Anglo American CEO Mark Cutifani hands over the reins in April, having delivered a blistering set of results for the year to December 31 2022.

The results were flattered by high commodity prices, which have streaked even further ahead since the close of the 2021 financial year.

It’s been a week of scintillating results for the Anglo stable, with Kumba and Anglo Platinum – and now Anglo American (AAC) – all announcing record profits.

Kumba celebrates record year with 69% bump in dividend
Anglo Platinum’s record-breaking performance aided by surging PGM prices

AAC’s revenue was up 63% to $ 41.5 billion, and Ebitda (earnings before interest, tax, depreciation and amortization) – fattened by a 56% mining margin – more than doubling to $ 20.6 billion (2020: $ 9.8 billion).

Profit attributable to shareholders leapt three-fold to $ 8.5 billion, with earnings per share up 185% to $ 7.22.

A special dividend of $ 0.50 a share has been added to a final dividend of $ 1.18, bringing to $ 4 billion the distribution to shareholders for 2021.

UBS noted in a report that the geopolitical risk of the Russia-Ukraine conflict could be positive for Anglo, with diamonds and platinum group metals most likely to benefit. Palladium prices jumped 3% to $ 2 587 / oz on Thursday on news of hostilities.

Higher PGMs, diamond and iron prices translated into stronger cash flows, which in turn allowed the group to reduce net debt by $ 1.7 billion to $ 3.8 billion, leaving a gearing ratio of 10%.

Two projects expected to absorb the lion’s share of growth capex in the year ahead are the Quellaveco copper mine in Peru, one of the largest in the world, and a new marine diamond recovery vessel for Namibia. Quellaveco, 60% owned by Anglo, will be fully powered by renewables when it goes live in 2022, following Anglo’s decision to source energy entirely from renewables in Chile as of 2021 and in Brazil from 2022. Construction of the copper mine began in 2018, with the first ore being excavated in October 2021. It will be ramped up to 300,000 tons a year.

Cutifani outlined how Anglo is determined to be a global leader in advancing the low-carbon economy, by exiting its thermal coal operations at Thungela and the Cerrejón coal operation in Colombia, and focusing on future-enabling metals and minerals.

More to come?

Sasfin Securities deputy chair David Shapiro says though Anglo has had a fantastic ride on the back of higher commodity prices over the last two years, there may be more good news to come – especially as the conflict between Russia and Ukraine plays out.

“I think Anglo sees this commodity wave, in certain of its metals at any rate, remaining firm for several years to come.”

As such, Anglo may have more gas in the tank yet. The group has positioned itself for the green economy, with massive investments in copper, nickel, iron ore and PGMs. Overall, iron ore production was up 3% for the year to 63.8 million tons (Mt), although the Kumba subsidiary managed a 9% jump in output to 40.9Mt.

Copper production was unchanged over the prior year at 647,200 tonnes, and nickel was down 4% to 41,700 tonnes (2020: 43,500 tonnes) due to licensing delays and lower ore grades.

The average price for the group’s basket of products was up 43% over 2020, despite a drop in mineral prices in the first half of the year. PGMs led the way with a 36% increase in prices, powered largely by rhodium which was up 85% for the year.

An unfavorable forex environment in the countries in which it operates drained $ 1 billion from Ebitda, most of which came from the stronger rand.

This was offset by a $ 1.1 billion kick to Ebitda from the easing of Covid restrictions that blunted global demand in 2020, principally in the diamond market. De Beers’ rough diamond production increased by 29% to 32.3 million carats (2020: 25.1 million carats), in response to the strong recovery in consumer demand in 2021.

The group’s average weighted consumer price inflation rate for the year was 5% (2020: 2.9%) across all regions.

Source: Anglo American 2021 financial results

Cutifani said while he was reluctant to call the current environment a supercyclic, a range of metals still had upside, while supplies remained tight. The Russian invasion of Ukraine this week has already triggered fears of supply chain difficulties for certain commodities, notably oil and natural gas, nickel and copper.

After a year of record results like this, with negligible debt and a cash pile of $ 9 billion at year-end, Anglo is in the enviable position of either returning more cash to shareholders, buying back another chunk of shares, or going on a spending spree.

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