Anglo American Plc · LSE:AAL
Anglo American — FY2010 Earnings Presentation
52 slides from Anglo American's earnings presentation, Feb 18, 2011
Slide 1: Preliminary Results, Year Ended 31 December 2010
PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2010 Cynthia Carroll Chief Executive René Médori Finance Director 18 February 2011
Slide 2: Highlights
HIGHLIGHTS • Group operating profit of $9.8bn, up 97% Operating Profit • Underlying earnings of $5bn and EPS $4.13, 93% 6 5.4 5 4.4 increase 4 2.8 • Platinum cash operating costs flat in real terms, 3 2.1 production target exceeded at 2.57 Moz, labour 2 1 productivity increased by 12% 0 • Asset opti
Slide 3: Major improvement in safety performance
MAJOR IMPROVEMENT IN SAFETY PERFORMANCE • Safety practices embedded and delivering Fatalities further improved results, particularly at SA underground operations and at Projects 50 44 40 68% reduction • 90% of our operations were without fatalities, 40 28 including 100% of 30 20 14 – Nickel, Copper,
Slide 4: Significant recovery in performance following the global downturn
SIGNIFICANT RECOVERY IN PERFORMANCE FOLLOWING THE GLOBAL DOWNTURN… Focus on capital preservation and cost cutting, including closure of high cost production at Platinum, whilst maintaining investment in key growth projects 4,000 Announced 4000 Disposal disposal of Australian of majority of 3,500 und
Slide 5: Operational excellence driving our assets down the cost curve
OPERATIONAL EXCELLENCE DRIVING OUR ASSETS DOWN THE COST CURVE Metallurgical Coal Productivity Platinum Productivity ROM (kt) per FTE at Export Mines m2 per operating employee per month +48% +23% 8.8 7.1 7.9 6.3 5.7 6.0 2008 2009 2010 2008 2009 2010 Metallurgical Coal Cost Curve Position Platinum Cos
Slide 6: Significant outperformance of asset optimisation and procurement targets
SIGNIFICANT OUTPERFORMANCE OF ASSET OPTIMISATION AND PROCUREMENT TARGETS Asset Optimisation Procurement $m +86% $m 2,150 2011 323 +52% $1bn target2 800 279 87 1,158 526 208 2011 81 466 $1bn 201 target1 1,548 253 749 247 192 2009 2010 2009 2010 OMI Core- one-off benefits Core - sustainable benefits O
Slide 7: A world class mining company
A WORLD CLASS MINING COMPANY Outperforming the industry1 Well diversified portfolio2 Structurally attractive commodities3 Op Profit ($bn) Op Profit Margin (%) 12 45% Diamonds China’s share of global consumption (%) 10% 40% 10 35% 21% 11% 8 30% Iron Ore & 27% 62% Manganese 25% 24% 6 Platinum 20% 24%
Slide 8: Well advanced on the strategic path
…WELL ADVANCED ON THE STRATEGIC PATH ● Next wave of projects delivering 100% volume growth over the next decade The “next wave of growth” ● $70bn project pipeline ● Key strategic growth projects delivering 50% growth by 2015 Delivering the ● Further growth in most attractive commodities near term pi
Slide 9: I. Operational Performance
I. OPERATIONAL PERFORMANCE CYNTHIA CARROLL
Slide 10: Copper
COPPER Copper • Operating profit of $2,817m, up 40% driven by record prices • Production 623 kt ,down 7% in line with expectations due to decline in grades, with exception of strike action at Collahuasi • Tight management of controllable costs offset by higher power costs and strong Chilean peso • L
Slide 11: Nickel
NICKEL Nickel • Operating profit of $96m, driven by strong prices • Production 20.2 kt up 2%, driven by higher production at Loma +13% • Unit costs 7% higher at $5.95/lb due to planned maintenance at Codemin and a strong Brazilian Real • Barro Alto 36 ktpa project on schedule for first production in
Slide 12: Platinum
PLATINUM Platinum • Operating profit $837m, driven by higher prices and partially offset by the strong Rand • Safety continues to improve LTIFR down 15% • Refined production 2.57 Moz, up 5%, higher production from own mines in H2 contributing to higher profitability • Operating cash unit costs flat
Slide 13: Iron Ore and Manganese
IRON ORE AND MANGANESE Iron Ore and Manganese • Operating profit of $3.7bn • Kumba’s profitability driven by 92% increase in export prices and 6% higher export volumes • Kumba sales volumes +8% to 43.1 Mt; export sales from Sishen +1.9Mt to 36.1 Mt • JIG plant produced 13.3 Mt, above nameplate capac
Slide 14: Metallurgical Coal
METALLURGICAL COAL Metallurgical Coal • Operating profit of $783m, up 74% • Driven by higher realised met coal prices +25% • Export met production 14.7 Mt up 16% with overall product mix improvement, offset by strengthening AUD • Production impacted by adverse weather and flooding • Export mine prod
Slide 15: Thermal Coal
THERMAL COAL Thermal Coal • Operating profit of $710m • Fatality free in 2010 and 27% improvement in LTIFR • Strong recovery in thermal coal prices and increased export volumes from SA, offset by strong Rand • Mafube ramped up to full production • Zibulo project is approaching completion and is ramp
Slide 16: Diamonds
DIAMONDS Diamonds • Operating profit of $495m • DTC sales up 57% to $5.1bn • Recovered 33 million carats, up 34% • Strong recovery in consumer demand and prices • Demand driven by restocking and increased demand from retail markets, particularly in India and China • Rough diamond prices returning to
Slide 17: II. Financials
FINANCIALS = = : RENEWEDORI. ... he a ee yl. “s +s fe a ‘=
Slide 18: Financial overview
FINANCIAL OVERVIEW Underlying EPS – $ Key financials 4.36 2.14 4.13 ($bn) 2010 2009 change Core operating profit(1) 9.1 4.5 +104% Operating profit 9.8 5.0 +97% Effective tax rate 31.9% 33.1% 2.90 Underlying earnings 5.0 2.6 +94% 2.29 Capex(2) 5.0 4.8 1.84 1.46 1.23 EBITDA 12.0 6.9 +73% 0.91 Net debt
Slide 19: Progress on restructuring
PROGRESS ON RESTRUCTURING Disposals Net cash inflows from disposals (1) Including: Completed in 2010 Completed in 2011 • Moly-Cop and AltaSteel $1.0bn • Australian undeveloped coal assets $0.5bn • Tarmac European businesses (2) $0.5bn • Skorpion zinc mine $0.6bn • Black Mountain $0.3bn • Lisheen $0.
Slide 20: Agreement to create a leader in UK construction materials
AGREEMENT TO CREATE A LEADER IN UK CONSTRUCTION MATERIALS • Tarmac Limited and Lafarge UK to create 50:50 JV of UK cement, aggregates, concrete, asphalt and contracting businesses • Completion subject to • Complementary geographical and product regulatory approval footprints • JV a path to maximum •
Slide 21: Full year operating profit variances: core operations
FULL YEAR OPERATING PROFIT VARIANCES: CORE OPERATIONS ($m) 11,000 +5,734 +100 (270) 10,000 (996) 9,000 Traded 2,813 159 718 (196) (331) (70) 170 (108) (429) 8,000 7,000 6,000 Bulks 2,921 5,000 9,102 4,000 3,000 2,000 4,451 1,000 0 2009 Price Exchange Inflation Volume Throughput Cash AO/SC Non Cash A
Slide 22: Core operating profit variances: price (traded)
CORE OPERATING PROFIT VARIANCES: PRICE (TRADED) Copper Price (2009 to 2010) c/lb ($m) 450 Avg 2009 Realised Price Avg 2010 Realised Price 400 $2.69/lb $3.55/lb 2,813 350 300 31/12/10 Nickel 234 250 31/12/09 Prov Pricing 200 Prov Pricing $4.37/lb $3.34/lb 903 150 31/12/08 100 Prov Pricing 50 $1.39/lb
Slide 23: Core operating profit variances: price (bulks - iron ore)
CORE OPERATING PROFIT VARIANCES: PRICE (BULKS - IRON ORE) ($m) Market Iron Ore Price (FOB Australia) $/t 180 160 2,921 140 Thermal 120 324 Coal 100 80 60 Met Coal 495 Spot (Platts) 40 Benchmark 20 0 2009 2010 Kumba Contract Mix (Mt) and Kumba Customer Mix (Mt) Realised Prices ($/t) Average 36.1 real
Slide 24: Core operating profit variances: price (bulks - coal)
CORE OPERATING PROFIT VARIANCES: PRICE (BULKS - COAL) ($m) 2010 Market HCC Price ($/t FOB AUS) Attributable Sales Volumes 2,921 $/t Transition to Shorter Term Pricing for JFY 2010-11 2010: 14.9Mt at $176/t (2009: $141/t) (1) Thermal 250 324 Spot Coal Spot 200 Annual Met Coal 495 Annual 150 Quarterly
Slide 25: Core operating profit variances: exchange/volume
CORE OPERATING PROFIT VARIANCES: EXCHANGE/VOLUME Strengthening Rand ZAR/US$ ($m) 11.0 10.5 10.0 (996) 9.5 100 9.0 8.5 8.0 2009 Avg: R8.41 7.5 Price 5,734 7.0 2010 Avg: R7.32 6.5 6.0 2009 2010 Production volumes 2010 vs. 2009 Associates 92% 34% 16% 4,451 2009 4,438 5% 2% 4% 5% (7%) Platinum Copper Ni
Slide 26: Core operating profit variances: costs
CORE OPERATING PROFIT VARIANCES: COSTS (1) Cash costs increase $270m or 2.1% Non controllable costs +$268m increase or +2.1% Controllable costs +$2m increase or +0.0% ($m) 114 179 13,000 53 (132) 66 149 (159) 12,000 11,000 12,980 12,982 12,712 10,000 9,000 (2) 2009 Fuel Electricity Other Maintenance
Slide 27: Group capex and net debt overview
GROUP CAPEX AND NET DEBT OVERVIEW Capital expenditure Net debt ($bn) ($bn) 4.8 4.7 4.5 0.3 FX impact Opening net debt – 1 Jan 2010 11.3 Operating cash flows (9.9) 0.9 Other Projects Capital expenditure (2) 5.0 1.7 1.3 Cash tax paid 2.5 0.4 Kolomela Net interest paid 0.6 0.1 0.3 Platinum Rights issue
Slide 28: III. Projects Update
III. PROJECTS UPDATE CYNTHIA CARROLL
Slide 29: Near term pipeline will increase production by 50% to 2015
THE NEAR TERM PIPELINE WILL INCREASE PRODUCTION BY 50% TO 2015, WITH FURTHER VOLUME GROWTH BEYOND THAT 100% 200 Selected projects Jacaré I, Morro Sem Boné 180 50% Indexed production growth (2009 = 100) Michiquillay, Collahuasi 160 Barro Alto 140 Various Platinum Los Bronces Projects Quellaveco 120 1
Slide 30: Significant further growth optionality from world class project pipeline
WITH SIGNIFICANT FURTHER GROWTH OPTIONALITY FROM A WORLD CLASS PROJECT PIPELINE Approved Feasibility Future Growth Options BMR Unki Siphumelele Venetia Thembelani 1 Khomanani Base and Precious Jwaneng Cut 8 Expansion Mer Decline Underground UG2 Gahcho Mer Decline Siphumele Kué UG2 Khuseleka Dishaba
Slide 31: Delivering near-term growth: Barro Alto, Brazil
DELIVERING NEAR-TERM GROWTH Barro Alto, Brazil • Barro Alto 36 ktpa nickel project on schedule for first production March 2011 • Open pit mining and proven processing technology – standard rotary kiln – electric furnace • Life of mine 20 yrs; 47.5 Mt @ 1.68% Ni, with an Additional Measured and Indic
Slide 32: Delivering near-term growth: Los Bronces, Chile
DELIVERING NEAR-TERM GROWTH Los Bronces, Chile • Los Bronces 278 ktpa copper expansion on schedule for first production Q4 2011 • Production at Los Bronces scheduled to increase to 490 ktpa over first 3 yrs, average 400 ktpa over first 10 yrs • Positioned firmly in the lower half of the cost curve,
Slide 33: Delivering near-term growth: Kolomela, South Africa
DELIVERING NEAR-TERM GROWTH Kolomela, South Africa • Kolomela 9 Mtpa iron ore project on schedule for first production Q2 2012 • At full capacity the mine will deliver 9 Mtpa of high quality seaborne iron ore • Reserves of 202.4Mt at an average grade of 64.3% Fe (cut-off at 48% Fe) • Measured and In
Slide 34: Delivery of project pipeline: Minas-Rio, Brazil
DELIVERY OF PROJECT PIPELINE Minas-Rio, Brazil • Significant progress made with licences and permits; Mining permit in August and LI part 2 in December • LI part 2 is final primary installation licence, supports commencement of the civil works for beneficiation plant and tailings dam, expected to st
Slide 35: Next wave of projects set for approval
NEXT WAVE OF PROJECTS SET FOR APPROVAL Quellaveco Copper Project, Peru • Average production of 225 ktpa over the first 10 years • Feasibility study complete. Subject to Board approval in 2011 pending water permits • First production estimated in 2015 • Capex estimated ~ $3bn • Targeted to operate in
Slide 36: IV. Outlook - The Macro Environment
IV. OUTLOOK – THE MACRO ENVIRONMENT
Slide 37: US economy showing marked improvement
US ECONOMY SHOWING MARKED IMPROVEMENT US GDP AND MANUFACTURING ISM US CONSUMPTION Composite leading indicators, normalised US personal consumption Real terms, % change on previous quarter at annualised rate 65 10 8 8 ISM index 8 60 (lhs) 6 66 8 55 4 44 6 50 2 4 22 45 0 2 -2 40 GDP, % change on 00 0
Slide 38: Strong emerging market growth will continue
STRONG EMERGING MARKET GROWTH WILL CONTINUE GROWING MIDDLE CLASS IN EMERGING CHINA AND US WILL CONTINUE TO DRIVE ECONOMIES WILL CONTINUE TO DRIVE DEMAND INFRASTRUCTURE GROWTH Middle Classes by region, mn US$ billion, constant 2005 prices and exchange rates 1000 Investment in infrastructure 900 800 2
Slide 39: China driving demand and use of higher quality materials
CHINA DRIVING DEMAND AND USE OF HIGHER QUALITY MATERIALS URBANISATION IN CHINA WILL DRIVE DEMAND …WITH A GREATER FOCUS ON HIGH QUALITY FOR OUR KEY METALS AND MINERALS MATERIALS Continued urbanisation in China, in context of GDP Chinese share of global stainless steel consumption increasing growth, d
Slide 40: Summary
AngloAmerican SUMMARY
Slide 41: Summary
SUMMARY • Operational excellence is delivering significant bottom line enhancement • Commodity positions moving down to the lower half of the cost curve • Major volume growth underway one of the largest near term expansion profiles –with $16bn approved in the next 3 years – 50% growth to 2015 • Stre
Slide 42: Q&A
Q&A
Slide 43: Appendix
AngloAmerican APPENDIX
Slide 44: Analysis of operating profit
ANALYSIS OF OPERATING PROFIT ($m) 2010 2009 Platinum 837 p 32 Diamonds 495 p 64 Copper 2,817 p 2,010 Nickel 96 p 2 Iron Ore and Manganese 3,681 p 1,489 Metallurgical Coal 783 p 451 Thermal Coal 710 q 721 Exploration (136) p (172) Corporate Activities and Unallocated Costs (181) q (146) Core 9,102 4,
Slide 45: Analysis of underlying earnings
ANALYSIS OF UNDERLYING EARNINGS ($m) 2010 2009 Platinum 425 p 44 Diamonds 302 p (90) Copper 1,721 p 1,201 Nickel 75 p (13) Iron Ore and Manganese 1,423 p 571 Metallurgical Coal 585 p 322 Thermal Coal 512 q 517 Exploration (128) p (167) Corporate Activities and Unallocated Costs (461) q (219) Core 4,
Slide 46: Average market prices
AVERAGE MARKET PRICES 2010 2009 Platinum - $/oz 1,610 p 1,211 Palladium - $/oz 527 p 266 Rhodium - $/oz 2,453 p 1,592 Copper – cents/lb 342 p 234 Nickel – cents/lb 989 p 667 Iron Ore – FOB Australia - $/t 136 p 68 Coal – RSA Export Thermal - $/t 92 p 64 Coal – AUS Export Thermal - $/t 99 p 72 Coal –
Slide 47: Underlying earnings sensitivities
UNDERLYING EARNINGS SENSITIVITIES Commodity/Currency Change in Price/Exchange $m Platinum + $100/oz 115 Rhodium + $100/oz 15 Palladium + $10/oz 6 Copper + 10c/lb 78 Nickel + 10c/lb 5 Iron ore + $10/t 154 Thermal Coal + $10/t 205 Metallurgical Coal + $10/t 99 ZAR / USD + every 10 c movement 101 AUD /
Slide 48: Regional analysis - operating profit
REGIONAL ANALYSIS – OPERATING PROFIT ($m) 2010 2009 South Africa 5,001 p 2,023 Other Africa 501 p 78 Europe (80) q (54) Americas 3,430 p 2,290 Australia & Asia 911 p 620 Total Operating profit 9,763 4,957 48
Slide 49: Capital expenditure
CAPITAL EXPENDITURE (1) ($m) 2010 2009 Platinum 1,011 1,150 Copper 1,530 1,123 Nickel 525 554 Iron Ore and Manganese 1,195 1,140 Metallurgical Coal 217 96 Thermal Coal 274 400 Corporate Activities 18 27 Core 4,770 4,490 Other Mining and Industrial 224 268 Total Capital Expenditure 4,994 4,758 1) Cap
Slide 50: Core operating profit variance: exchange
CORE OPERATING PROFIT VARIANCE: EXCHANGE ($m) By Business Unit 31 (56) (410) (133) (311) (105) (12) (996) Copper Nickel Platinum Iron Ore Metallurgical Thermal Coal Corporate Total Coal ($m) By Currency 50 (14) (56) (311) (665) (996) Other BRL CLP AUD ZAR Total Excludes associates 50
Slide 51: Above CPI cash cost movements 2006 - 2010
ABOVE CPI CASH COST MOVEMENTS 2006 – 2010(1) 11.0% 11% Non controllable costs 10% 9.6% Controllable costs 9% 4.4% 8% 3.1% 7% 6% 5.4% 5% 0.7% 4% 6.5% 6.6% 3% 4.7% 2.1% 2% 1% 2.1% 0% (1%) (1.8%) (2%) (3%) (2.7%) (4%) (5%) (4.5%) 2006 2007 2008 2009 2010 1) 2006 to 2009 shown on a Total Group Basis, ex
Slide 52: Debt evolution and gearing
DEBT EVOLUTION AND GEARING Net debt ($bn) Undrawn committed facilities and cash • The Group had over $17 billion of undrawn committed 11.3 11.3 facilities and cash at 31 December 2010 • During 2010, the Group: • refinanced a $2.5bn facility maturing in 2012 and 7.4 replaced it with a $3.5bn 5 year f