Financial Performance

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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.

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.


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.


Key financial indicators of performance included those shown in the table below:

R million
R million
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)

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:

  • 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.
  • 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.
  • 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 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.

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:

  • the reduction in the South African company tax rate from 29% to 28% (R144 million);
  • revaluation of the deferred tax liability owing to the above change (R318 million);
  • reduced STC on the lower dividends paid (R167 million);
  • reduction in the South African STC rate from 12.5% to 10.0% (R329 million); and
  • the election of an STC exemption in respect of the 2007 final dividend paid to Anglo American (R877 million).

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.

Split of gross sales revenue by metal


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.


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.


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.


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.


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.


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'.


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.


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.


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.



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.


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.