Anglo American Plc · LSE:AAL
Anglo American — BofA Global Metals, Mining & Steel Virtual Conference 2020
65 slides from Anglo American's conference presentation, May 14, 2020
Slide 1: BofA Global Metals, Mining & Steel Virtual Conference
BOFA GLOBAL METALS, MINING & STEEL VIRTUAL CONFERENCE 12-14 May 2020 Modern infrastructure (copper, iron ore, metallurgical coal)
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: Contents
CONTENTS Delivering through volatile times 4-14 Appendix: Simplified earnings & guidance 15-26 Liquidity 27-29 Portfolio overview 30-46 2019 financials 47-49 Our transformation journey 50-53 FutureSmart MiningTM & Sustainability 54-64 33
Slide 4: Delivering Through Volatile Times
DELIVERING THROUGH VOLATILE TIMES
Slide 5: Continued Improvement
CONTINUED IMPROVEMENT Safety Health Environment Group TRCFR1,2 Fatalities1 Occupational health – new cases1,3 Significant incidents1,4 209 30 5.4 4.7 175 159 4.0 15 3.6 3.2 111 11 101 15 2.7 96 9 2.2 6 6 5 4 39 6 6 4 2 1 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 2013 2014
Slide 6: Proactive and Dynamic Response to COVID
PROACTIVE AND DYNAMIC RESPONSE TO COVID WeCare: workforce & Balance sheet & communities assets 66
Slide 7: WeCare Supports Workforce & Communities Where It Is Needed Most
WECARE SUPPORTS WORKFORCE & COMMUNITIES WHERE IT IS NEEDED MOST Prevention Response Recovery Integrated workforce and Implement operating protocols Ensure safe and healthy operations community screening and testing Maintain essential services for Community support (incl. health Support education, jo
Slide 8: Robust Business Able to Respond Flexibly
ROBUST BUSINESS ABLE TO RESPOND FLEXIBLY Transformed business Phased cash conservation measures Since 2012 vs COVID-19 +105% $1.5bn Cu eq prodn per head5 Initial opex and capex reduction7 29% ~$1.5bn Unit cost improvement6 EBITDA benefit from FX and oil prices8 88
Slide 9: Positioned for Recovery
POSITIONED FOR RECOVERY Diamonds Copper Produce to demand Improving efficiency PGMs Bulks Strong refining response Flexible to market needs 99
Slide 10: Continued Transformation
CONTINUED TRANSFORMATION Operating model, P101 and <1.5x Net debt: EBITDA9 FutureSmart MiningTM 20-25% production growth10 45-50% mining margin11 10 10
Slide 11: Portfolio Positioned for a Sustainable Future
PORTFOLIO POSITIONED FOR A SUSTAINABLE FUTURE Consumer world Greener world Electrified world Copper equivalent production10 ~55% ~65% later later cycle cycle Diamonds Copper PGMs Steel making12 Thermal coal Nickel & Manganese Crop nutrients 11 11
Slide 12: Investment Proposition
INVESTMENT PROPOSITION Competitive Differentiated Sustainable Assets Capabilities Returns “Leading capabilities actively improving a competitive, world-class asset base to drive sustainable, attractive returns” 12 12
Slide 13: Q&A: Products That Improve People's Lives
Q&A Copper: renewables-driven electrification PGMs: air quality & lower emissions Diamonds: aspiration & growing prosperity Quality bulks: modern infrastructure development …ARE PRODUCTS THAT IMPROVE PEOPLE’S LIVES 13 13
Slide 14: Footnotes
FOOTNOTES All metrics in presentation shown on an underlying basis. 1. Recordable incidents. Data relates to subsidiaries and joint operations over which Anglo American has management control. Since 2018 data for fatalities, TRCFR and environmental metrics excludes results from De Beers’ joint ventu
Slide 15: Simplified Earnings & Guidance
SIMPLIFIED EARNINGS & GUIDANCE
Slide 16: 2019 Simplified Earnings by BU
2019 SIMPLIFIED EARNINGS BY BU $m (unless stated) De Beers Copper PGMs Kumba Minas-Rio Met Coal Thermal Coal Nickel Other1 Total (Diamonds) (Iron Ore) Sales volume (mined share) 30.8Mct2 644kt 1,402koz Pt3 42.0Mt 22.9Mt 22.4Mt4 26.9Mt5 41.7kt Benchmark price n/a $5,997/t6 n/a $93/t7 $104/t8 $167/t9
Slide 17: 2019 Simplified Earnings by BU - Notes
2019 SIMPLIFIED EARNINGS BY BU - NOTES PGMs basket price Iron ore realised price Coal blended prices & unit costs Own mined Coal weighted average Unit Price Volume Revenue Kumba Minas-Rio Price Volume PGMs basket market prices & unit cost cost Platinum $862/oz 1,402koz $1,208m Market price $93/t7 $1
Slide 18: Guidance Summary (May 2020)
GUIDANCE SUMMARY (MAY 2020) Earnings Capex1 Other Volumes: See slide 19 2020 $4.0-4.5bn Quellaveco copper project Unit costs: See slide 20 - Growth $1.3-1.5bn - Our share of capex included in - Sustaining $2.7-3.0bn capex guidance 2020 depreciation: ~$3bn 2021- $4.7-5.5bn 2020 effective tax rate: 31
Slide 19: Production Outlook as of May 2020
PRODUCTION OUTLOOK AS OF 11 MAY 2020 Units 2018 2019 2020F1 2021F 2022F Diamonds2 Mct 35 31 25-27 34-36 33-35 Previously: 32-24 Chile: 600-660 Copper3 kt 668 638 620-670 620-680 Peru: 100-150 Platinum – M&C4 Moz 2.5 2.15 1.5-1.75 2.0-2.25 2.0-2.25 Previously: 2.0-2.2 Palladium – M&C4 Moz 1.6 1.45 1.
Slide 20: Unit Costs Performance by Business Unit
UNIT COSTS PERFORMANCE BY BUSINESS UNIT De Beers (US$/ct)1 Copper (C1 USc/lb) PGMs (US$/Pt oz)2 Kumba (FOB US$/t) 60 63 ~60 134 126 ~125 1,561 1,543 <1,600 33 ~36 32 2018 2019 2020F 2018 2019 2020F 2018 2019 2020F 2018 2019 2020F Minas-Rio (FOB US$/t)3 Met Coal (US$/t)4 Thermal Coal SA export (US$/t
Slide 21: Earnings Sensitivities
EARNINGS SENSITIVITIES Impact of 10% change Sensitivity Analysis – 20191 in price / FX Commodity / Currency 31 December spot Average realised EBITDA ($m) Copper (c/lb)2 279 273 378 Platinum ($/oz) 971 861 140 Palladium ($/oz) 1,920 1,518 185 Rhodium ($/oz) 6,050 3,808 83 Kumba: 97 Iron Ore ($/t) 92
Slide 22: High-Returning Growth Drives Near-Term Capex
HIGH-RETURNING GROWTH DRIVES NEAR-TERM CAPEX $4.7 - 5.5bn +$0.3bn Woodsmith in 2021 $4.0 - 4.5bn Includes Woodsmith 1.5-2.0 Growth 1.3-1.5 3.2-3.5 Sustaining 2.7-3.0 2.8-3.1 2020F1 2021-22F Long-term per annum1 sustaining1 Excludes Mitsubishi share of Quellaveco capex1 which is: ~$0.5-0.6bn ~$0.5bn
Slide 23: Attractive Greenfield and Brownfield Options
ATTRACTIVE GREENFIELD AND BROWNFIELD OPTIONS Long life greenfields and fast returning brownfields1 Our share: From: Quellaveco (Copper) $2.5bn to $2.7bn1 +180ktpa 2022 ~4 year payback >15% IRR >50% margin Marine Namibia (Diamonds) ~$0.2bn +0.5Mctpa 2022 ~3 year payback >25% IRR >60% margin Moranbah-
Slide 24: Life Extensions Will Deliver Value; Higher Near-Term Sustaining Capex
LIFE EXTENSIONS WILL DELIVER VALUE; HIGHER NEAR-TERM SUSTAINING CAPEX 2020 sustaining capex1 2021-22 sustaining capex1,2 Long-term sustaining capex1 $2.7-3.0bn pa $3.2-3.5bn pa ~$2.8-3.1bn driven by lifex driven by lifex for expanded portfolio Lifex projects – subject to disciplined capital allocati
Slide 25: Quellaveco Financial Modelling
QUELLAVECO FINANCIAL MODELLING Ownership Anglo American 60%, Mitsubishi 40% Accounting treatment Fully consolidated with a 40% minority interest Shareholder loans from minority shareholder to be consolidated in Anglo American Group net debt Project capex (nominal) $5.0-5.3 billion (100% basis - Angl
Slide 26: Quellaveco Accounting
QUELLAVECO ACCOUNTING Anglo American consolidates 100% of Quellaveco’s P&L and Balance Sheet. Mitsubishi’s 40% share is shown as a non-controlling interest. After the initial $0.8bn equity injection by Mitsubishi, the project is now funded 60:40 through shareholder debt. Group net debt by the end of
Slide 27: Liquidity
AngloAmerican LIQUIDITY Real Mining. Real People. Real Difference.
Slide 28: Strong Liquidity of $14.5bn
STRONG LIQUIDITY OF $14.5BN1 $6.9bn1 Majority of cash held centrally in US dollars Cash + Investment grade credit ratings $7.6bn Undrawn committed facilities No plc covenants 1. As at 31 March 2020 including $1.5bn US bond issuance that priced on 1 April. 28 28
Slide 29: Limited Near-Term Debt Maturities
LIMITED NEAR-TERM DEBT MATURITIES Debt repayments1 ($bn) 2.1 1.9 1.4 1.1 1.0 1.1 0.9 0.7 0.6 0.5 0.4 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030+ Subsidiary Euro Bonds US$ Bonds GBP bond Other Bonds Financing % of portfolio 36% 53% 3% 1% 7% Bank 2% Capital markets 94% Other 5% US bonds Eu
Slide 30: Portfolio Overview
PORTFOLIO OVERVIEW New image Copper: renewables-driven electrification PGMs: air quality & lower emissions Diamonds: aspiration & growing prosperity Quality bulks: modern infrastructure development
Slide 31: Asset Quality Driven Portfolio
ASSET QUALITY DRIVEN PORTFOLIO Diamonds Copper World leader World class growth 43% margin1 44% margin1 PGMs Bulks World leader High quality niche 40% margin1 43% margin1 1. Margin represents the Group’s underlying EBITDA margin for the mining business. It excludes the impact of non-mining activities
Slide 32: De Beers: World Leader in Diamonds
DE BEERS: WORLD LEADER IN DIAMONDS Best-in-class business… …focused on consumers Global demand3 EBITDA mining margin1 Rest of world ~43% India Gulf USA China Trading margin (typical level) 2 Self purchases3 Millennials4 ~7% ~30% ~60% of demand of US demand 1. Represents the underlying EBITDA margin
Slide 33: A Growing, World Class Copper Business
A GROWING, WORLD CLASS COPPER BUSINESS Quality assets with growth High value portfolio with long term potential Collahuasi 249ktpa 1 (our share) ~1Mtpa at ~120c/lb 1 Los Bronces 335ktpa 1 With further growth potential from: • existing assets Quellaveco • new projects • exploration ~300ktpa 1 1. Repo
Slide 34: Quellaveco – A World Class Copper Project
QUELLAVECO – A WORLD CLASS COPPER PROJECT Attractive returns Focus on execution Successfully syndicated Low cost with significant All key permits in place, syndication transaction in further potential execution progressing well 2018 IRR Payback Mitsubishi subscription > 15% 4 years $851m Real, post-
Slide 35: World Leader in PGMs
WORLD LEADER IN PGMs Asset focused Own mined production split by volume $3,433/oz Mogalakwena Other Platinum 3% 8% 2% Base metals Palladium 56% Palladium Rhodium Gold Ruthenium 6% 46% Mining EBITDA margin Platinum Iridium Basket price Other 35% Own mined production split by revenue Amandelbult Trans
Slide 36: PGMs Market
PGMS MARKET Platinum demand1 Basket price driven by Pd and Rh Jewellery Other autocatalysts ~22% ~13% European light duty autocatalysts ~10% Industrial & other ~55% ICE/hybrid demand is set to grow2 Rhodium ~107m units +176% ~95m units 2% 5-10% PGM Basket 98% 90-95% +70% Palladium +56% 2019 2026F Pl
Slide 37: Structural Trends Favouring High Quality Bulks
STRUCTURAL TRENDS FAVOURING HIGH QUALITY BULKS Iron ore: premium, high grade products Metallurgical coal: world class operations Kumba production Minas-Rio production High quality portfolio ~64%Fe ~67%Fe 83% of which 67% is lump Pellet feed products Hard coking coal1 Production (Mt) Production (Mt)
Slide 38: Project Update
PROJECT UPDATE Quellaveco (Copper) Marine Namibia (Diamonds) 2020 capex (100%) 2020 capex1 ~$1.2-1.5bn ~$0.1bn Our share1: ~$0.7-0.9bn High value diamonds 3 month suspension Construction under way Capex guidance & first production maintained Woodsmith (Crop Nutrients) Aquila (Met Coal) 2020-21 capex
Slide 39: Sirius Minerals: A Compelling Fit and Opportunity
SIRIUS MINERALS: A COMPELLING FIT AND OPPORTUNITY Clear Strategic Fit Competitive Product Well Progressed Project Potential Tier 1 asset Multi-nutrient, low-chloride Attractive returns Long life, low cost, scaleable, POLY4 contains established nutrients, $1.1bn invested, key permits in place, minima
Slide 40: Portfolio Overview – Key Assets
PORTFOLIO OVERVIEW – KEY ASSETS De Beers Copper Botswana (Debswana) Los Bronces Namibia (Namdeb) Collahuasi South Africa (Venetia) Quellaveco project Trading PGMs Bulks Minas-Rio (Iron ore) Mogalakwena Kumba (Iron ore) Amandelbult Moranbah-Grosvenor (Met coal) Processing Thermal coal, Nickel & Manga
Slide 41: Business Unit Leadership
BUSINESS UNIT LEADERSHIP De Beers Base Metals Strategy Bruce Cleaver Ruben Fernandes Duncan Wanblad PGMs Bulks Marketing Natascha Viljoen Seamus French Peter Whitcutt 41 41
Slide 42: Asset Quality: Differentiated Portfolio
ASSET QUALITY: DIFFERENTIATED PORTFOLIO Revenue by product1 Capital employed by geography2 Nickel and Manganese Other 5% 5% Thermal coal PGMs Australia 6% 23% 11% Brazil 26% Met coal 13% Diamonds (De Beers) 16% Chile, Peru & Colombia Iron ore 24% 20% South Africa Copper Namibia & 24% 13% Botswana 14
Slide 43: Our Asset Improvement Journey
OUR ASSET IMPROVEMENT JOURNEY Group 2019 2013 Group 36th percentile 49th percentile Diamonds (De Beers) Copper PGMs Iron Ore Met Coal Thermal Coal Manganese Nickel Nickel & Manganese Average margin adjusted Q1 Q2 Q3 Q4 cost curve position1 1. Estimate based on data available at H1 2019. Source: Wood
Slide 44: Leading Margin Curve Improvement
LEADING MARGIN CURVE IMPROVEMENT Average margin adjusted cost curve position1 (%) 49% 47% 13 p.p. 45% 43% 38% 36% 36% 36% 34% 27% Peer 1 Peer 2 Peer 3 Peer 4 Anglo 2013 2019 1. Estimate based on data available at H1 2019. Source: Wood Mackenzie; AAP; De Beers; CRU. Includes non-AA mined commodities
Slide 45: High Quality Diversified Portfolio
HIGH QUALITY DIVERSIFIED PORTFOLIO ~1Mt copper #10 producer currently, #7 post Quellaveco1 ~37Mct diamonds (De Beers) #1 producer by value, #2 by volume ~5Moz PGMs #2 producer ~75Mt high grade iron ore #5 export producer ~30Mt premium coking coal #3 export producer ~30Mt export thermal coal #5 expor
Slide 46: Commodity Outlook
COMMODITY OUTLOOK Medium-to-long term commodity outlook • Demand robust medium to long term. China remains main driver. Green economy presents upside. Copper • Supply remains uncertain from mid 2020s. • Growing disposable income drives demand. Diamonds • Supply peaking due to mine exhaustion. • ICE/
Slide 47: 2019 Financials
Ansioamerican 2019 FINANCIALS Real Mining. Real People. Real Difference.
Slide 48: 2019 Results
2019 RESULTS EBITDA1 Buyback Capital expenditure3 $10.0bn $0.8bn $3.8bn Unit cost2 Dividends Free cash flow4 6% $1.09/sh $3.4bn 1. Underlying EBITDA is operating profit before special items and remeasurements adjusted to include the Group’s attributable share of associates’ and joint ventures’ opera
Slide 49: Minas-Rio Drives EBITDA Improvement
MINAS-RIO DRIVES EBITDA IMPROVEMENT $bn (0.1) 0.4 (0.1) (0.1) 0.1 Copper PGMs Kumba External factors 0.1 (0.1) 0.6 0.4 0.4 108 10.0 (0.5) 9.4 9.2 Diamonds midstream market 2018 Price2 Currency Minas-Rio Cost & Other 2019 EBITDA1 & CPI3 recovery volume4 EBITDA1 1. Underlying EBITDA as per slide 48 de
Slide 50: Our Transformation Journey
AngloAmerican OUR TRANSFORMATION JOURNEY SSS =<
Slide 51: A Transformed Business…
A TRANSFORMED BUSINESS… Production index1 +105% Productivity2 Productivity index2 Portfolio restructuring Cu Eq unit cost3 108 (29)% Operating model and Unit costs3 technical improvements 2012 2013 2014 2015 2016 2017 2018 2019 1. Copper equivalent production is calculated using long-term consensus
Slide 52: …With an Improved Competitive Position
…WITH AN IMPROVED COMPETITIVE POSITION Average quality adjusted cost curve position1 47% Improved from 49th percentile (in 2013) Peer range 36% 34% 108 Anglo American Peers 1. Estimate based on data available at H1 2019. Source: Wood Mackenzie; AAP; De Beers; CRU. Includes non-AA mined commodities (
Slide 53: Delivering Margin Improvement
DELIVERING MARGIN IMPROVEMENT Mining EBITDA margin1 +40% 42% 30% Commodity price basket down 5% 2012 2019 1. Margin represents the Group’s underlying EBITDA margin for the mining business. It excludes the impact of non-mining activities (eg PGMs purchases of concentrate, sale of non-equity product b
Slide 54: FutureSmart Mining
FUTURESMART MININGTM Our innovation-led approach to sustainable mining
Slide 55: Innovation Driving Sustainability
INNOVATION DRIVING SUSTAINABILITY 1900 Today Future? 40kg Cu: 0.5% Cu 6m3 water 4% Cu 1t waste 3m3 water 10 KWhr 24t waste 160 KWhr 1t ore 8t ore Ever increasing scale Precise. Predictable. Reliable 55 55
Slide 56: Operational Excellence Underpins Transformation
OPERATIONAL EXCELLENCE UNDERPINS TRANSFORMATION Operating Model: delivering stable & predictable outcomes Stabilisation at higher Work is planned, scheduled and properly resourced performance Stable and consistent performance Stabilisation Further improvement at still higher Safer and lower cost imp
Slide 57: Innovative Technologies in Development & Roll-out
INNOVATIVE TECHNOLOGIES IN DEVELOPMENT & ROLL-OUT Bulk Ore Sorting Coarse Particle Recovery Sensors determine ore content prior to processing Flotation process changed Waste rejected early: Allows material to be crushed to larger particle size: • Grade/throughput improvement; +5% to 25% • 20% more t
Slide 58: Water Management Integral to the Business
WATER MANAGEMENT INTEGRAL TO THE BUSINESS New technologies Bulk ore sorting to pre-concentrate Coarse particle recovery to allow water abstraction from tailings Management of key operational risks Improving efficiencies Grey water usage at Los Bronces Evaporation management 2030 target Investment Po
Slide 59: Energy Efficiency and GHG Emission Reductions
ENERGY EFFICIENCY AND GHG EMISSION REDUCTIONS Energy usage 2030 target Renewable energy usage Increased efficiency 30% Reduction in energy usage Total energy usage: 87 million GJ (2018: 84 million GJ) 2030 target Greenhouse Gases Gas capture 30% Reduction in GHG emissions Total CO2 eq emissions: 17.
Slide 60: Our Responsible Transition Out of Thermal Coal
OUR RESPONSIBLE TRANSITION OUT OF THERMAL COAL Coal demand Production down 54% since 2012 Thermal coal makes up ~38% of the global electricity mix Production (Mt) Thermal coal1 as % Group revenue 82 80 79 IEA & other forecasts see a significant role for thermal coal in the global 74 74 6% 62 energy
Slide 61: Industry Leading Dam Safety Management
INDUSTRY LEADING DAM SAFETY MANAGEMENT Managing tailings safely Tailings dams in our portfolio Group Technical Specialists Internal risk assurance Independent Downstream/ other TRP BU Technical Standard expert Engineer of Record Upstream Southern Australia Operation Africa 6 levels of assurance: 2 i
Slide 62: Our Contribution to Society
OUR CONTRIBUTION TO SOCIETY Taxes Paid to governments $3.0bn Wages and benefits Paid to employees and contractors $3.5bn Local procurement Paid to suppliers $3.8bn 62 62
Slide 63: A Sustainable, Responsible & Transparent Business
A SUSTAINABLE, RESPONSIBLE & TRANSPARENT BUSINESS Recognised as a sustainability leader in our sector #2 in diversified mining overall with the highest Top extractives company (including oil and management scores in the sector. Perceived risk gas) in the FTSE 100 based on commitments associated with
Slide 64: Additional Ratings & Accreditations
ADDITIONAL RATINGS & ACCREDITATIONS BBB (average) in line with peers Additional ESG ratings 71/100 and included in European Index. Rated ‘Industry Mover’ Rated as prime – placing us as joint top mining company Accreditations & memberships 64 64
Slide 65: Investor Relations
INVESTOR RELATIONS Paul Galloway paul.galloway@angloamerican.com Tel: +44 (0)20 7968 8718 Robert Greenberg robert.greenberg@angloamerican.com Tel: +44 (0)20 7968 2124 Emma Waterworth emma.waterworth@angloamerican.com Tel: +44 (0)20 7968 8574 65 65
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