Anglo American plc · LSE:AAL
Anglo American — H1 2008 Earnings Presentation
68 slides from Anglo American's earnings presentation, Jul 31, 2008
Slide 1: Interim Results – 30 June 2008
Interim Results – 30 June 2008 31 July 2008 Cynthia Carroll Chief Executive Officer René Médori Finance Director 0
Slide 2: Agenda
Agenda H1 08 Highlights – Cynthia Carroll, CEO Financial Results – René Médori, FD Asset Optimisation – Seamus French, CEO Anglo Coal Australia; and Andrew Hinkly, Group Head of Procurement Strategy, projects and outlook – Cynthia Carroll, CEO Question & Answer Session 1
Slide 3: Highlights: Record First Half 08 Performance
Highlights: Record First Half 08 Performance • Delivered record financial performance —Core operating profit up 30% to $6bn, despite challenging cost/power environment • Achieved production volume increases —Significant new iron ore volumes and record Australian coal production in H108 vs. H107 • Co
Slide 4: Safety: Major improvements in performance
Safety: Major improvements in performance 2.37 LTIFR Fatalities 1.96 Continues To Trend Downward 29 H107 H108 12 0.45 0.42 0.40 0.18 0.25 0.11 H107 H108 Platinum Base Metals Coal Ferrous Metals Notable Successes: • Platinum: 10 sites (inc. Amandelbult and Rustenburg) 1m fatality-free shifts, up from
Slide 5: Financial Highlights: Record performance
Financial Highlights: Record performance Group Operating Profit from Divisional Operating Profit ($m) Core Operations ($m) (1) +13% -3% +129% +129% +23% -22% 5,974 2,454 +30% 2,165 Core Non-Core 4,608 Operations Operations 1,517 1,467 1,252 546 731 319 328 266 209 163 H107 H108 Base Platinum Ferrous
Slide 6: Base Metals: Record Profit Driven by Copper Production and Price
Base Metals: Record Profit Driven by Copper Production and Price Copper production increases (kt) • Highest ever operating profit of $2.5bn – driven by 320.7 higher copper production and copper and fertiliser +4% 308.3 prices • Los Bronces and Barro Alto on time; Michiquillay and Pebble copper proje
Slide 7: Platinum: Building blocks in place for turnaround
Platinum: Building blocks in place for turnaround Production increases (koz) Higher Metal Prices 573 +33.6% 429 Basket price ($/Pt oz sold) = = Platinum Price ($/oz) 4,000 2,000 3,000 1,500 2,000 1,000 1,000 500 0 0 Q108 Q208 2004 2005 2006 2007 H108 • Operating profit impacted by flooding at Amande
Slide 8: Ferrous Metals: Record Profit Driven by Higher Prices and Volumes
Ferrous Metals: Record Profit Driven by Higher Prices and Volumes Increased Production (Mt) • Record operating profit of $1.3bn from core businesses, up 129% vs. 1H07 Iron Ore Manganese Ore 17.1 • Kumba: up 66% driven by higher iron ore prices 15.6 1.4 1.2 and sales volume • Samancor: up more than e
Slide 9: Coal: Major turnaround in Australia
Coal: Major turnaround in Australia • Operating profit up 129% to $731m with improvements Production (Mt) across all geographies: -5.0% —Australia: up five-fold driven by higher export thermal & South Africa coking prices and 20% increase in saleable production 29.4 28 —South Africa: more than doubl
Slide 10: Diamonds: Strong results in favourable pricing environment
Diamonds: Strong results in favourable pricing environment • Operating profit of $328m, up +23% vs. H1 07, Operating Profit ($m) reflecting favourable pricing environment +23% 328 266 • Production of 24.2m carats • De Beers Diamond Jewellers’ sales up double digit, with network expansion to 32 store
Slide 11: Industrial Minerals: Market leader in challenging construction industry
Industrial Minerals: Market leader in challenging construction industry • Operating profit decreased to $163m due to Operating Profit ($m) difficult trading conditions in the UK 209 -22.0% 163 • Tarmac maintained market share leadership in key products • Stronger performance at international operati
Slide 12: Financial Results
Financial Results René Médori 11
Slide 13: Financial Performance
Financial Performance Underlying EPS ($) $bn 2008 2007 change (+33%) 2.90 Operating profit – core 6.0 4.6 +30% 2.03 2.18 Total group financials: 2.22 Operating profit 6.2 5.5 +13% 2.18 Effective tax rate (%) 31.7 31.9 H1 2007 H2 2007 H1 2008 Underlying earnings 3.5 3.1 +14% Ordinary interim dividend
Slide 14: Operating profit variances
Operating profit variances $ million 96 (51) (318) (128) (405) 587 (183) 1,014 Bulks (75) 5,974 829 Traded 4,608 2007 Price Exchange Volume Inflation Energy Other Non-cash Associates Other 2008 Cash costs Costs Operating profit is stated for core operations: Base Metals, Platinum, Coal, Diamonds, Fe
Slide 15: Operating profit variances: Price – Traded
Operating profit variances: Price – Traded Traded metals – market price performance (indexed) 200 Price variance breakdown $m $ million 2,000 1,500 515 180 1,000 740 (254) (172) Platinum 500 Copper Nickel PGM 0 Zinc 829 Traded 160 4,608 140 Copper 120 100 2007 Price 80 Nickel 70 01/01/07 30/06/08 St
Slide 16: Operating profit variances: Price – Bulks
Operating profit variances: Price – Bulks % chg $ million Average price Average price yr on H1 2007 H1 2008 yr 1,014 Bulks Export Thermal Coal ($/t) 52 77 +48 Export Metallurgical Coal 829 ($/t) 86 138 +60 4,608 Price variance breakdown $ million 225 1,000 226 563 500 2007 Price 0 Coal Iron Ore Fert
Slide 17: Operating profit variances: FX and volume
Operating profit variances: FX and volume Production change H108 vs. H107 $ million Nickel Platinum1 Coal Copper2 Iron Ore 96 51 1,843 -26% -11% +4% +4% +9% 4,608 Op. profit 2008 2007 Impact Average Average ($m) 2007 Price Exchange Volume Rand 7.66 7.16 273 AUD 1.08 1.24 -101 Movement in Rand (+/-)
Slide 18: Operating profit variances: costs
Operating profit variances: costs Energy costs $m* $ million H1 H1 % 96 51 318 2007 2008 increase 128 405 1,843 Platinum 95 114 20% Coal 74 127 72% Base Metals 189 258 37% 4,608 +8.9% cash cost Ferrous Metals 68 81 19% increase Total 426 580 36% 11.7 9.0 6.2 2.2 Industry Electricity Prices1 (2006) U
Slide 19: Capital expenditure and net debt
Capital expenditure and net debt Capex- core ($ million) $bn Gearing 1,871 Opening net debt 1 5.2 20.0% 268 January 2008 Operating cashflows (4.8) Ferrous Metals 1,411 Base Metals Capital Expenditure 2.0 Platinum 177 554 Cash tax paid 1.2 Coal 148 Disposal (Shenhua) (0.7) Acquisitions 1.4 827 643 Di
Slide 20: Update on Asset Optimisation Programme
Update on Asset Optimisation Programme - Seamus French, CEO Anglo Coal Australia - Andrew Hinkly, Global Head of Procurement 19
Slide 21: Introduction
Introduction • Anglo Coal Australia developed a programme to transform business performance • Focus is on: — Creating value — Asset optimisation — Developing brownfield and greenfield resource base • Programme will deliver 3-5 year benefits but pleasing early wins in H108 — Profit up five-fold vs. H
Slide 22: Creating value: Anglo Coal Australia case study
Creating value: Anglo Coal Australia case study • Value model developed and key drivers identified Asset • 3 key value programmes – Asset 300% Optimisation Optimisation, Brownfield debottlenecking and Greenfield projects 200% • Asset optimisation drives expenditure reduction and production improveme
Slide 23: Focus on benchmarking components of production: Anglo Coal Australia
Focus on benchmarking components of production: Anglo Coal Australia Revenue Equipment performance • Equipment performance benchmarking benchmarking and improvement • Pit coal recovery maximisation • Logistics optimisation between plant and % 100 100 100 100 port 100 • Value increase by product blen
Slide 24: Early wins in H1 2008
Early wins in H1 2008 • German Creek plant debottlenecking from 118 kt to 167 kt per week results in record Increase in weekly production rates, H108 H1 met coal performance • Moranbah sees a 50% met coal production 220 German 200 Creek increase in H1 through improved Longwall 180 utilisation 160 We
Slide 25: A One Anglo Approach to Supply Chain
A One Anglo Approach to Supply Chain Anglo’s spend profile is fragmented across geographies and Business Units, however 20 categories and less than 10 percent of our suppliers represent 80 percent of our total spend $3.5B $3.5B Balance 20% 20% 80% $2.5B Top 5 Categories Spend Profile 25% 32% 20% T
Slide 26: A One Anglo Approach to Supply Chain
A One Anglo Approach to Supply Chain A change from near term tactical to longer term strategic activities, including: • Working across Business Unit and country boundaries • Cross-functional team approach to strategy development and implementation • Standardising process, tools, data, specifications
Slide 27: Examples of One Anglo Approach - Tyres
Examples of One Anglo Approach - Tyres Background • Experiencing critical shortages of tyres across the group with increasing demand for limited radial supply in the market place Key facts: Approach • Annual spend on tyres 2007: • Identified and delivered Total Cost of Ownership benefits by increasi
Slide 28: Examples of One Anglo Approach – Heavy Mining Equipment
Examples of One Anglo Approach – Heavy Mining Equipment Background • Discrete processes in each Business Unit for demand planning, market engagement and equipment supplier selection Key facts: Approach • US$700m • Established overall Anglo demand plan and increasing its visibility to annual spend su
Slide 29: Strategy, projects and outlook
Strategy, projects and outlook Cynthia Carroll 28
Slide 30: Demand for key metals remains strong
Demand for key metals remains strong Copper Seaborne Iron Ore • Supply constraints persist Demand (Mt) 4% CAGR Demand (Mt) • Increasing scarcity of basic 27 2,000 7% CAGR 30 commodities, e.g. energy, 22 1,512 18 1,185 20 skilled labour, water and 1,000 772 infrastructure 10 • Long lead-times for min
Slide 31: China to Continue as Growth Engine
China to Continue as Growth Engine China as Driver of World Demand Growth • China GDP rose by 10.1% in 100% % of 2007 World Demand Q208 vs. Q207 90% % of 2007-17 World Demand Growth 80% • Continued urbanisation and 70% 63% 65% industrialisation will drive future 60% 55% demand 50% 49% 39% 40% 31% 29
Slide 32: Strategic Priorities
Strategic Priorities • Uplifting performance of existing long-life asset base • Capturing full value potential of Anglo’s organic growth options • Building profitable and material positions in copper, seaborne iron ore, export coal; and capitalising on Anglo’s unique position in platinum • Selective
Slide 33: Organic Pipeline In The Most Attractive Markets
Organic Pipeline In The Most Attractive Markets • Steady flow of incremental 35 $30 bn $30 bn production expansion 30 Other Other North Ferrous America Metals* 25 • All projects have scale and Australia Coal are geographically spread 20 $15 bn $15 bn Zinc 15 Nickel South Copper • Investment is focus
Slide 34: Rapid Production Growth In Near-to-Medium Term
Rapid Production Growth In Near-to-Medium Term Copper To Double in 5 Years Nickel To Double in 3 Years Ktpa Ktpa 9% CAGR p.a. 08-16 22% CAGR p.a 08-16 1,400 120 Development & Conceptual Development 1,000 100 & Conceptual In Execution In Execution 600 50 Current Production 2007 Production: 666 Curren
Slide 35: Building A Leading Mining Company
Building A Leading Mining Company • Record first half performance; strong outlook for full year • Unique Anglo portfolio of assets across precious, bulks and base metals • Organic pipeline offers significant growth • Major change programme taking hold to drive maximum performance from operations Str
Slide 36: Calendar of events
Calendar of events Coal Investor Seminar October 2008 Q3 Production Report October 2008 Platinum Investor Seminar November 2008 Business Unit roadshows Q3 & Q4 2008 FY08 Results 18 February 2009 South American Site Visit 30th March-2nd April 2009 35
Slide 37: Appendix
Appendix /S) ANGLO 36 AMERICAN
Slide 38: Key Dates for Dividends
Key Dates for Dividends Currency Conversion (US$:Rand) 30 July 2008 Currency Conversion (US$:£/€) 27 August 2008 Ex-dividend (JSE) 18 August 2008 Ex-dividend (LSE) 20 August 2008 Record Date 22 August 2008 Payment of Interim Dividend 18 September 2008 37
Slide 39: Market prices
Market prices Average Price H1 2008 H2 2007 Platinum - $/oz 1,947 1,238 Palladium - $/oz 443 355 Rhodium - $/oz 8,860 6,064 Copper – cents/lb 368 307 Nickel – cents/lb 1,237 2,024 Zinc – cents/lb 103 162 Coal: thermal (RSA - API 4 index average) - $/t 116.03 52.60 38
Slide 40: Underlying earnings sensitivities
Underlying earnings sensitivities US$m 10% change in platinum price ± 132 10% change in palladium price ± 16 10% change in coal price ± 40 10% change in copper price ± 205 10% change in nickel price ± 38 10% change in zinc price ± 24 10% change in iron ore price ± 30 10% movement in SA rand/US$ ± 22
Slide 41: Analysis of Underlying Earnings
Analysis of Underlying Earnings $m 2008 2007 Base Metals 1,494 1,504 Platinum 850 717 Ferrous Metals and Industries 705 269 Coal 543 242 Diamonds 166 156 Industrial Minerals 139 181 Exploration (93) (50) Corporate Activities and Unallocated Costs (321) (215) Paper and Packaging - 189 Gold - 65 Under
Slide 42: Analysis of Operating Profit
Analysis of Operating Profit $m 2008 2007 Base Metals 2,454 2,165 Platinum 1,467 1,517 Ferrous Metals and Industries - core 1,252 546 Coal 731 319 Diamonds 328 266 Exploration (98) (55) Corporate Activities and Unallocated Costs (160) (150) Core 5,974 4,608 Ferrous Metals and Industries – non core 4
Slide 43: Capital Expenditure
Capital Expenditure $m 2008 2007 Base Metals 554 148 Platinum 697 643 Ferrous Metals and Industries 268 250 Coal 352 444 Industrial Minerals 118 104 Paper and Packaging - 186 Gold - - Other 9 15 Total 1,998 1,790 Capital Expenditure relates to cash expenditure on tangible assets 42
Slide 44: Operating profit variances: Exchange
Operating profit variances: Exchange $ million 250 43 (67) 200 (59) 150 176 3 100 96 50 Platinum Ferrous Metals Coal Base Metals Corporate Total Stated for core operations: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Samancor Manganese, Minas-Rio). 43
Slide 45: Operating Profit variances: Price - PGMs
Operating Profit variances: Price - PGMs $ million 800 24 96 700 740 43 600 500 577 400 300 200 100 Platinum Rhodium Ruthenium Other PGMs Total PGMs Stated for core operations: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Samancor Manganese, Minas-Rio). 44
Slide 46: Cash cost increase – H1 2008 core operations
Cash cost increase – H1 2008 core operations $ million +8.9% 403 800 Platinum +8.1% Base +16.7% 110 (55) 700 (111) Coal +8.8% 52 600 Ferrous +1.2% 86 500 128 400 183 300 533 200 140 100 - Materials Labour & Energy Selling & Maint. Other TC/RC Cost Cash Costs Contractors Dist. Savings 45
Slide 47: Underlying Earnings variance
Underlying Earnings variance $ million 7,000 6,000 5,000 1,265 66 (235) (42) (518) 4,000 336 (333) (54) (60) 3,000 3,483 3,058 2,000 1,000 0 H1 2007 Price Exchange Inflation Volume Cash Non-cash Interest Associates Structural H1 2008 costs costs & other 46
Slide 48: Regional analysis
Regional analysis Operating profit¹ $m 2008 2007 South Africa 2,656 2,497 Rest of Africa 303 417 Europe 111 472 Americas 2,485 1,978 Australasia & Asia 626 88 6,181 5,452 1Operating profit before special items and remeasurements and including share of operating profit of associates 47
Slide 49: Operating cost reconciliation
Operating cost reconciliation $ million 8,000 533 7,000 895 7,379 109 143 6,000 (9) (178) 318 5,000 5,568 4,000 3,000 2,000 1,000 0 H1 2007 Exchange Volume Inflation Non Cash Acqusitions Other Cash costs H1 2008 & Disposals Stated for core operations: Base Metals, Platinum, Coal, Diamonds, Ferrous M
Slide 50: Projects Appendix
Projects Appendix /S) ANGLO 49 AMERICAN
Slide 51: Projects in-depth: Base Metals – Los Bronces
Projects in-depth: Base Metals Los Bronces Name of project: Expansion Ownership structure 100% Anglo Base Metals 170 ktpa Cu(1) Production Ag and Mo by-products Total capex $1,744 million Capex spent to date $128 million Capex is shown on a 100% basis unless otherwise stated Estimates for Base Metal
Slide 52: Projects in-depth: Base Metals – Collahuasi
Projects in-depth: Base Metals Name of project: Collahuasi Projects Ownership 44% Anglo Base Metals, 44% Xstrata, structure 12% Japanese consortium Debottlenecking: 30 ktpa copper Production Expansion phase 1: 650 ktpa copper (1) Debottlenecking: $64 million Total capex Expansion phase 1: $750 milli
Slide 53: Projects in-depth: Base Metals – Barro Alto
Projects in-depth: Base Metals Name of project: Barro Alto Ownership structure 100% Anglo Base Metals Production 36 ktpa nickel Total capex $1,500 million Capex spent to date $366 million Capex is shown on a 100% basis unless otherwise stated Estimates for Base Metals, Platinum and Diamonds are pres
Slide 54: Projects in-depth: Base Metals – Quellaveco
Projects in-depth: Base Metals Name of project: Quellaveco Ownership structure 81.9% Anglo Base Metals 200 ktpa copper Production Ag and Mo by-products Total capex $2,200 million Resource base(1) 980 mt @ 0.64% Capex is shown on a 100% basis unless otherwise stated Estimates for Base Metals, Platinu
Slide 55: Projects in-depth: Coal – Dawson
Projects in-depth: Coal Name of project: Dawson 51% Anglo Coal, 49% Mitsui Ownership structure Coal Holdings 5.7 mtpa coking, semi-soft, Production thermal Total capex $839 million Capex spent to date $814 million Position on cash cost 2nd quartile: coking Capex is shown on a 100% basis unless other
Slide 56: Projects in-depth: Coal – Lake Lindsay
Projects in-depth: Coal Name of project: Lake Lindsay 70% Anglo Coal, 30% Mitsui Ownership structure Coal Holdings Production 4.0 mtpa coking and semi-soft Total capex $726 million Capex spent to date $621 million Position on cash cost Capex is shown on a 100% basis unless otherwise stated curve 2nd
Slide 57: Projects in-depth: Coal – Zondagsfontein
Projects in-depth: Coal Name of project: Zondagsfontein 73% Anglo Coal, 27% Inyosi Ownership structure Coal 6.6 mtpa Eskom/Export Production Thermal Total capex $505 million Capex spent to date $46 million Underground = 114.6 mt Capex is shown on a 100% basis unless otherwise stated Reserve base Ope
Slide 58: Projects in-depth: Coal – Mafube
Projects in-depth: Coal Name of project: Mafube Ownership structure 50% Joint Venture with Exxaro 5.4 mtpa Eskom/Export Production Thermal Total capex $218 million Capex spent to date $196 million Capex is shown on a 100% basis unless otherwise stated Position on cash cost Estimates for Base Metals,
Slide 59: Projects in-depth: Coal – Cerrejón
Projects in-depth: Coal Name of project: Cerrejón 33% Anglo Coal, 33% Xstrata, Ownership structure 33% BHP Billiton Production 3.0 mtpa (2nd stage) thermal Total capex $131 million Capex spent to date $122 million First production date 1Q07 Capex is shown on a 100% basis unless otherwise stated Esti
Slide 60: Projects in-depth: Ferrous Metals – Sishen Expansion
Projects in-depth: Ferrous Metals Sishen Expansion Name of project: Project Phase 1 Ownership structure 74% Kumba Iron Ore Production 13 Mtpa iron ore Total capex $754 million Capex spent to date $543 million Capex is shown on a 100% basis unless otherwise stated First production date 4Q07 Estimates
Slide 61: Projects in-depth: Ferrous Metals – Sishen South
Projects in-depth: Ferrous Metals Name of project: Sishen South Ownership structure 74% Kumba Iron Ore Production 9 Mtpa iron ore Total capex $782 million Position on cash cost curve 2nd quartile (1) Capex is shown on a 100% basis unless otherwise stated Mineral resource 185Mt @ 65.9 %Fe Estimates f
Slide 62: Projects in-depth: Ferrous Metals – Minas-Rio
Projects in-depth: Ferrous Metals Name of project: Minas-Rio Phase 1 Ownership structure 49% Anglo Ferrous Metals(1) Production 26.5 Mtpa iron ore pellet feed (wet basis)(1) Total capex $3,456 million Position on cash cost curve 1st quartile (1) Capex is shown on a 100% basis unless otherwise stated
Slide 63: Projects in-depth: Platinum – Mogalakwena North
Projects in-depth: Platinum Mogalakwena North Name of project: expansion(1) Ownership structure 100% Anglo Platinum Production 230 kozpa refined platinum Total capex $692 million Capex spent to date $594 million Capex is shown on a 100% basis unless otherwise stated Resource base 387.0mt @ 3.49 g/t(
Slide 64: Projects in-depth: Platinum – Amandelbult East
Projects in-depth: Platinum Amandelbult East Name of project: Upper UG2 Ownership structure 100% Anglo Platinum Production 100 kozpa refined platinum Total capex $224 million Capex spent to date $93 million Capex is shown on a 100% basis unless otherwise stated Resource base 67.0mt @ 4.97 g/t Estima
Slide 65: Projects in-depth: Platinum – Amandelbult Shaft
Projects in-depth: Platinum Name of project: Amandelbult 4 Shaft Ownership structure 100% Anglo Platinum 271 kozpa refined platinum Production (replacement) Total capex $1,602 million Capex spent to date $37 million Capex is shown on a 100% basis unless otherwise stated First production date 4Q15 Es
Slide 66: Projects in-depth: Platinum – Twickenham
Projects in-depth: Platinum Name of project: Twickenham Ownership structure 100% Anglo Platinum Production 180 kozpa refined platinum Total capex $800 million Capex spent to date $11 million Capex is shown on a 100% basis unless otherwise stated First production date 1Q12 Estimates for Base Metals ,
Slide 67: Projects in-depth: Diamonds – Snap Lake
Projects in-depth: Diamonds Name of project: Snap Lake Ownership structure 100% De Beers Production 1.6 m carats pa Total capex $997 million First production date 1Q08 Capex is shown on a 100% basis unless otherwise stated Full production date 2008 Estimates for Base Metals , Platinum and Diamonds a
Slide 68: Projects in-depth: Diamonds – Victor
Projects in-depth: Diamonds Name of project: Victor Ownership structure 100% De Beers Production 0.6 m carats pa Total capex $1,021 million First production date 1Q08 Full production date 3Q08 Capex is shown on a 100% basis unless otherwise stated Estimates for Base Metals, Platinum and Diamonds are