Anglo American Plc · LSE:AAL
Anglo American — H1 2016 Earnings Presentation
45 slides from Anglo American's earnings presentation, Jul 28, 2016
Slide 1: Interim Results, Six Months Ended 30 June 2016
INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2016 28th July 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: H1 Results 2016 – Business Performance
H1 RESULTS – 2016 BUSINESS PERFORMANCE Mark Cutifani
Slide 4: Committed to Delivering the New Anglo American
COMMITTED TO DELIVERING 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 portfolio of competitively positioned assets. Positive free cash flow expected in 2016 at spot prices and FX Del
Slide 5: Safety & Environment
SAFETY & ENVIRONMENT Safety: Loss of life and TRCFR(1) SAFETY 1.1 Regrettably, 6 fatalities in H1 2016. 0.9 15 0.8 0.8 South African businesses focused on “critical controls” and consistent application of safe 5 operating standards. 1 3 6 6 6 1 1 1 2 Total recordable injuries lowest on record
Slide 6: Operating Performance – Group Production
OPERATING PERFORMANCE – GROUP PRODUCTION BROADLY FLAT Production: H1 2016 versus H1 2015 (% change) 72% Sales volume +29% 2% (2)% (1)% (4)% (5)% (9)% (15)% De Beers(1) Export Iron Ore (3) Copper (4) Met Coal Platinum (5) Nickel Group thermal coal(2) Cu. Equivalent Core Core Core (1) De Beers product
Slide 7: Operating Performance – Unit Costs 19% Lower
OPERATING PERFORMANCE – UNIT COSTS 19% LOWER(1) DE BEERS (US$/ct) PLATINUM (US$/Pt oz) COPPER (C1 USc/lb) -21% -21% -18% Core 82 1,603 166 65 1,262 136 H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 H1 2016 KUMBA (FOB US$/t) AUSTRALIAN COAL (US$/t) SA COAL EXPORT (US$/t) -18% -21% -14% Non-core 33 58 42 27
Slide 8: Headcount – The Pace of Change Continues
HEADCOUNT – THE PACE OF CHANGE CONTINUES… Employee and contractor numbers Support Non core -40% Operations Core 162,000 151,000 13,000 128,000 11,500 120,000 10,500 98,000 98,000 9,300 40,800 57,200 ~50,000 2013 2014 2015 H1 2016 H1 2016 H1 2016 Target After announced disposals (1) 8 (1) Reflects Ni
Slide 9: Productivity Drives Cost Reductions
PRODUCTIVITY DRIVES COST REDUCTIONS Cu Equivalent production, unit cost & productivity 160 140 120 112 100 80 60 40 2012 2013 2014 2015 FY16F Cu Equiv Production Index(1) (1) Calculated using long-term consensus parameters. Excludes domestic/cost-plus production. (2) Unit cost includes only AA’s equ
Slide 10: A More Focused and Higher Margin Portfolio
A MORE FOCUSED AND HIGHER MARGIN PORTFOLIO Number of mining operations H1 2016 EBITDA Margin (%)(2) -26 70 68 -26 45 42 33% 35 23% 16 0 2013 2015 H1 2016 Core Non-Core Assets Core Assets After announced disposals(1) Coal Copper Nickel Iron Ore Platinum De Beers N&P (1) Reflects Niobium & Phosphates,
Slide 11: H1 2016 – Financials
H1 2016 – FINANCIALS René Médori
Slide 12: H1 2016 Results
H1 2016 RESULTS Key financials H1 H1 H1 H1 $bn Change $bn Change 2016 2015 2016 2015 Underlying EBITDA 2.5 3.3 (25)% Capital expenditure(2) 1.2 2.0 (42)% Underlying EBITDA – Core 1.4 1.8 (21)% Attributable free cash flow(3) 1.1 0.2 500% Underlying EBITDA – Non-core 1.1 1.5 (31)% Net debt(4) 11.7 12.
Slide 13: H1 2016 EBIT Variance
H1 2016 EBIT VARIANCE H1 2016 vs. H1 2015 ($bn) (1.2) De Beers volumes: +$0.2bn Offset by: (0.3) Copper and Kumba: $(0.2)bn Bulks (0.3) 0.3 (0.1) 0.0 (0.9) 0.9 1.9 Base & Precious 1.4 1.2 H1 2015 Price(1) Currency Inflation(2) Pt stock Sales Volume(4) Cash costs H1 2016 adjustment(3) (1) Price varia
Slide 14: Group Capital Expenditure and Net Debt
GROUP CAPITAL EXPENDITURE AND NET DEBT Net debt ($bn)(1) Capital expenditure ($bn)(2) Opening net debt – 1 January 2016 12.9 6.0 Previously <$3.0bn, Cash flow from operations (2.2) with $0.3bn reclassified from Working capital optimisation (0.5) cost/volume EBIT Capital expenditure(2) 1.2 3.3 improv
Slide 15: Active Working Capital Management
ACTIVE WORKING CAPITAL MANAGEMENT Working capital ($bn) INVENTORY REDUCTION -0.5 De Beers rough diamond inventory sell-down 3.8 Draw-down on Kumba inventories Platinum refined recovery 0.7 De Beers sales vs. KIO finished stock Platinum total stock production (100%) (Mt) (koz)(1) 3.3 (Mct) 4.7
Slide 16: Strong Liquidity Position Maintained
STRONG LIQUIDITY POSITION MAINTAINED Gross debt ($bn) Bond maturity profile ($bn)(1) -12% 19.8 0.9 17.5 0.7 0.2 2.5 1.9 0.9 2015 H1 2016 H2 2016 2017 2018 Gross debt including derivatives Bonds outstanding Bonds bought back(2) Liquidity headroom ($bn) Credit rating (Ba3 positive/BB stable) +6% Moo
Slide 17: Announced $1.5bn of Our $3-4bn 2016 Disposal Target
ANNOUNCED $1.5BN OF OUR $3-4BN 2016 DISPOSAL TARGET More advanced Transactions announced Rustenburg Australian Coal (Callide, Dartbrook, Foxleigh) Some combination of these Niobium & Phosphates is expected to contribute to the $3-4bn target for 2016. Moranbah & Grosvenor Nickel SA Coal - Domestic Ce
Slide 18: Commitments versus February 2016 Results Day
COMMITMENTS VERSUS FEBRUARY 2016 RESULTS DAY Feb 2016 2016 $bn Today results day Net debt (31 Dec 2016) On track <10bn 2016 Group EBITDA On track 4.8 Cost/Volume improvement Of the original $1.9bn, $0.3bn has 1.6 1.9 been reclassified as a capital saving 2016 Capex 2.5 to 2.7 <3.0 Attributab
Slide 19: New Anglo American
NEW ANGLO AMERICAN
Slide 20: Platinum
PLATINUM Realised Underlying Production Unit cost Capex ROCE Pt sales Headcount Basket price EBIT H1 2016 1,153 koz $1,632/oz $1,262/oz $134m $125m 6% 1,221 koz 44,314 vs. H1 2015 +2% -24% -21% -51% -30% -1pp +5% -3% Underlying EBIT ($m) PERFORMANCE 272 Portfolio restructuring, headcount reduction
Slide 21: De Beers
DE BEERS Realised Underlying Sales Average Production(1) Unit cost(2) Capex ROCE price EBIT (Cons.) price index H1 2016 13.3Mct $177/ct $65/ct $585m $240m 7% 17.2Mct 117 vs. H1 -15% -14% -21% +2% -34% -5pp +29% -16% 2015 Underlying EBIT ($m) PERFORMANCE 576 585 Higher rough diamond sales volumes,
Slide 22: Copper
COPPER Realised Underlying Material Production C1 unit cost Capex ROCE Sales price EBIT mined H1 2016 291kt 215c/lb 136c/lb $113m $238m 6% 138Mt 281kt vs. H1 2015 -18%(1) -15% -18% -35% -23% +1pp -31% -18% Underlying EBIT ($m) PERFORMANCE 174 Volumes lower due to expected lower grades at Los Bronc
Slide 23: Los Bronces Received ~15 Metres of Snow in 12 Months
LOS BRONCES RECEIVED ~15 METRES OF SNOW IN 12 MONTHS Los Bronces snow fall (metres): 2015 / 2016 versus 30 year average 3.6 Last 5 2.9 30 year years 2015/16 average average 1.9 Snow fall (metres) 14.5 6.8 4.7 1.7 1.6 1.5 1.1 0.2 0.1 0.0 0.0 0.0 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16
Slide 24: Nickel
NICKEL Realised C1 unit Underlying Barro Alto ore Production(1) Capex ROCE Sales(1) price cost(2) EBIT feed H1 2016 22.3kt 387c/lb 323c/lb $(12)m $14m (1)% 21.9kt 1.2Mt(3) vs. H1 2015 72% -33% -35% -100% 182% -1pp 36% 103% Barro Alto C1 unit cost (USc/lb) PERFORMANCE -44% Production and sales up s
Slide 25: Coal
COAL Export FOB price prod. Unit cost Underlying SA UG – OEE(3) Grasstree met / Capex ROCE met / met / thermal(2) EBIT benchmark LW cutting rate thermal(1) thermal 10.0Mt / H1 2016 $77/t / $50/t $50/t / $33/t $160m $274m 9% 63% 2,370t/hr 15.7Mt vs. H1 2015 -2% / -9% -23% / -17% -14% / -21% -40% -34%
Slide 26: Kumba
KUMBA Realised Unit cost Underlying Production Capex ROCE Sishen waste Export sales price (FOB) (FOB) EBIT H1 2016 17.8Mt $55/t $27/t $387m $84m 37% 65Mt 18.1Mt vs. H1 2015 (21)% (10)% (18)% (25)% (69)% +5pp (40)% (22)% Underlying EBIT ($m) PERFORMANCE Sishen reconfigured and restructured to a low
Slide 27: Minas-Rio
MINAS-RIO Realised price Unit cost Underlying Production Capex ROCE Sales (FOB) (FOB)(1) EBIT H1 2016 6.8Mt (wet) $44/wmt $32/wmt $(10)m $137m (1)% 6.9Mt vs. H1 2015 127% (12)% (63)% 9% (75)% - 165% Product - (Mt - wet) PERFORMANCE 15-17 Ramp up progressing albeit challenges with constrained pit a
Slide 28: Longer-Term Improvement
LONGER-TERM IMPROVEMENT AREAS OF FOCUS 1. Business Restructuring ...portfolio changes further improve delivery. 2. Operating Model …continuing efficiency improvements. 3. Innovation and Step Changes Grade concentration – pre-concentrating run of mine ore to improve grade into our concentrators.
Slide 29: Committed to Delivering the New Anglo American
COMMITTED TO DELIVERING THE NEW ANGLO AMERICAN Core portfolio of De Beers, PGMs and Copper Positive free cash flow in 2016 at spot prices and FX Non-core portfolio of bulks and minerals managed for cash or disposal Net debt reduced by $1.2bn, before disposals 29
Slide 30: Appendix
APPENDIX
Slide 31: 2016 EBIT Improvement Progressing
2016 EBIT IMPROVEMENT PROGRESSING Incremental EBIT improvement ($bn) - 2016 1.9 Costs ($bn) 2016 0.3 Operating efficiencies 0.6 1.6 Contract negotiations 0.2 Labour 0.2 Costs 1.2 Exploration 0.1 0.9 Other (0.2) Total cost improvement 0.9 Volume and other ($bn) 2016 Volume 0.7 0.7 De Beers, Nickel, N
Slide 32: Negative Free Cash Flow Being Minimised
NEGATIVE FREE CASH FLOW BEING MINIMISED Assets – operating free cash flow 2016F (1)(2) 16th February 2016 – 8 negative assets $0.2bn(2) PRC Placed on care and maintenance. Drayton Cease mining activities by end of 2016. Closure / C&M Snap Lake Placed on care and maintenance. Twickenham Placed on car
Slide 33: Balanced Portfolio Exposure
BALANCED PORTFOLIO EXPOSURE Core EBITDA by commodity (pro forma 2016)(1) EBITDA by demand driver (pro-forma 2016) Platinum 27% 15% Diamonds 43% Infrastructure 26% 30% Copper Core revenue by destination (pro forma 2016)(2) Consumer 49% 77% RoW North America 19% 21% Industrial 11% EU 14% Energy 12% 29
Slide 34: De Beers – Best Assets in Attractive Commodity
DE BEERS – BEST ASSETS IN ATTRACTIVE COMMODITY Diamond mining industry margin curve UPSTREAM LEADERSHIP Ratio of C1 costs plus SIB to revenue Best-in-class mining assets – large, long-life, 1.2 and scalable. De Beers Assets 1.0 Strong government partnerships – Botswana 0.8 and Namibia. 0.6 0.4
Slide 35: Platinum – Best Platinum Portfolio
PLATINUM – BEST PLATINUM PORTFOLIO Platinum net cash cost curve – 2015(1) PLATINUM LEADERSHIP The Tier 1 portfolio of assets. Net cash cost (US$/Pt oz) AAP Mines/JVs for exit Unki Modikwa Mogalakwena lowest-cost primary producer. By-product Mototolo Scalable production base with long life. Ama
Slide 36: Copper – Highly Competitive Position with Growth
COPPER – HIGHLY COMPETITIVE POSITION WITH GROWTH Top 10 Producing Mines (2015 Cu kt) WORLD CLASS ASSETS Escondida Morenci Attractive combination of scale, life and Collahuasi cost positions. Chuquicamata El Teniente Extensive high-quality resources underpin organic Los Bronces Los Pelambres grow
Slide 37: Attractive Outlook for Diamonds, PGMs and Copper
ATTRACTIVE OUTLOOK FOR DIAMONDS, PGMS AND COPPER Diamonds PGMs Copper Growth in demand is linked to Demand Pt flat at ~8Moz, Pd Demand (+2.2% p.a.) to ~27Mt economic growth and consumer grows (~3% pa) to 11.7Moz by by 2025. desire for diamond jewellery. 2025 - deficits in near term. • Broad ra
Slide 38: Production Outlook
PRODUCTION OUTLOOK(1) 2015 2016F 2017F 2018F Copper (2) 709kt 570-600kt 570-600kt 630-680kt Previously 600-630kt Previously 590-620kt Nickel 30kt 45-47kt 42-45kt 45-47kt Iron ore (Kumba)(3) 45Mt ~39Mt ~40Mt ~40Mt Iron ore (Minas-Rio) 9Mt 15-17Mt 19-21Mt 22-24Mt Previously 15-18Mt Metallurgical coal
Slide 39: Towards Dry Tailings
TOWARDS DRY TAILINGS Reducing water consumption and creating dry disposal – eliminating wet tailings Water efficiency is a step-change opportunity: • efficiency enables increased throughput • facilitates stakeholder license to expand and develop new mines in water-stressed areas • reduces safety a
Slide 40: Concentrating the Mine
CONCENTRATING THE MINE Driving throughput, reducing waste, increasing metal output Reduce processing of waste ore: • frees up plant capacity • reduces energy and other consumable costs Technology approaches: • increase plant throughput through improved ore fragmentation • increase head grade • r
Slide 41: Transforming Hard Rock Mining
TRANSFORMING HARD ROCK MINING Continuous underground mining: improving safety and productivity Continuous mining provides opportunity to increase safety, stability and reduce variability • less damage to hanging wall, therefore less risk of fall of ground • removing people from danger • faster shi
Slide 42: Sishen Mine – Improved Run Rates Expected H2 2016
SISHEN MINE - IMPROVED RUN RATES EXPECTED H2 2016 Sishen mine – tonnes mine per day New mine plan implemented Substantial workforce restructuring completed largely through voluntary separation Significant improvement in productivity post restructuring as achieved in June Run rates in 2H16 ex
Slide 43: Debt Maturity Profile at 30 June 2016
DEBT MATURITY PROFILE AT 30 JUNE 2016 Debt repayments ($bn) at 30 June 2016 3.5 2.9 2.3 2.1 1.9 1.8 2.0 1.0 H2 2016 2017 2018 2019 2020 2021 2022 2023+ BNDES Subsidiary Euro Bonds US$ Bonds Other Bonds De Beers Financing Financing % of portfolio 49% 28% 8% 11% 3% 1% Capital markets 85% Bank 15% US b
Slide 44: Earnings Sensitivities for H1 2016
EARNINGS SENSITIVITIES FOR H1 2016(1) Sensitivities Analysis Impact of change ($m) Commodity / Currency Change in price / exchange Achieved EBIT Iron Ore $10/t 52 249 Hard Coking Coal(2) $10/t 79 59 Thermal Coal (RSA) $10/t 50 90 Thermal Coal (Australia) $10/t 47 21 Copper(3) 10c/lb 215 61 Nickel(4)
Slide 45: Spot Pricing and Foreign Exchange Assumptions
SPOT PRICING AND FOREIGN EXCHANGE ASSUMPTIONS Sensitivities Analysis Commodity / Currency Spot at 19th July 2016 Iron Ore ($/t) 56 Hard Coking Coal ($/t) 93 Thermal Coal (RSA) ($/t) 62 Thermal Coal (Australia) ($/t) 61 Copper (c/lb) 224 Nickel (c/lb) 479 Platinum ($/oz) 1,086 Palladium ($/oz) 648 Rh