Anglo American: Interim Results 2010
Friday, July 30th, 2010
Anglo American announces operating profit of $4.4 billion and reinstates dividend
* Group operating profit(1) of $4.4 billion ($4.1 billion from core operations(2))
* Underlying earnings(3) of $2.2 billion and underlying earnings per share of $1.84
* Profit attributable to equity shareholders of $2.1 billion
* Net debt(4) at $10.9 billion at 30 June 2010
* Committed undrawn bank facilities and cash of over $12 billion at 30 June 2010
Operational performance and strategic delivery
* Asset optimisation and procurement programmes ahead of expectations, with run rate of $1 billion from core businesses for the six month period
o Asset optimisation: $796 million, including one-off benefits
o Procurement: $205 million
* Platinum operational turnaround to position in lower half of cost curve – cash operating costs controlled; full year production of 2.5 million ounces on track; labour productivity increased 11%
* $2.2 billion of expected proceeds from agreed divestments announced to date
o $1.3 billion sale of zinc business
o $0.5 billion sale of undeveloped Australian coal assets
o $0.4 billion sale of Tarmac’s European businesses
Near term growth a clear differentiator
* Barro Alto 36 ktpa nickel project – to more than double nickel production – on budget and on schedule for first production in Q1 2011
* Los Bronces 200 ktpa copper expansion on budget and on schedule for first production in Q4 2011
* Kolomela 9 Mtpa iron ore project on budget and on schedule for first production in Q2 2012
* Minas Rio 26.5 Mtpa iron ore project – good progress; key regulatory approvals remain outstanding, impacting timing and capital expenditure
* Further growth projects pending approval: Quellaveco (Peru, 225 ktpa copper) and Grosvenor (Australia, 4.3 Mtpa metallurgical coal)
Further safety achievements
* New safety practices embedded and delivering further improved results
o 38% reduction in fatalities vs. H1 2009
o 30% improvement in lost time injury rates vs. H1 2009
* Interim dividend of $0.25 per share
* Progressive dividend policy to maintain or steadily increase dividends in dollar terms
ynthia Carroll, Chief Executive, said, “Anglo American has made further significant progress during the first six months of 2010, delivering on our strategic objectives. Our businesses are operating strongly under our new organisational structure, our cost and efficiency programmes continue to deliver ahead of expectations, our divestment programme is well under way and we continue to make further progress on our safety performance. We achieved a strong operating performance across our businesses against still uncertain global economic conditions, with operating profit of $4.4 billion and underlying earnings of $2.2 billion.
We continue to extract substantial synergies as a result of our organisational structure and scale. By the end of June, our asset optimisation and procurement programmes had achieved a run rate of $1 billion of benefits, well ahead of expectations, and are making excellent progress towards our stated target of $2 billion from our core businesses alone by 2011.
The restructuring of both Platinum and De Beers is generating a new level of operational performance in both businesses. Platinum has achieved labour productivity gains of 11%, is showing a 27% increase in productivity since the first half of 2008 and continues to control its cash operating unit costs, despite high energy and wage inflation. At De Beers, significant sustainable cost savings have been embedded, enabling the company to benefit fully from the improved demand and pricing environment for diamonds.
Our near term production growth is a clear differentiator for Anglo American and will be delivered by four major strategic projects that we are developing. The first of these is the Barro Alto nickel project in Brazil, which is on schedule for first production in the first quarter of 2011 and will more than double our nickel production capacity when it reaches full production of 36,000 tonnes per year. The expansion of our Los Bronces copper operation in Chile is also on schedule for first production in the fourth quarter of next year, increasing our low cost production at this world class mine to 490,000 tonnes per year over the first three years. Furthermore, as we announced last year, two recent discoveries nearby are expected to enable considerable further expansion in due course. In South Africa, the 9 million tonne per annum Kolomela iron ore project is making excellent progress towards first production in the second quarter of 2012.
At Minas Rio, our 26.5 million tonne per annum phase one iron ore project in Brazil, we have made good progress on those areas of the project where the necessary approvals have been secured, in the context of what has become an increasingly rigorous and more complex environmental permitting process in Brazil in recent years. A number of key approvals remain outstanding and these are on the critical path of the project, therefore impacting the time and cost to complete. We have considerable resource deployed to resolve these issues, including constructive high level dialogue with the authorities in Brazil. Once the remaining initial approvals are granted, we believe it will take 27 to 30 months to construct and commission the mine and plant and to deliver the first ore on ship.
Following our initial announcement in October, the divestment of our non-core businesses is well under way. The announced sales of our zinc portfolio, several of Tarmac’s European businesses and five undeveloped coal assets in Australia are expected to generate proceeds in excess of $2.2 billion. As we stated from the outset, we will sell the balance of our divestment portfolio in a manner and on a timetable that maximises value for our shareholders. We have seen a lot of interest in these assets.
I am pleased to announce the resumption of dividend payments with an interim dividend of 25 cents per share, reflecting the Group’s improved operating performance and financial position, as well as progress on non-core asset sales and a supportive medium term outlook.
Our safety performance has shown further considerable improvement in the first half, with both fatality and lost time injury rates continuing to reduce. While these results represent a step change from the position in 2007, we will continue to strive to achieve our goal of zero harm.
The short term outlook for the world economy has become more uncertain in recent months, with certain less favourable leading economic indicators. However, in the medium to long term, we remain confident about prospects for Anglo American with the process of industrialisation and urbanisation in China, India, Brazil and other emerging countries continuing to drive demand for our key commodities.”