Anglo American plc · LSE:AAL
Anglo American — H1 2009 Earnings Presentation
57 slides from Anglo American's earnings presentation, Jul 31, 2009
Slide 1: Interim Results – six months ended 30 June 2009
Interim Results – six months ended 30 June 2009 Delivering on our commitments Cynthia Carroll Chief Executive René Médori Finance Director 31st July 2009 1
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: Agenda
Cynthia Carroll, CEO 1. Highlights – Delivering on our commitments René Médori, FD 2. Financial results Cynthia Carroll, CEO 3. Value creation from a unique portfolio Questions and Answers 3
Slide 4: Highlights
Highlights • Safety: a barometer for operational excellence • Delivering operational performance • Commitment to key projects to maximise long term returns 4
Slide 5: Significant cost reductions achieved
Significant cost reductions achieved • Performance orientated culture embedded throughout the group, bringing tangible results • Platinum: cash operating costs down 6.4% vs. H2 08 • Coal: FOB cash costs in Anglo Coal Australia down by 14% vs. H2 08 • De Beers: operating costs down by over 50% follow
Slide 6: Asset Optimisation & Procurement expected to deliver benefits of over $1bn in 2009
Asset Optimisation & Procurement expected to deliver benefits of over $1bn in ‘09 against the target of $2bn in ‘11 Asset Optimisation Procurement Operating Profit Improvements Cost Savings (opex & capex) 1,000 1,000 FY '11 Target FY '11 Target FY '09 Target $1,000m $1,000m 800 $700m 800 600 600 (US
Slide 7: Asset Optimisation already making a significant contribution
Asset Optimisation already making a significant contribution: $700m benefit expected in 2009 • Asset Optimisation (AO) embedded across the Group – Central team provides a structured and value driven process, subject matter expertise, and a means of sharing best practice – Trained AO managers appoint
Slide 8: Procurement well established, expected to deliver $330m in 2009
Procurement well established, expected to deliver $330m in 2009 • Centralised procurement function delivering operating and capital cost savings through – Leveraging the Group’s consolidated procurement expenditure – Providing deep category knowledge and subject matter expertise – Acting as a single
Slide 9: Platinum – reshaped for enhanced profitability
Platinum – reshaped for enhanced profitability • Restructured: Rustenburg and Amandelbult mines divided into 7 new mines, allowing increased cost focus and safety drive • Moving down the cost curve: one Rustenburg shaft put onto care and maintenance (30k oz) and a further two shafts under review (11
Slide 10: De Beers – decisive action taken
De Beers – decisive action taken • Operating costs reduced by more than 50% • Headcount reduced by 23% – Global workforce including contractors and corporate centres – Majority of reduced workforce expected to be permanent, maintaining benefit even as market improves • Production cut by 73% in respo
Slide 11: Base Metals: progress on our two major projects
Base Metals: progress on our two major projects well underway and on target to start up in 2011 Barro Alto Los Bronces Nickel project Brazil Copper expansion Chile • Project is 66% complete with start up on track • Expansion well underway, with start up on track for Q1 2011 for 2011 – 13.4 million m
Slide 12: Los Bronces: major new resources confirmed
Los Bronces: major new resources confirmed New high grade, world class deposits confirmed at Los Bronces • Located in a premier copper region, well positioned to exploit one of the world’s great mineral endowments • Existing Reserves of 2.4 Bt at 0.51% Cu (12.2 Mt of Los Bronces contained Cu)(1) sup
Slide 13: Minas-Rio: a multi-billion tonne resource with own logistics system
Minas-Rio: a multi-billion tonne resource with own logistics system and significant expansion potential Pipeline Construction, • First production in 2012 with full ramp-up to 26.5 Mtpa in 2013 Pump Station Minas Gerais • Scaleable resource and infrastructure with potential to deliver additional 53 M
Slide 14: Minas-Rio expected to be among the lowest cost in the industry
Minas-Rio expected to be among the lowest cost in the industry, generating a substantial cash margin Cost curve 2013 Sishen lump ore quality comparison 120 Ore Fe % Tumbler Index2 % Q1 Q2 Q3 Q4 Kumba 66.3% 93.0% 100 Australian 64.9% 90.0% FOB cost1, 2009 terms ($/t) Brazilian 66.9% 79.7% 80 Indian 6
Slide 15: Minas-Rio process
Minas-Rio process Minas-Rio ore is extracted and processed in the state of Minas Gerais and then transported as slurry to the Açú Port in the state of Rio Process step Extracted from Process to upgrade Ore slurry transported via the ground Fe content pipeline and dewatered Approximate operating cost
Slide 16: Minas-Rio development schedule
Minas-Rio development schedule Minas-Rio is on track for first ore shipment in mid-2012 2009 2010 2011 2012 Testing and Mine & Beneficiation Plant Commissioning October 2011 First ore through plant Testing and Pipeline Commissioning May 2012 First ore through pipeline Testing and Filtration Plant Co
Slide 17: Divisional highlights
Divisional highlights • Base Metals: Lower metal prices, partially offset by lower input costs • Ferrous Metals: Strong iron ore volumes into China • Coal: Higher realised metallurgical coal prices, benefits from asset optimisation and a cost reduction programme in Australia • Platinum: Impact of si
Slide 18: 2. Financial results
2. Financial results René Médori
Slide 19: 2009 interim results
2009 interim results $bn 2009 2008 change Underlying EPS ($) Operating Profit – Core 2.1 6.0 T 66% Total Group financials: Operating profit 2.1 6.2 T 65% 2.90 Effective tax rate (%) 31.8 31.7 Underlying earnings 1.1 3.5 T 69% 1.46 Capex 2.1 2.0 0.91 EBITDA 3.0 7.0 T 58% (1) Net Debt 11.3 11.0 H1 200
Slide 20: Operating profit variances
Operating profit variances (US$m) 7,000 6,000 5,974 5,000 AO Upside 4,000 +$335m 3,000 282 601 94 53 106 (68) 13 (36) (293) 2,000 (3,913) (759) 2,054 Cash cost 1,000 decrease $253m 0 H1 2008 Price Exchange Volume Inflation Cash Costs Cash Cost Cash Cost Throughput - Non-cash Associates Other H1 2009
Slide 21: Operating profit variances: price
Operating profit variances: price (US$m) MTM Copper impact (2008 to H1 2009) (3,913) $/lb 4.00 30/06/2008 5,974 3.50 Prov Pricing $3.89/lb 31/12/2007 3.00 30/06/2009 Prov Pricing Prov Pricing $3.02/lb 2.50 $2.25/lb 2.00 31/12/2008 Prov Pricing 1.50 $1.39/lb 1.00 (3,394) Dec-07 MTM Jun-08 MTM Dec-08
Slide 22: Operating profit variances: volume / exchange
Operating profit variances: volume / exchange (US$m) Production change H1 2009 vs. H1 2008 19% +9% +10% 11% 5,974 +0% (1%) (1%) Export sales Volume variance +29% +$246m includes +$282m AO Throughput Benefit Platinum (16%) (1) (2) Sales Met & Conc Copper Nickel Zinc Met Coal Thermal Iron Ore Coal (1)
Slide 23: Operating profit variances: costs
Operating profit variances: costs (Decrease)/increase in cash costs (US$m) Cash costs decrease $253m or 4.4% Non controllable costs $113 m decrease or 2.0% Controllable costs $140 m decrease or 2.4% 6,500 6,425 (72) (2) (14) 6,312 Fuel (27) Electricity Other 7 (94) Other 6,172 Savings Procurement (5
Slide 24: Percentage increase in cash costs
Cash cost movements 2006 - 2009 14.0% +12.6% +11.2% 12.0% 10.0% 3.7% 7.1% Non controllable costs +7.5% 8.0% Percentage increase in cash costs 1.0% 6.0% 4.0% 7.5% 6.5% Controllable costs 5.5% 2.0% H1 2009 0.0% (1) 2006 2007 2008 -2.4% -2.0% -2.0% -4.0% -6.0% -4.4% 24 (1) Restated for core continuing
Slide 25: Capital expenditure & net debt
Capital expenditure & net debt Capital expenditure (US$m) Net debt (US$bn) 246 Barro Alto Opening net debt – 1 January 2009 11.0 192 189 Minas-Rio Los Bronces Operating cash flows (2.5) 187 295 95 Working capital movement 0.8 Capital expenditure 2.1 999 770 878 Cash tax paid 0.5 Project AGA disposal
Slide 26: Debt evolution & gearing
Debt evolution & gearing Undrawn committed facilities and cash Dec 08 Jun 09 •At 30 June 2009, the Group had over $9 billion undrawn committed External net debt: $3.6bn $3.3bn facilities and cash, after making deductions to provide back-up for outstanding Commercial Paper Shareholder loans: $0.2bn $
Slide 27: 3. Value creation from a unique portfolio
3. Value creation from a unique portfolio Cynthia Carroll
Slide 28: A clear strategy focused on the most attractive commodities
A clear strategy focused on the most attractive commodities • A unique portfolio of world-class assets, 1 focused on the most attractive Demand commodities Dynamics • Targeted investment plan further increases 2 3 Returns exposure to the most attractive commodity Supply Cost groups Dynamics Structur
Slide 29: 1. Focused on China and other BRIC demand
1. Focused on China and other BRIC demand China share of world production and consumption • China has emerged as the largest 2009E-2013E aggregate consumer of industrial metals Production Consumption Consumption • Chinese industrialisation (particularly Share Share Rank (1) Bulk Commodities Fixed As
Slide 30: 2. Attractive supply side fundamentals
2. Attractive supply side fundamentals Production share of top five producers • Capacity has been rationalised in most 2008 production commodities during the last 12 months in responding to demand reduction Manganese 90% • Bulk commodities remain constrained Platinum 83% in terms of logistics/infras
Slide 31: 3. The significance of steep cost curves
3. The significance of steep cost curves Steeper cost curves Flatter cost curves Iron Ore cash cost curve (FOB) Nickel cash cost curve 120 20 100 2008 contract price: US$91/t Incremental C1 cash cost ($lb Ni) 15 H1 2008 average price: US$12.37/lb FOB cost (US$/t) 80 uneconomic Incremental 2009 contr
Slide 32: Focusing on commodities with most attractive long term returns
Focusing on commodities with most attractive long term returns Industry average ROIC(1) Anglo American core commodities Jan. 1990 – Dec. 2008 PGMs 22.2% Platinum Iron Ore Very Manganese attractive 18.9% Copper Met Coal Iron Ore 15.3% Copper 12.1% Diamonds Manganese Diamonds Attractive 9.6% Export Th
Slide 33: Unique and well diversified portfolio, with leading positions
Unique and well diversified portfolio, with leading positions in attractive commodities 2008 capital employed breakdown by commodity 2008 Capital Employed: $27.4 bn • World’s largest platinum producer Platinum • World’s largest resource base with reserves in excess of 160 Moz and resources of over 5
Slide 34: Tier 1 operating assets in Iron Ore, Diamonds, Platinum, Copper and Coal
Tier 1 operating assets1 in Iron Ore, Diamonds, Platinum, Copper and Coal Industry production Reserves to 2008 Cost curve position rank2 production Ratio (years)3 (quartile)4 Sishen 5th 28 Q1 Los Bronces 10th 5th 31 Q2 Collahuasi 5th 45 Q2 Amandelbult 6th 68 Q2 Cerrejón 2nd 24 Q2 Jwaneng 1st 20+ Q1
Slide 35: Intentionally blank
INTENTIONALLY BLANK 35
Slide 36: Projected Production across our priority commodities
Projected Production across our priority commodities Attributable Ore Reserves & Resources (additional to Reserves) 15,000 6,000 6,000 6,000 Copper Platinum Iron ore Coal 123 1,856 10,000 31 years 4,000 35 years 4,000 21 years 4,000 19 years 7,534 Mt 2,486 Mt Mt Mt 4,387 1,943 4,600 5,000 2,000 1,23
Slide 37: Detailed Reserves & Resources
Detailed Reserves & Resources Attributable Ore Reserves & Resources (additional to Reserves) (5) Attributable Ore Tonnes (Mt) Attributable Contained Metal Adjusted 2008 Production Total Inferred Total Total Total (1), (2) (3) (3) Commodity Proven Probable Reserves Measured Indicated Resources Proven
Slide 38: Production output expected to grow by one third by 2013
Production output expected to grow by one third by 2013 • Invest to enhance industry-leading position Current projects to expand output by one third by Platinum and • Develop production base in line with demand 2013 recovery Diamonds 140 Key projects Zinc • Significantly expand footprint in highly a
Slide 39: Summary
Summary • Significant cost reductions achieved • Asset Optimisation and Procurement expected to deliver benefits of over $1bn in 2009; already well on the way to achieving our target of $2bn in 2011 • Extensive restructuring underway at Platinum • Decisive action taken at De Beers • 3 major projects
Slide 40: Q&A
Q&A
Slide 41: Appendix
Appendix
Slide 42: Analysis of operating profit
Analysis of operating profit $m H1 2009 H1 2008 Base Metals 695 T 2,454 Platinum 8 T 1,467 Ferrous Metals & Industries - core 802 T 1,252 Coal 720 T 731 Diamonds 4 T 328 Exploration (70) S (98) Corporate Activities & Unallocated Costs (105) S (160) Core 2,054 5,974 Ferrous Metals & Industries – non
Slide 43: Analysis of underlying earnings
Analysis of underlying earnings $m H1 2009 H1 2008 Base Metals 454 T 1,494 Platinum 30 T 850 Ferrous Metals & Industries 336 T 705 Coal 505 T 543 Diamonds (67) T 166 Industrial Minerals 18 T 139 Exploration (67) S (93) Corporate Activities & Unallocated Costs (113) S (321) Underlying earnings 1,096
Slide 44: Market Prices
Market Prices Average Price H1 2009 H1 2008 Platinum - $/oz 1,103 T 1,947 Palladium - $/oz 218 T 443 Copper – cents/lb 184 T 368 Nickel – cents/lb 531 T 1,237 Zinc – cents/lb 60 T 103 44 Source: London Metals Exchange & Johnson Matthey.
Slide 45: Underlying earnings sensitivities
Underlying earnings sensitivities 10% change in: US$m Platinum + 51 Palladium + 5 Coal + 124 Copper + 80 Nickel + 5 Zinc + 14 Iron ore + 120 ZAR / USD + 115 AUD/USD + 26 BRL/USD + 7 CLP/USD + 13 45 Reflects +/- 10% change on actual results for the period ended 30 June 2009.
Slide 46: Regional analysis
Regional analysis Operating profit $m H1 2009 H1 2008 South Africa 974 T 2,656 Other Africa 37 T 303 Europe (63) T 111 Americas 782 T 2,485 Australia & Asia 406 T 626 Operating profit 2,136 6,181 46
Slide 47: Capital expenditure
Capital expenditure $m H1 2009 H1 2008 Base Metals 840 554 Platinum 579 697 Ferrous Metals & Industries 447 268 Coal 228 352 Industrial Minerals 40 118 Other 6 9 Capital Expenditure 2,140 1,998 47
Slide 48: Operating profit variance: Exchange
Operating profit variance: Exchange $m 47 23 By Business Unit 112 601 263 156 Platinum Coal Base Ferrous Corporate Total Metals & Industries $m 35 By Currency 60 35 184 601 287 ZAR AUD CLP BRL Other Total 48 Stated for core operations. Excluding associates.
Slide 49: Operating profit variance: Price
Operating profit variance: Price Traded Metals Bulks Price - (1) Iron Ore Coal Fertiliser Scaw Metals Price - Bulks Copper (1) Nickel Zinc (2) Niobium PGMs Traded (1) (1) 18 (1,267) 2 (285) (178) (344) (3,394) (519) (1,682) (170) (7) (1) Includes price impact of molybdenum. (2) Includes price impact
Slide 50: Operating profit variance: Volume
Operating profit variance: Volume $m By Business Unit 326 357 246 (209) (36) (282) (228) Platinum Coal Base Ferrous Metals Total - Inc AO AO - Total & Industries (1) Throughput Throughput removed Stated for core operations. Excluding associates. 50 (1) Includes impact of shipping volumes.
Slide 51: Operating cost reconciliation
Operating cost reconciliation 8,000 293 65 7,000 7,379 112 (896) (465) (63) 6,425 6,000 (106) (147) 6,172 5,000 4,000 3,000 2,000 1,000 0 H1 2008 Exchange Volume Inflation Acquisitions Revenue Non Cash Cash Costs Cost Savings H1 2009 & Disposals Recovered / Price Linked 51 Stated for core operations
Slide 52: Operating profit variance: Detailed cost reconciliation
HDS Operating profit variance: Detailed cost reconciliation Decrease/(Increase) in cash costs Cash costs decrease $253m or 4.4% Uncontrollable decrease $113m or 2.0% Controllable decrease $140m or 2.4% 300 53 250 253 100 94 200 150 49 15 22 100 14 (10) 72 (113) (16) (27) 50 0 (1) (1) Fuel Electricit
Slide 53: Underlying earnings variance
Underlying earnings variance 4,000 3,500 3,483 3,000 2,500 2,000 409 108 41 1,500 (70) (176) (45) 67 1,000 (2,235) (486) 1,096 500 0 H1 2008 Price Exchange Volume Inflation Cash Costs Non Cash Interest Associates Structural & H1 2009 Group Costs Other Group 53
Slide 54: Movement in working capital – impact of Cu price volatility
Movement in working capital – impact of Cu price volatility Copper Price Movement in working capital ($m) $/lb (1) 4.00 H1 2009 3.50 Total increase in Group working capital: 836 3.00 30/06/2009 (2) Impact of Cu MTM on working capital: 510 Prov Pricing 2.50 $2.25/lb • Final liquidation: 2.00 – Large
Slide 55: Overview of committed financing
Overview of committed financing Summary of the Group’s bonds and committed bank facilities Description Facility Utilisation at Maturity amount 30 June 09 Committed bank facilities: GBP 300m Bond $0.5bn $0.5bn 2010 •$1.5 billion (due March 2010) USD 1,250m Bond $1.2bn $1.2bn 2014 •$1.5 billion (due 2
Slide 56: Key definitions
Key definitions Reserves and Resources •A ‘Mineral Resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade,
Slide 57: Industry average ROIC analysis details
Industry average ROIC analysis details Sources • ROIC and Total Capital data sourced from Datastream for each company listed below (with the exception of De Beers and Samancor Manganese) since 1990 (or from earliest available date) on a daily basis • De Beers data calculated from De Beers financial