Anglo American Plc · LSE:AAL

Anglo American — BRICS Metals & Mining Conference 2004

29 slides from Anglo American's conference presentation, Nov 12, 2004

  1. Slide 1: BRICS Metals & Mining Conference: Beyond the Dreams of Avarice

    BRICS Metals & Mining Conference “Beyond the Dreams of Avarice” 12 November 2004 2004 Interim Anglo Results American plc

  2. Slide 2: Key questions: BRIC industrialisation and copper prices

    • What impact will the industrialisation of Brazil, Russia, India, and China have on copper prices? • What is Anglo American doing in response to these changes? 2 Anglo American plc

  3. Slide 3: Beyond the dreams of avarice?

    Beyond the dreams of avarice ? “There will be seasons when demand will follow so closely on the heals of supply that prices will go skywards, and the fool will say in his heart that the market must forever advance. There will also be periods when the supply will far exceed demand, and the faint of h

  4. Slide 4: Beyond the dreams of avarice?

    Beyond the dreams of avarice ? “There will be seasons when demand will follow so closely on the heals of supply that prices will go skywards, and the fool will say in his heart that the market must forever advance. There will also be periods when the supply will far exceed demand, and the faint of h

  5. Slide 5: A Secular Change in Metal Prices?

    A Secular Change in Metal Prices? 500 MSU - 21.9.04 Copper Prices 1900 - 2004 (e) 450 'Real' 2004 and Nominal c/lb 400 350 300 'Real' 250 'Best Fit' 1971-2003 200 minus 3.1%/yr 150 c/lb 100 50 Nominal 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 5 Anglo American plc

  6. Slide 6: Price forecasting: An exercise in futility?

    Price forecasting: An exercise in futility? 130 130 +42.4c/lb Mean, Max and Min of ~20 Forecasts of the 120 Copper Price 120 made in January of the Previous Year 110 Compared with the Outturn (c/lb) 110 100 max 100 c/lb eg, Forecast for 2001 c/lb 90 (made in Jan 2000) mean 90 80 -3.1c/lb 80 min 70 7

  7. Slide 7: 1945-1970: Increasing real metal prices

    1945-1970: Increasing real metal prices 500 MSU - 4.10.04 Copper Prices 1900 - 2004 (e) 450 'Real' 2004 and Nominal c/lb 400 350 'Best Fit' 1945-1970 300 plus 1.8%/yr 'Real' 250 'Best Fit' 1971-2003 200 minus 3.1%/yr 150 c/lb 100 50 Nominal 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 •

  8. Slide 8: 1970-2003: Decreasing real metal prices

    1970-2003: Decreasing real metal prices 500 MSU - 4.10.04 Copper Prices 1900 - 2004 (e) 450 'Real' 2004 and Nominal c/lb 400 350 'Best Fit' 1945-1970 300 plus 1.8%/yr 'Real' 250 'Best Fit' 1971-2003 200 minus 3.1%/yr 150 c/lb 100 50 Nominal 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 •

  9. Slide 9: Secular upturn: Demand-side arguments

    Secular upturn: Demand-side arguments • Industrialisation of China (and Russia, India, Brazil) • Synchronised growth in OECD • Reflationary bias of Central Banks • Commodities as a hedge against US dollar Structural or cyclical? 9 Anglo American plc

  10. Slide 10: What changed: China or OECD?

    What changed: China or OECD? 600 140 Change in Annual Refined Copper Consumption (kt) 400 200 'Nominal' LME Copper Price (c/lb) China 120 0 100 -200 OECD -400 80 -600 Contributions to Global Refined Copper Consumption, 1999-2004 (kt) 60 -800 OECD and China MSU - 18.10.04/OECD+China Growth and Copper

  11. Slide 11: Major demand-side uncertainties

    Major demand-side uncertainties • China: Hard or soft landing ? • OECD: – US deficits – Oil price – “Wealth effect” of asset price decreases – US dollar weakness/higher interest rates – Geopolitical events/terrorism 11 Anglo American plc

  12. Slide 12: Secular upturn: Supply-side arguments

    Secular upturn: Supply-side arguments • Improved capital discipline and concentration in mining industry • Exploration expenditure cuts • Trend increase in costs as grades decline and mines deplete 12 Anglo American plc

  13. Slide 13: Supply-side response: Mine production

    Supply-side response: Mine production 16.5 MSU - 22.10.04/Mine Production 16 Global Mine Production, 2000 to 2005 (est) million tonnes 15.5 15 Cutbacks & Closures million tonnes 14.5 Mine Production 14 13.5 13 12.5 12 2000 2001 2002 2003 2004 2005 13 Anglo American plc

  14. Slide 14: Supply-side response: Treatment charges

    Supply-side response:Treatment charges 110 100 Long-term TC of 'Term' Treatment Charges - $/tonne 90 $85 per tonne 80 70 60 Copper 'Term' TCs 50 MSU - 21.10.04/TCs 40 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 14 Anglo American plc

  15. Slide 15: Is the cycle dead?

    Is the cycle dead ? • Demand correlated to Industrial Production • Inventory build-up during upturn/destocking during downturn • Long lead times: New supply decisions made in anticipation of, not in response to, demand growth • Industry fragmented: Competitor behaviour hard to forecast • New mines l

  16. Slide 16: Investing over the cycle: Ideal profile

    Investing over the cycle: Ideal profile Downturn Bottom of cycle Upturn and peak ƒ Commence greenfield ƒ Make acquisitions ƒ Sell non core assets projects ƒ Commission projects ƒ Ramp up projects to full ƒ Assess acquisitions ƒ Commence de- production ƒ Increase capex bottlenecking projects ƒ Reduce

  17. Slide 17: Investing over the cycle: Actual profile

    Investing over the cycle: Actual profile 3,000 3,500.00 Base Metals Equity Issuance Copper Price (Smoothed) 3,000.00 2,500 2,500.00 P r o ceeds A m o u n t ( U S$ m m ) 2,000 C o p p er P r i ce ( U S$ / t) 2,000.00 1,500 1,500.00 1,000 1,000.00 500 500.00 0 0.00 1993 1994 1995 1996 1997 1998 1999 2

  18. Slide 18: Investing over the cycle: Actual profile

    Investing over the cycle: Actual profile 7000 140 Copper Mine Projects and Debt Financing 130 6000 Copper Price 120 Capex on Major 5000 Copper Mine 110 Nominal LME Price - c/lb Projects 100 $US million 4000 90 3000 80 2000 70 Project 60 1000 Finance 50 0 40 1990 1991 1992 1993 1994 1995 1996 1997 19

  19. Slide 19: A secular change in metal prices?

    A secular change in metal prices? • A secular change is possible, but appears to be a low probability outcome • More probable outcome is that structural increase in demand arising as a result of the industrialisation of BRIC will moderate the trend reduction in real metal prices • Current prices ref

  20. Slide 20: How is Anglo American responding?

    How is Anglo American responding? • Maintain focus on cost reduction and operating efficiencies • Prudently grow production to meet demand • Maintain capital discipline 20 Anglo American plc

  21. Slide 21: Maintain cost discipline

    Maintain cost discipline • Cost reduction and efficiency improvements: Base Anglo Metals Group 2002 $14m $279m 2003 $48m $335m 2004 (H1) $39m $248m • But significant upward pressure on costs: – TC/RCs – Energy – Steel – Acid – Labour 21 Anglo American plc

  22. Slide 22: Project pipeline: Collahuasi Rosario project

    Project pipeline: Collahuasi Rosario project „ Production* Throughput increased from 69ktpd to 110ktpd. Maintains production at over 400,000tpa Cu „ Capital cost* US$654m „ Status Commissioned * 100% basis. Anglo has 44% interest. 22 Anglo American plc

  23. Slide 23: Project pipeline: El Soldado pit expansion

    Project pipeline: El Soldado pit expansion „ Production Life extended to over 20 years. Production maintained at 63,000tpa „ Capital cost US$80m „ Status In progress 23 Anglo American plc

  24. Slide 24: Project pipeline: Chagres expansion

    Project pipeline: Chagres expansion „ Production Capacity increased from 162,000 tpa to 184,000 tpa „ Capital cost US$22m „ Status Approved. Commissioning Q1 2005 24 Anglo American plc

  25. Slide 25: Project pipeline: Los Bronces expansion

    Project pipeline: Los Bronces expansion „ Production Doubling of throughput to 130,000tpd. Additional ~200ktpa Cu „ Capital cost ~US$800m „ Status Conceptual study underway 25 Anglo American plc

  26. Slide 26: Project pipeline: Collahuasi expansion II

    Project pipeline: Collahuasi expansion II „ Production* Increase production to 600,000tpa ? „ Status Conceptual study * 100% basis. Anglo has 44% interest. 26 Anglo American plc

  27. Slide 27: Project pipeline: Quellaveco project

    Project pipeline: Quellaveco project „ Production 200,000tpa Cu in concentrate „ Capital cost ~US$850m „ Status Feasibility study completed. On hold 27 Anglo American plc

  28. Slide 28: Beyond the dreams of avarice?

    Beyond the dreams of avarice ? “There will be seasons when demand will follow so closely on the heals of supply that prices will go skywards, and the fool will say in his heart that the market must forever advance. There will also be periods when the supply will far exceed demand, and the faint of h

  29. Slide 29: BRICS Metals & Mining Conference: Beyond the Dreams of Avarice

    BRICS Metals & Mining Conference “Beyond the Dreams of Avarice” 12 November 2004 2004 Interim Anglo Results American plc

Anglo American — BRICS Metals & Mining Conference 2004 on 6ix