Anglo American Annual Report 2012

BUSINESS OVERVIEWOur Platinum business, based inSouth Africa, is the world’s leadingprimary producer of platinum, andaccounts for approximately 40% of theworld’s newly mined production of themetal. Platinum mines, processes andrefines the entire range of platinumgroup metals (PGMs): platinum,palladium, rhodium, ruthenium, iridiumand osmium. Base metals such asnickel, copper and cobalt sulphate areimportant secondary products and aresignificant contributors to earnings.Platinum’s operations exploit theworld’s richest reserve of PGMs,known as the Bushveld Complex,which contains PGM-bearingMerensky, UG2 and Platreef ores.Access to an excellent portfolio of orereserves ensures Platinum is wellplaced to be the world’s major platinumproducer for many years to come.Platinum wholly owns 10 miningoperations currently in production,a tailings re-treatment facility, threesmelters, a base metals refineryand a precious metals refinery.Concentrating, smelting and refiningof the output are undertaken atRustenburg Platinum Mines’ (RPM)metallurgical facilities.Platinum’s 100%-owned miningoperations currently consist of thefive mines at Rustenburg Section –Khomanani, Bathopele, Siphumelele,Thembelani and Khuseleka;Amandelbult Section’s two mines,Tumela and Dishaba; as well asMogalakwena and Twickenhammines. Union mine is 85% held, with ablack economic empowerment (BEE)partner, the Bakgatla-Ba-Kgafelatraditional community, holdingthe remainder. The Unki mine inZimbabwe is currently wholly ownedpending the implementation ofthe state’s recently approvedindigenisation plan.Platinum also has 50:50 joint ventureswith a BEE consortium, led by AfricanRainbow Minerals, at Modikwaplatinum mine; and with XK PlatinumPartnership in respect of the Mototolomine. In addition, Platinum has 50:50pooling and sharing agreementswith Aquarius Platinum covering theshallow reserves of the Kroondal andSince 2000,China has beenthe leadingplatinumjewellerymarket,followed byEurope, Japanand NorthAmerica.Marikana mines. The companyowns 49% of Bokoni mine andholds, through RPM, 27% of AtlatsaResources. Platinum is in partnershipwith Royal Bafokeng Resources,and has a 33% shareholding in thecombined Bafokeng-Rasimoneplatinum mine (BRPM) and Styldriftproperties. Platinum, through RPM,holds 12.6% of RB Plats’ issuedshare capital.INDUSTRY OVERVIEWPGMs have a wide range of industrialand high technology applications.Demand for platinum is drivenprimarily by its use in autocatalyststo control emissions from bothgasoline and diesel engine vehicles,and in jewellery. These uses areresponsible for 70% of total netplatinum consumption. PGMs,however, have a wide range of otherapplications, predominantly in thechemical, electronic, medical, glassand petroleum industries.Our Platinum business is the majorfunder and supporter of the PlatinumGuild International (PGI), which playsa key role in encouraging demand forplatinum and in establishing newplatinum jewellery markets. Since2000, China has been the leadingplatinum jewellery market, followedby Europe, Japan and North America.Industrial applications for platinumare driven by technology and,especially in the case of autocatalysts,by legislation. With the rapid spread ofexhaust emissions legislation, morethan 94% of new vehicles now haveautocatalysts fitted. The intensifyingstringency of emissions legislationwill drive growth in PGM demand.Palladium’s principal application,accounting for some 45% of demand,is in autocatalysts, particularly ingasoline vehicles. The metal is alsoused in electronic components, dentalalloys and, more recently, has becomean emerging jewellery metal inmarkets such as China.Rhodium is an important metal inautocatalytic activity, which accountsfor nearly 80% of net demand.STRATEGICPORTFOLIOREVIEWOn 15 January 2013, AngloAmerican announced theproposals of its portfolio review,the objective of which was toassess the options available tocreate a sustainable, competitiveand profitable Anglo AmericanPlatinum. The entire value chainwas reviewed, including costs,resources, mining, processing,the marketing and commercialstrategy, as well as the optimalshape and size of the portfolio.The main recommendation is toreduce Platinum’s productiontarget by around 400,000 ouncesa year to between 2.1 and2.3 million ounces per annum andto more closely align output withexpected demand, while retainingthe flexibility to meet potentialincreased demand. Thisrecommendation may beachieved through the proposalsmade within the consultationprocess embarked upon in termsof the requirements of the LabourRelations Act 66 of 1995, i.e. theclosure of Khuseleka andKhomanani mines (four shafts)and placing them on long termcare and maintenance, andthrough consolidatingRustenburg into three operatingmines. Should these proposalsultimately be implemented,production at Rustenburg mineswould reduce to a sustainablelevel of between 320,000 and350,000 ounces a year.Production from high cost assetswill be replaced with that fromlow cost, high quality assets overthe next decade. The productionprofile indicates excess smeltingand refining capacity in the shortto medium term and provides anopportunity to improve capitalefficiency. Options are beingevaluated to fill capacity andreduce costs. The cost basewill also be reduced to align withthe revised production levels,with a focus on labour andorganisational structure.Operating and financial reviewAnglo American plc Annual Report 2012 77