Anglo American Platinum Limited |
|
Global Financial Crisis
Our material issues
| R2.45 m | 1.37 | 23.7 PJ | ||
| ounces platinum output in 2009 | lost time injury frequency rate in 2009 |
total energy used in 2009 |
The sustainable development agenda generally is broad and there is a risk that we could focus our efforts on too many issues at any given time, thereby eroding the effectiveness of what we do. We need to focus our efforts by ensuring that we have effective internal risk-management and consultative processes with our stakeholders; which include, among others, government, investors, employees and people from the communities surrounding our operations
Overview
This section of our report describes our most material sustainability issues. It examines what is being done to mitigate the risks associated with these issues, and to boost and refine our management processes and systems. The methods used to determine these risks, and a description of Anglo American Platinum Limited’s (Amplats) overall approach to risk management, are covered in the previous section.
It needs to be noted at the outset that, while every effort is made to mitigate the risks associated with our activities, their consequences cannot always be eradicated.
GLOBAL FINANCIAL CRISIS
The global financial crisis continued to have a material impact on our business in 2009. The rise in the platinum price was to some extent negated by a strengthening of the rand by 21% during 2009. The Company responded to the global financial crisis by, among other things:
- maintaining platinum output in the range of 2.45 million ounces per annum;
- deferring capital expenditure on certain expansion and development projects;
- focusing on cost control and keeping cost escalations effectively flat at R11,236 per equivalent refined ounce;
- putting the high cost marginal shafts of Brakspruit, Boschfontein and Bleskop on care and maintenance; and
- reducing the number of people by 724 at the head and regional offices.
Despite these efforts, net debt rose by R5,8 billion to R19,3 billion during 2009. The global financial outlook for 2010 appears to be better and the Company is expecting the platinum price to trade above US$1,500. Costs in 2010 are expected to remain flat. The Company is not expecting to cut further jobs in 2010.
These aspects are discussed in more detail.
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 depressed demand for metal for use in autocatalysts and lower demand from the industrial sectors.
Developments in 2009 again highlight the importance of Amplats’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, maximise contribution to the total revenue from the basket of metals sold and reduce the absolute platinum incentive price.
During the challenging past year and the opportunity it provided to reposition Amplats, every aspect of our business was examined and questioned. Rebuilding the competitive position we formerly occupied remained a key focus and is supported by actions taken. The role of our corporate office was redefined and the structures reduced significantly and focused on supporting our operations in their efforts to improve performance.
The major restructuring of our mining operations, which we announced early in 2009, was completed by year-end. Our largest operations, Rustenburg and Amandelbult, have been split into more efficient stand-alone units, of five and two mines respectively. This new structure ensures we can achieve a sustainable reduction in the unit cost of our production and underpins our commitment to extracting maximum value from our assets.
As part of the restructuring process, we have optimised the source of ounces across our portfolio. This included placing three of our high-cost shafts onto ‘care and maintenance’ indefinitely: Bleskop shaft at Siphumelele Mine in April; and Brakspruit shaft at Siphumelele Mine and Boschfontein shaft at Khuseleka Mine in August. Union and Mogalakwena remain untouched by these changes. The result is that we have mines that are appropriately managed under current circumstances, with clear accountability to the executive team.
The programme to upgrade our smelters to provide maximum flexibility continued successfully in 2009 and the efforts of our process division employees contributed greatly to the enhanced smelter performance in the second half of 2009.
Reconfiguring the Company has come at a cost. We reduced our head office and regional office complement by 724 people last year. Overall, we reduced our labour by 15,752 people during the year or by 18,786 people from the peak in 2008. This reorganisation was done in a professional orderly and compassionate manner in line with our value of care and respect. Despite the significant reduction in employees and the associated challenges we did not experience any industrial action and we did not have a single forced retrenchment. This is only possible when there are sound, robust relations with our employees, partners and the unions.
We delivered on our production target for 2009 of 2.4 million ounces of refined platinum, with 2,452 million the final refined total. We also delivered on our cost target despite the inefficiency inherent in labour rationalisation periods. Amplats’s unit cost of production was essentially the same per equivalent refined platinum ounce in 2009 as in 2008, at R11,236. Cost management is being institutionalised in our business and we have plans to keep these costs flat for the next two years. This is a major challenge in an environment of very high escalation and we will be hard pressed to achieve this.
Our total capital expenditure for the year was some R3.1 billion lower than in 2008 owing to the aggressive actions taken to reduce the rate of capital expenditure across the Company while we were in the grip of the global economic downturn. This reduction resulted in a number of our projects being delayed, including Amandelbult 4 shaft, Twickenham Platinum Mine and the Styldrift Merensky Phase 1 project. However, the Khomanani 2 shaft, Dishaba UG2 and Khuseleka 1 shaft projects are all progressing without delay.
Capital expenditure for 2009, excluding capitalised interest, amounted to R9.7 billion, of which R6 billion was spent on projects and R3.7 billion on stay-in-business capital. It is important to further break down our stay-in-business capital, as a large portion of the expenditure is solely for waste-stripping at our open pit Mogalakwena Mine. The expenditure on waste-stripping at the latter during the year was R240 million.
Given the market conditions we believe that the appropriate level of production for 2010 is 2.5 million ounces of refined platinum and this is our target. We also aim to produce this volume at a unit cost of just over R11,000/oz, the same level as in the preceding two years. Our labour reductions are largely complete and we will spend the year working on improved productivity.
