Anglo American Annual Report 2012

Operating performanceProductionPlatinum’s own mines, includingWestern Limb Tailings Retreatment,produced 1.46 million of equivalentrefined platinum ounces, a decreaseof 9%.The illegal strike action at our miningoperations from 18 September to15 November 2012 resulted in a lossof platinum production of 306,000ounces, of which 82,000 ounceswere lost during the subsequent rampup period.Equivalent refined platinum productionfor the year totalled 2.22 millionounces, 8% down on 2011.Production at the Western Limboperations (Rustenburg, Union andAmandelbult mines) was negativelyaffected by the industrial action duringthe second half of 2012. Productionat the Rustenburg Complex minesdecreased by 43,300 ounces, or 8%,while Union and Amandelbult mines’production decreased by 13% and23% respectively.Mogalakwena mine output decreasedby 2% to 300,200 ounces, followinglower throughput at the concentratorsand lower head grade. The fall inproduction was partly compensatedby higher volumes from Unki mine.Equivalent refined platinumproduction at Unki increased by20% to 62,100 ounces as the mineexceeded its ramp up schedule,reaching steady state productionlevels ahead of schedule.The new nickel tank house at theBase Metal Refinery continuesto experience some operationalchallenges and this is expectedto impact production in 2013.Refined platinum productiondecreased by 6% to 2.38 millionounces as the processing of pipelinestocks into refined ounces in thesecond half of 2012 reduced theimpact of the industrial action.ProjectsSeveral projects were halted duringthe year owing to the current difficulteconomic and operating environment,including the Thembelani 2 shaft,Tumela 4 shaft, and slag cleaningfurnace 2 projects. The subsequentwrite-down for Thembelani 2 shaftproject was ZAR2.2 billion($251 million) while the write-downfor Tumela 4 shaft, slag cleaningfurnace 2 and other projects wasZAR4.4 billion ($579 million).OutlookDespite the lacklustre outlook forglobal economic growth, Platinumbelieves that global platinum demandis likely to be balanced in the shortterm. Overall platinum demand isexpected to grow marginally in 2013,despite the lack of economic growthin the European market. Tighteningemissions legislation in all markets,and the overall global increase invehicle production, especially in Chinaand India, is expected to offset lowervolumes in Japan, North Americanand Europe. Jewellery demand isexpected to grow, primarily owing tothe continuing growth in the popularityof platinum jewellery in China and Indiaand the expansion of retail outlets inChina by Hong Kong jewellers.Primary supply challenges areexpected to continue during 2013,with higher mining inflation exertingmargin pressure and the increased riskof supply disruptions from industrialaction in South Africa. The ongoingconstraint on capital investmentposed by low prices continues to limitSouth African output. However,supplies of metal from the recyclingof spent autocatalysts are expected torise as pipeline stocks are processed.Palladium demand is expected togrow in 2013, supported by globalvehicle production growth, particularlyin China, and tightening emissionslegislation. Primary supply is alsoexpected to be constrained by thesame factors as those affectingplatinum production. As a result,the palladium market is expectedto remain in deficit in 2013.The rhodium market is expectedto remain in balance during 2013.Modest growth in autocatalyst andnew industrial demand is likely tobe balanced by an increase inrecycled supply.Following the conclusion of the recentportfolio review, Platinum expects toproduce between 2.1 and 2.3 millionounces of refined platinum in 2013.Cost inflation challenges are likely tocontinue in 2013, with mining inflationexpected to remain above the averageinflation rate in South Africa. In spite ofthe difficult inflationary environment,Platinum aims to contain cash unitcosts to between ZAR16,000 andZAR16,500 per equivalent refinedplatinum ounce. The unit cost targetexcludes the cost of implementing theportfolio review proposals.Platinum’s project portfolio has beenaligned with the proposals of theportfolio review, with the capitalexpenditure target reduced by 25%to ZAR100 billion over the nextdecade. Capital allocation will continueto focus on the highest return andlowest risk opportunities.Operating and financial reviewAnglo American plc Annual Report 2012 81