Anglo American Plc · LSE:AAL
Anglo American — Investor Day (December 2015)
51 slides from Anglo American's investor day presentation, Dec 8, 2015
Slide 1: Investor Day 2015: Driving Change, Defining Our Future
INVESTOR DAY 2015 DRIVING CHANGE, DEFINING OUR FUTURE 8th December 2015 Barro Alto Venetia mine
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: Introduction
INTRODUCTION Mark Cutifani
Slide 4: Setting Context
SETTING CONTEXT The global market for commodities continues to deteriorate… Indexed commodity prices (1 Jan 2015 = 1) 1.1 Variance 1 Jan to 27 Nov 2015 1.0 Thermal Coal (7)% 0.9 Diamonds (15)% 0.8 (25)% Platinum (25)% 0.7 Met coal (27)% Copper (29)% Iron Ore (33)% 0.6 Nickel (38)% 0.5 1 Jan 2015 1 M
Slide 5: Defining 'The Future Anglo American'
DEFINING ‘THE FUTURE ANGLO AMERICAN’ We are embarking on a fundamental restructuring plan… A BOLD PORTFOLIO RESTRUCTURING • A more aggressive set of hurdles for inclusion in our portfolio. • Focussed on ‘Priority 1’ assets and commodity positions that deliver reliable cash and returns. CHARACTER
Slide 6: Our Core Assets – Accelerating Transformation
OUR CORE ASSETS – ACCELERATING TRANSFORMATION Focus on Priority 1 assets which deliver free cash flow through the cycle… Assets – operating free cash flow 2016F(1) Priority 1 Asset Criteria: 1. Size of resource and endowment. 2. Scalable with margin growth. 3. Cost & margin curve position. 4. Asset
Slide 7: The Transformation So Far
THE TRANSFORMATION SO FAR Our focus is on higher quality and more scalable assets… Number of operations(1) Our focus has shifted to Priority 1 assets… ~60% 55 Diversified portfolio: Access to Priority 1 assets. Focus on value: Deliver full potential on Priority 1 36 assets. Leaner Overheads an
Slide 8: Organisation Transformation
ORGANISATION TRANSFORMATION Our organisation transformation reflects our future state… CONSOLIDATING DIVISIONAL STRUCTURES • De Beers • Industrial Metals • Bulk Commodities REGIONAL COMMODITY HUBS • Utilise local infrastructure • Share skills and resources • Consolidate corporate offices FUNCT
Slide 9: Organisation Implications
ORGANISATION IMPLICATIONS Our rightsizing of the business and reductions in overheads is changing the business… Employee and contractor numbers 17% 162,000 151,000 ~30% ~70% 13,000 135,000 11,500 99,000 8,500 92,000 7,000 ~50,000 Support Operations 2013 2014 Expected Expected Expected Future 2015 20
Slide 10: How We Operate
HOW WE OPERATE We have achieved a step change in safety and environment… Loss of life (by business) SAFETY 17 15 Improvements underpinned by positive safety 13 milestones in Platinum and South African 6 6 operations. 12 7 6 3 Focus on workforce engagement will be 2 important as our restructuring
Slide 11: Now You Are Going to Hear…
NOW YOU ARE GOING TO HEAR… Tony O’Neill…operations and technical opportunities. Philippe Mellier…diamond market and midstream challenges. René Médori…addressing the financial implications.. Conclusion…transformation and the future portfolio. 11
Slide 12: Operating Excellence
OPERATING EXCELLENCE Tony O’Neill
Slide 13: Cost and Productivity Improvements
COST AND PRODUCTIVITY IMPROVEMENTS Our business improvement work continues to target our cost base… DELIVERED 2013 - 2015 TARGET 2016 NEW - TARGET 2017 $1.6bn $1.1bn $1.0bn Bring forward where 1.0 possible 1.0 Studies and 0.3 exploration 0.8 0.6 Operating 0.5 costs Operating 0.7 0.3 costs Support
Slide 14: Improving Operating Performance
IMPROVING OPERATING PERFORMANCE Realising short term productivity gains… EQUIPMENT EFFICIENCY DRILLING IMPROVEMENT CLEAN FLUIDS Significant potential value Improving drilling accuracy, quality Sustainable cost reduction opportunity and equipment utilisation through improved cleanliness of Re
Slide 15: Los Bronces
LOS BRONCES Operating model go-live will lead to ~15,000 tpa increase in copper production… LARGE TRUCK OPERATING HOURS 1 PLANT OPERATING TIME % CLOSE TO BENCHMARK FY 2014 throughput FY 2014 OT% benchmarking 7,500 2014 Throughput - Without planned maintenance and strikes Histogram 94% 95% 100 93% Av
Slide 16: Integrated Approach at Los Bronces
INTEGRATED APPROACH AT LOS BRONCES1 Integrating orebody knowledge, innovative technology and business improvement… LONG TERM FOCUS MEDIUM TERM BREAKTHROUGH SHORT TERM DELIVERY World class mineral endowment 2 Leading innovation Operating excellence One of the world’s greatest Increasing metal pro
Slide 17: Sishen
SISHEN The strategic redesign created the ability to react to market conditions… 2015 PERFORMANCE Significant deterioration in iron ore markets Pit redesign to reflect the lower price environment Insufficient compliance to mine plan RECONFIGURATION TO OPTIMISE MINE DESIGN 2016 production of
Slide 18: Minas Rio
MINAS RIO Now approaching 75% of design capacity with lower forecast FOB cash cost … PRODUCTION VOLUMES (MILLION WET TONNES) All system components have demonstrated performance at full capacity Full Production outlook capacity 1.3mt produced in November affected by confined 26.5mt Continuous l
Slide 19: Cost Performance
COST PERFORMANCE We have achieved a meaningful improvement in unit costs… INDEXED UNIT COST (FY2012 = 100) -29% -22% -21% -17% 100 100 100 100 100 93 92 91 89 90 85 86 84 83 2012 80 2013 80 79 79 2014 71 H1 2015 70 60 50 Peer 1 Anglo American Peer 2 Peer 3 Notes: Methodology (from externally disclos
Slide 20: Cost Performance
COST PERFORMANCE We have achieved a meaningful improvement in unit costs… INDEXED UNIT COST (FY2012 = 100) -29% -30% -21% -17% 100 100 100 100 100 93 92 91 89 90 86 85 2012 84 83 80 2013 80 79 79 2014 H1 2015 71 70 70 2016 60 2016 Target 50 Peer 1 Anglo American Peer 2 Peer 3 Notes: Methodology (fro
Slide 21: World Class Resources to World Class Businesses
WORLD CLASS RESOURCES TO WORLD CLASS BUSINESSES High quality assets with significant upside operating potential $2.1 billion target of further improvements in 2016 and 2017 Delivering material improvements in operating performance 21
Slide 22: De Beers
DE BEERS Philippe Mellier
Slide 23: Market Update
MARKET UPDATE Global diamond jewellery demand hit a record $81 billion in 2014… 2014 MARKET SHARE POLISHED WHOLESALE MARKET POLISHED WHOLESALE MARKET (%) (LOCAL CURRENCY % YOY) (US$ % YOY) Global 7% +3% -1% to -2% 6% 6% 7% 32% 4% 6% 3% 5% 42% 1% 1% 0% 5% -1% -1% 8% 14%* -8% -6% -11% -11% 2014A 2015F
Slide 24: Midstream Update
MIDSTREAM UPDATE The challenges in the diamond market predominantly lie in the midstream… Lower consumer demand in Grading labs overcome Excess polished stock at retail, Q4 2014 leads to slower backlog, releasing more especially in China retailer restocking polished Working capital and High midstrea
Slide 25: Production Update
PRODUCTION UPDATE Considerable Pullback in production additionalglobally investment in response in diamond to midstream marketing… challenges… DE BEERS PRODUCTION BY COUNTRY, 2014-2015F 32.6 32 - 34 ~29 Carats (millions 100% basis) 2014 2015 2015 2015F Front of the Venetia Red Area Tailing Treatment
Slide 26: De Beers Integrated Response
DE BEERS INTEGRATED RESPONSE A series of initiatives through the value chain… Downstream • Significant increase in advertising spend • Initiatives to stimulate consumer demand Midstream • Lowered rough prices • Increased flexibility to sightholders Upstream • Lowered production • Cost reduction prog
Slide 27: Integrated Response: Downstream
INTEGRATED RESPONSE: DOWNSTREAM Considerable additional investment in diamond marketing… Reintroduction of ‘A Diamond is Forever’ into our Forevermark marketing in the US New Christmas ad campaign, ‘It’s a long journey to become The One’ focuses on ‘The One’ the sourcing, selection, cutting and
Slide 28: Integrated Response: Midstream
INTEGRATED RESPONSE: MIDSTREAM Recognising current market challenges… Inventory Financing Profitability Confidence indigestion 2015 quarterly sales volumes (Mct) YTD 2015 price movements July 2011 to present price movements Q1 8.6 -8% Q2 5.4 -23% -28% -15% Q3 3.0 S10 S1 S2 S3 S4 S5 S6 S7 S8 S9 De Be
Slide 29: Integrated Response: Upstream
INTEGRATED RESPONSE: UPSTREAM Focus on volume and cost across our assets… Production outlook for 2016 Production guidance (million carats 100% basis) Debswana 32.6 Production reduced to ~20Mcts for 2016 and average ~29 mix being improved by less production at Orapa and more at Jwaneng 26 - 28 Or
Slide 30: Cash Saving Plan
CASH SAVING PLAN Implementation of permanent cash savings plan… Saving due to greater efficiency and mining to demand. Cost MINING PRODUCTION & per carat down from $111 in 2014 to $101 in 2016 despite WASTE COSTS production cuts Significant headcount reduction (more than 1,500 from FIT FOR PURPOSE C
Slide 31: Capital Expenditure Profile
CAPITAL EXPENDITURE PROFILE Capex at similar level in 2016… TOTAL CAPEX ($M) SUMMARY SIB Waste capitalised Project Project capex reduces after 2016: 689 ~700 • Debmarine Namibia new evaluation vessel ~650 ~500 • Gahcho Kué completion and ramp up • Venetia underground completed in 2020 2014 2015 2016
Slide 32: Focusing on the Fundamentals
FOCUSING ON THE FUNDAMENTALS Integrated response to short-term market dynamics… Global GDP growth slowdown (especially China) and FX volatility. MACRO ENVIRONMENT/ Decisive/integrated response, without compromising our ability to MIDSTREAM CHALLENGES capture upswing recovery Reduce production
Slide 33: The Long Term Story in Diamonds
THE LONG TERM STORY IN DIAMONDS Polished diamond market has historically bounced back from periods of weakness… Growth in Consumer Demand at Polished Wholesale Price – US$Bn 30 US Asia/ US US US Recession Recession Japan Recession Recession Crisis 25 20 15 10 5 0 1980 1982 1984 1986 1988 1990 1992 1
Slide 34: Balance Sheet and Capital Allocation
BALANCE SHEET AND CAPITAL ALLOCATION René Médori
Slide 35: Balance Sheet Actions and Lines of Defence
BALANCE SHEET ACTIONS AND LINES OF DEFENCE Our focus remains on delivering against management actions… MANAGEMENT ACTIONS ACTIONS FOCUS AREAS 1 Liquidity maintained through cash and Maintain Liquidity committed bank facilities 2 Operational turnaround, overheads downsizing Cash Flow Improvemen
Slide 36: Liquidity and Net Debt Position
LIQUIDITY AND NET DEBT POSITION We have maintained significant levels of liquidity… LIQUIDITY ($BN) Undrawn facilities Cash Target investment grade rating. 17 15 ~15 Limited impact of downgrade: • Bonds contain no margin step ups 8 7 ~7 • No incremental interest cost in the near term • $5bn RCF
Slide 37: Committed Facilities
COMMITTED FACILITIES The Group has significant committed bank facilities… SA SUBSIDIARY COMMITTED FACILITIES (ZARBN)(1) Core $5bn revolving credit facility is undrawn Total Committed Maturity Net Debt • Matures April 2020 Facilities • No financial covenants • No material adverse change clause Plat
Slide 38: Capex Outlook
CAPEX OUTLOOK Capex is reducing… CAPEX ($BN) (55)% 6.0 Reflecting the current portfolio and announced disposals and closures: 5.2 4.5 Major projects in execution nearing Project spend 3.2 ~4.1 completion (Gahcho Kué and Grosvenor) 3.6-3.9 ~3.2 Continued focus on optimisation of SIB capex 2.1 ~2.
Slide 39: Exceptional Charges & Net Debt Guidance
EXCEPTIONAL CHARGES & NET DEBT GUIDANCE Anticipated impairments mainly driven by a deterioration in market conditions… $ (bn) 2015 NET DEBT GUIDANCE H2 2015 (1) 2015 year end forecast of $13.0-13.5bn Loss on disposal of AA Norte ~0.3 unchanged since half-year, despite collapse in Impairment - Rust
Slide 40: Focusing the Portfolio
FOCUSING THE PORTFOLIO Objectives for the Portfolio • Lower aggregate cost curve position: stronger cash flow generation through the cycle • Reduced complexity and resulting overhead savings: step-change in EBITDA margin • Balanced geographical exposure across Southern Africa and Latin America • Gre
Slide 41: Conclusion
CONCLUSION Mark Cutifani
Slide 42: Commodity Strategies…It's About the Assets
COMMODITY STRATEGIES…IT’S ABOUT THE ASSETS Our commodity positioning is about providing opportunities to develop Priority 1 assets… De Beers Market position and low cost operations support margin growth. Copper Develop endowment potential from Priority 1 asset positions. Platinum Repositioning portf
Slide 43: The Plan
THE PLAN We have accelerated the drive towards a streamlined asset portfolio… PORTFOLIO…focus on ‘Priority 1’ assets. A leaner portfolio with a high quality core will improve our cash flow resilience and investment quality. OPERATIONS…efficiency target for 2016 of $1.1bn and additional target of $
Slide 44: In Summary – Driving Change, Defining Our Future
IN SUMMARY – DRIVING CHANGE, DEFINING OUR FUTURE We are embarking on a fundamental restructuring plan… RESTRUCTURE OF CORE PORTFOLIO Focus on ‘Priority 1’ assets that deliver reliable cash and returns Large scalable resources primarily positioned in/or moving to Q1 of cost curve ACCELERATE THE B
Slide 45: Appendix
APPENDIX
Slide 46: Production Outlook
PRODUCTION OUTLOOK(1) 2014 2015F 2016F 2017F 2018F Copper (2) 748kt 680-710kt 600-630kt 590-620kt 630-680kt Nickel 37kt 28-30kt 45-47kt 42-45kt 45-47kt Previously 40-45Mt Iron ore (Kumba)(3) 48Mt ~43Mt ~37-39Mt ~39-40Mt ~39-40Mt Previously 47Mt Previously 49Mt Iron ore (Minas-Rio) 0.7Mt ~10Mt 18-21M
Slide 47: Our Core Assets…'The Engine Room'
OUR CORE ASSETS…“THE ENGINE ROOM” Our “operating model” philosophy is about getting the best out of our Priority 1 assets… JWANENG (US$/CT) ORAPA (US$/CT) LOS BRONCES (C1 COLLAHUASI (C1 USC/LB) USC/LB) +7% -13% -34% +30% 190 46 145 150 160 150 130 30 30 39 50 35 2012 2015F 2016F 2012 2015F 2016F 201
Slide 48: Cost and Productivity Delivered to Date and Targeted
COST AND PRODUCTIVITY DELIVERED TO DATE AND TARGETED Split by BU ($bn) 2013 to 2015 2016 Total Coal 1.2 - 1.2 Copper 0.5 0.1 0.6 Exploration 0.3 0.1 0.3 KIO - 0.2 0.2 IOB - (0.1) (0.1) NNP - 0.3 0.2 Platinum 0.2 0.1 0.2 De Beers (0.7) 0.4 (0.2) Corporate & Other 0.1 0.1 0.2 TOTAL $1.6bn $1.1bn $2.7b
Slide 49: Debt Maturity Profile at 30 June 2015
DEBT MATURITY PROFILE AT 30 JUNE 2015 DEBT REPAYMENTS ($BN) AT 30 JUNE 2015 4.3 3.6 2.9 1.9 2.0 1.9 1.7 1.8 0.1 H2 2015 2016 2017 2018 2019 2020 2021 2022 2023+ BNDES Subsidiary Euro Bonds US$ Bonds Other Bonds De Beers Financing Financing % of portfolio 48% 28% 8% 8% 7% 1% Capital markets 84% Bank
Slide 50: Los Bronces Statement of Estimates for Ore Reserves, Mineral Resources
LOS BRONCES STATEMENT OF ESTIMATES FOR ORE RESERVES, MINERAL RESOURCES AND EXPLORATION TARGETS Ore Reserves Estimates Mineral Resources Estimates – Exclusive of Ore Reserves Exploration Targets Anglo American 50.1 % (as at 31/12/2014) (as at 31/12/2014) Total Mineral Probable Measured, Indicated, In
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