Anglo American Plc · LSE:AAL
Anglo American — Anglo American Platinum — Investor Presentation (January 2013)
41 slides from Anglo American's investor presentation, Jan 15, 2013
Slide 1: Creating a Sustainable, Competitive and Profitable Platinum Business
CREATING A SUSTAINABLE, COMPETITIVE AND PROFITABLE PLATINUM BUSINESS 15 January 2013
Slide 2: Disclaimer: Certain Forward-Looking Statements
DISCLAIMER: CERTAIN FORWARD-LOOKING STATEMENTS Certain statements made in this presentation constitute forward-looking statements. Forward looking statements are typically identified by the use of forward-looking terminology such as 'believes', 'expects', 'may', 'will', 'could', 'should', 'intends',
Slide 3: Agenda
AGENDA • Introduction • Overview of platinum mining and demand for PGMs • Proposed operational footprint • Marketing and commercial strategy • Rightsizing and simplifying the overhead structure • Financial & accounting implications • Social plan • Summary 3
Slide 4: Introduction
&S AngloAmerican PLATINUM INTRODUCTION
Slide 5: Key Messages
KEY MESSAGES • Full review of the business across the entire value chain to address the structural challenges that have eroded profitability over time • Taking action to create a sustainable, competitive and profitable platinum business for the long-term benefit of all our stakeholders ‒ Improving t
Slide 6: Background
BACKGROUND • Platinum business has attractive underlying Head grade and UG2 mining profile fundamentals, but structural changes have 6 100% UG2 as % of Merensky + UG2 impacted profitability 80% • Structural challenges leading to higher operating 4 Grade (g/t) costs include: 60% ‒ Increased UG2 minin
Slide 7: Overview of Platinum Mining and Demand for PGMs
OVERVIEW OF PLATINUM MINING AND DEMAND FOR PGMS
Slide 8: Previous Demand Expectations Stimulated the Creation of Over-Capacity
PREVIOUS DEMAND EXPECTATIONS STIMULATED THE CREATION OF OVER-CAPACITY • In 2006 industry forecasted platinum demand Gross platinum demand profile growth of 5% (CAGR) from 2007 to 2012 10,000 Platinum gross demand (koz) • Demand decreased by 0.5% (CAGR) from 2007 8,000 to 2012, versus growth of 5.4%
Slide 9: Primary Supply Facing Structural Challenges
PRIMARY SUPPLY FACING STRUCTURAL CHALLENGES • The structural changes seen over the last 5–10 Significant margin compression years continue to impact margins and returns 550 Platinum mining industry average unit cost +14% Rand platinum price 450 • Unit costs have increased more quickly than the Rand
Slide 10: Global Platinum Primary Supply Grew by 2% While Secondary Supply Grew Faster
OVERALL, GLOBAL PLATINUM PRIMARY SUPPLY GREW BY 2% SINCE 2000 WHILE SECONDARY SUPPLY GREW BY 4–8% • Global primary platinum supply grew by CAGR Global primary platinum supply profile of 1.9% between 2000 and 2011 8,000 Primary platinum supply (koz) • Primary supply from South Africa increased by 6,0
Slide 11: Tough Actions Required to Ensure Long-Term Sustainability of Our Business
TOUGH ACTIONS REQUIRED TO ENSURE THE LONG-TERM SUSTAINABILITY OF OUR BUSINESS Platinum mining industry break-even analysis (cash cost + maintenance capex) Source: Company reports, JP Morgan. Analysis is based on spot prices as at 10 January 2013 Anglo American Platinum (own mines) Anglo American Pla
Slide 12: Proposed Operational Footprint
PROPOSED OPERATIONAL FOOTPRINT
Slide 13: Existing Footprint and Resource Base Support Flexible and Competitive Business
EXISTING FOOTPRINT AND RESOURCE BASE SUPPORT THE CREATION OF FLEXIBLE AND COMPETITIVE BUSINESS 13
Slide 14: Portfolio Review Outcomes and Competitive Advantages
PORTFOLIO REVIEW OUTCOMES AND COMPETITIVE ADVANTAGES Portfolio review outcomes: ‒ Baseline plan is to stop unprofitable production and optimise operating footprint ‒ Increase focus on high quality, low cost, long life and expandable assets ‒ Align output with adjusted demand expectations, while reta
Slide 15: Portfolio Review: Key Recommendations
PORTFOLIO REVIEW: KEY RECOMMENDATIONS 1 ● Production profile would be reduced by ~400,000 ounces per annum to more closely align output with expected demand “Flat” ● Baseline production target of 2.1–2.3 million ounces per annum, with flexibility to meet potential production demand upside retained p
Slide 16: Portfolio Review: Key Recommendations
PORTFOLIO REVIEW: KEY RECOMMENDATIONS 4 ● Place Waterval UG2 concentrator on care and maintenance and construct conveyor to feed Waterval merensky concentrator from Bathopele (R20 million capex) Processing ● Shut one furnace (FCE2) at Waterval smelter ● Place Mortimer Merensky concentrator (Union) o
Slide 17: Proposed Restructuring to Rustenburg Mines
PROPOSED RESTRUCTURING TO RUSTENBURG MINES 17
Slide 18: Union Will Be Managed for Value Prior to Disposal
UNION WILL BE MANAGED FOR VALUE PRIOR TO DISPOSAL Union mine equivalent refined platinum production • Solid operational contribution, both historically profile – previous plan vs recommended option and in current portfolio 400 • Union has significant resource and relatively 350 high grade UG2 ore 30
Slide 19: Key Implications for Processing
KEY IMPLICATIONS FOR PROCESSING ● Capacity at Waterval concentrator complex in Rustenburg reduced by 40% by placing Waterval UG2 concentrator on care and maintenance: ‒ Waterval Merensky retrofit plant will process all ore from the reconfigured Rustenburg mines ‒ Requires the construction of a conve
Slide 20: Plan Aligns with Risk-Adjusted Demand Expectations
PLAN ALIGNS WITH RISK-ADJUSTED DEMAND EXPECTATIONS Equivalent refined platinum production – previous Short-term capital expenditure profile – previous plan vs baseline recommended option plan vs recommended option 3.5 14 12 R11 billion lower than 3.0 previous plan 10 Rand billion 8 2.5 6 Million oun
Slide 21: Proposed Portfolio Retains Flexibility, Reduces Complexity
PROPOSED PORTFOLIO RETAINS FLEXIBILITY, REDUCES COMPLEXITY AND INCREASES OUTPUT FROM MOST ATTRACTIVE ASSETS Production from most attractive assets to increase Operational complexity reduced significantly significantly over the long term 35 100% 32 6% 90% 30 28% 22% 80% 25 24 70% 18 Number of shafts
Slide 22: Marketing & Commercial Strategy
MARKETING & COMMERCIAL STRATEGY
Slide 23: Value Enhancing Commercial Strategy
VALUE ENHANCING COMMERCIAL STRATEGY ● Our new strategy integrates: ‒ Precious metal sales New strategy ‒ Market intelligence ‒ Market development ‒ Improved contract management ● Increased net revenue ● Improved forecast of future precious metal demand Deliverables ● Effective market-development inv
Slide 24: Improved Market Intelligence
IMPROVED MARKET INTELLIGENCE ● Demand views gathered from existing customer base Prior approach ● Demand forecasts mainly in support of long-term supply planning ● Closer cooperation with existing and expanded customer base and New original equipment manufacturers (OEMs) approach ● Supply/demand int
Slide 25: Effective Market Development Investments
EFFECTIVE MARKET DEVELOPMENT INVESTMENTS Prior ● Provided market development funding to global precious metal customers for general purposes approach without project oversight ● Direct investment in high-growth precious metal segments New ● Co-investment with value chain partners approach ● Focus on
Slide 26: Rightsizing and Simplifying the Overhead Structure
RIGHTSIZING AND SIMPLIFYING THE OVERHEAD STRUCTURE TO SUPPORT PROPOSED PORTFOLIO
Slide 27: Corporate and Operational Overhead Positions Reduced by ~1,000
CORPORATE AND OPERATIONAL OVERHEAD POSITIONS REDUCED BY ~1,000 Actions ● Redesigning the current organisational structure in line with optimised operational footprint Rightsizing and ● Eliminating duplication of functional activities through the creation of centres of excellence simplifying organisa
Slide 28: Efficiency and Productivity Improvements Delivering R3.8 Billion in Annual Benefits
EFFICIENCY AND PRODUCTIVITY IMPROVEMENTS DELIVERING R3.8 BILLION IN ANNUAL BENEFITS ● Identified annual benefits of R 2.3 billion per annum including cost reductions of R1.3 billion per annum and revenue enhancement initiatives of R1.0 billion per annum ● Design and implementation to take place in 2
Slide 29: Portfolio Review – Potential Labour Impact on ~14,000 Employees and Contractors
PORTFOLIO REVIEW – POTENTIAL LABOUR IMPACT ON ~14,000 EMPLOYEES AND CONTRACTORS Employees ● Direct mining reductions 10,019 Operations ● Central services reductions 363 placed on ● Employees on capital projects reductions 246 care and ● Direct processing (concentrators, smelters and refineries) redu
Slide 30: Financial & Accounting Implications
FINANCIAL & ACCOUNTING IMPLICATIONS
Slide 31: Financial Implications: Cash Impact
FINANCIAL IMPLICATIONS: CASH IMPACT ● Total gross cash cost of implementing the recommendations of the portfolio review and overheads review expected to be approximately R3.2 billion (to be incurred in 2013) ‒ Implementation of the recommended portfolio option to cost approximately R2.5 billion o Po
Slide 32: Assets Written Off in 2012 as per Trading Statement
ASSETS WRITTEN OFF IN 2012 AS PER TRADING STATEMENT Assets to be written off in 2012 as per trading statement Financial implications: non-cash 2012 impact (Rand billion) ● Separate to the portfolio review, a number of projects and Thembelani 2 shaft 2.2 other assets are not considered economically v
Slide 33: Financial Implications: Non-Cash Impact
FINANCIAL IMPLICATIONS: NON-CASH IMPACT Non-cash impact Potential non-cash impact/write-downs ● Closure and placing of Khomanani mine on 2013 care and maintenance to result in a potential Pre-tax write-down (Rand billion) pre-tax write-down of R1.9 billion in 2013 Khomanani mine 1.9 ● Closure and pl
Slide 34: Social Plan
PLATINUM ™ ns it syle z= <x i QO. 7 < O O Y~)
Slide 35: Comprehensive Social Plan – Commitments and Objectives
COMPREHENSIVE SOCIAL PLAN – COMMITMENTS AND OBJECTIVES ● Labour restructuring is necessary to ensure long-term viability of Anglo American Platinum for the benefit of all stakeholders, including employees ● A large-scale restructuring of this nature requires the Company to compile a comprehensive so
Slide 36: Comprehensive Social Plan – Proposed Jobs Model
COMPREHENSIVE SOCIAL PLAN – PROPOSED JOBS MODEL (TARGETED OFFSET BY END OF YEAR FIVE) 36
Slide 37: Comprehensive Social Plan – Overview and Costs
COMPREHENSIVE SOCIAL PLAN – OVERVIEW AND COSTS ● Immediate “safety net” aspects of the proposed social plan focus on: ‒ Redeployment of affected employees within the Anglo American Group Short-term ‒ Retraining of affected employees in portable skills and support with job seeking action plan ‒ Psych
Slide 38: Summary
PLATINUM SUMMARY
Slide 39: Summary
SUMMARY • Full review of the business across the entire value chain to address the structural challenges that have eroded profitability over time • Taking decisive and proactive action to create a sustainable, competitive and profitable platinum business for the long term benefit of all our stakehol
Slide 40: Appendix
PLATINUM APPENDIX
Slide 41: Anglo American Platinum Product and Revenue Mix
ANGLO AMERICAN PLATINUM PRODUCT AND REVENUE MIX Production volume from own mines declined from …….and was replaced by low-margin ounces from 2.5 moz in 2006 to 1.9 moz in 2011…… JVs, associates and other third parties 3000 100% 90% Platinum production (koz) 2500 Platinum production profile 80% 2000
Anglo American Platinum — Investor Presentation (January 2013) on 6ix