Anglo American Plc · LSE:AAL
Anglo American — H1 2011 Earnings Presentation
51 slides from Anglo American's earnings presentation, Jul 29, 2011
Slide 1: Interim Results: Six Months Ended 30 June 2011
INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2011 29 July 2011
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 Consistent Strategy and Simplified Organisation Delivering Results
A CONSISTENT STRATEGY AND SIMPLIFIED ORGANISATION DELIVERING RESULTS Well diversified portfolio(1) Improving productivity performance(3) Diamonds Iron Ore 150 & Manganese Copper 11% 140 26% 130 Kumba Platinum 23% 120 110 Met Coal 11% Platinum Met Coal 100 2% Nickel 11% 90 16% Thermal Coal 80 Copper
Slide 4: Highlights
HIGHLIGHTS • Group operating profit of $6.0bn, up 38% Operating Profit ($bn) • Operating profit increased across 7 6.0 all core business units 6 5.4 5 4.4 • Underlying earnings of $3.1bn and underlying EPS 4 2.9 $2.58, representing a 40% increase 3 2.1 2 • Solid foundation built over the last three
Slide 5: Safety Performance
SAFETY PERFORMANCE • Ten employees have lost their lives in work-related Fatalities incidents – 8 fatal accidents in Platinum 50 • 93% of operations operated without any loss of life Number of fatal injuries 40 40 30 • Individual operations continue to achieve 28 exceptional performance: 20 20 – Kol
Slide 6: Significant Improvement After Weather and Uncontrollable Events Impact Q1 Production
SIGNIFICANT IMPROVEMENT AFTER WEATHER AND UNCONTROLLABLE EVENTS IMPACT Q1 PRODUCTION Sishen Iron Ore (Mt) Met Coal(1) (Mt) Copper (kt) Platinum(2) (koz) +77% +8% +4% +18% 10.1 3.6 139 150 568 593 8.5 2.1 Q1 11 Q2 11 Q1 11 Q2 11 Q1 11 Q2 11 Q1 11 Q2 11 • Q2 JIG run-rate • Targeted recovery • Recovery
Slide 7: Input Costs Up Markedly vs H1 2010
INPUT COSTS UP MARKEDLY VS H1 2010 Key input commodities indexed to 100 at Q1 2002 Commodity rices H1 2011 vs. H1 2010 1,000 900 Rubber Rubber +65% 800 700 Sulphuric +60% Acid 600 500 Crude Oil Oil +27% 400 Ammonia 300 Sulphuric Acid Steel 200 Steel +22% 100 0 Ammonia +20% 2002 2003 2004 2005 2006 2
Slide 8: Supply Chain Offsetting Inflationary Pressures
SUPPLY CHAIN OFFSETTING INFLATIONARY PRESSURES Supply Chain Benefits ($m) Example: Large ‘off road’ tyres 220 +93% 200 466 180 Market price 49 160 140 120 Anglo American price 100 80 242 319 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 37 Example: Dump truck fleet 148 120 Market price 98 57 115 110 H1 10 H1
Slide 9: Asset Optimisation Exceeding Expectations
ASSET OPTIMISATION EXCEEDING EXPECTATIONS Asset Optimisation Benefits ($m) Example: Longwall Cutting Hours 110 100 +25% LW100 Target Level 90 (1) Monthly Average 1,170 80 Best Weekly Performance 122 70 116 60 935 50 139 40 76 30 Jan Feb Mar Apr May Jun 932 Operational Review process embedded 720 acr
Slide 10: I. Operational Performance
I. OPERATIONAL PERFORMANCE CYNTHIA CARROLL
Slide 11: Iron Ore and Manganese
IRON ORE AND MANGANESE • Operating profit of $2,507m, up 54% Sishen Iron Ore Production Q1 vs. Q2 (Mt) 10.1 • Kumba’s profitability up 66%, despite the impact of abnormally high rainfall. Strong supply chain +18% management resulted in solid sales at a time 8.5 of high prices • Focused plans in H2 t
Slide 12: Thermal Coal
THERMAL COAL South African Production Q1 vs. Q2 (Mt) • Operating profit of $521m, a 48% increase • Higher export prices driving profitability, sales 14 volumes impacted by train derailments and 20-day railway line maintenance +5% 13 • South African production increase due to Zibulo ramping up • The
Slide 13: Metallurgical Coal
METALLURGICAL COAL • Operating profit of $491m, an 87% increase and Production(1) Q1 vs. Q2 (Mt) a record H1 profit • Positive working relationships with customers 3.6 and early engagement allowed the business to effectively manage the flood impact and set the +77% record Q2 price 2.1 • Higher reali
Slide 14: Platinum
PLATINUM Production(1) Q1 vs. Q2 (koz) • Operating profit of $542m, a 30% increase • Higher sales volumes of refined platinum +4% 593 delivered at a time of strong metal prices 568 • Refined production increased by 17% • H2 performance expected to improve with higher production and operations contin
Slide 15: Copper
COPPER Production Q1 vs. Q2 (kt) • Operating profit $1,401m, an increase of 18% • Production was impacted by rain disruptions and 150 anticipated grade decline +8% • Broader pressures on costs due to rising input prices and weaker USD 139 • Inventory accumulated during the Patache port shiploader re
Slide 16: Nickel
NICKEL Production Q1 vs. Q2 (kt) • Operating profit of $93m, a 37% increase 6.6 • 21% higher sales volumes from Codemin and Loma de Níquel captured the benefit of the higher nickel price 6.1 +8% • Production increased by 26% due to Barro Alto start-up, two additional months of production at Loma de
Slide 17: Diamonds
DIAMONDS Production Q1 vs. Q2 (Mct) • Operating profit $450m, a 72% increase • Record sales driven by unprecedented price 8.1 growth; DTC rough price index increased by c. 35% in H1 and y-o-y 42% +10% • Growth driven by China, India and a good 7.4 recovery in US • De Beers Diamond Jewellers announce
Slide 18: On Track for Strong H2 2011 Performance
ON TRACK FOR STRONG H2 2011 PERFORMANCE Increased Los Bronces Barro Alto Platinum Met coal iron ore project first ramp up well Recovery production production production advanced normalised from KIO • Production recovery • Operational • Barro Alto delivering • 2011 refined • Production recovery plan
Slide 19: II. Financials
II. FINANCIALS RENE MEDORI
Slide 20: Financial Overview
FINANCIAL OVERVIEW Underlying EPS ($) Key financials 2.14 4.13 H1 H1 2.58 ($bn) change 2011 2010 2.29 (1) Core operating profit 5.9 4.1 45% 1.84 Operating profit 6.0 4.4 38% Effective tax rate 31.8% 31.9% 1.23 0.91 Underlying earnings 3.1 2.2 41% (2) Capex 2.3 2.0 17% EBITDA 7.1 5.4 31% (3) H1 H2 H1
Slide 21: Core Operating Profit vs Prior Period
CORE OPERATING PROFIT VS PRIOR PERIOD ($m) Cash Costs includes impact of lower 7,500 volumes or incremental costs arising from: Safety (80) 3,022 stoppages 7,000 Rain (115) (519) Infrastructure (20) 6,500 Traded 1,072 (215) (176) (124) 6,000 (499) (69) 204 14 5,500 5,000 Bulks 1,950 6,398 5,923 4,50
Slide 22: Core Operating Profit Variances: Price (Traded)
CORE OPERATING PROFIT VARIANCES: PRICE (TRADED) ($m) Platinum Price 1,900 1,072 1,800 1,700 PGMs 266 1,600 $/oz 1,500 1,400 H1 2010 Achieved Pt price: $1,593/oz H2 2010 Achieved Pt price: $1,625/oz H1 2011 Achieved Pt price: $1,782/oz 1,300 H1 2010 Achieved basket: R19,165/oz H2 2010 Achieved basket
Slide 23: Core Operating Profit Variances: Price (Bulks – Iron Ore)
CORE OPERATING PROFIT VARIANCES: PRICE (BULKS – IRON ORE) ($m) Market Iron Ore Price (FOB Australia) 1,950 200 Thermal 244 Coal 150 $/t 100 Met Spot Quarterly 521 50 Coal 0 Jan 10 Apr 10 Jul 10 Oct 10 Jan 11 Apr 11 Jul 11 Kumba Customer Mix (Mt) Kumba Contract Mix and Realised Prices ($/t) Average 1
Slide 24: Core Operating Profit Variances: Price (Bulks – Coal)
CORE OPERATING PROFIT VARIANCES: PRICE (BULKS – COAL) ($m) Market HCC Price ($/t FOB AUS) Attributable Sales (2) 1,950 Volumes 400 H1 2011: 5.0Mt at $251/t Thermal H1 2010: 6.4Mt at $148/t 244 350 Coal Spot 300 3% 4% 18% Annual 250 $/t Met 78% 521 200 (1) Coal Spot 78% Quarterly 150 Quarterly 19% 10
Slide 25: Core Operating Profit Variances: Exchange/Volume
CORE OPERATING PROFIT VARIANCES: EXCHANGE/VOLUME ($m) Strengthening Rand 8.5 (519) (124) 8.0 ZAR/US$ Price 3,022 7.5 7.0 6.5 H1 2010 Avg: R7.53 H2 2010 Avg: R7.11 H1 2011 Avg: R6.90 Jan 10 Jun 10 Dec 10 Jun 11 Production volumes H1 2011 vs. H1 2010 26% 17% H1 2010 4,071 5% (8%) (12%) (19%) Iron Ore
Slide 26: Above CPI Cash Cost Movements 2006 – H1 2011
(1) ABOVE CPI CASH COST MOVEMENTS 2006 – H1 2011 11% Non controllable costs 10% Controllable costs 4% 3% 7% 3% 5% Normalised: 5% 1% 7% 7% 2% 4% 4% 2% (2%) (3%) (5%) 2006 2007 2008 2009 2010 H1 2011 (1) 2006 to 2009 shown on a Total Group Basis, excluding AngloGold Ashanti, Mondi, Highveld Steel & To
Slide 27: Group Capex and Net Debt Overview
GROUP CAPEX AND NET DEBT OVERVIEW Capital expenditure ($bn) Net debt ($bn) 2.3 2.1 Opening net debt – 1 Jan 2011 7.4 0.2 FX Impact Operating cash flows (5.2) 1.9 0.3 Other Projects Capital expenditure (2) 2.3 0.7 Cash tax paid 1.4 0.5 0.2 Kolomela 0.2 Barro Alto Net interest paid 0.3 0.1 0.1 Dividen
Slide 28: III. Growth Projects
III. GROWTH PROJECTS CYNTHIA CARROLL
Slide 29: Material Growth in the Short and Long Term
MATERIAL GROWTH IN THE SHORT AND LONG TERM 220 >100% 200 180 Indexed production growth ((2010 = 100) >65% 160 >35% 140 120 Continuing to 100 Nickel Existing invest in Future growth Copper operations Near term exploration options 80 & approved approvals and projects restocking the PGM pipeline 60 40
Slide 30: Future Options: Moving Projects Through the Pipeline
FUTURE OPTIONS: MOVING PROJECTS THROUGH THE PIPELINE Approved Feasibility Future Options BMR Khomanani Jwaneng Cut 8 Unki Slag Tumela Expansion Venetia Mer Decline Cleaning Tumela 4 Shaft 10 West Siphumelele Underground Thembelani 1 Furnace UG2 Dishaba East Khuseleka UG2 Upper UG2 Ore Replace Der Br
Slide 31: Moving to Industry Leading Cost Positions
MOVING TO INDUSTRY LEADING COST POSITIONS Export Hard Copper Nickel Platinum Export Iron Ore Coking Coal 100% 80% 2nd half cost 60% curve 40% 1st half 20% cost curve 0% 2008 2015 2008 2015 2009 2015 2008 2015 2008 2015 Anglo American Platinum cost curve based on internal estimates; all other data so
Slide 32: Restocking the Pipeline: Significant Resource Growth
RESTOCKING THE PIPELINE: SIGNIFICANT RESOURCE GROWTH Iron Ore Brazil Copper Resources Nickel Resources Met Coal Resources Resources Contained Metal (Mt) Contained Metal (Mt) Tonnes (Mt) Tonnes (Mt) +292% +944% +119% +379% 123.4 4.9 4,662 5,974 2,132 31.5 1,246 0.5 2005 2010 2005 2010 2005 2010 2007
Slide 33: IV. Outlook
IV. OUTLOOK CYNTHIA CARROLL
Slide 34: Long Term Demand Growth Remains Healthy
LONG TERM DEMAND GROWTH REMAINS HEALTHY Chinese Regional Urbanisation(1) 2009 China’s expected growth 2010 to 2018 Heilongjiang Truck output 100% Jilin Inner Mongolia Liaoning Xinjiang Huang River Beijing Car output 85% Tianjin Hebei Shanxi Qinghai Shandong Ningxia Gansu Jiangsu Urban floor space 84
Slide 35: Set to Benefit from the Shift in Commodities Demand
SET TO BENEFIT FROM THE SHIFT IN COMMODITIES DEMAND Chinese share of global demand 60% Nickel 50% Copper 40% Finished Steel Light duty vehicles 30% 20% Polished diamonds 10% 0% 2000 2005 2010 2015 2020 Source: Anglo American Commodity Research 35
Slide 36: Supply Consistently Under Delivers
SUPPLY CONSISTENTLY UNDER DELIVERS Infrastructure project delays Copper industry grade declines, Copper industry production a long term downward trend planned vs. actual 3 1.7 20 1.6 2 2 ? 20101.5 2010 planned planned Copper grade Cu % 2 Copper (Mt) 1.4 Years 1.3 15 2007 2010 actual actual 1 1.2 1 1
Slide 37: Delivering Value from a Consistent Strategy
DELIVERING VALUE FROM A CONSISTENT STRATEGY • Zero harm remains the number one priority Operational improvements realised across businesses Indexed productivity(2) (2008 = 100) • Consistent strategy and simple organisational 150 Copper structure delivering results 140 130 • Comprehensive improvement
Slide 38: Q&A
Q&A
Slide 39: Appendix
AngloAmerican APPENDIX
Slide 40: Analysis of Operating Profit
ANALYSIS OF OPERATING PROFIT ($m) H1 2011 H1 2010 Iron Ore and Manganese 2,507 1,628 Metallurgical Coal 491 263 Thermal Coal 521 351 Copper 1,401 1,185 Nickel 93 68 Platinum 542 418 Diamonds 450 261 Exploration (46) (57) Corporate Activities and Unallocated Costs (36) (46) Core 5,923 4,071 Other Min
Slide 41: Analysis of Underlying Earnings
ANALYSIS OF UNDERLYING EARNINGS ($m) H1 2011 H1 2010 Iron Ore and Manganese 902 614 Metallurgical Coal 351 177 Thermal Coal 385 258 Copper 842 706 Nickel 58 64 Platinum 285 222 Diamonds 299 148 Exploration (45) (55) Corporate Activities and Unallocated Costs (19) (140) Core 3,058 1,994 Other Mining
Slide 42: Average Market Prices
AVERAGE MARKET PRICES H1 2011 H1 2010 Iron Ore (FOB Australia) - $/t 171 135 Hard Coking Coal (FOB Australia) - $/t 278 165 Thermal Coal (FOB South Africa) - $/t 121 87 Thermal Coal (FOB Australia) - $/t 124 97 Copper – cents/lb 426 323 Nickel – cents/lb 1,159 962 Platinum - $/oz 1,792 1,602 Palladi
Slide 43: Underlying Earnings Sensitivities
UNDERLYING EARNINGS SENSITIVITIES Commodity/Currency Change in Price/Exchange $m Iron Ore + $10/t 72 Hard Coking Coal + $10/t 28 Thermal Coal + $10/t 97 Copper + 10c/lb 37 Nickel + 10c/lb 3 Platinum + $100/oz 56 Rhodium + $100/oz 8 Palladium + $10/oz 3 ZAR / USD + every 10 c movement 35 AUD / USD +
Slide 44: Regional Analysis – Operating Profit
REGIONAL ANALYSIS – OPERATING PROFIT ($m) H1 2011 H1 2010 South Africa 3,322 2,190 Other Africa 371 265 South America 1,777 1,452 North America 72 47 Australia & Asia 603 429 Europe (121) (22) Total Operating Profit 6,024 4,361 44
Slide 45: Capital Expenditure
(1) CAPITAL EXPENDITURE ($m) H1 2011 H1 2010 Iron Ore and Manganese 595 467 Metallurgical Coal 206 21 Thermal Coal 31 140 Copper 831 601 Nickel 177 223 Platinum 410 431 Corporate Activities 6 6 Core 2,256 1,889 Other Mining and Industrial 72 104 Total Capital Expenditure 2,328 1,993 (1) Cash capital
Slide 46: Core Operating Profit Variance: Exchange
CORE OPERATING PROFIT VARIANCE: EXCHANGE ($m) By business unit (58) (163) (25) (36) 7 (231) (13) (519) Iron Ore Metallurgical Thermal Copper Nickel Platinum Corporate Total Coal Coal ($m) By currency 5 (12) (36) (163) (313) (519) Other BRL CLP AUD ZAR Total 46
Slide 47: Debt Evolution and Gearing
DEBT EVOLUTION AND GEARING Net Debt ($bn) Undrawn committed facilities and cash 11.3 11.3 • The Group had over $15 billion of undrawn committed facilities and cash at 30 June 2011 • In February 2011, the Group retired a $2.25 billion revolving credit facility maturing in June 7.4 6.8 2011 De Beers H
Slide 48: Barro Alto Delivered in 2011
BARRO ALTO DELIVERED IN 2011 Barro Alto, Brazil • Barro Alto 36 ktpa nickel project delivered first production on schedule in March 2011 • Product within specification from third metal run; first sale April 2011 • Full production H2 2012 • Positioned in lower half of the cost curve • Delivering an a
Slide 49: Substantial Copper Growth on Stream Later This Year
SUBSTANTIAL COPPER GROWTH ON STREAM LATER THIS YEAR Los Bronces, Chile • Los Bronces 278 ktpa copper expansion is 97% complete and on schedule for first production in Q4 2011 • Production at Los Bronces is scheduled to increase to 490 ktpa over the first three years, average 400 ktpa over the first
Slide 50: Iron Ore Growth on Stream Next Year
IRON ORE GROWTH ON STREAM NEXT YEAR Kolomela, South Africa • Kolomela 9 Mtpa iron ore project in South Africa • 94% complete, on schedule with construction substantially complete and hot commissioning to commence in H2 • First production on schedule with 4-5 Mt to be produced in 2012 and ramp up to
Slide 51: Further Iron Ore Growth from 2013
FURTHER IRON ORE GROWTH FROM 2013 Minas-Rio, Brazil • Minas-Rio 26.5 Mtpa iron ore project in Brazil • Mineral easement in Q2 allowing expropriation of remaining land and tailings dam and along pipeline • Beneficiation plant earthworks 73% complete; civil works started on schedule in March • Pipelin