Report of the Directors
Business Review

Financial Review of Operations
Precious Metal Products

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Performance in 2011/12

Precious Metal Products Division’s revenue increased by 19% to £9,841 million. Its sales were 8% up at £582 million, supported by good demand across all of its businesses. Underlying operating profit was 16% ahead at £200.8 million with good profit growth in all of the division’s businesses.

Services Businesses

Sales in the division’s Services businesses, which represent 34% of PMPD’s sales, grew by 10% to £199 million. Profit grew strongly in the year due to continued good demand for precious metal refining services and slightly higher average precious metal prices.

Platinum Marketing and Distribution

Global demand for platinum increased by 2% in the calendar year 2011. Demand from the autocatalyst sector grew only modestly. Strong demand in the heavy duty diesel sector was offset by lower demand from the light duty diesel sector, due to increased use of palladium, and from Japanese car makers in the aftermath of the March 2011 earthquake. Demand trends in other sectors were broadly positive with industrial applications enjoying a cyclical upturn. Supply increased due to releases of metal from in process and refined inventories as underlying mine production in South Africa declined. After being close to balance in 2010, the platinum market moved into surplus in 2011.

The price of platinum reflected these weaker fundamentals. After reaching a high point of $1,911/oz in August, the price retreated for the remainder of the calendar year, caught up in the general liquidation across the commodity sector, to end the year below $1,400/oz. Platinum averaged $1,670/oz for the financial year, virtually unchanged on 2010/11.

The balance of the platinum market is expected to be similar in 2012, with both supply and demand expected to be somewhat lower than in 2011. Investment sentiment is likely to continue to have the determining influence on the platinum price.

The palladium market moved into surplus in 2011 with growth in industrial demand outweighed by further Russian stock sales and net liquidation in the physically backed Exchange Traded Fund (ETF) investment market. The demand side was a mixed picture with autocatalyst demand reaching a new high but other industrial demand showing only moderate growth. Supplies of newly mined palladium were flat but there was a sharp increase in metal recovered from autocatalyst recycling.

Having opened the year at $770/oz, the palladium price suffered in the face of weak fundamentals. After reaching a year high of $845/oz in June, palladium had retreated to $570/oz by October as ETF liquidation reached a peak. The price recovered slowly in the rest of the year to average $710/oz, up 15% on the average for 2010/11.

With significantly lower shipments of Russian state stock anticipated in 2012 and a modest increase in demand, the palladium market is expected to swing back into deficit. This will be supportive of a rising price trend although external economic factors, particularly in emerging markets, are expected to have a significant influence.

The rhodium market was once again oversupplied in 2011 as modest growth in demand was outpaced by a rise in supplies and higher volumes of metal recovered from scrap autocatalysts. With a growing surplus, the price found little support, falling $1,000/oz to close the financial year at $1,400/oz. The average price of $1,734/oz was down 28% on 2010/11. The rhodium market is expected to remain in surplus in 2012, suggesting limited upside potential in the price.


Our Refining businesses had another strong year, led by our gold and silver refineries. In our Pgm Refining business sales were 1% up on 2010/11. Volumes were strong in the first half but there was some slowing of demand in the second following the fall in pgm prices during September. The business continued to benefit from its key strategic position in the refining of pgms from end of life autocatalyst scrap, with volumes 20% up on the strong growth seen in the prior year. Intakes of the more difficult to refine insoluble pgms, rhodium, ruthenium and iridium, also continued to be strong, benefiting from further development of the business’ world leading pgm chemistry and refining capabilities in this area. Operational improvements and continued focus on capacity management resulted in a reduction of metal tied up in refining processes and the business continues to work on long term projects to add value for its customers.

Both of our gold and silver refineries had a strong year. Throughputs were up by 13% for gold and 5% for silver against a back drop of record levels in the prior year. Our refinery in Salt Lake City, USA benefited from several new mines reaching optimal output during the year. In 2011/12 gold and silver prices averaged $1,661/oz and $36/oz, up 28% and 50% respectively on those in 2010/11. The second half saw a slowdown in demand for recycling as the economy started to recover in the US. However, demand for investment products such as gold and silver bars were at a record high, particularly in China.

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