AngloAmerican results 2009-02-20

1

2008 Annual Results

20 February 2009

2

Agenda

• Cynthia Carroll, CEO:– Operational review of 2008

– Positioning Anglo American through the cycle

• René Médori, FD:– Financial review of 2008

• Cynthia Carroll:– Outlook

• Question and Answer session

3

2008 Review

Cynthia Carroll

4

Summary• Strong performance in 2008

– Major improvement in safety record

– Record operating profit from core operations

– Secured new order mining rights across Anglo American’s businesses in South Africa

• Substantial progress on our key strategic initiatives– New $1 billion operating profit target from Asset Optimisation

– Continued delivery on cost reduction programmes

– Further portfolio restructuring and enhancements

• Significant reduction of commodity prices in H2• Positioning Anglo American through the cycle

– 2009 capital expenditure reduced by over 50%

– Cost reduction programme underway

– Dividend payments suspended

– Long term growth options preserved, new projects well timed to enter production from 2011

5

Safety

Fatality Rate

LTIFR

2007 2008

• Continued downward trend in fatalities

• 17% improvement in Lost Time Injury Frequency Rate

• Virtually all major divisions progressed towards eliminating fatalities and improved lost time injury rate performance

• Examples of outstanding achievements:— Anglo Platinum’s Union Mine in South Africa:

more than 6 million fatality-free shifts

— Barro Alto nickel project in Brazil: 966 days without a Lost Time Injury

— Anglo Ferrous Brazil: 3.5 million hours without a Lost Time Injury

4027

Anglo Managed Operations

1.271.05

Anglo Managed Operations

6

Record core operating profit

• More than tripling of operating profit in Coal with record production in all major locations

• Doubling of operating profit in Ferrous Metals and Industries with record production of iron ore and manganese ore and alloys

• Strong financial performance in Base Metals and Platinum despite rapidly deteriorating H2 pricing environment

Base Metals24%

Platinum22%

Ferrous27%

Coal22%

Diamonds5%

2008 Split of Operating Profit(1)

Base Metals46%

Platinum29%

Ferrous13%

Coal7%

Diamonds5%

2007 Split of Operating Profit(1)

(1) Core operations excluding Corporate Activities and Unallocated costs and Exploration costs

7

Precious

• Refined platinum production of 2.39m oz, despite flooding at Amandelbult, Eskom load shedding and safety stoppages

• Improved H2 08: refined production of 1.39m oz; +38% vs. H1 08 and +8% vs. H2 07

• Targeting 2.4m oz refined platinum production in FY09

• Production of 48.1 m carats, 6% lower than 2007

• Operating profit (Anglo share) up 5% to $508m• Three new mines opened in FY08: Snap Lake,

Victor and Voorspoed• 2009 production will be significantly reduced

2007 2008 2007 2008

Platinum Diamonds

Operating Profit ($m) Operating Profit ($m)

2,697

2,226484 508

8

Base Metals and Industrial Minerals

• Record production volumes at Los Bronces, Mantoverde; higher production at Collahuasi

• Sharply lower H2 demand and pricing environment combined with higher input costs (e.g. fuel, power, sulphur and sulphuric acid) for the year

• Targeting 5% growth in copper production in 2009; other base metals production flat

(1) Includes Nickel, Niobium, Mineral Sands and Phosphates

ZincNickel(1)

Copper

2007 2008

4,338

2,505

• Held market share in difficult UK markets• Successfully maintained Tarmac

International’s operating profit year-on-year• $101m of cost savings generated

2007 2008

474

228

Base Metals Industrial Minerals

Operating Profit ($m) Operating Profit ($m)

9

• Record operating profit of $2.9bn– Higher iron ore production, up 13% to 36.7mtpa

at Kumba Iron Ore; higher iron ore and manganese ore prices, partially offset by higher costs of fuels & lubricants, labour and mobile crushing

• Acquired control of Minas-Rio and Amapá• FY09 production +14% at Kumba Iron Ore,

driven by Sishen Expansion Project

Bulks

• Record operating profit of $2.2bn– Higher met coal production and higher met and

thermal coal prices, partially offset by higher royalties, port & rail costs and fuel & power costs

• Rapid decline in global steel production continues to affect demand for met coal

• Thermal coal demand remains relatively strong

• FY09 production to decrease year-on-year

2007 2008

2,240

614

SouthAmerica

Australia

SouthAfrica

Coal Ferrous Metals and Industries

Operating Profit ($m)2007 2008

2,935

1,432

KumbaIron Ore

SamancorManganese

Other

Operating Profit ($m)

10

Positioning Anglo American through the cycle

Cynthia Carroll

11

Near-term market weakness• Strong demand across core commodities in H1 08 has softened

• Since mid-2008, markets characterised by deteriorating demand, increasing stocks and rapidly declining prices

• Demand for commodities in 2009 is likely to remain weak

9001100130015001700190021002300

H1 08 H2 08$/oz

Platinum price

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Copper priceH1 08 H2 08$/oz

$1,526/ozJan

$2,069/ozJul

$922/ozDec

$3.01/lbJan

$3.94/lbJul

$1.32/lbDec

12

Addressing near-term challenges

• Actions taken to deal with rapidly changing price environment and increased level of gearing

• Ensuring cash preservation and maximising value for shareholders

• Optimisation programmes continue to drive cost and efficiency improvements

• Long term growth options preserved: new projects well timed to enter production from 2011

13

(I) Conserving cash through capex reduction• Completed a wide-ranging review of capital expenditure following the

unprecedented decline in commodity prices• 2009 capital expenditure plans reduced more than 50% to $4.5bn,

including $1.3bn stay-in-business capex (74% of depreciation)• Reducing pressure on balance sheet and maintaining flexibility for

future growth when commodity outlook improves

Actions taken

4.5TOTAL GROUP

1.3Group stay-in-business

Zondagsfontein Q2 2009 —0.4Coal

+12 months to Q2 2012Minas-Rio Phase 10.9Ferrous Metals

+8 months to Q4 2011+12 months to Q1 2011

Los BroncesBarro Alto1.4Base Metals

2011-2017

Amandelbult No.4 ShaftTwickenham

Styldrift0.6Platinum

New project timeframe(1)Projects affected

Targeted 2009 project capex

($bn)Business Unit

(1)First production date

14

(II) Production cuts

• Reduced platinum output: target of 2.4 million ounces for FY09

• Plans to grow metallurgical coal production by 10% for FY09 halted; production to be marginally below FY08

• FY09 thermal coal production to decrease by 2 mt year-on-year

• Significantly reduced diamond production

• Production levels will be monitored against economic developments and further cuts will be made if necessary; creating maximum flexibility for the future

Actions taken

15

(III) Reducing our cost base

• Group cost savings: $348 million achieved in 2008, including $217 million from Procurement

• Headcount reductions: expected 19,000 reduction in 2009, in line with growth and development plans

• Aggressive supply chain management to capture full benefits fromrecent reduction in input costs

Actions taken

16

(IV) New Asset Optimisation target of $1 billion

• Asset Optimisation and Procurement to deliver total benefits of $2 billion over three years

• Significant progress made during year:– Roll out of AOS structures now complete across all business units

– Appointed AOS managers in each division

– Global AOS information management platform being developed to aide knowledge and best practice sharing

• Emerging common themes across business units:– Mine planning and execution

– Capital projects management

– Asset management

– Equipment performance

– Metals recovery quality and market link

Actions taken

17

Favourable cost positions across the group• Majority of production in lower half of cost curve:

– 66% of our copper production is in the lower half of the industry C1 cost curve, improving to c. 80% post completion of Los Bronces expansion

– Iron Ore production at Sishen in 1st quartile of cost curve– 90% of thermal coal production in 1st quartile of cost curve; 95% of Hard Coking

Coal production in 1st half of cost curve

• Cost reductions at Anglo Platinum through:– Productivity improvements

– Restructuring of large mines into smaller units

– Reduction of contractor headcount

– Supply chain benefits

• Continued investment in and development of assets in lower half of cost curve in attractive markets

• Actions designed to ensure we create long term value for our shareholders

18

Recap of key messages

• Record core operating profit

• Major safety improvements

• $1 billion three-year Asset Optimisation target set

• Decisive actions taken to address market challenges

19

Financial ResultsRené Médori

20

2008 Financial Results

5.2

37.8%

12.1

4.1

5.8

31.8%

2007

-9%

change

11.0

36.8%

11.8

5.2

5.2

33.4%

2008

Effective tax rate (%)

ROCE (%)

Closing Net debt

EBITDA

Capex

Underlying earnings

$bn

10.110.1Operating profit

Results shown before special items and remeasurements and include share of associates Underlying earnings are stated after minority interestsCore operations: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Samancor Manganese, Anglo Ferrous Brazil)

8.9 +10%9.8Operating profit – core

Total group financials:Underlying EPS ($)

2007$4.40

H2 2007 H2 2008H1 2007

2.222.18

1.46

H1 2008

2.90

2008$4.36 (-1%)

21

Operating profit variances

Operating profit is stated for core operations: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Samancor Manganese, Anglo Ferrous Brazil), before special items and remeasurements and including share of associates

$ million

(802)

1,215 (919)

(740)(1,531)

(216)988 (248)

3,124

8,8949,765

2007 Price -Traded

Price -Bulks

Exchange Volume Inflation CashCosts

Non-cashcosts

Associates Other 2008

22

Operating profit variances: Price (Traded)

$ million

Stated for core operations: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Samancor Manganese, Anglo Ferrous Brazil)

Base Metals $(1,608)m

(802)8,894

2007 Price-Traded

TradedMetals

(484)

(491) 806

633

Copper Nickel Zinc PGMs

(633)

LME - Copper

0

50

100

150

200

250

300

350

400

450

Dec 2007 Mar 2008 Jun 2008 Sep 2008 Dec 2008

USc/lb

30/06/2008 Provisional Pricing389 USc/lb



Cu marked-to-market impact:H1: +$265mH2: -$850m

Full Year: -$585m

23

Operating profit variances: Price (Bulks)

$ million

Variances are stated for core operations excluding associates: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Anglo Ferrous Brazil)

$ million

Price variance breakdown$ million

Bulks

585

805

1,734

Coal Iron Ore Fertiliser & Other

3,124

(802)8,894

2007 Price -Traded

+206%30098Goonyella Benchmark –Hard Coking Coal ($/t)

08/09 Japanese Financial Year

2008 Calendar Year

08/09 Japanese Financial Year

Period

+63%8854Kumba Iron Ore Achieved Price - Export ($/t)*

120

2008

+90%

% change

63

2007

RSA API-4 Benchmark -Thermal Coal ($/t)

*Price increase of 93% from 1 April 2008 for 2008/2009 iron ore contracts

Price-Bulks

24

Operating profit variances: FX and volume

$ million

(1)Platinum is equivalent refined production


Exchange Sensitivity

+/- 0.50 ZAR/USD: $336m +/- 0.10 AUD/USD: $92m

(919)

2,322

8,894

2007 Price Exchange Volume

H2 +$1,119m

H1 +$96m

1,215

Nickel Platinum(1) Coal Copper Iron Ore

Production change 2008 vs. 2007

-21%+4%

-2%

+15%0%

-10% sales volume

6.00

7.00

8.00

9.00

10.00

11.00

Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08

ZAR

/USD

0.50

0.70

0.90

1.10

1.30

1.50

1.70

AU

D/U

SD

AUD/USD ZAR/USD

Key Exchange Rate Trend

ZAR08 Avg: 8.2707 Avg 7.05

AUD08 Avg: 1.1707 Avg 1.19

25

Operating profit variances: Costs

$ million

Variances are stated for core operations excluding associates: Base Metals, Platinum, Coal, Diamonds, Ferrous Metals (Kumba Iron Ore, Scaw Metals, Anglo Ferrous Brazil); (1)Source: US Energy Information Administration

Oil Price Sensitivity- Operating Profit impact

+/- $10/bbl: $70m

7.1% increase in non controllable

cash costs

5.5% increase in controllable

cash costs

(667)(188)(144)(222)

(310)

(919)

(740)2,322

8,894

2007 Price Exchange Volume Inflation Energy Sulphur/SulphuricAcid

Royalties Freight/Transport

OtherCashCosts

1,215

ICE Brent Crude ($bbl)

0

20

40

60

80

100

120

140

160

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

$63/bbl

$82/bbl

$110/bbl

$88/bbl

-$164m

-$21m

Operating profit impact

(1)

26

Capital expenditure and net debt

(0.7)Dividends received

(1.6)Currency movement

0.5Net interest paid

0.6Share buyback

11.0

(0.1)

2.3

8.6

(1.5)

2.2

5.1

(9.6)

5.2

$bn

37.8%

20.0%Gearing

2008 Closing net debt

Other

Dividends paid

Acquisitions(2)

Disposals

Cash tax paid

Capital expenditure

Operating cashflows

2008 Opening net debt

Capex ($ million)

4,500

125

4,5005,1464,117Total

246323579Non-core and

other(1)

(1) Non-core includes AIM, Mondi, Highveld, Tongaat Hulett and AngloGold Ashanti. Other includes corporate capex

Los Bronces

Minas-Rio

Barro Alto

SIB

Major Projects

(2) Includes $0.7bn debt acquired on acquisitions

1,2031,591

1,175 1,111

2,3351,928

1,649

981

549

960

338

459

502713

506

500 489

2007 2008 2009 2010

27

Debt evolution & gearing

External net debt: $3.55bn

3.3

11.0

5.2

37.8%

12.9%

20.0%

-

2.0

4.0

6.0

8.0

10.0

12.0

2006 2007 2008

$bn

0%

5%

10%

15%

20%

25%

30%

35%

40%

Net Debt Gearing %

28

Overview of committed financingSummary of the Group’s bonds and committed bank facilities

2012$0.9bn$2.5bnCore facility2

2011$4.5bn$4.5bnAcquisition facility

2009$1.1bn$2.9bnBridge loan facility

20184$0.0bn$0.6bnBNDES3

$13.4bn$19.0bnTotal bonds & committed facilities

2009-2018$2.5bn$3.5bnOther committed facilities

$10.3bn$15.9bnTotal committed facilities

2009-2012$0.3bn$0.3bnOther Bonds

$3.1bn$3.1bnTotal Bonds1

2010$0.4bn$0.4bnGBP 300m Bond

2015$1.6bn$1.6bnEUR 1,000m Bond

2018$0.8bn$0.8bnGBP 400m Bond

$1.9bn

Facility amount

$1.3bn

Utilisation at 31Dec 08

2009-2013AASA Bank Facilities2

AA plc bank facilities

MaturityDescription

1Including the impact of interest rate and currency swaps2Deductions to provide back-up for outstanding Commercial Paper of $1.1bn3Dedicated Barro Alto financing 4Amortising profile

Refinancing in 2009/2010•Anglo American’s only significant maturing debt facility in 2009 is a $3 billion revolving bank facility, of which $1.1 billion was drawn at 31/12/08. In addition, the GBP 300m Bond matures in December 2010

Committed bank facilities:•$0.5 billion (due April 2009)•$1.5 billion (due March 2010)•$2.3 billion (due 2012 and beyond)

Agreement to provide shareholder loan of $500m (Anglo share $225m)

Undrawn committed facilities and cash•At 31 December, the Group had over $7 billion undrawn committed facilities and cash, after making deductions to provide back-up for outstanding Commercial Paper

•In addition, the Group has a $1 billion dedicated, committed financing facility for Minas-Rio, subject to certain disbursement conditions

29

OutlookCynthia Carroll

30

Market outlook

• Markets are expected to remain weak and uncertain in the short term

• However, medium-to-longer term market fundamentals remain attractive

• We continue to invest in profitable growth with a bias towards copper, export bulks and platinum

31

Future production growth is well-timed

Copper

2009 2010 2011 2012 2013

Note: Selected approved projects*Production represents average over first ten years of the project**Replacement production

Los Bronces+173ktpa*

Barro Alto36ktpa

Minas Rio26.5Mtpa

Sishen South9Mtpa

AmandelbultNo. 4 Shaft**

271kozpa

Seaborne Iron Ore

Twickenham180kozpa

Nickel

Platinum Full production2016-2019

32

Major growth projects in:

• Copper• Iron ore• Coal

Anglo American growth profile

2008 2012500

900Ktpa

650

2008 2012

50

75Mtpa

40

90

100

Mtpa115

Copper production growth

Iron ore production growth

Coal production growth

2010

2010

2008 20122010

Well timed to enter production in 2011

33

Outlook

• Weak current market conditions, but medium-to-longer term fundamentals remain attractive

• Anglo well placed to create long term shareholder value

34

Question and Answer session

35

Appendix

36

Market pricesAverage Price 2008 2007

Platinum - $/oz 1,585 1,304

Palladium - $/oz 355 355

Copper – cents/lb 315 323

Nickel – cents/lb 953 1,686

Zinc – cents/lb 85 147

Coal: Thermal RSA API-4 index average - $/tonne 120 63

37

Underlying earnings sensitivitiesUS$m

10% change in platinum price + 144

10% change in palladium price + 22

10% change in coal price + 349

10% change in copper price + 275

10% change in nickel price + 50

10% change in zinc price + 45

10% change in iron ore price + 88

10% change in SA rand / US$ + 279

10% change in AUD/US$ + 110

10% change in GBP/US$ + 14

10% change in Chilean Peso/US$ + 45

Stated after tax at marginal rateSensitivities are the average of the positive and negative and reflect the impact of a 10% change in average prices received and exchange rates during 2008

38

Analysis of underlying earnings$m 2008 2007

Base Metals 1,369 3,100

Platinum 1,313 1,299

Ferrous Metal & Industries 1,396 605

Coal 1,581 490

Diamonds 256 239

Industrial Minerals 173 384

Exploration (200) (145)

Corporate Activities & Unallocated Costs (651) (495)

Paper & Packaging - 189

Gold - 95

Underlying Earnings 5,237 5,761

Underlying earnings is profit attributable to equity holders before special items and remeasurements and including share of underlying earnings of associates

39

Analysis of operating profit$m 2008 2007Base Metals 2,505 4,338Platinum 2,226 2,697Ferrous Metal & Industries - core 2,843 1,210Coal 2,240 614Diamonds 508 484Exploration (212) (157)Corporate Activities & Unallocated Costs (345) (292)Core 9,765 8,894Ferrous Metal & Industries – non core 92 222Industrial Minerals 228 474Paper & Packaging - 324Gold - 202Operating Profit 10,085 10,116

Operating profit before special items and remeasurements and including share of operating profit from associates

40

Regional analysisOperating Profit$m 2008 2007South Africa 5,107 4,291Rest of Africa 467 693Europe (183) 513Americas 2,956 3,942Australasia & Asia 1,738 151Total 10,085 9,590

Operating profit prepared on a continuing business basis (excludes Paper & Packaging and AngloGold Ashanti in 2007) before special items and remeasurementsand including share of operating profit from associates

41

Capital expenditure$m 2008 2007Base Metals 1,494 610Platinum 1,563 1,479Ferrous Metal & Industries 831 470Coal 933 1,052Industrial Minerals 301 274Paper & Packaging - 186Other 24 46Total 5,146 4,117

Capital Expenditure relates to cash expenditure on tangible assets

42

Operating profit variance: Exchange


$ million

1,21529204

36264

Platinum Coal Base Ferrous Corporate Total

682

43

Operating profit variance: Price – PGMs

$ million

(27) 52201

580

Platinum Rhodium Ruthenium Other Total PGMs

806

44

Underlying earnings variance

$ million

(554)(132)(128)

(1,058)(546)

(778)

636

7251,311

5,2375,761

2007 PriceExchange

VolumeInflation

Cash CostsNon Cash

Costs

Interest AssociatesStructural &

Other

2008

45

Operating profit variances: Costs12.6% increase in cash costs


Uncontrollable +7.1% Controllable +5.5%

(421)

(491)

27075(263)

(144)

(125)

(162)(1,531)

(110) 247

Fuel Electricity Sulphur /Sulphuric Acid

Royalties Freight &Transportation

TC/RC StockMovement

Labour &Contractors

Consumables Maintenance Admin & Other

CostSavings

Cash CostIncrease

(185)

(222)

46

Operating cost reconciliation


$ million

Operating costs include TC/RCs which for statutory reporting purposes are offset against revenue

222

1,531

216

682

(872) 740119

14,799

12,161

2007 Exchange Volume Inflation Non Cash Acquisitions &Disposals

Other Cash Costs 2008

AngloAmerican results 2009-02-20

Documents

Transcript of AngloAmerican results 2009-02-20