Anglo American Plc · LSE:AAL
Anglo American — FY2015 Earnings Presentation
54 slides from Anglo American's earnings presentation, Feb 16, 2016
Slide 1: Investor Update & Preliminary 2015 Results
INVESTOR UPDATE & PRELIMINARY 2015 RESULTS 16th February 2016
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: The New Anglo American
THE NEW ANGLO AMERICAN Mark Cutifani
Slide 4: The New Anglo American
THE NEW ANGLO AMERICAN CORE PORTFOLIO of De Beers, PGMs and Copper… Global leadership in diamonds and platinum and a high quality copper business. World class suite of assets. FREE cash flow POSITIVE IN 2016 at spot prices and FX… Planned $1.9bn of cost and business improvements vs 2015. For
Slide 5: Our Core Business
OUR CORE BUSINESS Relative earnings contributions driven by scale and quality… 2015 EBITDA vs. Revenue ($bn)(1) QUALITY ASSETS De Beers 2015 EBITDA ($bn) Long life, low cost and scalable. Copper Step change in EBITDA margin for core. Samancor Kumba Coal - Australia Platinum Sustainably free ca
Slide 6: Reduced Complexity
REDUCED COMPLEXITY Large, scalable resource and low cost operations… 55 55 50 45 45 De Beers(1) Platinum Copper 40 Jwaneng Mogalakwena Chile Los Bronces 35 Botswana Orapa Amandelbult Collahuasi 30 # of mines South Venetia South • BRPM 25 Africa Africa • Mototolo • Voorspoed Projects •
Slide 7: Core Business Profile - People
CORE BUSINESS PROFILE - PEOPLE Focus on fewer, but larger, more productive assets… Organisational structure Total headcount (‘000s) (1)(2) 128 Chief Executive Mark Cutifani 68 10 50 De Beers Copper Bulks Platinum Philippe Duncan Seamus Chris Griffith Mellier Wanblad French End 2015 Disposals Restruc
Slide 8: De Beers
DE BEERS Industry leadership across the pipeline… Diamond mining industry margin curve UPSTREAM LEADERSHIP Ratio of C1 costs to revenue 1.2 1.0 De Beers Assets Best-in-class mining assets – large, long life with scalable production and low cost. 0.8 0.6 Strong government partnerships – Botswana
Slide 9: Platinum
PLATINUM We are the leading PGM company and moving further down the cost curve… Platinum net cash cost curve – 2015 (1) PLATINUM LEADERSHIP Net cash cost (US$/Pt oz) AAP Mines/JVs for exit The Tier 1 portfolio of platinum assets. Modikwa Unki Mogalakwena lowest cost dedicated producer. By-produc
Slide 10: Copper
COPPER Highly competitive position in copper… Top 10 Producing Mines (2015 Cu kt) WORLD CLASS ASSETS Escondida Morenci Attractive combination of scale, life and cost positions. Collahuasi Chuquicamata Extensive high-quality resources underpin substantial El Teniente organic growth opportunities.
Slide 11: Core Business Profile – A Unique Exposure
CORE BUSINESS PROFILE – A UNIQUE EXPOSURE Our core assets have a greater exposure to consumer end markets… Demand drivers Core EBITDA by commodity (pro forma 2016) Pro forma 2016 EBITDA Diamonds Copper 13% Platinum 31% 26% 42% 27% 46% 78% Core revenue by destination (pro forma 2016) (1) RoW 13% 19%
Slide 12: Non-Core Assets and Balance Sheet
NON-CORE ASSETS AND BALANCE SHEET René Médori
Slide 13: Non-Core Assets and Balance Sheet
NON-CORE ASSETS AND BALANCE SHEET The Challenge The Agenda ~$7bn Disposals processes $12.9bn Dealing with the tail Cash flow position in 2016 at spot Net debt end 2016 and beyond Liquidity position maintained ~$6bn Dec-15 Net debt Medium-term Net debt Target @ spot 13
Slide 14: The Disposal Processes
THE DISPOSAL PROCESSES Targeting disposals of $3-4bn for value by end of 2016… More advanced Niobium & Phosphates Some combination of these is expected to contribute to the Nickel $3-4bn target for 2016 Moranbah & Grosvenor Australian Coal - Other SA Coal - Domestic Cerrejón Platinum - non-core SA C
Slide 15: Dealing with the Tail
DEALING WITH THE TAIL Action plans in place for negative free cash flow assets… Assets – operating free cash flow 2016F (1) Callide Sale announced. Sale Dawson Process underway. Foxleigh Process underway. PRC Placed on care and maintenance. Thabazimbi Closure underway. Closure / C&M Snap Lake Placed
Slide 16: Incremental Cash Flow Improvement in 2016
INCREMENTAL CASH FLOW IMPROVEMENT IN 2016 $1bn additional cash flow identified… 2016 free cash flow ($bn) Cash flow improvement initiatives 0.4 Core $0.6bn Non-core $0.5bn $1.0bn 0.0 0.2 0.2 0.3 $0.8bn EBIT benefit: 0.5 0.3 Volume Costs (1.0) 0.8 2016: As at EBIT Taxes Working Further Cash flow Pric
Slide 17: Net Debt Target
NET DEBT TARGET Targeting net debt of below $10bn by end 2016… Target net debt evolution Considerations $12.9bn $3-4bn Medium-term target - solid investment grade rating. − ~$6bn net debt @ spot for core portfolio. End 2016 net debt target of <$10bn. <$10bn To come from cash generation At spot
Slide 18: Liquidity Position
LIQUIDITY POSITION Liquidity maintained at ~$15bn… Liquidity headroom ($bn) Bond maturity profile ($bn)(1) 3.4 15.1 14.8 2.6 6.7 6.9 1.6 1.2 2.9 8.4 7.9 1.1 1.4 0.5 0.5 2014 2015 2016 2017 2018 Cash Undrawn committed facilities Eurobonds US bonds AUS bonds Liquidity headroom – December 2015 ($bn) 7.
Slide 19: 2015 – Operating Performance
FULL YEAR RESULTS 2015 – OPERATING PERFORMANCE Mark Cutifani
Slide 20: Commodity Prices
COMMODITY PRICES Prices continued their slide during 2015… Indexed commodity prices (1 Jan 2015 = 1)(1) 1.1 1.0 0.9 Thermal Coal (4) (15)% Diamonds (15)% Platinum(2) (24)% 0.8 (3) (24)% Met coal(4) (26)% 0.7 Copper (28)% Nickel (29)% Iron Ore (34)% 0.6 0.5 1 Jan 2015 1 Mar 2015 1 May 2015 1 Jul 2015
Slide 21: Financial Highlights
FINANCIAL HIGHLIGHTS Commodity price headwinds dominate results… Underlying EBIT $2.2bn -55% ...commodity prices down 24%. EPS $0.64 -63% …........finance costs impacting. Cost reduction $1.0bn ....unit costs down 16% in US$. Capital expenditure $4.0bn -33% ….....in control SIB efficiencies.
Slide 22: Safety and Environment
SAFETY AND ENVIRONMENT Our performance improvement is led by people…for people… Loss of life (by business) SAFETY 17 Best safety performance in a full production year. 15 13 Q4 fatality free – 1 fatal incident in H2. 6 6 Modernisation strategy will support ongoing broad- 12 7 6 3 based safety
Slide 23: Operating Performance – Production
OPERATING PERFORMANCE – PRODUCTION Modest increase despite continuing cost focus and asset level restructuring… FY 2015 versus FY 2014 (% change) 25% 9% 5% 1% (1)% (3)% (12)% (19)% Nickel De Beers SA export coal & Copper (1) Met Coal Iron Ore (2) Platinum(3) Group Total Cerrejón (1) Copper normalise
Slide 24: Headcount Reductions Progressing
HEADCOUNT REDUCTIONS PROGRESSING The organisation impacts of the restructuring support efficiency focus… Employee and contractor numbers -21% 162,000 Reductions to 2015 ~ 10,000 Closures 151,000 ~ 11,000 Restructuring 13,000 ~ 5,000 Asset sales ~ 8,000 Capital works 128,000 11,500 2013 2014 2015 Not
Slide 25: Unit Costs – Supported by Productivity Improvements
UNIT COSTS – SUPPORTED BY PRODUCTIVITY IMPROVEMENTS Significant productivity improvements support cost reductions… Cu Equivalent production, unit cost & productivity 2015 vs 2014 Unit cost variance 140 (US$) 127 in Q4 2015 120 120 100 80 -6% 73 -13% -9% -9% 60 -23% (16%) average Cu equiv. 40 -28% 20
Slide 26: Project Delivery – Under Control
PROJECT DELIVERY – UNDER CONTROL We are coming to the end of our major project spending commitments… Group capital expenditure ($bn)(1) CAPITAL IN CONTROL & REDUCING -$2bn Minas-Rio $8.3bn…………….~$500m under revised budget. 6.0 6.1 6.0 Barro Alto $0.3bn....~$30m under budget & scope delivered. 4.
Slide 27: EBIT Improvement in 2015 and Beyond
EBIT IMPROVEMENT IN 2015 AND BEYOND We are now targeting $1.9bn of EBIT improvement in 2016… Incremental EBIT improvement ($bn) 3.4 1.0 1.9 1.2 1.3 Costs 1.0 0.8 0.7 Volume 0.3 2015 Improvements De Beers 2015 volume 2016 Improvement Target 2017 Improvement Target Note: any apparent differences are d
Slide 28: 2015 – Financials
FULL YEAR RESULTS 2015 – FINANCIALS René Médori
Slide 29: 2015 EBIT Variance
2015 EBIT VARIANCE Improved operational performance… 2015 vs. 2014 ($bn) (2.4) Bulks 1.0 (0.8) 4.9 (0.3) (0.6) 0.3 (1.8) 1.8 Base & Precious 2.0 2.2 2014 Price(1) Currency Inflation(2) Sales Cash De Beers Other(4) 2015 Volume(3) costs volume (1) Price variance calculated as increase/(decrease) in pr
Slide 30: Group Capital Expenditure
GROUP CAPITAL EXPENDITURE Continued focus on reduction in committed spend and optimisation of SIB capex… Capital expenditure ($bn)(1) Net debt ($bn) 6.0 Opening net debt – 1 January 2015 12.9 Cash flow from operations (4.2) -$1bn Capital expenditure 4.0 3.3 4.0 Project spend Cash tax paid 0.6 -$0.5b
Slide 31: Summary
SUMMARY
Slide 32: Driving Change…Defining Our Future
DRIVING CHANGE…DEFINING OUR FUTURE CORE PORTFOLIO of De Beers, PGMs and Copper… Global leadership in diamonds and platinum and a high quality copper business. World class suite of assets. FREE cash flow POSITIVE IN 2016 at spot prices and FX… Planned $1.9bn of cost and business improvements vs
Slide 33: Appendix
APPENDIX
Slide 34: 2015 Results – Core vs Non-Core
2015 RESULTS – CORE VS NON-CORE $bn 2015 results 2015 Disposals (1) Non-Core Core Turnover 23.0 1.3 8.9 12.8 EBITDA 4.9 0.1 2.0 2.8 EBIT 2.2 - 0.9 1.3 (1) 2015 Disposals include Tarmac Lafarge in Jul 2015 and Mantos Blancos & Mantoverde in Sep 2015 34
Slide 35: EBIT Improvements Delivered to Date and Targeted
EBIT IMPROVEMENTS DELIVERED TO DATE AND TARGETED 2016 (Announced Dec 2016 improvement Split by BU ($bn) 2013 to 2015 Total 2015) target Copper 0.5 0.1 0.1 0.6 Platinum 0.1 0.1 0.3 0.4 De Beers (0.7) 0.4 0.5 (0.2) KIO 0.1 0.2 0.3 0.4 IOB - (0.1) - - Coal 1.1 - 0.1 1.2 NNP - 0.3 0.3 0.3 Other(1) 0.4 0
Slide 36: Our Core Assets
OUR CORE ASSETS JWANENG (US$/ct) ORAPA (US$/ct) LOS BRONCES (C1 USc/lb) COLLAHUASI (C1 USc/lb) +6% +47% -10% -9% 190 46 158 50 145 149 142 128 33 30 39 34 2012 2015 2016F 2012 2015 2016F 2012 2015 2016F 2012 2015 2016F VENETIA (US$/ct) DBMN (US$/ct) MOGALAKWENA AMANDELBULT (US$/Pt oz) (US$/Pt oz) -6
Slide 37: Production Outlook
PRODUCTION OUTLOOK(1) 2014 2015 2016F 2017F 2018F Copper (2) 748kt 709kt 600-630kt 590-620kt 630-680kt Nickel 37kt 30kt 45-47kt 42-45kt 45-47kt Iron ore (Kumba)(3) 48Mt 45Mt ~39Mt ~40Mt ~40Mt Iron ore (Minas-Rio) 0.7Mt 9Mt 15-18Mt 19-21Mt 22-24Mt Previously 18-21Mt Previously 21-23Mt Previously 26.5
Slide 38: High Quality Assets with Long Life
HIGH QUALITY ASSETS WITH LONG LIFE De Beers PGMs Copper Carats (Mc) (4E Moz) (Mt – Tonnes) 20 14 31 +25 25 70 29 365 6,855 165 4,213 208 149 151 116 3,123 101 1,598 63 1,332 1,523 Jwaneng Orapa Venetia Mogalakwena Los Bronces Collahuasi Quellaveco Ore Reserve Mineral Resource Life of Mine (Diamonds)
Slide 39: Ore Reserve and Mineral Resource Estimates as at 31 December 2015
ORE RESERVE AND MINERAL RESOURCE ESTIMATES AS AT 31 DECEMBER 2015 Ore Reserves Estimates Mineral Resources Estimates (Exclusive of Ore Reserves) Proved Probable Measured Indicated Inferred Treated Recovered Saleable Treated Recovered Saleable AA plc Tonnes Grade Carats Tonnes Grade Carats Tonnes Gra
Slide 40: Ore Reserve and Mineral Resource Estimates as at 31 December 2015
ORE RESERVE AND MINERAL RESOURCE ESTIMATES AS AT 31 DECEMBER 2015 Ore Reserves Estimates Mineral Resources Estimates (Exclusive of Ore Reserves) Proved Probable Measured Indicated Inferred Contained Contained Contained Contained Contained AA plc ROM Tonnes Grade ROM Tonnes Grade Tonnes Grade Tonnes
Slide 41: Debt Maturity Profile at 31 December 2015
DEBT MATURITY PROFILE AT 31 DECEMBER 2015 Debt repayments ($bn) at 31 December 2015 3.8 3.8 3.0 2.0 2.1 1.9 1.9 1.8 2016 2017 2018 2019 2020 2021 2022 2023+ BNDES Subsidiary Euro Bonds US$ Bonds Other Bonds De Beers Financing Financing % of portfolio 52% 28% 4% 10% 5% 1% Capital markets 84% Bank 16%
Slide 42: Portfolio Changes Delivered to End 2015
PORTFOLIO CHANGES DELIVERED TO END 2015 Portfolio restructuring has progressed in a tough market… CLOSURES/C&M DISPOSALS - DISPOSALS – ANNOUNCED COMPLETED/ANNOUNCED IN 2015 Khomanani 1 - Rustenburg Tarmac Building products Niobium & Phosphates Khomanani 2 - Rustenburg Tarmac Middle East
Slide 43: Exceptional Charges
EXCEPTIONAL CHARGES Impairments mainly driven by a deterioration in market conditions… 2015 (1) $ (bn) 2015 has seen significant further weakness in commodity prices leading to impairments across the H1 2015(2) 3.4 portfolio. Loss on disposal of Anglo American Norte 0.3 Anglo American Norte disp
Slide 44: 2015 Results
2015 RESULTS Key financials Price variance 1 Jan to 31 Dec 2015(4) $bn 2015 2014 Change Underlying EBITDA 4.9 7.8 ↓(38)% Underlying EBIT 2.2 4.9 ↓(55)% Effective tax rate (1) 31.0% 29.8% - (15)% (15)% Underlying earnings 0.8 2.2 ↓(63)% Earnings per share ($) 0.64 1.73 ↓(63)% (24)% (24)% (26)% Capita
Slide 45: EBIT by Business Unit
EBIT BY BUSINESS UNIT EBIT ($bn) 2015 2014 % var. Platinum 263 32 722% Recovery post 2014 strike, lower overheads, offset by price. De Beers 571 1,363 (58)% Lower sales volumes in response to market conditions. Copper 228 1,193 (81)% Lower copper price, more than offset lower costs. Nickel(1) (22) 2
Slide 46: Platinum
PLATINUM Operational recovery, post prolonged strike… Production Realised Underlying Unit cost Capex ROCE Pt sales Headcount (oz) Basket price EBIT 2015 2,337 koz $1,905/oz $1,508/oz $263m $366m 4% 2,471 koz 45,520 vs. 2014 +25% -21% -28% nm -36% +4pp +17% -8% Underlying EBIT ($m) PERFORMANCE 263
Slide 47: De Beers
DE BEERS Solid operating and cost performance… Underlying Average price Production(1) Realised price Unit cost(2) Capex ROCE Sales (Cons.) EBIT index 2015 28.7Mct $207/ct $104/ct $571m $697m 6% 19.9Mct 135 vs. 2014 -12% +5% -6% -58% +1% -7pp -39% -8% Underlying EBIT ($m) PERFORMANCE Lower rough di
Slide 48: Copper
COPPER Strong cost management and focus on cash generation… Realised Underlying Material Production C1 unit cost Capex ROCE Sales price EBIT mined 2015 709 kt 228c/lb 154c/lb $228m $659m 3% 350 Mt 706 kt vs. 2014 -5% -24% -9% -81% -9% -15pp -6% -7% Underlying EBIT ($m) PERFORMANCE Production down
Slide 49: Nickel
NICKEL Furnace rebuilds completed and both furnaces now operating at design capacity… Underlying Barro Alto ore Production (1) Realised price C1 unit cost (2) Capex(3) ROCE Sales (1) EBIT feed 2015 30.3kt 498c/lb 431c/lb $(22)m $26m (1)% 32.0kt 2.4Mt(5) 2014 (19)% (32)% (12)% (105)% 86% (2)pp (11)%
Slide 50: Kumba
KUMBA Lower prices and higher waste stripping… Realised Unit cost Underlying Production Capex ROCE Sishen waste Export sales price (FOB) (FOB) EBIT 2015 44.9 Mt $54/t $31/t $739m $523m 26% 222 Mt 43.6 Mt vs. 2014 -7% -41% -9% -61% -31% -34pp +19% +8% Underlying EBIT ($m) PERFORMANCE 1,911 Export s
Slide 51: Minas-Rio
MINAS-RIO Ramp-up progressing… Realised price Unit cost Underlying Production Capex ROCE Sales (FOB) (FOB) EBIT 2015 9.2Mt $41/wmt $60/wmt $(21)m $899m (1)% 8.5Mt Product - (Mt - wet) PERFORMANCE All major equipment proven at full target capacity. 19-21 Filtration plant and water availability is
Slide 52: Coal
COAL Despite lower metallurgical and thermal coal pricing… Export prod. FOB price Unit cost Underlying SA UG – OEE(2) Grasstree Capex ROCE met / thermal met / thermal met / thermal(1) EBIT benchmark LW cutting rate 21.2Mt / 2015 $90/t / $55/t $55/t & $39/t $457m $941m 9% 61% 214kt/wk 33.8Mt vs. 2014
Slide 53: Earnings Sensitivities for FY2015
EARNINGS SENSITIVITIES FOR FY2015(1) Sensitivities Analysis Impact of change ($m) Commodity / Currency Change in price / exchange Achieved EBIT Iron Ore $10/t 54 491 Hard Coking Coal $10/t 90 142 Thermal Coal (RSA) $10/t 55 200 Thermal Coal (Australia) $10/t 55 54 Copper(2) 10c/lb 228 168 (3) Nickel
Slide 54: Spot Pricing and Foreign Exchange Assumptions
SPOT PRICING AND FOREIGN EXCHANGE ASSUMPTIONS Sensitivities Analysis Commodity / Currency 10th February 2016 spots Iron Ore ($/t) 44 Hard Coking Coal ($/t) 81 Thermal Coal (RSA) ($/t) 52 Thermal Coal (Australia) ($/t) 54 Copper(3) (c/lb) 204 Nickel(2) (c/lb) 365 Platinum ($/oz) 926 Palladium ($/oz)