Anglo American Plc · LSE:AAL
Anglo American — Investor Day (December 2018)
47 slides from Anglo American's investor day presentation, Dec 11, 2018
Slide 1: Investor Update
INVESTOR UPDATE 11 December 2018 Copper – Quellaveco
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American plc (“Anglo American”) and comprises the written materials/slides for a presentation concerning Anglo American. By attending this presentation and/or reviewing the slides you agree to be bound by the following con
Slide 3: A Fundamentally Different Business vs 2012
A FUNDAMENTALLY DIFFERENT BUSINESS VS 2012 Number of assets1 Portfolio: Focus on quality assets 47% Production Volumes2 Operations Delivery: Operating model ~10% Productivity1 Leadership & People: Efficiencies ~95% 3
Slide 4: Our Asset Improvement Journey
OUR ASSET IMPROVEMENT JOURNEY Group 2018 2013 Group 37th percentile 49th percentile Diamonds (De Beers) Copper PGMs Iron Ore Met Coal Thermal Coal Manganese Nickel Nickel & Manganese Margin curve position3 Q1 Q2 Q3 Q4 4 Source: Wood Mackenzie, CRU, De Beers internal analysis, Anglo American Platinum
Slide 5: Our Leading Margin Improvement
OUR LEADING MARGIN IMPROVEMENT Average margin curve position4 (%) 60 50 49% 12 p.p. 45% 45% 43% 40 39% 38% 37% 36% 36% 30 27% 0 Peer 1 Peer 2 Peer 3 Peer 4 Anglo 2013 2018 5 Source: Wood Mackenzie; AAP; De Beers; CRU
Slide 6: Step Change in Performance and Sustainability
STEP CHANGE IN PERFORMANCE AND SUSTAINABILITY P101 Exceeding industry best practice equipment performance Operating Model Stability and optimisation FutureSmart Mining Game-changing technology and data analytics Incremental improvement Step change 6
Slide 7: Performance Update
PERFORMANCE UPDATE Stephen Pearce De Beers – Jwaneng
Slide 8: A World Class Copper Business
A WORLD CLASS COPPER BUSINESS Portfolio strength ~1Mtpa Production ~120c/lb Future C1 unit cost (post Quellaveco) A transformed business ~660kt 2018 production guidance Q2 C1 unit cost: Lowest since 2010 with more to come… Continuing delivery ~640ktpa Average production 135-140c/lb 2019 C1 unit cost
Slide 9: Continued Delivery of Improvements
CONTINUED DELIVERY OF IMPROVEMENTS 2018 production5 2018 unit costs5 +2% -5% vs guidance, driven by Copper, PGMs & vs guidance Diamonds flat in 2019, improvements offset inflation 2019 production5 2020 production5 +3% +5% vs 2018 vs 2019 9
Slide 10: Other 2018 Guidance
OTHER 2018 GUIDANCE 2018 working capital build Corporate cash outflows Net interest ~$0.6bn ~$0.6bn ~$0.4bn in PGMs, Kumba & De Beers Treasury shares, FX translation & bond buybacks 2018 cost and volume Depreciation7 Tax rate7 improvement6,7 ~$0.4bn ~$2.8bn ~33% ~$0.2bn offset by oil/cost inflation
Slide 11: Capital Allocation
CAPITAL ALLOCATION Capital allocation framework8 Capital allocation 2016-20188 Based on H2 consensus • Attributable free cash flow of ~$10bn ~12 • Add back discretionary spend Cash flow Discretionary after capital sustaining options capital Balance sheet • Reduced net debt by ~$9bn flexibility to su
Slide 12: Life Extensions Will Deliver Value; Higher Near-Term Sustaining Capex
LIFE EXTENSIONS WILL DELIVER VALUE; HIGHER NEAR- TERM SUSTAINING CAPEX ~$2.8bn total capex, including $0.1bn growth 2018 2019-2021 pa Long term pa Total sustaining capex9 ~$2.7bn ~$3.2bn $2.8bn to $3.1bn SIB & Stripping9 ~$2.5bn ~$2.7bn Increase from previous guidance due to expanded portfolio e.g.
Slide 13: Attractive High Returning Options Driving Growth
ATTRACTIVE HIGH RETURNING OPTIONS DRIVING GROWTH CAPEX 2019 growth capex9 $0.6bn to $0.9bn driven by Quellaveco and technology projects Disciplined capital allocation framework drives project selection11 Anglo American share: Quellaveco (Copper) $2.5bn to $2.7bn12 +180ktpa from 2022 ~4 year payback
Slide 14: Growth Optionality – Positioned for a Changing World
GROWTH OPTIONALITY – POSITIONED FOR A CHANGING WORLD An Electrified A Greener A Richer World World World ~1Mt copper ~37Mct diamonds (De Beers) ~5Moz PGMs Our high grade products suited to modern steel production ~70Mt high grade iron ore ~30Mt premium coking coal ~30Mt export ther
Slide 15: Continued Delivery of Improvements to Drive Margins Higher
CONTINUED DELIVERY OF IMPROVEMENTS TO DRIVE MARGINS HIGHER Mining EBITDA margin13 (%) 5-10pp +5-10pp Margin13 uplift through $3-4bn of cost & volume improvement6 (2018-2022), including $0.5bn in 2019 46-50 +11pp • Operational Efficiency including P101 (1-5 years) 41 • Innovation and Technology (3-5
Slide 16: Project Update
PROJECT UPDATE Mark Cutifani Copper - Quellaveco
Slide 17: Minas-Rio Restart on Schedule
MINAS-RIO RESTART ON SCHEDULE • Clean-up work complete • Pipeline scan complete • Results verified by two independent expert teams • 4km of pipeline replaced as a precaution • One of three required approvals for start up received Restored area post pipeline spill • Additional monitoring
Slide 18: Quellaveco on Track
QUELLAVECO ON TRACK Construction Contracts and Procurement Engineering and Workforce • Asana River diversion complete • All awards on track: • Advanced engineering progress: ~60% contracted; ~60% complete • Earthworks and concrete ~50% procurement complete meaningfully progressed • ~6,000 workers on
Slide 19: Building on Firm Foundations
BUILDING ON FIRM FOUNDATIONS Mark Cutifani Copper - Los Bronces
Slide 20: Leading Returns for the Long Term
LEADING RETURNS FOR THE LONG TERM H1 2018 Long term ROCE17 19% 20%+ Asset life18 30 yrs 30 yrs 20
Slide 21: Sustainability at the Heart of Our Business
SUSTAINABILITY AT THE HEART OF OUR BUSINESS Trusted corporate leader Thriving communities OPERATIONAL FEWER ACCESS TO $ EFFICIENCY SURPRISES RESOURCES GROWING RETURNS Improved Positioned as Additional Healthy productivity and development partner opportunities environment resource efficiency More con
Slide 22: Investment Proposition
INVESTMENT PROPOSITION “Leading capabilities actively improving a world-class asset base to drive sustainable, competitive returns” Assets Capabilities Returns Focus on quality Operating Model Capital discipline Long life Innovation & Sustainability leader Dividend payout ratio Low-cost growth optio
Slide 23: Footnotes
FOOTNOTES 1. 2012-2018 estimate. Includes benefits of portfolio upgrading. 9. Cash expenditure on property, plant and equipment including related 2. 2012-2018 estimate. Copper equivalent is calculated using long-term consensus derivatives, net of proceeds from disposal of property, plant and equipme
Slide 24: Appendix
APPENDIX De Beers - Forevermark
Slide 25: Safety, Health & Environment
SAFETY, HEALTH & ENVIRONMENT Safety Health Environment Group TRCFR Fatalities Occupational health – new cases Major incidents (Level 3-4) 15 203 30 4.98 173 11 155 4.14 9 108 15 6 6 96 5.49 5 74 3.78 3.46 6 5 2.63 4 2 2013 2014 2015 2016 2017 YTD 2013 2014 2015 2016 2017 YTD 2013 2014 2015 2016 2017
Slide 26: Production Outlook
PRODUCTION OUTLOOK Units 2017 2018F 2019F 2020F 2021F (new guidance) Diamonds1 Mct 33.5 35-36 31-33 33-35 35-37 (previously 34-36) (previously ~32) (previously ~32) Copper2 Kt 579 ~660 ~630-660 ~620-680 ~590-650 (previously 630-660) (previously 600-660) (previously 600-660) Platinum3 Moz 2.4 2.45-2.
Slide 27: 2018 Unit Costs Guidance Beat; Improvement Offsets Inflation in 2019
2018 UNIT COSTS GUIDANCE BEAT; IMPROVEMENT OFFSETS INFLATION IN 2019 De Beers (US$/ct)1 Copper (C1 USc/lb) PGMs (US$/Pt oz)2 Kumba (FOB US$/t) 63 ~65 ~65 147 ~140 135-140 1,443 ~1,550 <1,600 31 ~35 ~35 2017 2018F 2019F 2017 2018F 2019F 2017 2018F 2019F 2017 2018F 2019F Minas-Rio (FOB US$/t)3 Met Coa
Slide 28: New Accounting Standard for Leases
NEW ACCOUNTING STANDARD FOR LEASES • Leases mainly corporate offices and jewellery stores; very limited mining equipment • Previously accounted for ‘off-balance sheet’ with lease costs taken to P&L New accounting from 2019 • Lease commitments brought onto the balance sheet, increasing net debt by: ~
Slide 29: Operating Model, Technology and Innovation
OPERATING MODEL, TECHNOLOGY AND INNOVATION
Slide 30: Anglo American Operating Model: A Differentiated Approach
ANGLO AMERICAN OPERATING MODEL: A DIFFERENTIATED APPROACH Apply a manufacturing approach to Work that is planned, scheduled and mining, through organised and efficient properly resourced is safer and delivers planning and execution of work consistently and at a lower cost Further improvements implem
Slide 31: Innovation Is Needed to Ensure Sustainability
INNOVATION IS NEEDED TO ENSURE SUSTAINABILITY Then Now Future state 1900 2018 What is required to produce 40kg of copper 24t waste 6m3 water 1t waste 3m3 water 1t ore 10 KWhr 8t ore 160 KWhr 40kg 4% Cu 0.02 Km2 0.5% Cu 100 Km2 31
Slide 32: P101: Focused on the Key Value Drivers
P101: FOCUSED ON THE KEY VALUE DRIVERS Mine Plant Drill Blast Load & haul Crush Mill Float & filter Percentage of 2018F direct cost base, Los Bronces = c.5% cost base >45Mtpa +10% > 94% > 89% Shovel Throughput Operating time Recoveries performance increase 32
Slide 33: A Number of Game Changing Technologies
A NUMBER OF GAME CHANGING TECHNOLOGIES >50% Reduction in water intensity Coarse Particle Recovery Dry Disposal >50% Reduction in energy intensity Advanced Shock-break Precision Classify Fragmentation 33
Slide 34: Coarse Particle Recovery: Improved Recoveries
COARSE PARTICLE RECOVERY: IMPROVED RECOVERIES Drill Blast Load & haul Crush Mill Float & filter • Flotation process changed to allow for larger diameter material Technology • Ore is liberated and recovered at a higher grade • Significant increase in throughput Benefits • Solidified disposal material
Slide 35: Coarse Particle Recovery: In Copper
COARSE PARTICLE RECOVERY: IN COPPER Drill Blast Load & haul Crush Mill Float & filter >10% >20% Increase in Operating Decrease in water and Free Cash Flow energy intensity 35
Slide 36: Bulk Sorting: Less Waste to Concentrator
BULK SORTING: LESS WASTE TO CONCENTRATOR Drill Blast Load & haul Crush Mill Float & filter • Uses sensors to determine ore content prior to processing Technology • Gangue is removed using natural heterogeneity of ore bodies • Provides immediate grade assays • Unlocks production capacity by rejecting
Slide 37: Bulk Sorting: In Copper
BULK SORTING: IN COPPER Drill Blast Load & haul Crush Mill Float & filter >10% Decrease in water and energy intensity 37
Slide 38: Copper Site Visit
AngloAmerican COPPER SITE VISIT Lg
Slide 39: A Uniquely Positioned Copper Business
A UNIQUELY POSITIONED COPPER BUSINESS A step change in volumes… …an improved cost position Copper production (kt) (13) C1 unit costs (c/lb) 1,400 1,200 1,000 800 2014 2018F 600 2025 400 200 0 2020 2025 2030 2035 Q1 Q2 Q3 Q4 El Soldado Quellaveco Los Bronces Sakatti Collahuasi 39
Slide 40: World Class Assets
WORLD CLASS ASSETS Los Bronces Collahuasi 52mt Contained Copper Resources(5) 3rd Largest endowment in the world • 2018 forecast production: ~365kt • 48mt of contained copper in Exclusive Mineral Resources and • Significant future growth optionality 30mt in ore reserves(5) • Contained copper in miner
Slide 41: Quellaveco – A World Class Copper Project
QUELLAVECO – A WORLD CLASS COPPER PROJECT Attractive returns Focus on execution Successfully syndicated Low cost with significant Strong local support and all Extending a long-standing potential key permits in place relationship, confirms asset’s value IRR Payback Consideration > 15% 4 years $600m R
Slide 42: Quellaveco Financial Modelling
QUELLAVECO FINANCIAL MODELLING Ownership Anglo American 60%, Mitsubishi 40% Accounting treatment Fully consolidated with a 40% minority interest. Shareholder loans from minority shareholder to be consolidated in Anglo American Group net debt. Project capex (nominal) $5.0-5.3 billion (100% basis - An
Slide 43: Quellaveco Accounting
QUELLAVECO ACCOUNTING • Anglo American consolidates 100% of Quellaveco’s P&L and Balance Sheet • Mitsubishi’s 40% share is shown as a non-controlling interest • After the initial $0.8bn equity injection by Mitsubishi, the project will be funded 60:40 through shareholder debt • Group net debt by the
Slide 44: Los Bronces – Significant Growth Optionality
LOS BRONCES – SIGNIFICANT GROWTH OPTIONALITY Current state Growth options Future state Production (2018F) • Abundant high grade ore Production Los Bronces ~365 ktpa Underground • Mine life extension to 2065 400-500ktpa • Permit submission in Q1 2019 C1 Cost (2018F) • Reduced mine interference C1 Cos
Slide 45: Collahuasi – Plant Expansion Options
COLLAHUASI – PLANT EXPANSION OPTIONS Number of expansion options available • 170ktpd 1,100 Copper production (kt) (100%) Existing licence allows throughput of up to 170ktpd, from existing levels of 155-160ktpd prior to 2020 1,000 900 • 210ktpd 800 Investigating options to expand concentrator through
Slide 46: Longer-Term Growth Options
LONGER-TERM GROWTH OPTIONS Sakatti Los Bronces District • Located in Finnish Lapland, in an established • Located adjacent to proven production assets mining district, close to infrastructure • Synergies with existing infrastructure • Smaller high grade ore body • Attractive mineralisation • Pre-fea
Slide 47: Investor Relations
INVESTOR RELATIONS Paul Galloway paul.galloway@angloamerican.com Tel: +44 (0)20 7968 8718 Robert Greenberg robert.greenberg@angloamerican.com Tel: +44 (0)20 7968 2124