Anglo American plc · LSE:AAL
Anglo American — De Beers — Investor Day (2017)
46 slides from Anglo American's investor day presentation, 2017
Slide 1: De Beers Finance Seminar
DE BEERS FINANCE SEMINAR Image: Gahcho Kué pit and process plant Image: Aggregating / Sorting Image: Forevermark by TBZ The Original Bracelet
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: Agenda
AGENDA Section 1: Demand Drivers………………………………………………………………. 30 mins Section 2: Group Overview……………………………………………………………..... 30 mins Q&A Section 3: Upstream………………………………………………………………………… 20 mins Section 4: Downstream……………………………………………………………………. 10 mins Summary & Q&A 2 The De Beers Group of Companies
Slide 4: Demand Drivers
Dr BrEeErRs Group OF COMPANIES DEMAND DRIVERS
Slide 5: Diamond Industry Overview
DIAMOND INDUSTRY OVERVIEW Diamond demand almost exclusively jewellery driven Global polished diamond demand has remained roughly flat % demand over the last 3 years at ~$25bn(1) while rough sales have been more volatile, impacted by midstream dynamics Jewellery Industrial Investment Autocatalyst 34%
Slide 6: Key Demand Drivers
GDP Personal Disposable Income Jewellery KEY DEMAND DRIVERS manufacturing Cutting, polishing & trading Long term polished demand closely correlated to GDP US and China remain key, driving overall demand Indexed polished demand vs. indexed GDP for the US Polished demand (polished wholesale price; nom
Slide 7: Currency Impact
GDP Personal Disposable Income Jewellery CURRENCY IMPACT manufacturing Cutting, polishing & trading Non-US demand impacted by USD strengthening USD strengthening impact felt in India, China & Japan Global diamond jewellery demand Global jewellery demand growth and related exchange rates 2016 = $80bn
Slide 8: Midstream
Personal Disposable Income Jewellery manufacturing Cutting, polishing MIDSTREAM & trading Rough distribution & trading Midstream profitability / returns are driven by a number of … one of which is the relationship between rough and factors … polished prices … Index Sustainable Cutting, polishing, ma
Slide 9: Group Overview
Dr BrEeErRs GROUP OF COMPANIES GROUP OVERVIEW
Slide 10: De Beers Group Overview
DE BEERS GROUP OVERVIEW Ownership structure Anglo American (85%) Government of the Republic of Botswana (15%) De Beers Group Operations Rough diamond sales Brands / retail / Exploration Production support services Mining Supermaterials De Beers Element Six Debswana Global Global Consolidated Namdeb
Slide 11: Legal, Economic and Accounting Interests
LEGAL, ECONOMIC AND ACCOUNTING INTERESTS Consolidation Business Legal Economic Account. type • Canada (excl. Gahcho Kué) • Global Sightholder Sales • Auction Sales • Forevermark 100% • E6 – Technologies Subsidiaries • Technologies • Debmarine South Africa • De Beers Jewellers(1) • DBCM(2) 74% 74% 10
Slide 12: Flow of Diamond Volumes
FLOW OF DIAMOND VOLUMES Owned 3rd Party JVs Namdeb Canada Mining Debswana DBCM Victor Gahcho Holdings Kué 10% 49% - Gahcho Kué Revenue / Mountain 100% 100% 90% SDT(3) volume Province Trading DTCB JV NDTC JV DBSSSA 100% Victor (50%) (50%) 51% Gahcho Kué 15% 15% Revenue / 85% ODC(1) 85% Namdia(2) volu
Slide 13: Trading EBITDA Margin - Model at 6-8% on Average
TRADING EBITDA MARGIN - MODEL AT 6 - 8% ON AVERAGE Value through aggregation, allowing for a more Historic analysis of EBITDA margins: average 6-8% but consistent offering (volume and mix) impacted by changes in rough prices & mix Trading EBITDA margin (%) Rough diamond revenue ($bn) 8.9% 6.8% 5.8 6
Slide 14: De Beers Portfolio Diversity and Flexibility
DE BEERS PORTFOLIO DIVERSITY AND FLEXIBILITY Diverse portfolio with breadth in mix of production … … and flexibility in supply to meet demand Average price & production 2016 (excluding Gahcho Kué) Production value Production volume (Mct) and value ($/ct) Group $178/ct(2) $170/ct(3) Voorspoed Average
Slide 15: De Beers Revenue and Production
DE BEERS REVENUE AND PRODUCTION Revenue impacted by consumer demand … and production adjusted to meet … with lower sales volumes … and midstream destocking … demand, now returning to previous levels De Beers rough diamond consolidated revenue ($bn) Total rough diamond sales volumes Total rough diamo
Slide 16: Modelling Changes to De Beers Inventory Levels
MODELLING CHANGES TO DE BEERS INVENTORY LEVELS In value terms, 2015 inventory build was eliminated in … although India demonetisation impacted destocking of 2016 … lower value goods in late 2016 (completed in H1 2017) $bn, restated to 2016 price index Mct Production Total external gem sales +1.1 +1.
Slide 17: Contribution by Business
CONTRIBUTION BY BUSINESS EBITDA contribution by business Key components contributing to segments $m 604 1,818 Debswana 379 571 80% 344 DBCM 282 Trading 579 268 44% 1,406 Upstream 207 Namdeb 147 40% 378 184 990 178 Canada 154 107 79 28% 55%(1) 579 Midstream Trading 107 378 7% Upstream 1,333 1,102 (10
Slide 18: Group and Upstream EBITDA Margins
GROUP AND UPSTREAM EBITDA MARGINS Group EBITDA blended margin % Consolidation of Group EBITDA margin 2016 EBITDA margin 23% 23% 54% 21% 7% -1% Upstream Trading Downstream & Other 2016 2015 2016 Weighting (based on total revenue) ~30% 100% 100% Upstream margin analysis 2016 Upstream EBITDA margin by
Slide 19: Taxation
TAXATION De Beers tax rate by jurisdiction Results in a group effective tax rate of 23%(3) 2016 Royalties Income tax South Africa(1) Formulae based 28% 23% 23% Canada (1,2) Formulae based 26% Botswana: DTCB & DBGSS n/a 22% Botswana: Debswana 0% 0% Namibia 10% Turnover 55% Note: In 2016 Debswana paid
Slide 20: Sales Seasonality
SALES SEASONALITY Jewellery sales driven by Q4 holidays, principally in the US . . . Rough sales are reported every cycle and drive total revenue % diamond jewellery sales by quarter ~30% Provisional cycle revenue is reported after GSS Sight week and includes auctions since the previous GSS Sight ~2
Slide 21: Press Release Disclosure
PRESS RELEASE DISCLOSURE Press release disclosure: Six months ended 30 June 2017: Reconciliation Applied 7% to all operations in line with 6-8% guidance; actual trading margins vary by region Key performance indicators(1) Production Realised price P&L cash cost Margin per carat Proxy EBITDA and comp
Slide 22: Basic Model Flow
BASIC MODEL FLOW 1 ESTABLISH YEAR 1 DEMAND 2 ESTIMATE FORECAST DEMAND (MARKET FUNDAMENTALS) 3 EMBED STRUCTURAL AND PRICE CHANGES 4 USE PRODUCTION FLEXIBILITY TO DELIVER PRODUCTION GUIDANCE 5 DETERMINE STOCK MOVEMENT TO MEET FORECAST DEMAND 6 APPLY MARGINS TO CALCULATE UPSTREAM AND TRADING EBITDA 7 F
Slide 23: Questions
Dr BrEeErRs Group OF COMPANIES QUESTIONS
Slide 24: Upstream
Dr BrEeErRs GROUP OF COMPANIES UPSTREAM
Slide 25: Upstream Modelling
UPSTREAM MODELLING Summary of mines and data provided Modelling of production costs Granular operational information to model costs presented High level disclosures Calculations Debmarine Jwaneng Orapa Production Tonnes Namibia (carats) ÷ Grade x100 treated Venetia Gahcho Kué Waste Stripping mined r
Slide 26: Jwaneng Mine - Overview
JWANENG MINE - OVERVIEW Plan view of Jwaneng pit Key mine information • Life of mine (LOM): 2034 • Probable Diamond Reserve Estimates (Open Pit): 139Mct; 130cpht(2); 106Mt Reserves & • Mining licence: 2029 Resources(1) • Exclusive Diamond Resource Estimates(3) (Open Pit): • Indicated: 106Mct; 93cpht
Slide 27: Jwaneng Mine – Production Characteristics
JWANENG MINE – PRODUCTION CHARACTERISTICS Significant flexibility in mix and grade across Evolution of stripping activity pipes and tailings 2016 = Jwaneng average = Production volume = Production volume trend • Cut 8 waste of ~700Mt in total Higher • ~500Mt of waste was mined before first ore, whic
Slide 28: Jwaneng Mine – EBITDA Margin & Other KPIs
JWANENG MINE – EBITDA MARGIN & OTHER KPIS Price, cost and EBITDA margin Key performance indicators $/ct 2015 2016 Price(1) 242 Waste mined Mt 109.8 109.4 Ore mined Mt 7.7 9.5 198 Tonnes treated Mt 7.6 8.0 Carats recovered Mct 9.8 12.0 Proxy Average grade cpht 128 150 215 EBITDA (89%) Price(1) $/ct 2
Slide 29: Jwaneng Mine – Linking Mining and Production to Cash Costs
JWANENG MINE – LINKING MINING AND PRODUCTION TO CASH COSTS 2016 Truck and haul Mining cash Total mining Mining cash Loading cycle (mins) cost(1) $/t (Mt) costs ($m) Shovels (t/hr) Average tyre life (hours) +10% +17% -17% 2.6 ~120 ~300 1,672 5,787 4.2 1,514 4,940 3.5 Treatment / support costs / other
Slide 30: Orapa Regime - Overview
ORAPA REGIME - OVERVIEW Plan view of Orapa mine pit & plant Key mine information • Life of mine (LOM): 2030 • Probable Diamond Reserve Estimates (Open Pit): 145Mct; 92cpht(2); 157Mt Orapa Mine • Mining licence: 2029 Reserves & • Exclusive Diamond Resource Estimates Resources(1) (Open Pit)(3) • Indic
Slide 31: Orapa Regime – Production Characteristics
ORAPA REGIME – PRODUCTION CHARACTERISTICS Production has fallen since 2014 due to trading conditions Average price and grade levels aligned to Orapa mine 2016 = Orapa Regime = Production size = Future source of production Orapa Plant 1 on partial C&M; ramped up in H1 2017 Damtshaa to be recommission
Slide 32: Venetia Mine - Overview
VENETIA MINE - OVERVIEW Plan view of Venetia pits Key mine information North • Life of mine (LOM): 2046 K03 • Probable Diamond Reserve Estimates (OP & UG): 96Mct; 85cpht(2); 113Mt Reserves & • Mining licence: 2038 Resources • Exclusive Diamond Resource Estimates (OP & (OP & UG)(1) UG)(3): • Inferred
Slide 33: Debmarine Namibia - Overview
DEBMARINE NAMIBIA - OVERVIEW Crawler schematic Key performance indicators Mafuta • Probable Diamond Reserve Estimates: 4.3Mct; Reserves & 0.09cpm2(2); 46 million m2 Resources(1) • Exclusive Diamond Resource Estimates(3): (Marine • Indicated: 9.1Mct; 0.07cpm2; 131 million m2 Placers) • Inferred (ex &
Slide 34: Gahcho Kué Mine - Overview
GAHCHO KUÉ MINE - OVERVIEW Gahcho Kué pit and process plant Key information • Life of mine (LOM): 2028(1) • Probable Diamond Reserve Estimates (Open Pit): 51Mct; Reserves & 153cpht(2); 33Mt • Exclusive Diamond Resource Estimates (Open Pit)(3): Resources(1) • Indicated: 3.2Mct; 136cpht; 2.3Mt • Infer
Slide 35: Capex Profiles
CAPEX PROFILES Total capex profile $m ~700 ~700 Projects Projects subject to ~525 trading conditions 295 ~0.3bn ~0.2-0.3bn Stay In Business ~0.1bn VUG 120 ~0.2bn ~0.2bn Capitalised Waste 110 ~0.1bn ~0.1bn 2014 2015 2016 2017F 2018+ Forecast 34 The De Beers Group of Companies
Slide 36: Downstream
Dr BrEeErRs GROUP OF COMPANIES DOWNSTREAM
Slide 37: Downstream & Other
DOWNSTREAM & OTHER EBITDA $m 2015 2016 Industrial synthetic diamonds and 57 50 super materials Marketing (120) (120) Other: (16) 6 • Forevermark • De Beers Diamond Jewellers • DebTech (technology; sorting and synthetic detection) • International Institute of Diamond Grading & Research • Corporate •
Slide 38: Element Six – Synthetic Industrial Diamonds
ELEMENT SIX – SYNTHETIC INDUSTRIAL DIAMONDS 2013-16 Revenue by industry, EBITDA and key products Revenue ($m) 482 439 • Carbide picks supplied into soft rock mining and road planing Other 365 • Carbide wear parts for heavy industrial applications 314 Mining, Road & Wear • Superhard tool tips and gri
Slide 39: Summary & Questions
Dr BrEeErRs Group OF COMPANIES
Slide 40: Appendix
Dr BrEeErRs Group OF COMPANIES APPENDIX
Slide 41: Overview of Group Financial Structure
OVERVIEW OF GROUP FINANCIAL STRUCTURE Upstream Trading Element Six Downstream MKT, CORP, BOTS NAM SA CAN GSS & DBAS E6 OTH. 19.2% 100% 100% % Interest 50% 100% 100% 100% Pre-tax / 51% Demand driven forecast – industry gem revenue Consol. Impact of cutting centre inventory, 3rd party Revenue Revenue
Slide 42: Jwaneng Mine – EBITDA Margin & Other KPIs
JWANENG MINE – EBITDA MARGIN & OTHER KPIS Price, cost and EBITDA margin Key performance indicators $/ct 2015 2016 Price(1) 242 Waste mined Mt 109.8 109.4 Ore mined Mt 7.7 9.5 198 Tonnes treated Mt 7.6 8.0 Carats recovered Mct 9.8 12.0 Proxy Average grade cpht 128 150 215 EBITDA (89%) Price(1) $/ct 2
Slide 43: Orapa Regime – EBITDA Margin & Other KPIs
ORAPA REGIME – EBITDA MARGIN & OTHER KPIS Price, cost and EBITDA margin Key performance indicators $/ct Price(1) 113 2015 2016 Waste mined Mt 15.0 7.3 97 Ore mined(3) Mt 16.9 14.4 Tonnes treated Mt 12.9 10.6 Proxy 85 Carats recovered Mct 10.6 8.5 EBITDA (75%) 64 (66%) Average grade cpht 82 80 margin
Slide 44: Venetia Mine – EBITDA Margin & Other KPIs
VENETIA MINE – EBITDA MARGIN & OTHER KPIS Price, cost and EBITDA margin Key performance indicators $/ct 140 2015 2016 Price(1) Waste mined Mt 37.3 25.0 126 Ore mined Mt 4.4 3.9 Proxy Tonnes treated Mt 5.3 4.7 EBITDA 85 (61%) Carats recovered Mct 3.1 3.5 margin(1) 79 (63%) Grade cpht 59 74 Price(1) $
Slide 45: Debmarine Namibia – EBITDA Margin & Other KPIs
DEBMARINE NAMIBIA– EBITDA MARGIN & OTHER KPIS Price, cost and EBITDA margin Key performance indicators $/ct Price(1) 566 2015 2016 528 Area mined Million m2 12.0 12.0 Carats recovered Mct 1.3 1.2 Proxy Average Grade cpm2 0.1 0.1 364 EBITDA (64%) 337 Price(1) $/ct 566 528 margin(1) (64%) Total cash c
Slide 46: Victor, Voorspoed and Namdeb (Land)
VICTOR, VOORSPOED AND NAMDEB (LAND) 2016 # Victor Voorspoed Namdeb (land) Life of mine Years 3 4 Varies by operation Production kct 596 649 403 Price(1) $/ct 443 122 529 P&L cash cost(2) $/ct 212 80 400 Proxy EBITDA margin % 52% 34% 24% Total cash cost(3) $/ct 212 98 400 Victor Voorspoed Namdeb (lan