Anglo American plc · LSE:AAL
Anglo American — Investor Day (December 2013)
104 slides from Anglo American's investor day presentation, Dec 12, 2013
Slide 1: Driving Value: Understanding the Potential
DRIVING VALUE UNDERSTANDING THE POTENTIAL Investor Presentation, 12 December 2013
Slide 2: 1918-2013
1918-2013 2
Slide 3: 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 4: Agenda
AGENDA Setting context Mark Cutifani Asset reviews & operational priorities Duncan Wanblad, Tony O’Neill, Mark Cutifani Q&A Break Commercial model Peter Whitcutt Focus on capital René Médori Safety, sustainability & engagement Mark Cutifani Conclusion Mark Cutifani Q&A 4
Slide 5: Presenters
PRESENTERS Mark Cutifani Chief Executive Tony O’Neill René Médori Group Director Finance Director Technical Peter Whitcutt Group Director Duncan Wanblad Strategy, Business CEO Base Metals and Development & Minerals Commercial 5
Slide 6: Organisation
ORGANISATION We have implemented a new organisation structure … Chief Executive Chief Executive's Office Mark • Business Process Model Cutifani • Driving Value programme Executive Director Human Resources Technical Strategy, Business Finance Kumba Iron Ore Coal Base Metals and Platinum De Beers RSA
Slide 7: What Are You Going to Hear?
WHAT ARE YOU GOING TO HEAR? We have focused our discussions around those assets and issues… 1. The BIG TICKET asset opportunities 3. Major project progress report • Sishen recovery and optimisation • Minas-Rio update • Platinum restructuring and 4. New development opportunities reconfiguration appro
Slide 8: Anglo American - World Class Asset Base
ANGLO AMERICAN - WORLD CLASS ASSET BASE… Iron Ore – Sishen, Kolomela Copper – Los Bronces Copper – Collahuasi Diamonds – Jwaneng Platinum – Mogalakwena Met. Coal – Moranbah North 8
Slide 9: ...and World Class People
...AND WORLD CLASS PEOPLE
Slide 10: Second Impressions...Understanding the Detail
SECOND IMPRESSIONS…UNDERSTANDING THE DETAIL We have now completed the review of our asset portfolio... • Large, scalable resources across diversified commodity portfolio………………….a unique set of options. • High quality assets with potential to deliver better margins and returns: Opportunities to bet
Slide 11: Setting Industry Context
SETTING INDUSTRY CONTEXT Since 2006 industry ROCE has dropped significantly... Estimated mining industry ROCE • Commodity prices have dropped from 10 year highs • Companies over capitalised their assets in pursuing 24% growth at any cost • Takeovers “at any price” driven by desire to dominate market
Slide 12: Setting Our Strategic Context
SETTING OUR STRATEGIC CONTEXT We need to focus on what we have to do well in resources... Discovery Being effective explorer Capital Allocation Exploitation Commodity, country and Developing, mining and asset logistics Marketing Industry structure and pricing …to ensure we can deliver returns and ca
Slide 13: Diversified Commodity Mix
DIVERSIFIED COMMODITY MIX We have a diversified and high quality commodity portfolio... Share of 2012 EBITDA by commodity Commodity Diversification Peer 1 Peer 2 Peer 3 Peer 4 DIVERSIFIED Aluminium Metallurgical Coal Nickel Diamonds Alloys Iron ore Thermal Coal Zinc Petroleum MINER Manganese Copper
Slide 14: Diversified Geographic Base
DIVERSIFIED GEOGRAPHIC BASE Our asset base is geographically diversified... Average attributable capital employed by geography 31% 27% 11% 14% 6% 4% 19% 30% 8% 4% 9% 17% 4% 10% 4% 2% 2012 2016 South Africa North America Chile Rest of Africa Australia Brazil Other South America Other …and will contin
Slide 15: Asset Focus - Margins and Returns
ASSET FOCUS – MARGINS AND RETURNS We are focused on assets and associated industry positioning... Hitting the target zone supports improved Industry margins and returns structure Competitive Resource position quality …to help focus our capital allocation decisions. 15
Slide 16: Portfolio Position - Asset Performance
PORTFOLIO POSITION – ASSET PERFORMANCE Structured approach to asset driven portfolio strategy… Assets Copper Diamonds Iron Ore Niobium/Phosphates Coal Manganese Bubble size = 2012 operating profit: Nickel <US$50m US$50-100m Platinum >US$100m Q4 Q3 Q2 Q1 Industry Margin / Cost Curve Quartile …where c
Slide 17: Portfolio Position - Asset Performance
PORTFOLIO POSITION – ASSET PERFORMANCE Structured approach to asset driven portfolio strategy… % of 2012 Total EBIT 86% Target asset position 68 Smaller, higher cost assets 70 60 50 40 30 20 18 10 10 4 0 Q1 Q2 Q3 Q4 Industry Margin/Cost Curve Quartile …majority of profits from low cost assets. Sourc
Slide 18: From Our Last Conversation - Business Execution
FROM OUR LAST CONVERSATION - BUSINESS EXECUTION We talked about our immediate challenges... Platinum restructure Implementation now in process • Rebuilding pit development strategy…….in progress Kumba revitalisation AMSA dispute resolved Copper production delivery Collahuasi and Los Bronces pe
Slide 19: The Plan to Address the Headwinds
THE PLAN TO ADDRESS THE HEADWINDS... Los Bronces grades/El Soldado fault impacting production ~50-60kt lower production Copper Los Bronces and El Soldado stripping and process debottlenecking Plan ~150kt higher production Collahuasi stripping to access higher grade ore / increased throughput Sishen
Slide 20: Focus on Returns - A Key Measure of Performance
FOCUS ON RETURNS – A KEY MEASURE OF PERFORMANCE We are making good progress in identifying the steps to achieving our ambition… On-going LoM Attributable ROCE (%) / EBIT Impact ($bn) (1) (2) strategy reviews 1.3 Identified Upside >15% Defined Plans 1.2 Identified Upside Defined Plans 0.9 Minas-Rio,
Slide 21: ...and Capital Allocation
…AND CAPITAL ALLOCATION We have applied a more stringent capital allocation model... Pebble project withdrawal Non-core asset sales deliver c.$400m cash returns Sustaining capital controls tightened…“Investco” criteria rebuilt Project pipeline recalibration – focus on exploration and study c
Slide 22: Key Messages
KEY MESSAGES We have defined where we are going and what needs to be done… Asset review completed and opportunities identified • Key risks have planned mitigation plans in place • Improvement opportunities are in planning and execution • Commercial model in place and delivering improved margins
Slide 23: Asset Review
ASSET REVIEW DUNCAN WANBLAD • Approach • Process and methodology • Findings
Slide 24: The Pathway to Value
THE PATHWAY TO VALUE Improvement efforts cover the full pathway to value curve… Pathway to value* Optimise Enhance management operating strategy system Value creation Ore body Methods & Operating Planning & Best Continuous Resource-to- Capability Design Parameters Scheduling Practices Improvement ma
Slide 25: We Reviewed All Our Operating Assets
WE REVIEWED ALL OUR OPERATING ASSETS Canada South Africa • Snap Lake • ACP • KPM* • Siphumelele • Trend Roman • Amandelbult • Kriel • Sishen • Victor • Bathopele • Landau • Thabazimbi • Bokoni* • Mafube* Thembalani • BRPM* Modikwa* • Tumela • Dishaba Mogalakwena • Twickenham Brazil • Goedehoop • Mor
Slide 26: 20 Assets Represent ~80% of EBIT
20 ASSETS REPRESENT ~80% OF EBIT 2012 EBIT Wave 1 Wave 2 Wave 3 Other Diamonds Platinum Kumba Met Coal Thermal Coal 13 assets 33 assets 11 assets Copper 74% of operating 21% of revenue 5% of revenue profit Nickel Note: For illustrative purposes only 26
Slide 27: Approach Followed
APPROACH FOLLOWED Five key questions have been addressed in the Asset Reviews… What is the likelihood of meeting 1 the 2013 Budget ? Is there a material delivery risk 2 to budgets in 2014 and 2015? What are the key risks faced 3 by the assets? 4 What is the asset's full potential? A Capability vs. b
Slide 28: Process Stability Is Key to Improved Performance
PROCESS STABILITY IS KEY TO IMPROVED PERFORMANCE Further improvements implemented with little initial process stability Stabilisation of processes at a higher performance Stabilisation of processes at still higher performance Low stability and high variation of performance µ µ (751th Pct.) Timeline
Slide 29: Operational Priorities: Pathway Approach
OPERATIONAL PRIORITIES: PATHWAY APPROACH Asset Review benefits realisation examples exploiting different Focus of improvements per mine aspects of the Pathway to Value 1• Sishen: optimise mine design to ensure optimal waste stripping; Optimise Enhance operating strategy management systems plus minin
Slide 30: We Found Some Systemic and Specific Opportunities
WE FOUND SOME SYSTEMIC AND SPECIFIC OPPORTUNITIES Comprehensive view on systemic opportunities and root causes developed… Description Our approach to improve Opportunities and themes identified across all our operations Identify root causes and overall Systemic organisation and business process oppo
Slide 31: Copper: Los Bronces
COPPER DUNCAN WANBLAD LOS BRONCES • Location: Chile • Ownership: 50.1% Anglo; 29.5% Codelco and Mitsui JV; 20.4% Mitsubishi • Product: Copper (Moly by-product) • Mining method: Open pit • Processing: Concentrate, Cathode • LoM: 36 yrs (2049 – LOM plan)
Slide 32: Copper: Production and Grades
COPPER: PRODUCTION AND GRADES Grade variability and increasing ore hardness would… Copper production maintained to 2016 Variable copper grades in the near term (% Cu)1 0.90% 660kt 0.85% 0.80% 0.75% Los Bronces Reserve grades2 Avg 2012-2017: 0.81% Reserves: 0.61% 0.70% 2012 2013 2014 2015 2016 2012 2
Slide 33: Los Bronces
LOS BRONCES Challenges we are facing at Los Bronces… Los Bronces challenges in 2010... • Mine development behind plan Los Bronces ore phases • Mining operation inefficiencies Don01 Cas02 Inf05 Inf07 Don02 • Plant processing constraints 100% 90% • Recovery challenges 80% • Variation in ore grade 70%
Slide 34: Collahuasi
COLLAHUASI Improved performance at Collahuasi…. • Focus on operational stability and maximising existing asset potential given current production limitations (largely governed by water supply and the existing plant) • Less variability and higher throughput achieved through improved mine to plant coo
Slide 35: Quellaveco Project
QUELLAVECO PROJECT Very large ore body with attractive grades… • Located in Southern Peru in an established mining district • Resources of 1.5Bnt at 0.60% Cu and 0.020% Mo, remaining open at depth and to the north west • Feasibility Study and related permit modifications for a larger scale project b
Slide 36: Sishen Mining Strategy
SISHEN MINING STRATEGY TONY O’NEILL Location: South Africa Ownership: 51.5% (73.9% by Kumba Iron Ore) Product: Iron Ore Mining method: Open pit Processing: Open pit feeding DMS & JIG plants LoM: +17 years Costs: Second quartile
Slide 37: Sishen Mine
SISHEN MINE “Business as usual” ore produced Ore Mt ~33 ~34 ~30 ~31 2013 2014 2015 2016 Waste profile (Mt) 175 220 255 270 37
Slide 38: Sishen Mine Current Status
SISHEN MINE CURRENT STATUS Ore Exposure Status at Sishen Profile of Sishen pit Profile of Sishen pit – current pit and remaining ore/waste • Sishen ore body dips and thins to the west, resulting in a rising strip ratio Current pit Waste • Sishen now has an accumulated waste stripping deficit and red
Slide 39: Sishen Mine: Reschedule Key Inputs
SISHEN MINE: RESCHEDULE KEY INPUTS Spatial waste to ore ratio Push back sink ratio Future +60m cuts Pushback 80m Sink Rate Waste Laminated & Massive Ore 39
Slide 40: Sishen Mine: Push Back Re-design
SISHEN MINE: PUSH BACK RE-DESIGN & PUSH BACK 2 FOCUS AREA Mining direction • Pit design re-optimised to take into account ore “written off” • Push backs re-designed including rotating mining direction in some areas through 90 degrees • Optimised “smaller” push backs and design changes enables faster
Slide 41: Sishen Video
SISHEN VIDEO 41
Slide 42: Sishen Mine: Video Clips on Current Design and Re-design
SISHEN MINE: VIDEO CLIPS ON CURRENT DESIGN & RE- DESIGN PUSH BACKS • Current designs Final Pit Outline Waste Material Clay Material Constraint Material (Ore and Waste) * Constraint Material : different loading rates - the loading rates is generally lower than the waste or clay material above it • Re
Slide 43: Sishen Mine: The Scenarios
SISHEN MINE: THE SCENARIOS Production profile of long term do nothing Production profile incorporating re-design and optimisations of push backs Mt Mt ~36 ~37 ~35 ~33 ~34 ~30 ~30 ~31 2013 2014 2015 2016 2013 2014 2015 2016 Waste Waste 175 220 255 270 175 220 255 270 Profile (Mt) Profile (Mt) 43
Slide 44: Minas-Rio
MINAS-RIO TONY O’NEILL Location: Brazil Ownership: Mine 100%; Port 49% LoM: ~60 years Production: Phase 1 26.5 Mtpa (wet) Resource of 5.7Bt Mining method: Open cut – truck & shovel Product: Iron Ore (68% Fe), low contaminant pellet feed Cash unit costs: c.US$33-35/t (wet) First Ore
Slide 45: Minas-Rio Project
MINAS-RIO PROJECT Fully integrated mine and infrastructure… Minas-Rio • Total Resource of 5.7 Bt Linhares • Life of Mine: ~60 years Belo Horizonte • Fully integrated mine-to-ship Samarco N infrastructure Vitória • Design capacity of 26.5Mt (wet) • High grade (68% Fe), low contaminant 0 50 100km CSN
Slide 46: Minas-Rio Video
MINAS-RIO VIDEO 46
Slide 47: Minas-Rio Progress
MINAS-RIO PROGRESS 82% complete in November… Pl • Operational readiness preparation • Pre-stripping activities finalised Mine • Application to convert from LI to LO on-going • Over 600 operational employees already hired • 80% overall progress Beneficiation • 100% transmission line towers erected Pl
Slide 48: Minas-Rio Update
MINAS-RIO UPDATE Project schedule for first ore on ship (FOOS) remains end 2014… 2013 2014 H1 H2 H1 H2 Mine access approved Mine Cave 1 Start of 1st off-road truck Conclusion of Mine fleet suppression pre-stripping ready for pre-stripping operational operation (2M m3) Piping & electrical Beneficiati
Slide 49: Minas-Rio Financials
MINAS-RIO FINANCIALS Cash unit cost up $3/t… FOB cash cost To be spent breakdown ($bn) 1st 18 yrs Avg. (Real 2014 terms) $10/t - $11/t 8.8 5.7 Contingency Mine $9/t 3.1 Beneficiation 0.6 $2/t 2.5 Pipeline Approved Budget Spend to 31 Dec 2013 To be Spend $1/t Opex FOB cash cost ($/wmt) Filtration Fri
Slide 50: Platinum Restructuring Update
PLATINUM RESTRUCTURING UPDATE MARK CUTIFANI • Current • Future possibilities
Slide 51: The Strategy in Context
THE STRATEGY IN CONTEXT We need to reconstruct the business to ensure returns in a weak platinum pricing environment… 2004 - 2012 2013-2016 2016 & beyond Tonnes Head Grade Milled (k) (4E) RESTRUCTURE RECONFIGURE 40,000 5.0 • Drive growth from • Focus on 4.5 operations and high productivity 35,000 ef
Slide 52: Restructuring - Progress Update
RESTRUCTURING – PROGRESS UPDATE We are executing our restructuring plan… Rationalise Rustenburg operations into 3 mines Blasting stopped at Khomanani 1 & 2 and Khuseleka 2 in August 2013 Reduction of 7,450 positions by the end of 2013 Reductions comprise 5,150 employees leaving the organisat
Slide 53: Organisation Transformation - On Track
ORGANISATION TRANSFORMATION – ON TRACK 96% progress made, and on track to meet FY13 plan… Employees affected 8,000 7,450 3,650 200 7,182 7,000 6,000 5,000 4,000 1,300 3,000 2,300 2,000 2,300 Redeployed 1,000 0 Total redeployed Total contractors Total VSPs Other Total FY13 estimated Actual positions
Slide 54: Mogalakwena
MOGALAKWENA MARK CUTIFANI • Location: South Africa • Ownership: 80% (100% owned by Anglo American Platinum) • Product: PGMs, nickel, copper • LoM: 60+ years • Mining method: Open pit • Processing: Two concentrators on site • Reserves (4E): ~89.1 Moz • Indicative Nickel and Copper content: Nickel ~1.
Slide 55: Overview
OVERVIEW A large scale platinum resource that provides new possibilities… Only operating Platinum mine on Northern Limb Mineral Resources by Reef Type1 Contained 4E million troy ounces Mogalakwena 328.8 264.9 197.1 UG2 Merensky Platreef (Mogalakwena) • Platreef can support open pit mining deeper tha
Slide 56: Mogalakwena - A Significant Resource
MOGALAKWENA – A SIGNIFICANT RESOURCE A resource of size and quality provides a range of development options… 2012 Contributing operating margin (%) (2) 40.0 Mogalakwena Mototolo (JV) 20.0 Dishaba Kroondal (JV) Modikwa (JV) Unki (JV) Siphumelele 0.0 Tumela Bathopele Union (North & South) Khuseleka Kh
Slide 57: ...But Has Not Met Plan in Recent Years
...BUT HAS NOT MET PLAN IN RECENT YEARS Several key issues were identified during the Asset Reviews… • Mining strategy can be optimised……………….to reduce waste stripping • Extraction strategy can be improved……………to reduce cost structures • Mining productivities across all processes……………..can be improv
Slide 58: Mining Strategy Improvements
MINING STRATEGY IMPROVEMENTS Mining strategy improvements materially impact potential… Improved design and optimised scheduling Decreased strip ratio(1) 3 Business Plan 2014 2 Business Plan 4 Strip ratio Mining strategy improvements 1 2014 5 15 6 7 5 9 7 6 7 11 4 13 11 12 6 5 13 Twf North 10 14 15 1
Slide 59: Process Improvements
PROCESS IMPROVEMENTS …and improvement in key processes is already enhancing flexibility • Pit layout can deliver higher productivity • Production in 2013 now on track for record platinum ounces…early improvements in drill and blast has driven the increase • Mean daily tons mined rate up 38% YTD, now
Slide 60: Optimisation: Steps to Delivery
OPTIMISATION: STEPS TO DELIVERY Improvement steps Description Production volume impact • Improved stockpiling approach • Optimised cut-back layout and Cost reduction impact Mining strategy Improvements in underlying schedule improvements efficiencies will help reduce • Simultaneous consecutive bench
Slide 61: Targets - 2014 Milestones
TARGETS – 2014 MILESTONES We are looking to incrementally increase Mogalakwena in the mix… • Resource / Reserve update in March • Commissioning new rope shovel • 15m bench heights support productivity improvements in the South pit • Process upgrades improve sink rates • Design and implement change t
Slide 62: Moranbah North
MORANBAH NORTH MARK CUTIFANI • Ownership: 88% Anglo American • LoM: 35 years • Location: Australia • Product: Metallurgical Coal • UG/OC: Underground • Mining method: Longwall
Slide 63: Business Execution - The Foundations for Delivery
BUSINESS EXECUTION – THE FOUNDATIONS FOR DELIVERY We are using a structured approach to improve our performance… Key Components of the Business Process Framework Underlying theory: Labour, 1. Doing the right work, at Materials & Equipment the right time Operational Set Work in the right way Expendit
Slide 64: Longwall Performance Improvements
LONGWALL PERFORMANCE IMPROVEMENTS New leadership team implemented processes ...which led to significant performance improvement to address key issues and risks... compared to historical performance Longwall cutting hours / week Saleable production single longwall (Mtpa) +72% Avg hrs: 5.5 Avg hrs: 10
Slide 65: Grasstree Mine: Learnings Replicated
GRASSTREE MINE: LEARNINGS REPLICATED …and we are extending the process in coal… Longwall cutting hours/week Saleable production (Mtpa) Avg hrs: +18% 78/wk 3.3 Avg hrs: 51/wk 2.8 Roof fall Planned LW shutdown 2012 2013e …with Grasstree already showing material improvement. 65
Slide 66: Target Production Growth
TARGET PRODUCTION GROWTH We can see continuing improvements… Mt 12 +117% 10 8 6 4 2 0 2012 2013 2014 2015 2016 Grosvenor Grasstree Moranbah North …as we apply our learnings to current and new projects in coal. 66
Slide 67: Snapshots: Diamonds, Thermal Coal, Niobium & Phosphates, Nickel
SNAPSHOTS: DIAMONDS THERMAL COAL NIOBIUM & PHOSPHATES NICKEL MARK CUTIFANI
Slide 68: Jwaneng Journey to Performance Recovery
JWANENG JOURNEY TO PERFORMANCE RECOVERY Cut 8 waste Cut 6/7 waste 2012 waterlogged ore 2013 prepared for rain +12% +78% 2012 Challenges 2014 and beyond focus on: • Uncontrolled side wall • Consistent delivery 2012 2013e 2012 2013e failure • Maintenance efficiency • Fatality results in low improvemen
Slide 69: Thermal Coal - Optimising the Resource
THERMAL COAL – OPTIMISING THE RESOURCE • Natural quality decline impacts production forecasts • Plan focuses on lower calorific coal…at low incremental cost • Low capex and low cost maintains margins and returns New plan on low capex Mt +12% Forecast as at April 2013 20 Mt 20 -8% 15 15 10 10 5 5 0 0
Slide 70: Niobium & Phosphates: An Evolving Story
NIOBIUM & PHOSPHATES: AN EVOLVING STORY Phosphates presents excellent positioning… “The next step" “Fast growing, high return Business Unit " • Planning and MA CE “Divestment; execution Retention; of selected PI Reintegration to AA value creating group” • S&SD and initiatives AA influence area MBAC
Slide 71: Barro Alto: Getting the Basics Right
BARRO ALTO: GETTING THE BASICS RIGHT Production improvement and operational stability… • A series of shorter-term improvements made and an • Engineering is under way for the furnace increased level of monitoring put in place are already rebuilds which will commence in H2 2014 with starting to yield
Slide 72: Commercial Overview
COMMERCIAL OVERVIEW PETER WHITCUTT
Slide 73: Anglo American's Commercial Transformation
ANGLO AMERICAN’S COMMERCIAL TRANSFORMATION We are transforming our commercial activities… 2011-2013 2013-2014 2014 2015 and beyond 4 Achieve customer- centric commercial excellence 3 Ensure integrated value delivery • Further develop Strengthen downstream activities 2 functional focus for future gro
Slide 74: Transition to Central Commercial Unit
TRANSITION TO CENTRAL COMMERCIAL UNIT We have created one commercial business unit… We have moved from nine separate export …to a central Commercial business unit marketing marketing offices… all our commodities from two main hubs London Thermal Coal Platinum Iron Ore Iron Ore, One Commercial Shippi
Slide 75: Commercial Organisation
COMMERCIAL ORGANISATION We have implemented a centralised organisation structure … Strategy, Business Development & Commercial Peter Whitcutt Strategy Head of Marketing Head of Marketing Head of Marketing Head of Marketing Head of Marketing Head of & Sales & Sales & Sales & Sales & Sales Commercial
Slide 76: Capturing Commercial Margin Is Our Priority
CAPTURING COMMERCIAL MARGIN IS OUR PRIORITY Our commercial strategy is built on four pillars… Move closer to Manage commercial EBIT upside $m performance and risk customers ... exposure ... 20% 25% ...by measuring value creation ...and utilise all available value and implementing robust risk levers
Slide 77: Kumba: Maximising the Lump:Fine Ratio
KUMBA: MAXIMISING THE LUMP : FINE RATIO We are working closely with operations… Fines • Phasing out of coarse sinter product for 2Mt 34% European market creates an opportunity 40% to adjust the product mix • Resetting of crusher and screen settings Lump ore produces additional 2 Mt of lump ore as 66
Slide 78: Shipping: Better Freight Utilisation
SHIPPING: BETTER FREIGHT UTILISATION Our scale and diversified global portfolio… Route Cargo • Time chartering a Cape sized vessel is more efficient than freight for the two 1 Saldanha-Qingdao Iron Ore voyage charters with respective ballast 2 Qingdao-Indonesia Ballast routes 3 Indonesia-Mundra Ther
Slide 79: Focus on Capital
FOCUS ON CAPITAL RENÉ MÉDORI
Slide 80: Our Target
OUR TARGET We have set ourselves a realistic financial target… • Key challenges to ROCE delivery – improving returns on existing assets – delivery of committed projects – optimising SIB and stripping • Opportunities – focus on capital allocation process to optimise new capex – driving value programm
Slide 81: Our Capital Employed
OUR CAPITAL EMPLOYED Capital employed will increase as projects in execution are advanced… Average attributable capital employed 30 June 2013 exchange rates and commodity prices ($bn) Attributable ROCE: 15% 15 49 Other Kumba BVFR Copper Attributable Grosvenor ROCE: 9% Minas Rio De Beers 35 Kumba (12
Slide 82: Project Prioritisation and Evaluation Criteria
PROJECT PRIORITISATION AND EVALUATION CRITERIA Investment principles Capex outlook • Commodity agnostic – focus on risk and returns $7.0-7.5bn $6.3-6.5bn • Technically driven – understand capex, opex, schedule $6.0-6.5bn $5.0-5.5bn • Risk adjusted – assess hurdle rate and payback required Total Expa
Slide 83: Greater Discipline on SIB Capital
GREATER DISCIPLINE ON SIB CAPITAL SIB is forecast to remain broadly flat… Sishen Strip Kumba SIB ($bn)(1) De Beers and estimated IFRIC 20 stripping impact Ratio SIB (1) Forecast SIB, stripping and development 5.5-5.7 1.0 Focus of asset 0.8 Group SIB ($bn) reviews to 3.5 0.6 further reduce 0.4 $3.0-3
Slide 84: Immediate Steps Taken to Reduce Pipeline
IMMEDIATE STEPS TAKEN TO REDUCE PIPELINE We have optimised our portfolio of project options… Study Costs ($m) Opex + capex for studies (incl. buy-in costs) (1) • Platinum spend optimised to reflect asset review ~$1,150m outcomes Nickel Platinum • Better sequencing of expansion in Met Coal’s ~$850m $
Slide 85: Balance Sheet Flexibility
BALANCE SHEET FLEXIBILITY Cashflows and capex will normalise post completion of Minas-Rio… Consensus net debt forecast ($bn)1 Liquidity ($bn) ROW SA 19 15.8 17 14.3 13 11.0 11 Reducing through Level dependent on normalisation of capex normalisation of capex and cashflow recovery 6 6 and cashflow rec
Slide 86: Dividend
DIVIDEND Dividend profile DPS (cents per share) • Dividend an important part of +31% our return to investors 85 74 65 53 • Dividend sustainable at 40 46 current level through to Minas-Rio completion Final Interim 28 32 32 25 • Long term commitment to 2010 2011 2012 2013 maintain or grow dividend Div
Slide 87: Overhead and Supply Chain Savings
OVERHEAD AND SUPPLY CHAIN SAVINGS Overhead savings progress achieved Example supply chain savings to deliver $100m target ($bn) Current annual off-road tyre spend $220m Target $0.5bn Examples • Streamline core processes Actions taken Scoping • Review office footprint Group tyre demand forecasting
Slide 88: Production Outlook
PRODUCTION OUTLOOK COMMODITY 2012 2013 2014 2015 2016 Copper (1) 660kt 745-755kt 690-710kt c.700kt c.700kt Nickel(2) 31kt 33-34kt 30-35kt 20-25kt 40-45kt Iron ore (Kumba)(3) 43Mt ~41Mt 44-46Mt 45-47Mt 46-48Mt Iron ore (Minas-Rio) (4) - - N.M. 11-14Mt 24-26.5Mt Metallurgical Coal 17.7Mt 18-19Mt 18-20
Slide 89: Sustainability and Engagement
SUSTAINABILITY AND ENGAGEMENT MARK CUTIFANI
Slide 90: Safety Performance
SAFETY PERFORMANCE Safe production is our number one priority Number of Fatal Injuries 50 0.02 0.02 0.020 • In 2013, 13(1) people lost their lives as a result 40 0.01 0.015 of work-related incidents (2012: 13) 30 40 0.01 0.01 FIFR 0.01 0.010 20 28 0.01 – 9 incidents in total (6 people involved in th
Slide 91: Stakeholder Engagement - A Sustainable Model
STAKEHOLDER ENGAGEMENT – A SUSTAINABLE MODEL We recognise we must build partnerships across the business… A POINT ON PHILOSOPHY… • Shareholders own the business… and are entitled to attractive returns reflecting the risks they take in funding the business and the social development programs • Employ
Slide 92: Emerging Global Pressures Critical to Sustainability
EMERGING GLOBAL PRESSURES CRITICAL TO SUSTAINABILITY Changing dynamic What it means for mining • Increased demand for resources Population growth and • Growing demand for employment urbanisation • Increased likelihood of needing to undertake resettlements at projects • Tied to improved awareness, in
Slide 93: Value Captured in Four Indicators
VALUE CAPTURED IN FOUR INDICATORS Excellence in sustainability programmes… Value from sustainability Growing returns ✓ Additional opportunities, such as mine certification facilitating a price premium ✓ Positioned as development partner of Access to resources choice, preferential access to human, fi
Slide 94: Our Performance
OUR PERFORMANCE For the last two years Anglo American has been Sector leader recognised as the sector leader on the Dow Jones Sustainability Index (DJSI). Anglo American achieved the best mining performance score in the Carbon Disclosure Project (CDP) in 2012 and 2013 and has been included on the
Slide 95: Relative Performance Against Peer Group
RELATIVE PERFORMANCE AGAINST PEER GROUP Anglo American has ranked well against peers in several sustainability performance indicators over the last 3 years despite a larger proportion of our operations being based in developing countries Dow Jones Sust. 2010 2011 2012 Anglo American CSI vs. Peers, 2
Slide 96: Conclusion
CONCLUSION MARK CUTIFANI
Slide 97: Conclusion...and What You Heard Today
CONCLUSION…AND WHAT YOU HEARD TODAY We have identified the issues… The BIG TICKET asset opportunities Major Project progress report Sishen recovery and optimisation Minas-Rio update Copper recovery and development New development opportunities strategy Niobium/phosphate strategy Platinum restru
Slide 98: And So What Makes Us Different?
AND SO WHAT MAKES US DIFFERENT? We provide investors with a balanced portfolio of opportunities… High quality resources………….............................development optionality Commodity portfolio…………..consumer market for platinum and diamonds Growing geographic diversity……..……………policy and cur
Slide 99: Appendix
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Slide 100: Committee Members
COMMITTEE MEMBERS Investment Committee Corporate Committee René Médori, Finance Director René Médori, Finance Director Tony O’Neill, Group Director – Technical Mark Cutifani, Chief Executive Peter Whitcutt, Group Director – Strategy, Business Tony O’Neill, Group Director – Technical Development & Co
Slide 101: Anglo American Attendees
ANGLO AMERICAN ATTENDEES Mark Cutifani* Chief Executive Philippe Mellier CEO De Beers René Médori* Finance Director Gareth Mostyn CFO De Beers Tony O'Neill* Group Director – Technical Group Head of Finance & Performance Ian Botha Management Group Director – Strategy, Business Peter Whitcutt* Develop
Slide 102: ROCE and Attributable ROCE - Definition
ROCE AND ATTRIBUTABLE ROCE – DEFINITION • Return on capital employed (ROCE) is a ratio that measures the efficiency and profitability of a company's capital investments. It displays how effectively assets are generating profit for the size of invested capital • ROCE calculation is annualised underly
Slide 103: Reconciliation of 2012 Capital Employed to Average Attributable Capital Employed
RECONCILIATION OF 2012 CAPITAL EMPLOYED TO AVERAGE ATTRIBUTABLE CAPITAL EMPLOYED AT 30 JUNE 2013 EXCHANGE RATES AND COMMODITY PRICES Period ending 31st Dec Period ending 31st Dec Capital Employed ($bn) 2012 2011 Total Closing Capital Employed 52(2) 42 Less: Removal of De Beers 45% Fair Value uplift
Slide 104: Underlying Earnings Sensitivities
UNDERLYING EARNINGS SENSITIVITIES(1) Commodity / currency Change in price / exchange $m Iron ore(2) + $10/t 78 Metallurgical coal + $10/t 48 Thermal coal + $10/t 105 Copper + 10c/lb 34 Nickel(3) + 10c/lb 2 Platinum + $100/oz 49 Rhodium + $100/oz 6 Palladium + $10/oz 3 ZAR / USD + every 10c movement