Anglo American Plc · LSE:AAL
Anglo American — H1 2006 Earnings Presentation
49 slides from Anglo American's earnings presentation, Aug 4, 2006
Slide 1: Creating Long Term Shareholder Value: Interim Results
CREATING LONG TERM SHAREHOLDER VALUE Interim Results 4 August 2006 This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Pr
Slide 2: Highlights
Highlights • Record performance: – EBIT up 52% at $4,563m – underlying earnings up 47% at $2.5bn • Strong underlying performances from mining business • Cash generation (EBITDA) up 37% at $5.9bn • Cost savings and efficiencies on track at $261m • Interim dividend up 18% to 33c per share • $1bn speci
Slide 3: Mining highlights
Mining highlights Base Metals Platinum Operating profit Operating profit $1,854m $934m $721m $410m H1 H1 H1 H1 2005 2006 2005 2006 • Record operating profit - up 157% on the back of • Anglo Platinum profit up 128% to $934m increased prices and higher nickel, zinc volumes • Increased prices and highe
Slide 4: Mining highlights
Mining highlights Ferrous Metals and Industries Coal Operating profit Operating profit $791m $374m $356m $644m H1 H1 H1 H1 2005 2006 2005 2006 • Kumba records strong performance on the back of • Operating profit at $356m; H1 impacted by lower higher iron ore prices export sales from South Africa and
Slide 5: Mining highlights
Mining highlights Diamonds Industrial Minerals Operating profit Operating profit $297m $293m $193m $151m H1 H1 H1 H1 2005 2006 2005 2006 • Operating profit at $293m • Tarmac UK profits impacted by lower volumes in challenging markets, severe winter weather in • Production up 4% at 24.7m carats Europ
Slide 6: Paper and Packaging and Gold highlights
Paper and Packaging and Gold highlights Gold Paper and Packaging Operating profit Operating profit $303m $233m $212m $172m H1 H1 H1 H1 2005 2006 2005 2006 • Operating profit up 76% to $303m on the back of • Operating profit down 9% in difficult market stronger gold price conditions • Average price r
Slide 7: Creating Long Term Shareholder Value
CREATING LONG TERM SHAREHOLDER VALUE Interim Results 4 August 2006 René Médori 7 2006 Interim Results
Slide 8: Financial Performance
Financial Performance $m H1 2006 H1 2005 %ch Revenue 18,825 17,145 10% Operating profit 4,563 2,993 52% Net finance costs (138) (255) (46%) Profit before tax 4,425 2,738 62% Tax rate (%) 33.9% 26.8% Underlying earnings 2,502 1,699 47% Results shown before special items and remeasurements and include
Slide 9: Operating profit variances
Operating profit variances $m Overall cash cost increase: 6,000 +6.7% 2,506 (57) (66) 5,000 (229) 4,563 (429) (72) (17) (66) 4,000 2,993 3,000 2,000 1,000 0 H1 2005 Price Exchange Volume Inflation Cash cost Non-cash Associates Other H1 2006 cost 9 2006 Interim Results
Slide 10: Operating profit variance: Price
Operating profit variance: Price Group total = +$2,506m Commodity price performance (indexed) 340 300 Zinc 260 Copper 220 180 Platinum 140 Gold 100 $m Jan 05 Jun 05 Jan 06 Jun 06 3,000 125 96 90 2,506 2,500 160 710 (55) 2,000 1,500 1,380 1,000 500 0 Base Platinum Gold Coal Ferrous Industrial Paper a
Slide 11: Cost and efficiency savings: $261m
Cost and efficiency savings: $261m Cost and efficiency savings of $261m in H1 2006 contributing to the limited cost increases $m Cost savings by type Cost savings split by business unit 200 $m 120 163 101 100 Other Platinum Energy 80 Coal Materials & supplies Base Metals 98 100 Labour Industrial Min
Slide 12: Net cashflow / net debt
Net cashflow /net debt $bn June 2006 Opening net debt 5.0 Operating cashflows (4.1) Capital expenditure 1.5 Cash tax paid 0.9 Deconsolidation of AGA (1.7) Gross Proceeds from AGA (1.0) Dividends paid 1.6 (Including $0.5bn special dividend) Share buyback 1.6 ($1.8bn at the end of July) Capital redemp
Slide 13: Evolution of net debt
Evolution of net debt Dec-02 Dec-03 Dec-04 Dec-05 Jun-06 Gearing¹ 27.9% 32.0% 25.4% 17.0% 11.0% EBITDA interest cover² 20.0x 12.7x 18.5x 20.0x 47.4x Moody’s upgraded long-term rating from A3 to A2 8.6 8.2 Standard and Poor’s upgraded long-term rating from A- to A $bn 5.6 5.0 2.7 Net Debt 2002 20
Slide 14: Distribution history: Cash returned to shareholders
Distribution history Cash returned to shareholders $m 3500 $9bn returned since 1999 3000 Additional $4bn buyback 2500 $2bn announced 2000 Interim dividend increased 1500 33cps to 33c (+18%) 1000 67cps 62cps Special dividend of 67c 500 28cps 33cps announced 0 1999 2000 2001 2002 2003 2004 200
Slide 15: Creating Long Term Shareholder Value
CREATING LONG TERM SHAREHOLDER VALUE Interim Results 4 August 2006 Tony Trahar 15 2006 Interim Results
Slide 16: Strategic progress
Strategic progress • Shareholding in AGA reduced to 41.8% • Plans being developed for demerger of Mondi • Tarmac in depth review completed; restructuring underway • Sale of Highveld to Evraz and Credit Suisse announced • Unbundling of Hulamin from Tongaat-Hulett group progressing • Additional $4bn b
Slide 17: Strategy update: AngloGold Ashanti
Strategy update: AngloGold Ashanti Shareholding in AGA reduced from 50.9% to 41.8% Registered secondary offering of 16.3 million shares plus 3.4 million shares under a greenshoe option completed in April 2006 Proceeds of $978 million Shares sold at a 21.4% premium to price pre 26 October 200
Slide 18: Strategy update: Mondi
Strategy update: Mondi Plans being developed for demerger of Mondi Discussions with regulatory authorities underway Full announcement in due course 18 2006 Interim Results
Slide 19: Strategy update: Tarmac
Strategy update: Tarmac Extractive business with group technology transfer Well developed business in the UK No 1 UK aggregates and asphalt producer Unrivalled reserve and asset base Leading market and brand position Significant growth opportunities in Central and Eastern Europe 19 2006
Slide 20: Strategy update: Tarmac
Strategy update: Tarmac Restructuring review completed Clearly defined scope of activities & geographic focus Disposals in UK, Hong Kong, India, Germany virtually completed Restructuring programmes in place $50m business improvement targeted over next 3 years Business remains strongly ca
Slide 21: Strategy update: Highveld Steel
Strategy update : Highveld Steel Sale of Anglo’s 79% holding in Highveld to Evraz and Credit Suisse for $678m announced on 14 July 2006 Initial 49.8% stake sold for a total of $412m. Evraz has option to purchase remaining 29.2% stake for $266m, subject to competition approval Based on R/$ exch
Slide 22: Future growth – strong project pipeline
Future growth – strong project pipeline Project pipeline $6.2bn of approved projects $10-15bn of future projects MEREBANK COLLAHUASI SADDLER’S PAARDEKRAAL $174m SASA marine SEP Extension EXPANSION CREEK $316m $52m CERREJÓN 2 $195m Copper Coal ISIBONELO $43m INYANDA $65m SOUTH AFRICA MAFUBE MONASH EN
Slide 23: Approved coal projects underway
Approved coal projects underway Project pipeline Dawson Lake Lindsay 1st coal scheduled Q2 1st coal scheduled Q4 2007 2006 Project on schedule for Forecast to be within completion H2 2008 approved budget Negotiations on Milestones – completion construction of CHPP of foundations for Coal
Slide 24: Platinum projects on pipeline track
Platinum projects on pipeline Project track PPRust North Expansion project Kroondal ($138m) and Marikana ($18m) approved H1 06 - JVs $692m Mototolo ($100m) JV approved Open pit Lebowa Merensky replacement project 600 000 tonnes per ($179m) approved month PPRust North replacement projec
Slide 25: Iron ore projects on pipeline track
Iron ore projects on pipeline Project track Sishen expansion (SEP) SEP approved 2005 SEP extension $559m capex approved 2006 10mtpa additional iron $195m capex ore exports 3Mtpa additional iron Ramp up in 2007 ore exports Full production in 2009 Ramp up in 2008 Full production in
Slide 26: Significant base metal potential
Significant base metal potential Unapproved base metal projects Growth: potential approval > 18 months • Quellaveco (copper) : 200,000 tpa - revised feasibility study H1 2008 • Gamsberg (zinc) : Gamsberg east exploration potential. Re-evaluation of project options • Jacare (nickel) : Exploration suc
Slide 27: Significant platinum potential
Significant platinum potential Unapproved platinum projects • Projects under evaluation: Booysendal, Der Brochen, Ga Phasha, Pandora, Styldrift, Twickenham • Anglo Platinum growing at 5% per annum average to meet demand 27 2006 Interim Results
Slide 28: Significant coal potential
Significant coal potential Unapproved coal projects South America South Africa Australia Cerrejón: expansion from 32mtpa thermal New Largo: 10.0 mtpa domestic thermal Grosvenor:4.0 mtpa export coking Elders: 6-7 mtpa export/domestic thermal Moranbah South: 4.0 mtpa export met Zondagsfont
Slide 29: Significant iron ore potential
Significant iron ore potential Iron ore projects mt 100 80 Faleme Pellets Unapproved projects 60 SEP 2 Phase 1 Phoenix (37mtpa) Sishen South 40 SEP extension Thabazimbi SEP 1 Actual and 20 approved projects Sishen (44mtpa) 0 2005 2007 2009 2011 2013 2015 29 2006 Interim Results
Slide 30: Global Exploration 2006
Global Exploration 2006 Anglo is actively exploring in 33 countries either singly or in 111 alliances with 103 entities world-wide y Base Platinum Iron ore Coal Industrial Minerals Diamonds Gold Annual spend (including total spend by AGA and DBI) is $154m 30 2006 Interim Results
Slide 31: Summary
Summary • A successful first half • Record earnings • Additional buyback of $4bn; special dividend of $1bn • Significant progress in delivering strategic goals • Significant growth prospects underpinned by project pipeline • Strong second half forecast should metal prices stay at or close to current
Slide 32: Creating Long Term Shareholder Value
CREATING LONG TERM SHAREHOLDER VALUE Interim Results 4 August 2006 32 2006 Interim Results
Slide 33: Key Dates
Key Dates • Currency Conversion (US$:Rand) 7 August 2006 • Currency Conversion (US$:£/€) 29 August 2006 • Ex-dividend (JSE) 21 August 2006 • Ex-dividend (LSE) 23 August 2006 • Record Date 25 August 2006 • Payment of Interim Dividend 21 September 2006 • Annual Results 21 February 2007 33 2006 Interim
Slide 34: Market Prices
Market Prices H1 2006 H1 2005 Gold 590 427 Platinum 1111 867 Palladium 318 190 Rhodium 4222 1583 Copper 275 151 Nickel 787 720 Zinc 125 59 Coal: thermal (RSA - API 4 index average) 42.9 54.4 Ferrovanadium 42 70 34 2006 Interim Results
Slide 35: Underlying Earnings Sensitivities
Underlying Earnings Sensitivities US$m 10% change in gold price ± 47 10% change in platinum price ± 80 10% change in palladium price ± 13 10% change in coal price ±110 10% change in copper price ±173 10% change in nickel price ± 19 10% change in zinc price ± 67 10% change in iron ore price ± 33 10%
Slide 36: Approved projects
Approved projects Additional Production Approved Project name production Full production capex ($m) (attributable) commences (attributable) Grasstree Maintain production 2006 2006 107 Dawson 2.9mtpa coking 2005 2007 426 Bundoora Maintain production 2006 2006 49 Cerrejón 1 2mtpa 2004 2007 50 Cerrejón
Slide 37: Approved projects
Approved projects Additional Production Approved Project name production Full production capex ($m) (attributable) commences (attributable) Finsch 17m carats over LOM 2004 2007 130 SASA marine 2007 52 Voorspoed 2007 2009 80 Snap Lake 1.5m carats pa 2007 2008 397 Victor 0.6m carats pa 2008 2009 356 M
Slide 38: Analysis of Underlying Earnings
Analysis of Underlying Earnings $m H1 2006 H1 2005 Platinum 492 256 Gold 102 69 Diamonds 164 188 Coal 260 263 Base Metals 1,277 525 Industrial Minerals 112 140 Paper and Packaging 120 133 Ferrous Metals and Industries 293 413 Exploration (53) (50) Corporate Activities (265) (238) Underlying Earnings
Slide 39: Analysis of Operating Profit
Analysis of Operating Profit $m H1 2006 H1 2005 Platinum 934 410 Gold 303 172 Diamonds 293 297 Coal 356 374 Base Metals 1,854 721 Industrial Minerals 151 193 Paper and Packaging 212 233 Ferrous Metals and Industries 644 791 Exploration (66) (67) Corporate Activities (118) (131) Operating Profit¹ 4,5
Slide 40: Capital Expenditure
Capital Expenditure $m H1 2006 H1 2005 Platinum 276 243 Gold 196 311 Coal 290 126 Base Metals 104 100 Industrial Minerals 115 120 Paper and Packaging 254 392 Ferrous Metals and Industries 222 133 Other 9 8 Total 1,466 1,433 40 2006 Interim Results
Slide 41: Operating variance: Exchange
Operating variance: Exchange Group total = ($57m) Ferrous $m Paper and Base Industrial Metals and Packaging Metals Minerals Industries Platinum Corporate Gold Coal Total - (10) (20) (30) (28) (40) (50) 8 (60) (28) 5 (57) 4 (70) 0 (16) (2) (80) 41 2006 Interim Results
Slide 42: Operating variance: Volume
Operating variance: Volume Group total = ($66m) $m 150 14 2 29 100 75 (14) 50 (74) 0 (50) (98) (66) (100) Paper and Platinum Ferrous Base Industrial Coal Gold Total Packaging Metals and Metals Minerals Industries 42 2006 Interim Results
Slide 43: Underlying Earnings variance
Underlying Earnings variance $m 4,000 1,788 3,500 (30) (140) (46) 104 3,000 (333) (22) (43) 2,502 2,500 (475) 2,000 1,699 1,500 1,000 500 H1 2005 Price Exchange Inflation Volume Cash Cost Non-cash Interest Associates Structural & H1 2006 Cost other 43 2006 Interim Results
Slide 44: Regional Analysis
Regional Analysis Operating profit¹ $m H1 2006 H1 2005 South Africa 1,810 1,283 Rest of Africa 314 226 Europe 475 430 Americas 1,805 885 Australasia 159 169 4,563 2,993 1 Operating profit before special items and remeasurements. Includes share of associates. 44 2006 Interim Results
Slide 45: Operating Cost Reconciliation
Operating Cost Reconciliation $m 2005 H1 Operating costs (subsidiaries and share of joint ventures) (12,084) Inflation (229) Exchange 173 Sales volume (200) Depreciation & amortisation (72) Price linked costs (195) Acquisitions, disposals and new operations 812 Structural and other1 55 Cash cost var
Slide 46: Anglo Platinum Reconciliation
Anglo Platinum Reconciliation $m IFRS headline earnings (US$ equivalent) 715 Exploration 15 Exchange rate difference (19) Other adjustments (6) 705 Minority interest (182) Depreciation on assets fair valued on acquisition (net of tax) (31) Contribution to AA plc underlying earnings 492 46 2006 Inter
Slide 47: AngloGold Ashanti Reconciliation
AngloGold Ashanti Reconciliation $m IFRS adjusted headline earnings (published) 226 Exploration 15 241 Minorities’ share of profit during subsidiary period up to 20/04/2006 (69) Depreciation on assets fair valued on acquisition (net of tax) (11) Share of earnings not attributable to AA plc 41.8% sha
Slide 48: De Beers Reconciliation
De Beers Reconciliation $m DBI underlying earnings (100%) 308 Adjustments 9 DBI underlying earnings – AA plc basis (100%) 317 AA plc’s 45% ordinary share interest 143 Income from preference shares 21 Contribution to AA plc underlying earnings 164 48 2006 Interim Results
Slide 49: Creating Long Term Shareholder Value
CREATING LONG TERM SHAREHOLDER VALUE Interim Results 4 August 2006 This presentation is being made only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Pr