,7
Other
Operating lease rentals - buildings 694,7 440,1 711,5
- within remainder of year/one year 38,2 7,9 35,6
- within two to five years 165,9 59,9 160,5
- thereafter 490,6 372,3 515,4
Information Technology Service Providers 102,2 112,2 126,6
- within remainder of year/one year 32,0 15,7 33,4
- thereafter (within 5 years) 70,2 96,5 93,2
These commitments will be funded from cash resources, future operating cash
flows, borrowings and any other funding strategies embarked on by the Group.
12. Contingent liabilities
The Group provided guarantees in favour of Changing Tides 166 (Proprietary)
Limited, a wholly owned subsidiary of Group Five. The guarantee provides
security for lease payments to Group Five by the Anglo Platinum Housing Trust.
The probability of any obligation arising under this guarantee is considered
remote.
The Group provided a guarantee in favour of Nedcor Limited (Nedcor) for
financing provided by Nedcor to Salene Mining (Proprietary) Limited (Salene).
The Group provided the guarantee to enable Salene to put mining infrastructure
in place. The guarantee is valid until 1 July 2006 or earlier, on repayment by
Salene of the loan. Salene will sell all ore production from the mine to the
Group. The facility granted by Nedcor to Salene is for a maximum amount of R120
million. In the event that Nedcor calls up the guarantee, the Group holds bonds
over sufficient assets of Salene to make good any obligations that may be
incurred.
Aquarius Platinum (South Africa) (Proprietary) Limited holds a put option to put
its interest in the 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 dependent on a
discounted cash flow valuation at that point in time.
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.
13. Change in accounting policy - adoption of AC 501 - 'Accounting for Secondary
Tax companies (STC)'
AC 501 became effective on 1 January 2004. This pronouncement determines that
STC should not be anticipated or deferred at the interim reporting stage based
on the effective tax rate that is expected for a full financial year. This
accounting pronouncement requires a change to the Group's accounting policy of
providing for taxation at the interim reporting stage at the average rate that
is expected for the year and includes expected STC. The impact of this
adjustment of net profit is a gain of R27,8m (June 2003: charge of R71,7m; Dec
2003: R nil).
Corporate Governance
The Board is of the view that the Company and its subsidiaries are fully
compliant with the recommendations as set out in the Code of Corporate Practices
and Conduct contained in King 2.
Report of the Independent Auditors
To the members of
Anglo American Platinum Corporation Limited
We have reviewed the accompanying summarised consolidated financial statements
included in the interim report of Anglo American Platinum Corporation Limited
and its subsidiaries for the six months ended 30 June 2004, set out above. This
interim report is the responsibility of the Company's directors. Our
responsibility is to issue a report on this interim report based on our review.
Scope
We conducted our review in accordance with the statement of the South African
Auditing Standard applicable to review engagements. This standard requires that
we plan and perform the review to obtain moderate assurance that the interim
financial information is free of material misstatement. A review is limited
primarily to enquiries of Company personnel and analytical procedures applied to
financial data and thus provides less assurance than an audit. We have not
performed an audit and, accordingly, we do not express an audit opinion.
Review opinion
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying interim report is not fairly presented, in all material
respects, in accordance with the South African Statement of Generally Accepted
Accounting Practice and the International Financial Reporting Standard as
applicable to Interim Financial Reporting and the Companies Act in South Africa.
Deloitte & Touche
Registered Accountants and Auditors Johannesburg
Chartered Accountants (SA) 26 July 2004
Commentary
1. FINANCIAL RESULTS
The Group has shown a significant performance improvement in comparison with the
first half of 2003 as a result of increased production and sales volumes and
higher US dollar prices realised on metals sold. Headline earnings attributable
to ordinary shareholders increased to R1,48 billion, 32,5% above those reported
for the same period in 2003, while headline earnings per ordinary share rose by
32,0% to 685 cents. An interim dividend of 400 cents per share has been
declared.
A change in accounting policy required by AC 501 has resulted in the restatement
of results for the six months to June 2003. On a restated basis headline
earnings attributable to ordinary shareholders changed from R1,12 billion to
R1,04 billion.
Gross sales revenue increased by R2,24 billion to R9,59 billion. The increase
was as a result of higher volumes of metals produced and sold, amounting to
R1,60 billion, firmer US dollar metal prices achieved, contributing R1,9
billion, offset by a R1,26 billion reduction in rand revenues as a result of a
17% stronger rand.
Cost of sales rose by R1,67 billion to R6,94 billion:
Cash mining, smelting, and refining costs increased by R0,78 billion to R5,74
billion, as detailed in the Operations section of this commentary.
Purchases of metal in concentrate increased by R286,1 million to R412,4 million,
owing mainly to the commencement of the BRPM Joint Venture in March 2004,and to
increased purchases from the Modikwa Joint Venture.
Amortization of operating assets rose by R234,6 million as a result of charges
against 2003 capital expenditure and higher production at new operations.
The value of metals in inventory increased by R337,0 million during the first
half of 2004 as a result of higher stock levels at the end of June compared to
the end of December 2003 and cost increases which affected the unit cost at
which metal stocks are valued.
Other net expenditure for the first half of 2004 amounted to R150,2 million,
compared with other net income of R25,5 million in 2003. This primarily reflects
the impact of exchanges of assets in connection with joint ventures (R97,6
million) and lower profits realized on commodity contracts and the disposal of
mineral rights, offset by lower foreign exchange losses. The impact of the joint
venture transactions has been added back in calculating headline earnings and
therefore had no effect on headline earnings for the period.
Net interest paid during the review period amounted to R179,8 million, compared
with R19,5 million in 2003, increasing as a result of higher average
borrowings. Interest paid was net of R73,4 million of interest on borrowings
allocated to capital projects under development.
2. OPERATING PERFORMANCE
Refined platinum production for the six months to 30 June 2004 rose by 26,6% to
1 158 900 ounces. The improvement was mainly as a result of the normalisation of
metal flows through the process division; in the first half of last year, some
160 000 ounces of platinum were temporarily locked up in the process pipeline.
In addition, the volume of platinum mined and purchased increased by 91 600
ounces. Equivalent refined platinum production, which reflects mine production
adjusted to expected refined metal output and which eliminates the effect of
temporary pipeline build ups, increased by 7,8%.
The cash operating cost per refined platinum ounce decreased by 7,1% compared to
the first half of 2003 because of the sharp increase in refined production.
After adjusting for the once-off build-up of stock in process in 2003, the unit
cost per equivalent refined ounce increased by 7,4%.
3. SAFETY
It is encouraging to note that the considerable improvement in safety
performance achieved in 2003 was sustained in the first half of 2004. The
Behaviour Based Safety initiatives continued to be successful and have become a
natural part of work practices, resulting in a reduction in the number of
fatalities not related to fall-of-ground incidents. Nevertheless, eleven
employees died at managed operations as a result of work-related accidents
during the first half of 2004. Management and the Board extend their sincere
condolences to the families, friends, and colleagues of the deceased. The Group
remains wholly committed to the extensive safety programmes adopted and to
eliminating fatalities at work.
4. OPERATIONS
Mining operations
All mines produced more than in the first half of 2003 and total platinum
delivered to the smelters rose by 7,8% for the period. The largest contributors
to the increase were the Rustenburg UG2 project, Modikwa, and the Western Limb
Tailings Retreatment plant ("WLTR").
The cash on-mine cost per equivalent refined platinum ounce rose by 9,6%,
principally as a result of a 9,25% wage increase following the two-year wage
increase settlement of 2002 and the effect of inflationary price increases on
stores.
Process operations
The smelters and the Anglo Platinum Converting Process ("ACP") Plant performed
well in the first half of 2004. The ACP Plant helped significantly in reducing
sulphur emissions from the Waterval Smelter complex.
The base and precious metals refineries also performed well. De-bottlenecking at
these operations, intended to cope with planned production increases, proceeded
according to plan and did not disrupt production.
The cash smelting, treatment, and refining cost per refined platinum ounce
declined by 17,2% owing mainly to the large increase in refined production and
to cost optimization efforts. Per equivalent refined ounce, unit costs fell by
2,8%.
5. PROJECTS
Anglo Platinum remains confident of the robustness of current and future demand
for platinum and its expansion programme is proceeding in accordance with the
build-up profile announced in December 2003. New investments are however
reviewed on a regular basis to assess their viability at varying prices and
exchange rates. The continuing strength of the rand against the US dollar is
clearly impacting the ability of new projects to meet the Group's required
hurdle rates. As a result, further delays in the Group's extensive expansion
programme may become unavoidable.
It is pleasing to report that operations at the ACP Plant and Polokwane Smelter,
both of which were commissioned last year, were stable and in line with planned
production build-ups. The Western Limb Tailings Retreatment Plant was
commissioned at the end of 2003 and achieved a rapid build-up of tonnage. The
Kroondal Pooling and Sharing Agreement concluded at the end of 2003 is reflected
in Anglo Platinum's results for the six months to June 2004.
The Bafokeng-Rasimone Platinum Mine substantially achieved its design parameters
and is therefore reported as a steady-state operation from January 2004.
Production from the mine will continue to rise through grade improvement.
6. CAPITAL EXPENDITURE
Capital expenditure amounted to R2,02 billion (2003: R3,05 billion). Expenditure
to maintain operations decreased to R1,07 billion (2003: R1,48 billion) and
expansion expenditure amounted to R0,88 billion (2003: R1,52 billion). Interest
of R73,4 million was capitalized (2003: R51,4 million).
There is an ongoing focus on capital optimization to ensure that expenditure is
reduced where appropriate and deferred where possible without negatively
impacting production levels. It is anticipated that capital expenditure for the
full year will amount to some R5 billion.
7. FINANCIAL STRUCTURE
In May 2004, Anglo Platinum successfully concluded a rights offer of convertible
perpetual cumulative preference shares, which raised R4 billion. The proceeds
were used to reduce short-term borrowings.
Net debt decreased by R4,91 billion to R2,01 billion during the six months to
June 2004. The rights offer raised R3,92 billion, net of issue costs. Cash
generated by operations amounted to R3,46 billion. Cash outflows consisted
mainly of capital expenditure (R2,02 billion), interest payments (R0,2 billion),
and taxation payments (R0,2 billion). The final 2003 dividend, declared in
February 2004, amounted to R581,5 million, of which R481,6 million was
re-invested at the election of shareholders and the balance of R99,9 million was
paid in cash.
8. NEW MINERALS LEGISLATION AND EMPOWERMENT OF HISTORICALLY
DISADVANTAGED SOUTH AFRICANS
Anglo Platinum continues to work closely with the Department of Minerals and
Energy and good progress is being made towards meeting the ownership and
attributable production requirements of the Mineral and Petroleum Resources
Development Act and Broad-based Economic Empowerment Charter. The Group is
preparing to convert "old-order" rights to "new-order" rights in accordance
with the requirements of the new Act.
The BRPM Joint Venture with the Royal Bafokeng Nation ("RBN"), first announced
in 2002, became fully operational on 1 March 2004. In terms of the agreement
governing the JV, the parties contributed the mineral reserves and resources on
the adjacent Boschkoppie and Styldrift farms and will equally share the
historical and future costs and benefits associated with establishing and
operating the mining venture to concentrate stage. On 30 June 2004, this
arrangement, including interest, resulted in the RBN owing Anglo Platinum R580,2
million, which is reflected as a loan in Anglo Platinum's accounts ("the loan").
The RBN will forego any benefits from the JV until the loan, including interest
at commercial rates, is settled, but in any event no later than 1 March 2014.
Until the loan is settled, Anglo Platinum will continue to fund all expenditure
and receive all cash flows from the JV. Thereafter, the JV benefits will be
shared equally between the parties.
9. SOCIAL RESPONSIBILITY AND HIV/AIDS
Anglo Platinum continues to invest significantly in social upliftment
programmes, including home ownership around the Group's operations, local
economic development, the provision of healthcare, and the economic development
of areas providing migrant labour.
The Group acknowledges the need to manage the impact of HIV/AIDS and a
comprehensive programme is in place to address all aspects of this pandemic. The
programme of free antiretroviral treatment for employees, introduced in 2003, is
achieving good results.
10. DIVIDEND
The declaration of dividends will continue to be considered by the Board in the
light of current and future funding requirements, and will be adjusted to levels
considered appropriate at the time of the declaration. Dividends will be paid
out of cash generated from operations.
The Board has declared an interim ordinary dividend of 400 cents per ordinary
share. This is 8,1% higher than the 2003 interim ordinary dividend of 370 cents.
Dividend cover has been increased to 1,74 in view of the strong rand and the
possibility that earnings in the second half of 2004 could be lower than those
of the first half.
11. PROSPECTS
Production performance for the first half of 2004 was as expected and refined
platinum production remains on track to meet the target of 2,45 million ounces
for the year. In building the robustness of the Group, it remains imperative
that the Group continues to focus on operating efficiencies and unit costs.
Various initiatives have been introduced to achieve improvements and the Group
continues to target a unit cash cost increase in line with CPIX for 2004.
Platinum prices are expected to remain firm owing to the fundamental strength of
demand for the metal. The prices of other PGMs are expected to remain at current
levels. Fundamental trends in base metal markets, particularly for nickel,
support an outlook of firm prices for these metals for the remainder of 2004.
The most significant variant in earnings will be the rand/US dollar exchange
rate. If, in the second half of the year, the rand remains at current levels and
US dollar metal prices remain where they are, then earnings for the second half
of the year are likely to be slightly lower than those of the first half.
In addition, and as indicated earlier, the impact of the strong rand on project
economics will continue to influence the development pace of new projects.
Supplementary Information
Consolidated Statistics (unaudited)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
Total operations 2004 2003 2003
Marketing statistics
Average market prices
achieved
Platinum (US$/oz) 844 649 696
Palladium (US$/oz) 243 202 198
Rhodium (US$/oz) 686 556 527
Nickel (US$/lb) 5,83 3,62 4,07
US$ basket price (Net (US$) 1 183 899 948
sales revenue per Pt ounce
sold)
Platinum (R/oz) 5 605 5 198 5 140
Palladium (R/oz) 1 608 1 614 1 459
Rhodium (R/oz) 4 556 4 460 3 967
Nickel (R/lb) 38,76 29,46 30,76
R basket price (Net sales (R) 7 855 7 222 7 017
revenue per Pt ounce sold)
Average exchange rate (R:$) 6,6408 8,0158 7,4055
achieved on sales
Exchange rate at end of (R:$) 6,2269 7,4838 6,6679
period/year
Financial statistics and
ratios
Gross profit margin (%) 25,9 25,6 23,7
Earnings before interest, (R millions) 3 031,9 2 300,7 4 578,5
taxation, depreciation and
amortization (EBITDA)
Operating profit to (%) 13,4 21,9 20,2
average operating assets
Return on average ordinary (%) 21,8 18,5 16,3
shareholders' equity
Return on capital employed (%) 14,1 17,9 10,5
Interest cover - EBITDA 9,9 17,5 9,6
Net debt to total capital (%) 9,8 11,8 34,9
employed
Interest-bearing debt to (%) 15,4 30,7 60,3
shareholders' equity
Net asset value per share (R) 82,0 57,5 57,7
Cost of sales per Pt oz 5 922 5 323 5 313
sold
Cash operating cost per 4 791 4 459 4 622
equivalent Pt oz
(excluding ounces from
purchased concentrate and
associated costs)
Analysis of operating (R millions)
contribution by mine
Rustenburg Section Steady 784,5 575,1 1 130,0
state
Union Section 272,7 195,4 413,7
Amandelbult Section 1 094,1 1 007,8 2 106,7
Potgietersrust Platinums 287,4 312,1 509,9
Lebowa Platinum Mines 114,1 88,0 163,4
Bafokeng-Rasimone Platinum 137,8
Mine *
Western Limb Tailings 36,1
Retreatment Plant (WLTR)
Kroondal Pooling and 84,9
Sharing Agreement
Steady state operating 2 811,6 2 178,4 4 323,7
contribution
Bafokeng-Rasimone Platinum 51,2 120,3
Mine *
Rustenburg UG2 Project 36,1 (7,4) 66,4
Modikwa Platinum Mine 5,8 (12,3) 3,2
Consolidated operating 2 853,5 2 209,9 4 513,6
contribution - all
operations
Other costs 373,6 330,4 603,7
Gross profit on metal 2 479,9 1 879,5 3 909,9
sales
Refined production from
mining operations
Platinum (thousands) (oz) 1 115,1 897,9 2 264,7
Palladium (thousands) (oz) 591,1 456,0 1 150,6
Rhodium (thousands) (oz) 102,0 94,3 225,2
Gold (thousands) (oz) 44,2 51,9 114,8
Nickel (thousands) (tons) 10,8 10,1 21,9
Copper (thousands) (tons) 6,4 6,3 12,9
PGMs (thousands) (oz) 1 991,4 1 622,0 4 059,0
Refined production from
purchased metals in
concentrate
Platinum (thousands) (oz) 43,8 17,2 43,1
Palladium (thousands) (oz) 33,0 14,1 40,3
Rhodium (thousands) (oz) 4,3 3,5 7,3
Gold (thousands) (oz) 1,6 0,7 1,3
Nickel (thousands) (tons) 0,3 0,1 0,2
Copper (thousands) (tons) 0,2 0,1 0,1
PGMs (thousands) (oz) 88,3 39,8 102,5
Total refined
production *
Platinum (thousands) (oz) 1 158,9 915,1 2 307,8
Palladium (thousands) (oz) 624,1 470,1 1 190,9
Rhodium (thousands) (oz) 106,3 97,8 232,5
Gold (thousands) (oz) 45,8 52,6 116,1
Nickel (thousands) (tons) 11,1 10,2 22,1
Copper (thousands) (tons) 6,4 6,3 12,9
PGMs (thousands) (oz) 2 079,7 1 661,8 4 161,5
PLATINUM PIPELINE
CALCULATION
Equivalent refined (thousands) (oz) 1 214,3 1 126,4 2 360,5
platinum production **
Steady state operations (thousands) (oz) 1 013,8 888,3 1 831,0
Rustenburg Section (thousands) (oz) 271,1 283,0 571,3
Steady state
Union Section (thousands) (oz) 160,3 152,4 318,2
Amandelbult Section (thousands) (oz) 312,6 308,3 644,7
Potgieters-rust (thousands) (oz) 96,2 93,9 191,8
Platinums
Lebowa Platinum Mines (thousands) (oz) 57,1 50,7 105,0
Bafokeng-Rasimone (thousands) (oz) 89,2
Platinum Mine ***
Western Limb Tailings (thousands) (oz) 27,3
Retreatment Plant
Kroondal Pooling and (thousands) (oz) 34,8
Sharing Agreement -
mined
Kroondal Pooling and (thousands) (oz) (34,8)
Sharing Agreement -
sold ****
Ramp-up operations (thousands) (oz) 200,5 238,1 529,5
Bafokeng-Rasimone (thousands) (oz) 86,7 183,5
Platinum Mine ***
Rustenburg UG2 Project (thousands) (oz) 145,1 114,0 255,0
Modikwa Platinum Mine (thousands) (oz) 55,4 37,4 91,0
Refined platinum (thousands) (oz) 1 158,9 915,1 2 307,8
production *
Mining (thousands) (oz) 1 115,1 897,9 2 264,7
Purchase of concentrate (thousands) (oz) 43,8 17,2 43,1
Platinum pipeline (thousands) (oz) 55,4 211,3 52,7
movement
* Refined metal produced by the refinery and appointed toll-treaters from mined
material and purchased concentrate, as well as metals in product sold from the
refinery.
** Mines' production and purchases of metal in concentrate converted to
equivalent refined production using Anglo Platinum's standard smelting and
refining recoveries.
*** Steady state from January 2004.
**** Sale of metal in concentrate attributable to Anglo Platinum from the
Kroondal Poding and Sharing Agreement(KPSA). The metal sold to Impala in terms
of an off-take agreement that was in place when the KPSA commenced. Metal in
concentrate surplus to the volumes stipulated in the off-take agreement will be
refined by Anglo Platinum.
Directors and Company Secretary
EXECUTIVE DIRECTORS:
R Havenstein (Chief Executive Officer), D T G Emmett,
R G Mills, A M Thebyane, R H H van Kerckhoven (Belgian), A I Wood (British).
NON-EXECUTIVE DIRECTORS:
B E Davison (Chairman), L Boyd, M W King, W A Nairn,
A J Trahar, P L Zim.
INDEPENDENT NON-EXECUTIVE DIRECTORS:
T A Wixley (Deputy Chairman), C B Brayshaw, B A Khumalo,
T H Nyasulu.
ALTERNATE DIRECTORS:
A H Calver (British), J M Halhead (British), R Pilkington, C B Sheppard, V P
Uren.
Company Secretary:
I G Acres (Acting)
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 2004 (Pty) Limited
(Registration No. 2000/006082/06)
70 Marshall Street, Johannesburg, 2001
(P.O. Box 61051, Marshalltown, 2107)
Facsimile +27 11 836-0792/6145 Telephone +27 11 370-7700
London Secretaries
Anglo American Services (UK) Limited,
20 Carlton House Terrace, London, SW1Y 5AN, England
Facsimile +44 207 698-8755 Telephone +44 207 698-8888
United Kingdom Registrars
Capita IRG plc
The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, England
Facsimile +44 207 478-7717 Telephone +44 207 478-8241
Internet Address: http://www.angloplatinum.com
E-mail enquiries should be directed to: mmtakati@angloplat.com
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