Anglo American Platinum: This is Sparta!

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Anglo American Platinum: This is Sparta!
Credit: © Reuters.

Remember the movie 300, in which a large number of muscular Greeks made the rest of us mortals feel entirely inadequate for 1 hour and 57 minutes? If you remember nothing else about this earnings result, just keep the number 300 in your mind.Anglo American (JO: AMSJ ) Platinum (which everyone calls Amplats for collective sanity) has released its 2021 annual results. This gives us a solid reminder of how lucrative 2021 was for the Platinum Group Metals (PGM) industry despite the ongoing challenges for the auto industry (the largest demand source) from the semiconductor chip shortage. Put simply, if there's a shortage of chips that is hurting new car production, then demand for PGMs also takes a knock.The rand basket price per PGM ounce sold increased by a whopping 22% to achieve record prices. Amplats revenue basically doubled (up 99%) thanks to record refined production and a decrease in inventories driving an increase in sales volumes by 82%. Adjusted EBITDA was catapulted 161% higher by the effect of operating leverage.I write about this a lot, but it is worth repeating: when times are good in mining, they are really good. When times are bad, this sector is where investment dreams go to die. Operating leverage works in both directions.That operating leverage (growth in revenue at a rate faster than growth in costs) comes through in the mining EBITDA margin, which increased from 55% to 65%. This is why the impact on adjusted EBITDA was so much higher than on revenue.HEPS increased by 160%, coming in at R300.42 per share. This is a trailing Price/Earnings (P/E) multiple of 6.5x based on yesterday's closing share price of R1,944. The forward multiple (based on expected earnings next year) is more important in mining, as commodity prices are volatile and are the primary drivers of earnings for these companies.Thanks to a 163% increase in net cash, the dividend per share for 2021 was a spectacular R300 per share. The movie reference hopefully makes sense now. The group has generated R80 billion in dividends for shareholders in this financial year and essentially paid out all profits, which is remarkable.Please note that some of this has previously been declared and paid as an interim dividend. The final dividend is R125 per share, a yield based on yesterday's closing price of 6.4%.Touching on ESG, environmental enthusiasts will be pleased to note that the Limpopo Department of Economic Development gave authorisation in December for the proposed 100 MW solar photovoltaic (PV) plant at the Mogalakwena mine in that province.Amplats expects metal in concentrate production in 2022 to be between 4.1 and 4.5 million PGM ounces (vs. 4.3 million in 2021), a range expected to be repeated in 2023 and 2024. Refined PGM production is expected to be between 4.2 million and 4.6 million PGM ounces, well down from over 5.1 million ounces in 2021. The forecast is a reduction in 2023 before a recovery in refined production in 2024.To give an idea of the value of timing the cycle correctly, the Amplats share price is up 500% over the past 5 years. That's an ever more impressive number than the Spartans!

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