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The platinum price down 24% in 1H 2016

2016-07-30


Review for the six months ended 30 June 2016; Anglo American reported underlying earnings of $0.7 billion against H1 2015 had registered of $0.9 billion, with underlying EBIT decreasing by 27% to $1.4 billion. Falling realised prices were seen across most products compared with the prior year with the platinum US$ basket price down 24%, diamonds down 14%. This was only partly offset by weaker producer country currencies ($0.9 billion impact), in particular a 29% weakening of the South African rand against the US dollar.

Operational performance was mixed across the business. Total platinum production rose by 2%, driven by continued strong performance at Amandelbult and Mogalakwena. The Group achieved a favourable cost performance in H1 2016, primarily as a result of cost reduction initiatives and the benefits of weaker producer country currencies.

At Platinum, year-on-year cash operating costs per unit of platinum production also decreased by 21% owing primarily to a weaker South African rand and cost containment. Underlying EBIT decreased by $138 million to $134 million to H1 2015 of $272 million. This was due to lower sales volumes of palladium, rhodium and minor metals, the weakening of dollar metal prices, and a lower stock gain of $38 million over H1 2015 of $181 million from an annual inventory count.

Year-on-year cash operating costs per unit of platinum production decreased by 21% to $1,262 per ounce, owing primarily to a weaker South African rand. The average US dollar basket price per platinum ounce sold for H1 2016 was $1,632 per ounce, down 24% on the H1 2015 average achieved price of $2,157 per ounce. Despite the lower average platinum market price, the platinum price increased over the first six months in 2016. Fundamentals are generally supportive for platinum and palladium..

 Global production of the platinum group metals has fallen in the first six months of 2016, with exports of these metals from South Africa underperforming previous year levels. The recovery of platinum from end-of-life automotive catalysts continued to be weak in the first half despite improving economic fundamentals for the recycling industry.

In H1 2016, platinum demand was relatively robust. Light-duty vehicle sales grew strongly in Western Europe, rising 9% year on year. There were also some signs of the Chinese platinum jewellery market stabilising over this period, with sales of platinum on the Shanghai Gold Exchange 2% above H1 2015 levels. Industrial demand for platinum remains healthy despite widespread concerns over the state of the global economy.

Refined platinum production decreased by 9% to 1,008,400 ounces owing to a planned stock take and the impact of a Section 54 safety stoppage at the precious metal refinery in Q1 2016, which halted production for 12 days and affected production build-up for a further 37 days. The PMR has recovered to steady state, and made up most of the shortfall in production. The remainder of the shortfall in refined production will be caught up in Q3 2016.

Despite lower refined production, platinum sales volumes increased by 5% to 1,221,200 platinum ounces, drawing down from refined metal inventory. It is anticipated that platinum production guidance is unchanged at between 2.3-2.4 million ounces in 2016. The Twickenham project will be placed on care and maintenance in H2 2016.