Slide 1: Quellaveco: A World Class Copper Project
QUELLAVECO A WORLD CLASS COPPER PROJECT TOM MCCULLEY, CEO QUELLAVECO 27 NOVEMBER 2018 Real Mining. Real people. Real Difference 0
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: Quellaveco – Many Companies, One Team
QUELLAVECO – MANY COMPANIES, ONE TEAM 2
Slide 4: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 5: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 6: Experienced Leadership Team
EXPERIENCED LEADERSHIP TEAM Tom McCulley Christoff Kuhn Peter White Tito Cacho Diego Ortega Carlos Dominguez Craig LaFortune Chief Executive Project Director Chief Financial Operations Corporate Affairs Human Resources Project Director Officer Officer (Fluor) • Anglo American • Management and • Qual
Slide 7: Robust Governance and Leading EPCM Partner
ROBUST GOVERNANCE AND LEADING EPCM PARTNER Anglo American Group Governance Quellaveco Project Structure Mark Cutifani Anglo Mitsubishi American Corp. Anglo American CEO 60% 40% Quellaveco Steering Project Committee Tom McCulley Owners EPCM scope scope Quellaveco CEO • Won competitive bid process • S
Slide 8: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 9: In-Depth Knowledge of the Project
IN-DEPTH KNOWLEDGE OF THE PROJECT …developed over >25 years 2018 in Anglo American portfolio FS updated. Investment 2015 Assurance review successful FS for 127.5ktpd completed. Mitsubishi acquires All major permits approved. additional 21.9% stake of Independent Project Review Quellaveco from AA plc
Slide 10: Peru – An Attractive Mining Jurisdiction
PERU – AN ATTRACTIVE MINING JURISDICTION The world’s second largest producer of copper, Project supported by Central, Regional with mining accounting for ~10% of GDP and Local government • Government supports project Central execution, acknowledging government importance to national economy • Legisl
Slide 11: World-Class Feasibility Study
WORLD-CLASS FEASIBILITY STUDY • Strong presence in South America • In-depth understanding of project • Extensive Quellaveco • World-class experience independent • Excellent credentials, reviews verified by completion of nearby project Feasibility Study 10
Slide 12: Not Your Typical Greenfield…
NOT YOUR TYPICAL GREENFIELD… Significant early works completed Detailed ✓ 120km of drilling supports 7.6Mt Contained Copper Ore Reserves and Geological 6.0Mt of Contained Copper Mineral Resources1 Model Advanced Geotechnical ✓ Excellent understanding of grinding area geotechnical conditions Understa
Slide 13: …Culminating in Project Approval in July 2018
…CULMINATING IN PROJECT APPROVAL IN JULY 2018 Located at ~3,500m above sea level in south of Peru, 34km from the city of Moquegua Quellaveco – Key statistics Copper Commodities: (molybdenum by-product) Peru Mine: Open-pit, 1.3Bt Reserves, 0.57% TCu1 Overview Lima Returns: >15% IRR, >20% ROCE, 4-yr p
Slide 14: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 15: High-Grade Ore in 4-Year Payback Period
HIGH-GRADE ORE IN 4-YEAR PAYBACK PERIOD …with high degree of confidence in ore body First five years: ~330ktpa production 0.84% TCu grade >90% Proved Reserves In payback period: Softer, near-surface, easily accessible high-grade secondary ore LOM Pit shell Limited overburden (~50Mt) due to erosion b
Slide 16: 30-Year Reserve Life with Significant Potential
30-YEAR RESERVE LIFE WITH SIGNIFICANT POTENTIAL Favourable mineralisation characteristics 4,000m above sea level Mineralisation open at depth, to north 1.3Bt Reserves1 and to south ~800m ~400m ~1,200m Neighbouring mines operating >40 years and 2-3x deeper Cuajone Quellaveco Toquepala 2,000m above se
Slide 17: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 18: Structural Cost Advantages: Low-Cost Mining
STRUCTURAL COST ADVANTAGES: LOW-COST MINING Open-pit operation, with optimal design based on latest resource block model Waste Dump Asana River Diversion Tunnel Low strip-ratio • Ore body uncovered through erosion by the Asana River… Open-Pit • …leading to low strip ratio of 0.8x Tunnel Exit (LOM) 9
Slide 19: Overburden Stripped by Asana River
OVERBURDEN STRIPPED BY ASANA RIVER 18
Slide 20: Conventional, Well-Understood Processing
CONVENTIONAL, WELL-UNDERSTOOD PROCESSING Two grinding lines, designed for hard ore, to produce high-grade copper concentrate Plant overview Conventional processing • Plant designed for hard ore, with softer ore to be processed in early years • One SAG and one Ball Mill on each grinding line, with sp
Slide 21: Highly Competitive Q1 Cost Position
HIGHLY COMPETITIVE Q1 COST POSITION Key structural cost advantages expected to deliver a Q1 cash cost position C1 cash cost C1 cash unit cost (excl. by-products) $1.05/lb Average over first 10 years Mine 25% Plant 35% Structural cost advantages 15% G&A • Low strip-ratio 25% • Efficient and short hau
Slide 22: Marketing Advantages from High-Grade Concentrate and Low Impurities
MARKETING ADVANTAGES FROM HIGH-GRADE CONCENTRATE AND LOW IMPURITIES Quality of concentrate offers marketing advantages Arsenic content benchmarking 6,000 5,500 • High grade copper concentrate with low impurities Import limit 5,000 into China - >40% concentrate grade in first 5 years; 4,500 Arsenic c
Slide 23: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 24: All Major Construction Permits in Place
ALL MAJOR CONSTRUCTION PERMITS IN PLACE Major Permits Water Licences Permits Status Licences Status Environmental Impact Study Construction Water Authorisation Beneficiation Concession Operations Water Licence (grant on Mining Plan start of operations) Mining Closure Plan 23
Slide 25: Committed to Working with Local Communities
COMMITTED TO WORKING WITH LOCAL COMMUNITIES Dialogue Table focussed on three key …with firm commitments areas… Water Supply and optimal use of water resources 26 Agreements directly from the Dialogue Table Environment Compliance and monitoring of environmental 31 Bodies from 3 different municipaliti
Slide 26: Licence to Operate to Underpin Project Success
LICENCE TO OPERATE TO UNDERPIN PROJECT SUCCESS Sustainability at the heart of Anglo American values, reflected in approach to Quellaveco’s development Safety and Health Environment Safety Policy & Programme • Comprehensive health and safety programme based on • Robust environmental programme princip
Slide 27: Licence to Operate to Underpin Project Success
LICENCE TO OPERATE TO UNDERPIN PROJECT SUCCESS Project benefits from unique social credentials Economic programmes • Commitment to hire 80% of unskilled workforce from local community: >80% achieved to date • Support integrated and • At peak construction, ~9,000 jobs to be created sustainable rural
Slide 28: Delivering Improved Quality and Volume of Water to Local Communities
DELIVERING IMPROVED QUALITY AND VOLUME OF WATER TO LOCAL COMMUNITIES Responsibly sourced water for operations Water for operational phase to come from two sources in High Mountain region: • 80% (18Mm3) from Titire River: unfit for human, livestock or agricultural use due to naturally high salt, boro
Slide 29: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 30: What Are We Building…
WHAT ARE WE BUILDING… Area 1000 – High Mountain Water Area 2000 – Quellaveco Mine Area 3000 – Papujune Plant • Vizcachas River: dam and reservoir • Asana River diversion system • Conventional processing plant • Titire River water intake • Overland conveyor, incl. tunnel • Two grinding lines: one SAG
Slide 31: Achievements to Date
ACHIEVEMENTS TO DATE Engineering Contracts and Procurement Milestones • Utilising global Fluor network of • All awards on track • On-track to achieve first major engineers across four locations milestone of river diversion in • ~60% contracted early-December • Advanced progress: ~60% • ~50% procurem
Slide 32: On Track Since Project Approval
ON TRACK SINCE PROJECT APPROVAL Area 1000 – High Mountain Water Area 2000 – Quellaveco Mine ✓ Vizcachas River diversion on track ✓ Asana River diversion on-track to complete early-December ✓ Dam and water intake in progress ✓ Mass earthworks begun ✓ 95km water pipeline construction on track to begin
Slide 33: Schedule to Completion
SCHEDULE TO COMPLETION Asana River Critical Path: Start water Start Mine-loop Start water First concentrate diversion Plant storage at pre-strip energised transportation on ship complete earthworks Vizcachas to tailings dam complete, start dam concrete Total integrated project progress curve 100 90
Slide 34: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 35: Attractive Returns Profile
ATTRACTIVE RETURNS PROFILE Robust financial returns on project capex of $5.0-5.3bn IRR ROCE Payback period >15% >20% 4 years Real, post-tax Average over first 10 years From first production in 2022 EBITDA margin Construction capex Implied NPV >50% $2.5-2.7bn $2.74bn Average over first 10 years Anglo
Slide 36: A World Class Copper Project Supported By…
A WORLD CLASS COPPER PROJECT SUPPORTED BY… 1 Highly experienced management team, leading EPCM contractor 2 In-depth knowledge of project: world-class feasibility study Favourable geology: high-grade ore in payback period; 3 30-year reserve life; significant endowment potential Q1 cost position drive
Slide 37: Appendix
AngloAmerican APPENDIX
Slide 38: Financial Modelling
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 - Anglo America