Slide 1: Anglo American Metallurgical Coal Investor & Analyst Briefing
ANGLO AMERICAN METALLURGICAL COAL Investor & Analyst Briefing 14 June 2012
Slide 2: Disclaimer
DISCLAIMER 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 conditions. T
Slide 3: Contents
CONTENTS 1. OUR BUSINESS 2. MARKETING & OUTLOOK 3. PEACE RIVER & ASSET OPTIMISATION 4. DELIVERING HIGH VALUE GROWTH PROJECTS 5. SUMMARY
Slide 4: Key Value Drivers
KEY VALUE DRIVERS • World class assets in developed regions close to growth markets • High performing business – 60% productivity improvement – Real unit cost reduction – High margin assets • Hard Coking Coal our preferred growth product • Best project pipeline – Large Hard Coking Coal resources clo
Slide 5: Our Business
OUR BUSINESS
Slide 6: Anglo American Underlying Earnings by Business Unit
ANGLO AMERICAN UNDERLYING EARNINGS BY BUSINESS UNIT1 Other Diamonds Iron Ore & Manganese 6% 7% Platinum 25% 7% Nickel 0% 26% 14% Copper Metallurgical Coal 15% 1 Financial results 2011 Thermal Coal 6
Slide 7: A Global Coal Business Focussing on Premium Metallurgical Coal
A GLOBAL COAL BUSINESS FOCUSSING ON PREMIUM METALLURGICAL COAL Scale Europe 2nd largest Australian and 3rd 2 Mt largest global seaborne China 1 Mt metallurgical coal producer Total Americas Asia Production 1 Mt Operations 1 Mt India 13 Mt • 6 in Australia 3 Mt • 1 in Canada Total Production Key Part
Slide 8: Our Operations
OUR OPERATIONS Canada Australia 2 34 5 6 1 British Columbia 7 Production Product Production Product 1 Trend mine 100% 1 Mt Premium hard coking coal 2 Moranbah North 88% 2.8 Mt Premium hard coking coal 3 Capcoal 70% 7.2 Mt Premium hard coking PCI coal 4 Foxleigh 70% 2.0 Mt Premium PCI coal 5 Jellinba
Slide 9: Clear Strategy to Deliver Value from Our World Class Assets
CLEAR STRATEGY TO DELIVER VALUE FROM OUR WORLD CLASS ASSETS Safety, Sustainable • Zero Harm • Environmental Best Practice Development & • Carbon Reduction Community • Community Partnerships • Asset Optimisation Increase Margins • Streamlined Asset Portfolio • Marketing Strategy • Grosvenor • Moranba
Slide 10: A World Class Metallurgical Coal Business
A WORLD CLASS METALLURGICAL COAL BUSINESS Productivity (export mines) Metallurgical coal production ROM tonnes/FTE QLD rain Mt 10,000 impacts 15 7,500 10 5,000 5 2,500 0 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 FOB Cost (export mines excluding royalties) Operating profit QLD rain Cost red
Slide 11: Industry Wide Capital and Operating Cost Pressures Remain
INDUSTRY WIDE CAPITAL AND OPERATING COST PRESSURES REMAIN 2011 vs. 2010 % cost increase Costs and commodity prices indexed to 100 Oil Hot rolled Copper Premium hard Chile South Africa Australia 160 sheet steel price coking coal price 140 120 100 0 Q4 Q1 Q2 Q3 Q4 Q1 27% 26% 2010 2011 2011 2011 2011 2
Slide 12: Portfolio Streamlined to Focus on High Margin Product
PORTFOLIO STREAMLINED TO FOCUS ON HIGH MARGIN PRODUCT Divestment program EBITDA margin by product • Dawson seam gas divested in 2010 for $38m US$/t • Bylong, Sutton Forest and Surat Basin assets divested in 2010 for $580m Hard Coking Coal • Domestic thermal coal – Drayton 1 Mtpa domestic thermal now
Slide 13: Large Tier One HCC Resources with Excellent Port Access
LARGE TIER ONE HCC RESOURCES WITH EXCELLENT PORT ACCESS IN AUSTRALIA AND CANADA • Metallurgical coal resource base predominantly Reserve Resource Coal premium quality Hard Coking Coal Mt Mt Inventory Mt • Hard Coking Coal located in two major hubs in Queensland and Peace River region in Canada Metal
Slide 14: Highest Growth in Hard Coking Coal
HIGHEST GROWTH IN HARD COKING COAL Our Hard Coking Coal growth Competitor growth comparison (Hard Coking Coal) 2010 - 2020 Mt 40 12% CAGR 30 12% CAGR 6% CAGR 20 3% CAGR 10 0 2010 2020 Anglo American BHP Billiton Teck Source: All figures on equity basis. Based on advanced stage projects only. Teck an
Slide 15: Marketing & Outlook
MARKETING & OUTLOOK
Slide 16: Strong Demand Growth for Met Coal Driven by China and India
STRONG DEMAND GROWTH FOR MET COAL DRIVEN BY CHINA AND INDIA Growth markets Global seaborne metallurgical coal demand (Mtpa) • India‟s steel production growth is reliant on imported coal due to poor quality domestic supply 409 • China‟s reliance on seaborne coking coal imports will CAGR 77 increase d
Slide 17: Indian Steel Production Will Be Reliant on Seaborne Imports
INDIAN STEEL PRODUCTION WILL BE RELIANT ON SEABORNE IMPORTS - CAGR 9% Our customers • Anglo American first shipment in 1993. Long term partnerships in public and private sectors • Limited domestic metallurgical coal reserves with little growth potential – Deep, expensive, high ash and low yield mini
Slide 18: China Imports Forecast to Grow Significantly
CHINA IMPORTS FORECAST TO GROW SIGNIFICANTLY - CAGR 8% • The majority of steel production capacity growth is Major Chinese steel mills geared towards large coastal mills • Major steel companies are commissioning large capacity blast furnace (+4,000m3) requiring Hard Coking Coal • Depletion of domest
Slide 19: We Will Supply Over 30% of Australian and Canadian Increase
WE WILL SUPPLY OVER 30% OF BOTH THE AUSTRALIAN AND CANADIAN* INCREASE Existing supply source Global seaborne metallurgical coal • Australia: New port & rail infrastructure at Abbot Point supply (Mtpa) and Wiggins Island will facilitate the development of new metallurgical coal mines in the Bowen Bas
Slide 20: Marketing Strategy
MARKETING STRATEGY Product strategy 2011 2020 • Focus on building our brand with new customers: transition Anglo American from a mid-tier Australian PCI PCI producer to the leading, reliable global supplier of 16% 20% premium Hard Coking Coal 80% 84% Coking Coal Coking Coal Customer strategy • Compr
Slide 21: Marketing Strategy
MARKETING STRATEGY Pricing strategy Our contract portfolio • Seaborne metallurgical coal market has moved from the 2009 2010 2011 yearly benchmark system 4% 8% 6% • Anglo American has worked closely with customers to 9% facilitate the changes and has led quarterly benchmark negotiations 92% 85% 96%
Slide 22: Peace River & Asset Optimisation
PEACE RIVER & ASSET OPTIMISATION
Slide 23: Peace River, Canada
PEACE RIVER, CANADA • Open cut metallurgical coal mine producing 100% Saleable production HCC (Mt) premium Hard Coking Coal • Decision made to retain based on potential for 1 significant growth from coal inventory of over 1,400 Mt of Hard Coking Coal 0.8 • Acquisition of 25% minority interest comple
Slide 24: Delivering Value from Asset Optimisation & Supply Chain
DELIVERING VALUE FROM ASSET OPTIMISATION & SUPPLY CHAIN Marketing Realised benefits 2008 - 2010 Contract renegotiations Supply 10% Blending and value in use pricing Logistics management Marketing 40% Operations 50% Operations Moranbah – Longwall cutting hours 0.88 Mt Dawson – Coal loss reduced to 7%
Slide 25: Cost Curve Position - Opencut Best Practice
COST CURVE POSITION - OPENCUT BEST PRACTICE Business Plan targets Best Practice at Dawson & Peace River Coal operations • Evidence of best practice performance throughout the Peace River coal business plan business • Best practice gap represents A$8/t ROM cost reduction FOB costs • Business plans to
Slide 26: Asset Optimisation – Target to Lift Longwall Cutting Hours
ASSET OPTIMISATION – TARGET TO LIFT LONGWALL CUTTING HOURS TO 100 HOURS PER WEEK Longwall benchmarking Grasstree cutting hours (H1 2011) Hours Hours 120 120 100 100 80 80 Best Weekly Performance 60 60 Monthly Average Cutting 40 40 Hours 20 20 0 0 Anglo Anglo Australian US Jan Feb Mar Apr May Jun Ame
Slide 27: Longwall100 Project Contributes to Near Term Production Increase
LONGWALL100 PROJECT CONTRIBUTES TO NEAR TERM PRODUCTION INCREASE Asset Optimisation to 2015 Asset Optimisation beyond 2015 Mt 50 • Longwall design for Grosvenor and Moranbah South Projects is „Longwall of the Future‟ which • Longwall100 at Moranbah builds in potential for cutting performance of 120
Slide 28: Delivering High Value Growth Projects
DELIVERING HIGH VALUE GROWTH PROJECTS
Slide 29: Platforms Established to Deliver Our Growth
PLATFORMS ESTABLISHED TO DELIVER OUR GROWTH Growth Infrastructure (Advanced stage projects only) • Ongoing investigation of dedicated terminal development options at Abbot Point and Dudgeon Mt 50 Point • Consideration of other terminal capacity options, including Wiggins Island Stage 2 • Pacific Nat
Slide 30: Capturing Synergies from Continuous Project Pipeline
CAPTURING SYNERGIES FROM CONTINUOUS PROJECT PIPELINE IN AUSTRALIA AND CANADA Example from Australian Longwall Projects (a similar model for the development of multiple open cut hubs in Canada is under design) Project delivery Our approach Target outcomes Benefits objectives Cost Performance 1. One s
Slide 31: Advanced Projects Heavily Weighted Towards Hard Coking Coal
ADVANCED PROJECTS HEAVILY WEIGHTED TOWARDS HARD COKING COAL Margins Project Stage Product Type Metallurgical Coal Roman Feasibility HCC Grosvenor Stage 1 Feasibility HCC HCC PCI Export Thermal Grosvenor Stage 2 Prefeasibility HCC Growth 2010 - 2020 Mtpa Moranbah South Prefeasibility HCC 30 Export Th
Slide 32: Exploration is Focused on Premium Hard Coking Coal Targets
EXPLORATION IS FOCUSED ON PREMIUM HARD COKING COAL TARGETS Australia MORANBAH • Significant exploration investment to firm up quality resource $40 million base in all regions >$100m pa • Priority targets are the Grosvenor and Moranbah South CAPCOAL/FOXLEIGH resources $46 million • Life of mine exten
Slide 33: A Substantial and Active Resource Development Pipeline
A SUBSTANTIAL AND ACTIVE RESOURCE DEVELOPMENT PIPELINE PREDOMINATELY IN HARD COKING COAL Project Stage Mining Location Growth/ Product Type Sustaining Metallurgical Coal Aquila Concept Longwall HCC Capcoal/Foxleigh Sustaining Moranbah North LW2 Concept Longwall HCC Moranbah Growth Belcourt Saxon Exp
Slide 34: Grosvenor Project
GROSVENOR PROJECT - 100% OWNED IN THE MORANBAH AREA PRODUCING 12 MTPA FROM TWO LONGWALLS Stage 1 Stage 2 Mining Longwall Longwall Premium Hard Premium Hard Product Coking Coal Coking Coal Saleable 5 Mtpa (increasing 6 Mtpa Production to 6 Mtpa) Development Coal 2013 2015 Longwall 2016 2017 Commissio
Slide 35: Moranbah South Project - 50% Joint Venture with Exxaro
MORANBAH SOUTH PROJECT - 50% JOINT VENTURE WITH EXXARO Mining Two Longwalls Product Premium Hard Coking Coal Saleable Production 12 Mtpa Development Coal 2015 – 2017 Longwall Commissioning 2017 – 2020 Infrastructure Greenfields processing facility Cost Curve Position Bottom half Life of Mine 28 yrs
Slide 36: Drayton South
DRAYTON SOUTH - PROJECT EXTENDS LIFE OF DRAYTON OPERATION BY 26 YEARS Mining Open Cut – Truck/Excavator Product Export Thermal Coal Saleable Production 4 Mtpa Pre-strip 2013 Open Cut Commissioning 2015 Utilises existing Drayton Infrastructure CHPP and loadout facilities Cost Curve Position Bottom ha
Slide 37: Dartbrook
DARTBROOK - OPEN CUT MINE USING EXISTING COAL PLANT AND RAIL INFRASTRUCTURE Mining Open Cut Truck/Excavator PCI (35%) and Export Product Thermal Coal (65%) Saleable Production 5 Mtpa Pre-strip 2015 Open Cut Commissioning 2017 Utilises existing Dartbrook Infrastructure CHPP and loadout facilities Cos
Slide 38: Roman - 100% Owned at Peace River
ROMAN - 100% OWNED AND EXPANDS EXISTING TREND OPERATION AT PEACE RIVER Mining Open Cut Truck/Excavator Product Premium Hard Coking Coal 3 Mtpa (target production for Saleable Production total Peace River region is 8 Mtpa by 2020) Pre-strip 2014 Open Cut Commissioning 2015 Expands existing Peace Rive
Slide 39: Summary
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Slide 40: Summary
SUMMARY • World class assets in developed regions close to growth markets • High performing business Europe – 60% productivity improvement 2 Mt China 1 Mt – Real unit cost reduction Total Asia – High margin assets Production 16 Mt 1 Mt India 3 Mt • Hard Coking Coal our preferred growth product • Bes
Slide 41: Summary
SUMMARY • World class assets in developed regions close to growth markets Productivity (export mines) • High performing business ROM tonnes/FTE 10,000 – 60% productivity improvement 7,500 – Real unit cost reduction 5,000 – High margin assets 2,500 • Hard Coking Coal our preferred growth product 0 20
Slide 42: Summary
SUMMARY • World class assets in developed regions close to growth markets • High performing business – 60% productivity improvement Seaborne metallurgical coal demand growth 2010-2020 – Real unit cost reduction – High margin assets 2 Korea • Hard Coking Coal our preferred growth product 7 Japan • Be
Slide 43: Summary
SUMMARY • World class assets in developed regions close to growth markets Metallurgical Coal Growth • High performing business (Advanced stage projects only) Mt – 60% productivity improvement 50 – Real unit cost reduction 40 Roman – High margin assets (Peace River) • Hard Coking Coal our preferred g
Slide 44: Summary
SUMMARY • World class assets in developed regions close to growth markets • High performing business Competitor growth comparison (Hard Coking Coal) 2010 - 2020 – 60% productivity improvement – Real unit cost reduction 12% CAGR – High margin assets • Hard Coking Coal our preferred growth product • B
Slide 45: Summary
SUMMARY • World class assets in developed regions close to growth markets • High performing business – 60% productivity improvement – Real unit cost reduction – High margin assets • Hard Coking Coal our preferred growth product • Best project pipeline – Large Hard Coking Coal resources close to port
Slide 46: Appendix
APPENDIX
Slide 47: Strategy Implementation: In the Last Twelve Months We Have...
STRATEGY IMPLEMENTATION: IN THE LAST TWELVE MONTHS WE HAVE... Safety Zero Harm Developed 3 Year Safety Improvement Plan and initiated Zero Harm Longwall of the Future Project Increase Margins AO/Supply Chain Delivered a 26% increase in Asset Optimisation/Supply Chain benefits ($0.7bn) from 2010 and
Slide 48: Carbon Management
CARBON MANAGEMENT - MINIMISING THE IMPACT ON THE ENVIRONMENT AND OUR BUSINESS Carbon reduction Carbon emissions (Mtpa) • Mitigation and initiatives identified to achieve a 40% reduction in 14 emissions 12 – Improved drainage and capture pre & post mining – Improved flare capacity 10 – Expansion of G
Slide 49: Traditional Country Relativities Are Changing Due to Australia's Rising Cost Pressures
TRADITIONAL COUNTRY RELATIVITIES ARE CHANGING DUE TO AUSTRALIA’S RISING COST PRESSURES • Canada becoming more cost competitive given structural FOB cash costs ($/t) changes in Australian domestic costs • Cost increases in Australia due to: Future costs Rail & Port – Currency: Both local currencies s
Slide 50: Project Delivery – Providing Leadership and Structure
PROJECT DELIVERY – PROVIDING LEADERSHIP AND STRUCTURE TO DELIVER GROWTH AND OPERATIONAL EXCELLENCE Organisational design Workforce growth (FTE) • Ensuring the right structures and leadership are in place to manage the business effectively as it grows in size, complexity and with extended geographica
Slide 51: Infrastructure Strategy Will Provide Port and Rail Capacity
INFRASTRUCTURE STRATEGY WILL PROVIDE PORT AND RAIL CAPACITY TO SUPPORT OUR GROWTH • Strategy to secure dedicated port and rail capacity in Abbot Point Queensland to provide certainty of delivery of Hard Coking Coal resource to market – Port capacity secured for growth to 2023 at Dalrymple Dalrymple
Slide 52: Dawson
DAWSON Large open cut metallurgical and export thermal mine • 51% ownership in joint venture with Mitsui Saleable Production (Mt) • Estimated coal inventory of 2,700 Mt with reserves of 174 Mt 10 8 • Key operational data Export – Producing 7 Mtpa of coking and export-quality 6 Thermal thermal coal,
Slide 53: Foxleigh
FOXLEIGH Open cut metallurgical mine producing 100% premium PCI coal • 70% ownership with Posco and Nippon Steel Saleable production PCI (Mt) • Estimated coal inventory of 242 Mt 3 • Key operational data – Best practice for 500 tonne class excavators (RH 340) 2 at 12.5 Mbcm per annum – Foxleigh prod
Slide 54: Drayton
DRAYTON Open-cut thermal coal mine in New South Wales Hunter Valley • 88% ownership with Mitsui, NCEA, Hyundai Saleable production thermal (Mt) & Daesung 5 • Following a $47m CHPP upgrade completed in Q3 2011, now 100% export thermal coal operation 4 Domestic 3 • Key operational data 2 – Best practi
Slide 55: Capcoal
CAPCOAL Combined open cut and underground operation producing 11 Mtpa of Hard Coking Coal and PCI from 2014 • 70% ownership in joint venture with Mitsui Saleable production (Mt) • Estimated coal inventory of 1,500 Mt with reserves of Mt 217 Mt 10 8 • Life of mine of more than 25 years Thermal 6 PCI
Slide 56: Moranbah North
MORANBAH NORTH Underground longwall producing 100% premium Hard Coking Coal • 88% ownership with Mitsui, Nippon Steel, JFE, Saleable production HCC (Mt) Shinsho & NS Resources 5 • Estimated coal inventory of 960 Mt with reserves of 130 Mt 4 3 • Key operational data 2 – Currently produces 4 to 5 Mtpa