NOMPU SIZIBA: Anglo American Platinum released their annual financials today (February 17, 2020) for the 12 months ended December 2019. The company reported robust numbers on the back of a good price performance from its platinum group metals. It reported revenue at R99.6 billion – that was up 33% – with earnings before interest, tax, depreciation and amortisation, or ebitda, coming in at R30 billion. That’s up 107% on the year before. Headline earnings per share rose by 145% to 70.87 cents. The company is now sitting with a net cash value of R17.3 billion, up 497% on the end of 2018. And shareholders are set to get a dividend per share of R41.60, which includes a R25 per share special dividend.
Well, to tell us the story behind the numbers I’m joined on the line by Chris Griffith, the CEO of Anglo Platinum. Thanks very much, Chris for joining us. A great set of results for 2019, with many of the commodities you produce under the PGMs umbrella having had a great year from a demand and price point of view.
CHRIS GRIFFITH: I think we know that the PGM business is in really great shape. We’ve had a 38% increase in the rand basket price for our metals, on the back of very solid production numbers. So those are the aspects that have come together to deliver a really fantastic and in many cases record set of results for Angloplats.
NOMPU SIZIBA: How much of a benefit did you derive from a relatively weaker currency in the period under review?
CHRIS GRIFFITH: The dollar basket price was up by 27%. And then, with the 9% weakening of the rand, that contributed to a 38% basket price. So – mostly as a result of really good fundamentals driving the price of palladium and rhodium in particular, but then also a 9% weakening of the rand.
NOMPU SIZIBA: I see that a decision was taken to ensure that shareholders also benefit from the latest performance.
CHRIS GRIFFITH: Absolutely – after the last two years of being able to reintroduce dividends after many, many years of paying no dividends. And then last year, after starting a dividend with a 30% pay-out ratio of headline earnings, we already could increase that to 40% and we paid R3 billion in the first half of the year as dividends. And then in the second half we were able to increase that to R11.2 billion. So, overall, [we were] able for a full year not only to increase our dividends, but also add a special dividend, with very, very material returns to shareholders. Really a great outcome after some shareholders having waited for a number of years to get there.
No mine fatalities
NOMPU SIZIBA: Indeed. One of the things you are proud of in the report is that there were no fatalities at your mines. I’m sure that raises the pressure to say if you could prevent deaths in one year, you should be able to prevent in every year.
CHRIS GRIFFITH: I think rather than that being a pressure on us from somebody else, what that does is it gives to us such incredible motivation to our own staff to say, “Hey, guys, you’ve done this before, it’s possible. And therefore if we can do it one year we can do it every single year.” So rather than pressure, I think that would be a great motivation to our staff to say even in our narrow-reef conventional mining where we put 145 000 people underground in a single mine every day, the team of Amandelbult then to be fatality-free last year really was just a really great confirmation that we can mine without anyone losing their life.
Every single employee last year went home safely to their family. That’s the real cherry on the cake.
All the other stuff – hurting few, if you are producing record production and you are hurting people, that’s not an ambition. So last year that was a really super way for us to motivate staff to say: “Guys we can do this every single year, now that we’ve done it once before.
Tackling safety, health and environmental concerns
NOMPU SIZIBA: Chris, you talk about having invested a lot of time and money in the ESG – environment, social and governance – space. Just tell us a bit about that.
CHRIS GRIFFITH: I think the story, Nompu, is this is not a new journey for us. What we are doing is spending a bit of time talking to the market and sharing with them some of the things that we are doing. Yes, safety is important, but health, for example – we were able to share the journey that we’ve been on for the last number of years.
One of the numbers that I used to explain that is that in 2013 we had 66 of our own staff members, our own employees, die because of TB/HIV-related illnesses. This last year that was three. So, over a period of five or six years we have been able to save, every year, 60 people’s lives. That’s a great story to tell around health. There are lots of other amazing things we are doing on health, but what we did today in the presentation we just shared sort of all the things that make up ESG – safety, health, environment, reducing amounts of waste that we put to landfill. [We’re] a mining company that is now virtually free of any waste going to a landfill.
We’ve been able to reduce 83% over the last four years of waste that we put to landfill.
We are using less water, we are using less energy, we are emitting less carbon into the atmosphere. And 40% of all water that we take onto our operations now is coming from recycled or grey water.
So it’s many of those kind of things over time. I think we are getting better at telling our story, as opposed to this being something new that we are doing. We’ve been receiving global recognition for all the work that we’ve been doing over the last number of years.
NOMPU SIZIBA: So, Chris, mining can be clean.
CHRIS GRIFFITH: Absolutely. We are not yet at zero carbon emissions, but that’s certainly an aspiration for us. And one of the things that we were talking about today is on the back of the solar plant that we are designing, and they are going to be building at Mogalakwena. We’ve been talking about high ……. fuel cell mining trucks – the enormous mining trucks running off fuel cells and using clean hydrogen that we generate from the solar power going into trucks that are carbon-free. So just think about that great story from renewable power generating clean hydrogen going into the enormous mining trucks that are emitting no carbon emissions.
We are not quite to zero [carbon emissions] yet, but there absolutely is a road map for mining to be clean and to be safe.
NOMPU SIZIBA: Speaking to other mining houses about the announcement that was made by the mineral and energy minister, Gwede Mantashe, about being able to self-generate and so on, most of them saying, “Indeed we welcome that, and so forth; we want to see the detail”. I think the president tried to give a bit more detail at the Sona. But what they say is that, even though they may take advantage, there is no way that they would be able to completely come off the grid. Would the same apply to you guys – that you would use renewable energy and the likes as a back-up, but you would still largely be reliant on Eskom?
CHRIS GRIFFITH: I think that’s absolutely correct. Firstly, the process to get the licences is not absolutely as quick and as seamless as may have been described – that we just need to apply. We’ve got to apply to Nersa. But there are also environmental impact assessments that have got to be done. There are water-use licences that have to be obtained.
So this process is still fairly complicated and still fairly time-consuming, and I think the question is how can we condense those times but still do the right thing, so that we are not making mistakes environmentally and with water.
Having said that, I think the comment that has been made that we won’t be able to completely come of the grid anytime soon is absolutely valid.
Amplats future prospects
NOMPU SIZIBA: Chris, is Anglo Platinum now at its optimal position in terms of its lean and meanness, following you overseeing the restructuring of the company?
CHRIS GRIFFITH: No, I absolutely think there is lots more to come from Anglo Platinum, and certainly lots more for the new leadership of Anglo Platinum to extract from the business.
For example, since last year we’ve been talking about what the next wave of strategy for the company looks like. I think there are four big areas where we think we can still drive value, improving our underlying business to world benchmark practices; some of the growth projects using some new technology that can change the way that we mine and get more out of existing infrastructure; and then also the market developments to increase the demand for platinum group metals.
There is still plenty of value and I’m very pleased to say that, because I would have been sad if this great company got to a point where there is no more value to extract. I think I and my team and the board have done a fairly good job in turning the company around. The company is in great shape, but there is great momentum behind that and the company has still got lots to do, lots or more for shareholders – both existing and new shareholders – to benefit both from the growth in share price and the returns of cash to shareholders. There is still lots more to come from this great company.
NOMPU SIZIBA: And then lastly, Chris, on a personal note, we do understand that you’ve announced that you won’t be CEO any more come April, and there is a handover process and so on with the new CEO.
But, when you came in as CEO it was a very dark time, with labour disputes and just after the Marikana tragedy. Just give us a summation of the experience from the time you took over, when commodity prices were low and your costs were sky-high, to where you are now as you look to leave as CEO.
CHRIS GRIFFITH: Nompu, you absolutely describe the period around 2012/13. At that time pretty much 60% of the industry was loss-making. Angloplats – about 50% of our business was loss-making. We had just been bailed out by shareholders in a rights issue in 2010, which saved the company. But then we were well on our way back to being insolvent again. In 2014 we hit almost R15 billion in debt.
So it was a very, very tough environment The Marikana disaster had just happened. As I took over there were massive strikes in the business ongoing right through the course of 2013, which culminated eventually in the big strike of 2014 – a five-month strike. We had to shut down mines that were loss-making, we had to restructure our overheads.
We took 60% out of the business as part of that restructuring. We needed to make our mines that weren’t particularly efficient at the time much more efficient. And then ultimately, after we’d sort of “fixed the bannisters” to at least a level that at least we could look beyond that, then we decided that we were going to do the repositioning of the portfolio.
Having now fixed some of the mines that were dramatically loss-making, we said okay, there are some mines that we would sell then that would be better in someone else’s hands, that were at the top end of the cost curve, and then we would focus on a different portfolio of assets.
Those were very tough times. And today one of the things that Craig [Miller], our CFO, mentioned, is the turnaround from that almost R15 billion rand in debt to today announcing R17 billion in cash.
In five years we turned around the cash position of this company by more than R30 billion.
So we’ve done some amazing things. Some great things we mentioned earlier around safety, health and the environment. While we were doing that, we were I think turning round the fortunes of this company. The company is much more focused on making money and focused around value and not volume. People are substantially more productive. One such example was Mogalakwena. They delivered, in 2013, 300 000 platinum ounces. This year they went 520 000 platinum ounces without spending any capital. That just shows you the level of productivity improvement.
So, all round I think the company has dramatically changed its fortunes. But it was very, very difficult in the beginning, and I think difficult to everyone. Difficult for government when we were shedding jobs. Of course it was difficult for our employees and right throughout the organisation, because it didn’t only affect people at the lower level. But we needed to do that so that this company didn’t go insolvent and then everyone would lose their jobs. I think we were successful in doing that.
And now we are in the position that we can talk about much nicer things. So internally we talked about ladders – that with the burning platform, that period of our time. Now we are talking about the burning ambition, which sounds so much more positive and sounds like we can grow and build. And that’s the wave of strategy that I think the new CEO will be part of.
So I’m very excited for the new succession. I think it’s a good time for me to step down. I’ve been at the company for 7.5 years, and it feels to me that there is a great momentum still behind the company and lots to deliver. It wasn’t all easy, but now the company can think of more positive things going forward around growth and extracting more value and more potential out of the underlying business.
NOMPU SIZIBA: Well, that’s a great oral CV for any prospects who are listening and wanting to hire a CEO like yourself! Thanks very much, Chris for your time.