Anglo American Plc · LSE:AAL
Anglo American — Investor Presentation (November 2012)
67 slides from Anglo American's investor presentation, Nov 30, 2012
Slide 1: Diamonds Briefing
DIAMONDS BRIEFING 30 November 2012
Slide 2: Programme
PROGRAMME Sandwich lunch 12.30-13.00 6th floor dining room Investor & Analyst presentation 13.00-15.00 6th floor boardroom 15.00-16.00 De Beers Diamond tour Christmas drinks 16.00-17.30 6th floor 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: De Beers – Strong Fit with Anglo American Strategy
DE BEERS – STRONG FIT WITH ANGLO AMERICAN STRATEGY Focus on Attractive Products Asset Quality Filter Highly Attractive Industry Fundamentals The World’s Leading Diamond Company Robust demand growth led by the emerging consumer The biggest producer in the most profitable part of the middle class
Slide 5: The Integration of De Beers and Anglo American
THE INTEGRATION OF DE BEERS AND ANGLO AMERICAN HAS BEEN FOCUSED ON… Maintaining business momentum • Limited change to De Beers' management structure • Support for major De Beers strategic initiatives • Emphasis on maintaining De Beers' unique brand Identifying and developing key areas of value • Ali
Slide 6: De Beers & the Diamond Market
De Beers & the Diamond Market London: 30 November 2012 London
Slide 7: Agenda
Agenda Overview: Diamonds & De Beers Philippe Mellier CEO Mining & Exploration Bruce Cleaver Executive Head, Strategy & Corporate Affairs Sales Varda Shine Executive Vice President, Global Sightholder Sales Marketing Stephen Lussier Executive Vice President, Marketing Technology Philippe Mellier CEO
Slide 8: Diamonds & De Beers
Diamonds & De Beers Philippe Mellier London
Slide 9: Diamonds are unique
Diamonds are unique Demand Sources for Diamonds v. Gold and Platinum - 2011 Differing values $500,000 $500,000 $500,000 Source: De Beers analysis; World Gold Council Gold Demand Trends FY2011, Feb 2012; Johnson Matthey Platinum charts 2011. 9
Slide 10: US is the top diamond jewellery market, with China and India growing
US is the top diamond jewellery market, with China and India expected to increase their share of diamond demand Consumer Demand Forecasts (Nominal Polished Sales) 2011 ~ USD23bn 2016F ~USD31bn Turkey RoW 2% RoW Turkey 19% Hong Kong 15% 2% 2% Hong Kong USA USA 2% 37% Taiwan 35% Taiwan 2% 2% +35% Gulf
Slide 11: Emergence of middle class and luxury sector should support demand
Emergence of middle class and strength of luxury sector should continue to support demand for diamonds going forward Global Growth of Middle Classes in emerging markets1 Worldwide personal luxury goods market evolution (2010 to 2015) (2010-2014F, €bn) Indonesia Mins of people +55 ∆ 2010-2015 Russia
Slide 12: Macro-economic forecasts supportive of polished diamond demand growth
Macro-economic forecasts are supportive of growth in polished diamond demand over the short to medium term Global Consumer Polished Demand Growth (nominal) (2012-15) Global Polished Diamond Demand Growth 7.0% 6.0% 5.0% Year‐on‐Year % Growth 4.0% 3.0% 2.0% 1.0% 0.0% 2012f 2013f 2014f 2015f 12 Source:
Slide 13: Long-term view: Production to recede gradually after 2017
Long-term view: Production to recede gradually from pre-crisis levels after 2017 Global production in carats 180 Rough diamond industry now requires investment in new projects 160 even to maintain production. In the next few years, additional 140 production from Gahcho Kue, Argyle and Petra mines li
Slide 14: A structural supply deficit should provide price upside
A structural supply deficit should continue to provide the industry with price upside Supply Demand Gap (smoothed from 2014) 180 160 Consumer Demand (nominal) 140 120 100 Supply @ constant prices 80 60 2011A 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 14 Sourc
Slide 15: De Beers strategy: maximum value of each carat
De Beers strategy is focused on sustainably capturing the maximum value of each carat mined by the Group Rough Polished Exploration Jewellery Jewellery Mining Distribution Manufacturing Consumers & Projects Manufacturing Retail & Trading & Trading 15
Slide 16: De Beers strategy: maximum value of each carat
De Beers strategy is focused on sustainably capturing the maximum value of each carat mined by the Group Rough Polished Exploration Jewellery Jewellery Mining Distribution Manufacturing Consumers & Projects Manufacturing Retail & Trading & Trading 16
Slide 17: De Beers strategy: maximum value of each carat
De Beers strategy is focused on sustainably capturing the maximum value of each carat mined by the Group Upstream Commercial Downstream Optimised Core Business Unique Value Demand Generation and Future Proposition Growth Platform Rough Polished Exploration Jewellery Jewellery Mining Distribution Man
Slide 18: De Beers across the diamond pipeline
De Beers participates in the exploration, mining, distribution and retail segments of the diamond pipeline De Beers across the diamond pipeline Jewellery Rough Polished Retail Exploration Jewellery Mining Distribution Manufacturing (including Consumers & Projects Manufacturing & Trading & Trading Di
Slide 19: Upstream Midstream Downstream
Philippe Mellier CEO, De Beers Group Bruce Cleaver Pat Lowery Varda Shine Stephen Lussier Strategy, Business Cyrus Jilla Technical Global Sightholder Sales Marketing Development & Element Six Corporate Affairs Tony Guthrie Neil Ventura Gareth Mostyn Canada Mining Auction Sales Finance Philip Barton
Slide 20: The world's leading diamond company with a global footprint
The world’s leading diamond company with a global footprint Mines Exploration Corporate/Sales Offices Auction Sales Element Six De Beers Diamond Jewellers Forevermark 20
Slide 21: Mining & Exploration
Mining & Exploration Bruce Cleaver
Slide 22: Diamond exploration challenge: finding economic mines is difficult
Diamond exploration challenge: finding economic diamond mines is difficult Global discovery of ~7000 kimberlites has Ore grade in equivalent: ppm concentration resulted in only 7 ‘Tier 1’1 mines Diamond exploration results from the last 140 years (as of 2011) Polymetallic 7 000 mines 6 800 1000 1 00
Slide 23: Exploration activity focused on five countries since 2009
Exploration activity has been focused on five countries since 2009 De Beers exploration spend by country, 2009 - 2011 De Beers exploration is active in both operating and non-operating countries $,m 50 46 47 46 40 30 20 10 0 2009 2010 2011 Non‐Operating Country Canada India Support & lab services An
Slide 24: Competitive advantage in diamond mining
Competitive advantage in diamond mining ● Strong safety record – will benefit from integration with Anglo American ● World’s leading producer by value, with the largest reserve base, providing scale and sustainable future production ● Well positioned project portfolio for the long-term, with a geogr
Slide 25: World's leading producer by value with largest reserve base
World’s leading producer by value, with the largest reserve base, providing scale and sustainable future production Supply Share in USD (2010-2011) Est. 2011 Supply Value Share Est. Total Sales 2010 2011 (USD bn) De Beers 5.1 6.5 Artisana/ Other Informal 15% ALROSA1 3.3 4.3 9% De Beers 34% Rio Tinto
Slide 26: 20% highest value carats account for almost 75% of value
20% highest value carats account for almost 75% of total De Beers value of rough diamonds Value v. Volume of Diamonds (De Beers Actual 2011 Sales) 100% Top 5% of carats = 47% 90% of value Proportion of Total 2011 Sales Value 80% Top 50% of carats = 92% of value 70% Bottom 20% of carats = 1% 60% of v
Slide 27: Production overview
Production overview 2010 2011 H1 2012 ● Production in line with Sightholder demand Mine Holding Carats Carats Carats Recovered ● Reduced production in Q4 2011 and Recovered (mill) Recovered (mill) (mill) throughout 2012, focusing on waste- stripping and maintenance, and Jwaneng 50% 11.5 10.6 4.8 pos
Slide 28: More than 70% of production on lower half of cost curve
More than 70% of De Beers production is located on the lower half of the cost curve Higher margin assets Cost/revenue Snap lake Namdeb operations Gahcho Kue (project) Damtshaa Orapa Venetia Jwaneng Cumulative revenue 28 Source: De Beers
Slide 29: Debswana
Debswana ● 50/50 JV with the Government of the Republic of Botswana Milestones – 1955 - The search for diamonds in Botswana began in the Tuli Block in 1955. Three small alluvial diamonds were found along the Motloutse river – 1969 - Following the discovery of Orapa, Debswana was formed – 1982 - Jwan
Slide 30: Jwaneng Mine
Jwaneng Mine ● Discovered by De Beers geologists in 1972. 2010 2011 H1 2012 Jwaneng is an open pit mine, using traditional truck and shovel methods, located 160km west of Waste (tonnes 43.8 50.8 38.6 millions) Gaborone Ore mined (tonnes 6.7 6.7 3.2 ● Comprises four known ore bodies (three large pipe
Slide 31: Jwaneng Cut 8 project will extend mine life to 2028
Jwaneng Mine - Cut 8 project and mining operations will extend the life of the open pit from 2017 to 2028 Background Cut‐8 plan ● Cut 8 Waste to be mined: 660 Million tons ● Cut 8 ore to be mined: 91 Million tons ● Cut 8 carats from ore mined: 102 Million carats ● Infrastructure capital cost: P3.5bn
Slide 32: Orapa Regime
Orapa Regime ● First discovered in 1966, the Orapa Regime 2010 2011 H1 2012 (cluster) consists of Orapa, Letlhakane and Damtshaa Mines, which are open-pit operations Waste (tonnes 17.8 13.1 6.9 using traditional truck and shovel methods, and millions) clustered in a radius of under 25km in the Centr
Slide 33: South Africa
South Africa ● 74% (De Beers) / 26% (BEE partner Ponahalo Holdings) ● Milestones: – 1888: De Beers Consolidated Mines created – 2006: Ground-breaking BEE deal with Ponahalo Holdings – 2006-2010: Portfolio significantly reshaped ● Three mining operations: open-pit mines of Venetia and Voorspoed, and
Slide 34: Venetia Mine
Venetia Mine ● Discovered in 1980, the Venetia kimberlite cluster 2010 2011 H1 2012 lies 90km west of Musina, in the Limpopo province ● It comprises 15 known bodies (13 pipes and two Waste (tonnes millions) 24.5 29.0 19.4 dykes), outcrops over an area of approximately 4ha Ore mined (tonnes 4.3 5.0 2
Slide 35: Venetia underground
Venetia underground ● Venetia underground project will extend the life of South ● Solution considers two vertical shafts (Service and Africa’s largest diamond mine until at least 2043, yielding Production) to 1040 metres approximately 111 million carats ● Sub Level Caving (SLC) mining method, produc
Slide 36: Namdeb Holdings
Namdeb Holdings ● 50/50 JV with Government of the Republic of Namibia, and owns 100% of Namdeb (land) and Debmarine Namibia (sea) licences to 2020 ● The marine mining operations operate off the coast of Namibia in water depths of 80-130m ● The alluvial land operations are conducted along the south-w
Slide 37: Canada
Canada ● 100% De Beers owned ● Two mining operations: Snap Lake mine (underground mine) in the Northwest Territories (NWT) and Victor mine (open pit mine) in northern Ontario ● Produced 1.7 million carats in 2011 ● Gahcho Kué, De Beers (51%) JV with Mountain Province Diamonds (49%), located 80 km so
Slide 38: Midstream
Midstream Varda Shine 38
Slide 39: Our customers operate across the globe, most cutting in India
Our customers operate across the globe, with most industry cutting and polishing in India 39
Slide 40: Many mid and downstream activities; customers involved in most
There are many activities in the mid and down stream and our customers are involved in most areas Jewellery Rough Cutting & Polished Jewellery Primary Model Preparing Manu- Retail Dealing Polishing Wholesale Wholesale facturing Dealers Dealers / Preparers Dealers / C&P Dealers / C&P / JM C&Ps C&P /
Slide 41: Competitive advantage in rough diamond distribution
Competitive advantage in rough diamond distribution ● World’s largest distributor of rough diamonds, with activities in sorting, valuing, sales and diamond beneficiation ● Scale and mix of resource allows for aggregation of goods and enables long-term supply contracts ● Beneficiation is a core part
Slide 42: Integrated two-channel distribution system
Integrated two-channel distribution system to serve different customer types with differing needs GLOBAL SIGHTHOLDER AUCTION SALES SALES Three year contract Wide customer base 76 Sightholders – 571 registered Regular, planned DYNAMISM auction participants supply Equal opportunity to Inte
Slide 43: The two channels provide long-term and spot proposition
The 2 channels provide a long-term and a spot proposition Global Sightholder Sales Auction Sales ~90% of Sales ~10% of Sales 76 Sightholders 571 Registered Auction Participants Both Sightholders and non-Sightholders Sightholders are chosen based on their ability to add value to the rough Limited ent
Slide 44: Botswana sales agreement
Botswana sales agreement ● 10 year sales agreement was signed in 2011 (effective 1 January 2011) ● Requires the transfer of all of De Beers functions which relate directly to the sale of Debswana diamonds to Botswana by the end of 2013 ● If achieved, De Beers will receive financial benefit in the fo
Slide 45: Flow of goods through Botswana
Flow of goods through Botswana Global Sightholders 100% SSV Local DBUK / DBGSS GRB Window Sightholders 85-90% of goods at 94- 100% SSV 95% SSV 100% SSV 10-15% of goods at 94- 95% SSV DTCB 90% SSV Debswana 45
Slide 46: Flow of goods through Namibia
Flow of goods through Namibia Global Sightholders 100% SSV DBUK / DBGSS Local Sightholders 95% SSV 100% SSV 100% SSV NDTC 90% SSV Namdeb 46
Slide 47: Flow of goods through South Africa
Flow of goods through South Africa Global Sightholders 100% SSV DBUK / DBGSS Local Sightholders 95% SSV 100% SSV 100% SSV DTC SA SDT 90% SSV 100% SSV DBCM 47
Slide 48: Downstream
Downstream Stephen Lussier 48
Slide 49: Strong downstream expertise and track record creating demand
Strong downstream expertise & track record in creating demand will unlock further value De Beers has a track record of creating demand for diamonds in different countries % of first time brides who receive a diamond only engagement ring USA … … Japan … … and now China 50 years 30 years 16 years CAGR
Slide 50: De Beers Diamond Jewellers
De Beers Diamond Jewellers ● Independently managed 50/50 retail joint venture with Louis Vuitton Moët Hennessy LVMH ● 44 stores in leading diamond consumer markets around the world ● Business split roughly between USA, Japan, Europe and Asia ● 2011/2012 expansion in mainland China ● Focus on driving
Slide 51: Forevermark
Forevermark ● The diamond brand from the De Beers Group of Companies that come with a promise that they are beautiful, rare and responsibly sourced ● Diamonds that meet Forevermark’s standards are inscribed with the Forevermark icon and a unique identification number (both are invisible to the naked
Slide 52: Technology
Technology Philippe Mellier 52
Slide 53: World-class technology
World-class technology ● Proprietary technology provides De Beers with competitive advantage across the diamond pipeline ● ‘Sea walker’ used to extract diamonds from along the surf zone ● State of the art technology to mine diamonds from the sea bed ● Machine based colour and clarity sorting providi
Slide 54: Element Six
Element Six ● World’s leading synthetic diamond supermaterials company ● Element Six Abrasives SA (~60% owned by De Beers, ~40% owned by Umicore) - solutions for abrasive applications including cutting, grinding, drilling, shearing, polishing ● Element Six SA (100% owned by De Beers) – utilises the
Slide 55: Financials
Financials Gareth Mostyn
Slide 56: Financials
Financials ● During H1, total sales decreased 14 percent to Total Sales ($ billion) US$3.3 billion (2011: US$3.9 billion) 8.0 ● Sales of rough diamonds in H1 were US$3.1 billion 7.0 (2011: 3.5 billion) 6.0 5.0 Half 2 ● After strong Q1-Q3 in 2011, the final quarter of last Half 1 4.0 year and 2012, h
Slide 57: Financials
Financials ● During H1, production totalled 13.4 million carats Production (cts millions) 10 (H1 2011: 15.5 million carats) 9 ● In light of prevailing market conditions that began in 8 7 South Africa Q4 2011, operations continued to focus on 6 Namibia maintenance and waste stripping, positioning De
Slide 58: Summary & Outlook
Summary & Outlook Philippe Mellier
Slide 59: In 2012, total market likely up in low to mid single digits
In 2012, total market likely to be up in low to mid single digits Growth by Market (USD Polished Sales Growth) Market 2012 8m 2012F Overview of H1, Forecast of H2, (world share) 2011A E* Base 2012 2012 USA (37%) 8% 4% 4% • Despite a considerable • General anticipation of China (10%) 25% 10% 11% slow
Slide 60: Summary
Summary ● Diamonds are not a commodity ● Growing consumer demand for diamond jewellery, driven by China and India, coupled with flat production in the short to medium term, will result in a structural supply deficit that should yield price upside for the industry ● De Beers strategy is focused on su
Slide 61: debeersgroup.com
debeersgroup.com
Slide 62: Appendices
Appendices
Slide 63: Production output by operation
Production output by operation 2010 2011 H1 2012 Mine Holding Carats Recovered (‘000) Jwaneng 50% 11,470 10,641 4,816 Orapa 50% 10,749 12,248 5,479 Venetia 74% 4,287 3,146 1,037 Voorspoed 74% 732 580 247 Kimberley 74% 823 778 354 Snap Lake 100% 926 882 381 Victor 100% 826 779 358 Namdeb 50% 402 346
Slide 64: Voorspoed Mine
Voorspoed Mine ● Open pit mine located in Free State Province, 2010 2011 H1 2012 mined using traditional truck and shovel methods Waste (tonnes ‘000) 7 609 10 877 5 502 ● Every employee has completed secondary school and at least 25% of technical and mining jobs are Ore mined (tonnes 2 976 2 293 1 2
Slide 65: Snap Lake Mine
Snap Lake Mine ● Snap Lake Mine is Canada’s first completely 2010 2011 H1 2012 underground diamond mine and De Beers’ first mine outside Africa Waste (tonnes ‘000) 223 213 60 ● It is located 220 km northeast of Yellowknife in the Ore mined (tonnes 855 808 405 ‘000) NWT Tonnes treated ● Ore body is a
Slide 66: Victor Mine
Victor Mine ● Victor Mine is an open pit mine, and Ontario’s first 2010 2011 H1 2012 diamond mine Waste (tonnes ‘000) 6 952 6 618 2 690 ● It is located in James Bay Lowlands 90 km west of Attawapiskat Ore mined (tonnes 2 660 2 844 1 640 ‘000) ● Victor is one of 18 kimberlites, 16 of which are Tonnes
Slide 67: Dr Ber RS
Dr Ber RS
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