Anglo American Plc · LSE:AAL
Anglo American — Anglo American Thermal Coal — Investor Presentation (April 2010)
40 slides from Anglo American's investor presentation, April 2010
Slide 1: Anglo American Thermal Coal Investor Presentation
Anglo American Thermal Coal Investor Presentation April 2010 0
Slide 2: Agenda
Agenda 1. Overview of Anglo American Thermal Coal (AATC) 2. Market Overview 3. Strategy & Growth Pipeline 1
Slide 3: Agenda
Agenda 1. Overview of Anglo American Thermal Coal (AATC) 2. Market Overview 3. Strategy & Growth Pipeline 2
Slide 4: Historical Timeline
Historical Timeline 1975 1998 1998 1975 1897 1897 Anglo American Production Vereeniging merges its various reaches 53Mt 2009 Estates coal ventures into Anglo American 1998 1998 Limited (VEL) VEL which splits its coal Amcoal absorbed incorporated changes its name operations into 1941 1949 into Anglo
Slide 5: Overview of Anglo American Thermal Coal
Overview of Anglo American Thermal Coal Colombia (2009) South Africa (2009) Puerto Bolìvar (33%) 1 4 2 9 1 3 10 5 8 6 7 Richards Bay (27%) Mine Holding Total Export Domestic LOM Attributable Mt Mt Years production 2009 11. Goedehoop 100% 6.9Mt 6.9 - 10 2 Greenside 2. 100% 3.8Mt 3.3 0.5 12 3 Kleinkop
Slide 6: A Stable Cash & Earnings Contributor to AA Plc
A Stable Cash & Earnings Contributor to AA Plc Coal % Contribution to AA EBIT 25% Total Coal Anglo Thermal Coal Anglo Met Coal 20% For 2004-09 Thermal Coal on average 15% accounted for 9% of Anglo American EBIT 10% 5% 0% 2004 2005 2006 2007 2008 2009 AATC has been a consistent contributor to Anglo A
Slide 7: AATC South Africa Safety Performance
AATC South Africa Safety Performance AATC South Africa Lost Time Injury Frequency Rate & Fatalities LTIFR Fatalities • 2 Fatalities in 2009 vs. 4 in 2008. Zero for 2010 YTD 0.5 8 Fatalities • LTIFR improvement of 9.4% LTIFR 7 • AATC 2009 fatal injury frequency rate was 0.009 0.4 compared to 0.05 for
Slide 8: South African Operations Location
South African Operations Location Source: Anglo American Thermal Coal 7
Slide 9: South African Logistics
South African Logistics South Africa coalfields rail & port infrastructure • Coal railed to Richard Bay Coal Terminal (RBCT) for export • Coal is railed by Transnet Freight Rail (TFR) - with nominal railing capacity of 72Mtpa • In 2009 TFR railed only 61Mt – railing volumes are bottleneck to coal ex
Slide 10: Mining Methods
Mining Methods A. B. Surface/Opencast Underground Mining Mining 1. Doze Over 2. Dragline 1. Bord & Pillar 2. Longwall Shovel & Truck Strip Mining Mining Mining 3. 3. Mini Pit Mining Pillar Extraction • Mafube • Landau • Goedehoop • New Denmark • Waterberg • Kleinkopje • Greenside • Heidelberg • New
Slide 11: AATC South Africa Market Position
AATC South Africa Market Position …Anglo Coal Total South SA is Africa a major player production for 2009inofall market segments approximately 260 Mt 14% 22% 5% Anglo Exxaro 9% Sasol BHP Xstrata Optimum 20% Others 14% 16% AATC is the leading coal producer in South Africa & holds around a quarter of
Slide 12: A 1st Cost Quartile Thermal Coal Producer
A 1st Cost Quartile Thermal Coal Producer 90 90 Port Loading 80 Freight 80 Royalties 70 70 Mining & Processing Labour 60 60 50 50 40 40 30 30 20 20 10 10 0 0 0 50 100 150 200 250 300 350 400 450 500 Cumulative Forecast Production, Mt All AATC South African export operations within the 1st Opportunit
Slide 13: RSA Domestic Market: Eskom & Other
RSA Domestic Market: Eskom & Other Domestic production share of total AATC RSA tonnage Share of total Eskom tonnage Production, Mt 60 AATC supplies c.30% of Eskom Export total 50 27% 40 • c. 36Mt to Eskom for power generation 30 62% Eskom • Eskom average CV (air dried) 4,550kc/kg ( 19.1MJ/kg) 20 • P
Slide 14: RSA Export Market
RSA Export Market ExportACSA operations production share ofare currently well positioned on the 2009 2008exports AME Cost Curve by destination total AATC RSA tonnage 2009 exports by customer type country/region Production, Mt Export Sales, Mt Export Sales, Mt 60 16 16 2.4 Mt Utility Traders 3.8 Mt O
Slide 15: Cost Breakdown
Cost Breakdown ACSA AATC operations South are currently Africa well positioned on the 2008 AME Cost Curve cost breakdown 2009 Actual 8% • Royalties will be applicable from 0% 43% 2010 – expected to account for 3% ~1% of costs Labour & contractors Maintenance & stores • Electricity a relatively small
Slide 16: AATC South Africa Margins & ROCE
AATC South Africa Margins & ROCE Price & exchange rate AATC South Africa EBIT margin Historic adjusted ROCE sensitivity US$m EBIT Margin ROCE Change in EBIT 1000 45% 100% US$m EBIT 20 EBIT Margin 40% 800 35% 80% 15 30% 600 60% 25% 10 20% 400 40% 15% 5 10% 20% 200 5% 0 US$1/t ZAR0.10 0 0% 0% 2005 200
Slide 17: Leadership in BEE Transactions: Eyesizwe and AIC
Leadership in BEE Transactions: Eyesizwe and AIC Anglo Inyosi Coal empowerment transaction WDB Lithemba Pamodzi Coal Investment Communities Consortium Holdings 33% 33% 19% 15% Anglo Coal Inyosi Anglo Inyosi Coal formed in November 2007 for R7bn 73% 27 % 27% BEE participation from inception Resources
Slide 18: Social Responsibility
Social Responsibility Progress against Mining Charter - BEE procurement spend 2009: R5.6Bn (56%) - HDSA in Management: 45% (target 40%) - Women in Mining: 16.5% (target 10%) - Women in Management: 17% - Women in Technical Occupations: 11% Winter school classes at - Learnerships in AATC SA: 545 (88%
Slide 19: Sustainable Development: Water Treatment
Sustainable Development: Water Treatment SA’s first large-scale mine water treatment plant ZAR390m Capex, 25 Ml/day potable + 8 Ml/day process water Navigation Kleinkopje Greenside South Witbank Addresses environmental impact of mine water whilst alleviating water shortage in local community of Emal
Slide 20: AATC Asset Optimisation Initiatives
AATC Asset Optimisation Initiatives CMIG Project: Benchmarking against 109 continuous miners in SA Mt G/Side Vuma G/Side Thandeka ROM Tons Jan – Dec 2009 ☺ Asset optimisation is clearly GH Sim Iskonjane 5/Top 10 = Anglo Vlak Mangwapa GH South Khomanani Kriel Ngwenya 1.2 focused on key mining equipme
Slide 21: Agenda
Agenda 1. Overview of Anglo American Thermal Coal (AATC) 2. Market Overview 3. Strategy & Growth Pipeline 20
Slide 22: Fuel Demand Outlook
Fuel Demand Outlook Coal is forecast to increase its share of GDP growth is the principal driver of growth primary energy, due to higher share of in demand for energy power generation GDP CAGR Mtoe1 10% 6000 1990-2007 5000 2030 8% 2007-2015 2007 2007-2030 4000 6% 3000 4% 2000 2% 1000 0% 0 China Indi
Slide 23: Thermal Coal-Fired Energy Demand
Thermal Coal-Fired Energy Demand Thermal coal-fired energy demand expected to almost double over the next 20 years, mainly driven by Asian markets CAGR Twh Total 2.7% 16,000 15,300 Africa 1.8% Middle East 4.6% 14,000 13,500 South America 6.9% 11,750 12,000 10,500 10,000 Asia 4.0% 8,200 • China 4.0%
Slide 24: Seaborne Export Supply & Demand
Seaborne Export Supply & Demand India the key driver of export demand due to high forecast GDP growth & a Indonesia, Australia and Colombia with shortfall in domestic supply the highest expected supply growth Demand, Mt Supply, Mt CAGR CAGR 1,250 1,250 Total 2.5% Total 2.5% 1,018 1,000 1,000 Other 1
Slide 25: Growth focused on the Indo-Pacific basin
Growth focused on the Indo-Pacific basin Russia 69Mt exports Europe 160Mt imports USA/Can. 35% of 22Mt imports world N. East Asia thermal China 221Mt imports demand in 50Mt imports the Atlantic basin India 36 Mt 50Mt imports Minor trade flows Colombia Major trade flows Indonesia 65Mt exports 215Mt e
Slide 26: AATC maintains its position as swing supplier to Atlantic and Indo-Pacific markets
AATC maintains its position as swing supplier to Atlantic and Indo-Pacific markets South African exports 2003–2009 Declining volumes to Europe Volume in Mt 1 (% of total sales) CAGR '03–'09 – Overall stagnating market demand due to 75 economic and environmental factors 71 70 68 12% 68 68 8% 672 – Co
Slide 27: Thermal Coal Pricing Outlook
Thermal Coal Pricing Outlook Export thermal coal prices follow indices – which are expected to remain high going forward USD/t API4 (FOB RBCT) API4 forward curve 1981 - 2001 2002 - 2007 2008 - 2009 2010 - 2014 Source: McCloskey 26
Slide 28: Key market trends and implications for Thermal Coal
Key market trends and implications for Thermal Coal Market trend Thermal Coal implications • Export market growth will be driven by two key markets Pace of growth in China • Moderate slow-down in Chinese GDP growth and delays to Indian expansion not and India expected to change structural market shi
Slide 29: Agenda
Agenda 1. Overview of Anglo American Thermal Coal (AATC) 2. Market Overview 3. Strategy & Growth Pipeline 28
Slide 30: Anglo American Thermal Coal Future Production
Anglo American Thermal Coal Future Production Current production levels are sustainable for a number of years. Production, Mt 140 Limpopo 120 Elders OC 100 Cerrejon P500 Waterberg 80 Elders UG 60 Heidelberg UG 40 New Largo Cerrejon P40 20 Existing and Approved 0 2010 2011 2012 2013 2014 2015 2016 20
Slide 31: Approved project: Zibulo
Approved project: Zibulo Topic Description General information • Approved in Dec. 2007 • Project includes colliery and Phola coal wash plant • Mining started Q4 2009 (0.1Mt) • Full capacity 6.6Mt reached in 2012 Products • Export • 3.3mtpa • Eskom • 3.3mtpa Financials • Capital expenditure = US$505m
Slide 32: Project: New Largo
Project: New Largo Topic Description Timeline • Feasibility study: 2010 – 2011 • First coal: 2013 • Full capacity: 2017 Products • Eskom • 14mtpa to Kusile Power Station Financials • Estimated capital expenditure = US$1.7Bn People • 870 @ full production Ownership • 73% Anglo American • 27% Inyosi P
Slide 33: South Africa Infrastructure Constraints
South Africa Infrastructure Constraints South Africa forecast power supply & TFR expected railings vs RBCT capacity demand TWh Capacity, Mt 290 100 RBCT Capacity 280 80 Anglo TFR Allocation Demand 270 60 Demand with energy savings Supply 260 40 Others TFR Allocation 20 250 0 240 2011 2011 2012 2012
Slide 34: Southern Africa Infrastructure
Southern Africa Infrastructure Emergent coal export corridors – possible medium term scenario Tete Hwange Beira Botswana Limpopo Waterberg (to connect to RBCT Maputo line) Witbank-Highveld Richards Bay Existing export corridors Emergent export corridors Undeveloped basins will require significant tr
Slide 35: Coal Bed Methane Gas
Coal Bed Methane Gas CBM exploration and pilot projects Waterberg CBM Pilot Project Waterberg • Waterberg CBM exploration proceeding • Small-scale production tests ongoing GROOTEGELUK LEPHALALE • Conceptual study in progress COLLIERY Botswana • Significant leaseholds in Botswana • Reconnaissance exp
Slide 36: Discard Coal-Fired Power Project
Discard Coal-Fired Power Project Witbank project to utilise waste coal • Project under evaluation: fluidised bed boiler technology, ~300MW • Third party ownership – est. capex ~US$600m • Power for use of Anglo American - could enable growth projects and hedge against future costs of power • Technica
Slide 37: Conclusion
Conclusion Stable cash generating business and consistent contributor to AA plc profitability Positive market outlook for RSA thermal coal in the medium term driven by export demand in the Indo-Pacific region & domestic South African power demand Thermal export prices expected to remain at historica
Slide 38: Appendix
Appendix
Slide 39: Global Coal Production
Global Coal Production Total world coal production of 6.8Bt in 2008 concentrated in relatively few countries & principally in domestic markets Major coal producers & exporters (2008) Production*, Bt Mtoe 7.0 Major Domestic 1.5 Net Exporters 13% Export Markets 18% Other 6.0 1.3 3% Indonesia 4% South
Slide 40: Management Team
Management Team CEO Thermal Coal N. Mbazima Head of Head of Head of Head of Manager Head of Head of Joint Venture Head of Thermal Commercial Human Marketing & Comm. & Safety Strategy & BD Manager Mining Operations & Performance Resources Sales Public Affairs Cerrejón Services D. Haselau M. Samad P.
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