TIDMAAL
RNS Number : 5842F
Anglo American PLC
22 February 2018
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year end FINANCIAL REPORT
for the year ended 31 December 2017
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22 February 2018
Anglo American Preliminary Results 2017
Free cash flow increased by 93% to $4.9 billion, halving net
debt to $4.5 billion
Mark Cutifani, Chief Executive of Anglo American, said: "We have
delivered a 93% increase in attributable free cash flow, almost
halving net debt to $4.5 billion at the year end. These strong
financial results benefit from transformed productivities and
efficiencies across our business - including a 28% productivity
improvement in 2017 alone - together with our portfolio upgrading
and improved prices for many of our products. Our increased
dividend for the second half equates to our targeted level of 40%
of underlying earnings, totalling $1.02 per share for the year as a
whole.
"We exceeded our cost and volume improvement target for the
year, achieving $1.1 billion of underlying EBITDA benefit. Over the
last five years, we have now delivered a $4.2 billion annual
underlying EBITDA improvement. While we have already driven a
material operational turnaround, we believe there is significant
additional upside within the business both through further
operating gains and from selected organic growth options. As part
of how we run the business, we are therefore targeting an
additional $3-4 billion annual run--rate improvement by 2022 from
production volumes, productivity improvements and cost
reductions."
Highlights - year ended 31 December 2017
-- Delivered attributable free cash flow* of $4.9 billion, a 93% increase
-- Reduced net debt* to $4.5 billion, a 47% reduction, equal to 0.5x net debt / EBITDA
-- Generated underlying EBITDA* of $8.8 billion, a 45% increase
-- Profit attributable to equity shareholders doubled to $3.2 billion
-- Achieved cost and volume improvements of $1.1 billion - in excess of target
-- Targeting additional $3-4 billion annual underlying EBITDA run-rate improvement by 2022
-- Increased dividend of 54 US cents per share for the second
half, equal to 40% of second half underlying earnings*
- Total dividend payable for 2017 of $1.02 per share
Year ended 31 December 31 December Change
US$ million, unless otherwise 2017 2016
stated
-------------------------------- ------------ ------------ -------
Underlying EBITDA* 8,823 6,075 45%
Underlying earnings* 3,272 2,210 48%
-------------------------------- ------------ ------------ -------
Profit attributable to equity
shareholders of the Company 3,166 1,594 99%
-------------------------------- ------------ ------------ -------
Underlying earnings per share*
($) 2.57 1.72 49%
Earnings per share ($) 2.48 1.24 100%
Dividend per share ($) 1.02 - -
Group attributable ROCE* 19% 11% -
Notes to the highlights and table are shown at
the bottom of this section.
Words with this symbol * are defined as Alternative Performance
Measures ('APMs'). For more information on the APMs used by the
Group, including definitions, please refer to page 57.
Safety and environmental performance
Anglo American's safety record in 2017 was the Group's single
disappointment. Nine people lost their lives in fatal accidents in
2017, all in South Africa. Every leader in the business understands
it is unacceptable to continue to work where there is a likely
consequence of injury. As a result, significant further operational
interventions to manage activity risks to end fatal incidents
across all operations have taken place. Safety continues to be the
Group's most critical area of focus, and while significant progress
over recent years must be recognised -- reducing safety incident
rates by more than 40% -- there is still a long way to go on the
journey to zero harm.
Environmental incidents have been reduced by more than 90% since
2013, with continued focus on detailed operational planning across
Anglo American's operating interests. Good progress continues to be
made towards greater water and energy efficiency, as part of the
overall business improvements.
Operational and financial review of Group results for the year
ended
31 December 2017
SUMMARY
Anglo American's profit attributable to equity shareholders
doubled to $3.2 billion (2016: $1.6 billion). Underlying earnings
were $3.3 billion (2016: $2.2 billion), while operating profit was
$5.5 billion (2016: $1.7 billion).
Group underlying EBITDA increased by 45% to $8.8 billion (2016:
$6.1 billion), benefiting from strong bulk commodity and copper
prices. Cost and volume improvements across the Group benefited
underlying EBITDA by $1.1 billion, exceeding the $1.0 billion
target for the year, driven by the ongoing ramp-up of Minas-Rio and
strong sales volumes at De Beers in the first quarter. There were
also productivity improvements at Kumba, with increased fleet
efficiency and higher plant yields, while Platinum made a solid
recovery from the operational challenges experienced in 2016. The
impact of the Group's ongoing cost-efficiency programme also played
a significant role in exceeding our improvement target for the
year.
The Group delivered a strong operational performance and
increased copper equivalent production by 5%, despite challenges
arising from adverse weather conditions in Australia, and an
extended longwall move at Grosvenor (Metallurgical Coal).
Group copper equivalent unit costs increased by 7%, principally
driven by stronger producer currencies. When the impact of foreign
exchange movement is excluded, this increase was only 2%; below the
Group's weighted average CPI for the year of 4%.
Attributable ROCE increased to 19% (2016: 11%), owing to the 73%
improvement in attributable underlying EBIT to $5.1 billion.
Net debt (including related derivatives) reduced to $4.5
billion, $4.0 billion lower than at 31 December 2016. The reduction
was driven by $4.9 billion of attributable free cash flow,
reflecting the strong underlying EBITDA and working capital
inflows, partly offset by the payment of dividends to Group
shareholders.
Our materially improved balance sheet supported the resumption
of the dividend at the half year. Based on a payout ratio dividend
policy, 48 US cents per share was paid in September 2017. In line
with this policy, the Board proposes a final dividend of 40% of
second half underlying earnings equal to 54 US cents per share,
bringing the total dividends paid and proposed for the year to
$1.02 per share.
OPERATIONAL PERFORMANCE
We have continued to lift the performance of our assets through
the implementation of our Operating Model. Across the Group,
production increased by 5% on a copper equivalent basis, driven by
improved performances at De Beers (+22%), Kumba Iron Ore (+8%) and
Iron Ore Brazil (+4%), partly offset by lower production at the
Coal operations (-4%)(1) .
At De Beers, rough diamond production increased by 22% to 33.5
million carats (2016: 27.3 million carats), reflecting stronger
trading conditions and the contribution from the Gahcho Kué mine in
Canada, which entered commercial production in March 2017.
Kumba delivered a strong operational performance, increasing
iron ore production by 8% to 45.0 Mt (2016: 41.5 Mt), following
improvements in mining productivity resulting from fleet
efficiencies and higher plant yields. In Brazil, our Minas-Rio iron
ore operation produced 16.8 Mt (wet basis), 4% higher (2016: 16.1
Mt), as the operation continued to ramp up its current operating
capacity.
Copper production was in line with the prior year at 579,300
tonnes (2016: 577,100 tonnes), with solid performances at Los
Bronces and Collahuasi partly offset by the impact of lost
production at El Soldado, owing to the temporary suspension of
mining operations in the first half.
Our Metallurgical Coal business in Australia produced 19.7 Mt of
metallurgical coal, 6% lower than the prior year (2016: 20.9 Mt).
This was driven by the divestment of Foxleigh mine (PCI producer),
although was largely offset by a strong performance at the
underground longwall operations, which produced 12.3 Mt, 14% higher
than the prior year (2016: 10.8 Mt). Coal South Africa's export
thermal coal production declined by 3% to 18.6 Mt (2016: 19.1 Mt),
mainly owing to operational challenges at Khwezela mine, and the
planned transition to a new pit at Mafube. The Coal South Africa
operations were also affected by self-enforced safety stoppages,
following three fatalities in the year.
Group copper equivalent unit costs increased by 7%, driven
mainly by stronger producer currencies. Excluding the impact of
foreign exchange, the cost increase was 2%. Lower unit costs were
realised at Platinum in rand terms, as a result of ongoing
cost-saving initiatives, and at De Beers, where higher production
and efficiency drives helped reduce unit costs. These efficiencies
were offset, however, by higher costs across the Coal business
which, in addition to experiencing Khwezela's operational
challenges, encountered lower volumes at Dawson and the effects of
the extended longwall move at Grosvenor (both Metallurgical
Coal).
FINANCIAL PERFORMANCE
UNDERLYING EBITDA*
Group underlying EBITDA increased by 45% to $8.8 billion (2016:
$6.1 billion), with a five percentage point increase in EBITDA
margin from 26% to 31%, driven by strong pricing, particularly in
bulk commodities and copper, continued productivity improvements
and cost control across the portfolio.
Underlying EBITDA* by segment
$ million Year ended Year ended
31 December 31 December
2017 2016
------------------------ ------------- -------------
De Beers 1,435 1,406
Copper 1,508 903
Platinum 866 532
Iron Ore and Manganese 2,357 1,536
Coal 2,868 1,646
Nickel 81 57
Corporate and other (292) (5)
Total 8,823 6,075
------------------------ ------------- -------------
(1) Metallurgical and export thermal coal production.
Underlying EBITDA* reconciliation 2016 to 2017
The reconciliation of underlying EBITDA from $6.1 billion in
2016 to $8.8 billion in 2017 allows an understanding of the
controllable factors (e.g. cost and volume) and those largely
outside of management control (e.g. price, foreign exchange and
inflation) that drive the Group's performance.
$ billion
---------------------------------- ---- ------
2016 underlying EBITDA* 6.1
Price 2.4
Foreign exchange (0.7)
Inflation (0.4)
Volume 0.9
Cost 0.2
----------------------------------
Net volume and cost improvements 1.1
Other 0.3
---------------------------------- ---- ------
2017 underlying EBITDA* 8.8
---------------------------------- ---- ------
Price
Average market prices for the Group's basket of commodities and
products increased by 16%, contributing $2.4 billion of improvement
to underlying EBITDA. The realised prices of metallurgical coal and
copper increased by 57% and 29% respectively, while palladium
(Platinum) showed a 44% improvement in realised price. The average
realised price of diamonds decreased by 13%, mainly owing to a
lower-value mix, with the average rough price index being 3%
higher.
Foreign exchange
Stronger producer country currencies had the effect of reducing
underlying EBITDA by $0.7 billion, mainly owing to a 9%
strengthening of the South African rand and a 4% strengthening of
the Chilean peso against the dollar.
Inflation
The Group's weighted average CPI for the year was 4%, in line
with the prior year, principally influenced by South Africa, which
had local CPI of 5%. The impact of inflationary cost increases
reduced underlying EBITDA by $0.4 billion.
Volume
Following the cessation of capitalisation of earnings at
Minas-Rio in January 2017, the operation's 16.8 Mt iron ore
production materially benefited underlying EBITDA by $0.4 billion,
which was also boosted by higher sales volumes at De Beers,
reflecting stronger demand for lower-value goods in the first
quarter of 2017. Kumba's increased fleet efficiency and higher
plant yields, as well as Platinum's solid recovery from the
operational challenges experienced in 2016, also contributed to the
Group volume improvement.
Cost
The Group's cost improvements benefited underlying EBITDA by
$0.2 billion, overcoming the effects of above--CPI inflationary
pressure on the mining industry. This performance reflected the
numerous cost-saving initiatives being implemented across the
Group.
Other
Improved profitability at the Group's joint ventures and
associates, Samancor, Cerrejón and Jellinbah, added $0.5 billion to
underlying EBITDA. This was driven by higher prices on a stable
production base. The action taken in 2016 to streamline our
portfolio, which included the disposal of our Niobium and
Phosphates business and tactical divestments at Metallurgical Coal,
had a negative underlying EBITDA impact of $0.2 billion.
UNDERLYING EARNINGS*
Group underlying earnings increased by 48% to $3.3 billion
(2016: $2.2 billion), in excess of the 45% increase to underlying
EBITDA.
Reconciliation to underlying earnings*
$ million Year ended Year ended
31 December 31 December
2017 2016
------------------------------- ------------- -------------
Underlying EBITDA* 8,823 6,075
Depreciation and amortisation (2,576) (2,309)
Net finance costs and
income tax expense (2,223) (1,118)
Non-controlling interests (752) (438)
Underlying earnings* 3,272 2,210
------------------------------- ------------- -------------
Depreciation and amortisation
Depreciation and amortisation increased to $2.6 billion (2016:
$2.3 billion), reflecting cessation of capitalisation at Grosvenor
in August 2016, and at Minas-Rio and Gahcho Kué during the course
of 2017, in addition to the effect of stronger local
currencies.
Net finance costs
Net finance costs, before special items and remeasurements,
excluding associates and joint ventures, were $0.5 billion (2016:
$0.2 billion). The increase was principally driven by the cessation
of capitalisation of borrowing costs associated with Minas-Rio and
Grosvenor, leading to a reduction in interest costs capitalised to
$35 million (2016: $0.4 billion), as well as the impact of
increases in LIBOR. This was partly offset by lower interest
expense resulting from reduced average borrowings during the
year.
Income tax expense
The underlying effective tax rate was 29.7% for the year ended
31 December 2017 (2016: 24.6%). The effective tax rate in 2017
benefited from the reassessment of deferred tax balances, primarily
in Australia and Brazil, partly offset by the reassessment of
withholding tax provisions, primarily in relation to Chile and
South Africa, and the impact of the relative levels of profits
arising in the Group's operating jurisdictions. In future periods,
it is expected that the underlying effective tax rate will remain
above the United Kingdom statutory tax rate.
The tax charge for the year, before special items and
remeasurements, was $1.3 billion
(2016: $0.7 billion).
Non-controlling interests
Non-controlling interests of $0.8 billion (2016: $0.4 billion)
principally relate to minority shareholders in Kumba Iron Ore (Iron
Ore and Manganese) and has increased as a result of higher
profitability at Anglo American Sur (Copper).
SPECIAL ITEMS AND REMEASUREMENTS
Special items and remeasurements are a net charge of $0.1
billion (2016: net charge of $0.6 billion) and include net
impairment reversals of $0.4 billion, relating to the impairment
reversal at Sishen (Iron Ore and Manganese) of $0.5 billion, and El
Soldado (Copper) of $0.2 billion, partly offset by impairments of
the Group's interest in BRPM (Platinum) and at Coal South
Africa.
Full details of the special items and remeasurements recorded in
the year are included in note 9 to the Condensed financial
statements.
CASH FLOW
Cash flows from operations
Cash flows from operations increased by $2.5 billion to $8.4
billion (2016: $5.8 billion), reflecting strong underlying EBITDA
from subsidiaries and joint operations and working capital
inflows.
Cash inflows on operating working capital were $0.9 billion
(2016: inflows of $0.4 billion), driven mainly by an increase in
operating payables across the Group and, in particular, by a $0.2
billion prepayment from a customer in our Platinum business.
Attributable free cash flow*
Attributable free cash flow increased to a $4.9 billion inflow
(2016: $2.6 billion inflow). The improvement resulted from a $2.5
billion increase in cash flows from operations and a $0.2 billion
reduction in capital expenditure, offset by a $0.6 billion increase
in dividends paid to non-controlling interests.
NET DEBT*
$ million 2017 2016
------------------------------------------ -------- ---------
Opening net debt* (8,487) (12,901)
------------------------------------------ -------- ---------
Underlying EBITDA* from subsidiaries
and joint operations 7,632 5,469
Working capital movements 879 391
Other cash flows from operations (136) (22)
------------------------------------------ -------- ---------
Cash flows from operations 8,375 5,838
Capital expenditure* (2,150) (2,387)
Cash tax paid(1) (843) (465)
Dividends from associates, joint
ventures and financial asset investments 517 172
Net interest(2) (355) (581)
Dividends paid to non-controlling
interests (601) (15)
------------------------------------------ -------- ---------
Attributable free cash flow* 4,943 2,562
Dividends to Anglo American plc (618) -
shareholders
Other net debt movements (339) 1,852
------------------------------------------ -------- ---------
Total movement in net debt*(3) 3,986 4,414
------------------------------------------ -------- ---------
Closing net debt* (4,501) (8,487)
------------------------------------------ -------- ---------
(1) 2016 excludes tax payments of $146 million relating to
disposals, which are shown as part of net disposal proceeds.
(2) Includes cash inflows of $22 million (2016: $89 million),
relating to interest payments on derivatives hedging net debt,
which are included in cash flows from derivatives related to
financing activities.
(3) Net debt excludes the own credit risk fair value adjustment
on derivatives of $9 million (2016: $73 million).
Net debt (including related derivatives) of $4.5 billion was
$4.0 billion lower than at 31 December 2016, representing gearing
of 13% (2016: 26%). Net debt at 31 December 2017 comprised cash and
cash equivalents of $7.8 billion (2016: $6.0 billion) and gross
debt, including related derivatives, of $12.3 billion (2016: $14.5
billion). The reduction in net debt was driven by $4.9 billion of
attributable free cash flow, partly offset by the payment of
dividends to Group shareholders in September, as well as other net
debt movements.
BALANCE SHEET
Net assets of the Group increased by $4.6 billion to $28.9
billion (2016: $24.3 billion). This reflected the reduction in net
debt and net foreign exchange gains relating principally to
operations with South African rand and Australian dollar functional
currencies. Capital expenditure of $2.2 billion was more than
offset by depreciation and amortisation of $2.6 billion.
ATTRIBUTABLE ROCE*
Attributable ROCE increased to 19% (2016: 11%), primarily owing
to the 73% improvement in attributable underlying EBIT to $5.1
billion (2016: $3.0 billion), driven by higher prices, higher sales
volumes at De Beers, the ongoing ramp-up of production at Minas-Rio
in Brazil and the continued delivery of cost efficiency programmes
across the Group. This improvement was mitigated by inflation and
stronger producer country currencies. Average attributable capital
employed was constant at $27.4 billion (2016: $27.4 billion), as
capital expenditure and the strengthening of producer currencies
were offset by the impact of disposals during 2016 on average
capital employed, and a $0.9 billion reduction in working capital
during the year.
LIQUIDITY AND FUNDING
In March 2017, the Group completed the repurchase of $1.3
billion (including the cost of unwinding associated derivatives) of
euro- and sterling-denominated bonds with maturities from April
2018 to June 2019. This was followed in April 2017 with a $1.0
billion dual tranche 5- and 10-year issuance in the US bond
markets.
In September 2017, the Group completed the repurchase of $1.9
billion (including the cost of unwinding associated derivatives) of
US- and euro-denominated bonds with maturities from September 2018
to November 2020. Concurrently, the Group issued corporate bonds
with a US dollar equivalent value of $2.0 billion, including a $1.3
billion dual tranche 7- and 10-year issuance in the US bond markets
and a EUR0.6 billion 8-year bond in the European bond markets.
On 7 February 2018, Anglo American gave notice that it will
redeem in full its outstanding $750 million, 9.375% US bond, due
April 2019, on 9 March 2018.
These transactions, as well as $1.9 billion of bond maturities
during 2017, have reduced short term refinancing requirements,
increased the weighted average maturity of outstanding debt by
approximately one year and reduced gross debt.
GROUP CAPITAL EXPITURE*
Capital expenditure decreased to $2.2 billion (2016: $2.4
billion), due to rigorous capital discipline applied to all project
investments, coupled with the commissioning of the Minas-Rio,
Gahcho Kué and Grosvenor projects - all previously projects in
execution, for which capitalisation has ceased.
$ million Year ended Year ended
31 December 31 December
2017 2016
-------------------------------- ------------- -------------
Expansionary 384 967
Stay-in-business 1,310 1,042
Development and stripping 586 551
Proceeds from disposal of
property, plant and equipment (52) (23)
Total 2,228 2,537
-------------------------------- ------------- -------------
Capitalised operating cash
flows (78) (150)
-------------------------------- ------------- -------------
Total capital expenditure 2,150 2,387
-------------------------------- ------------- -------------
Stay-in-business capital expenditure increased to $1.3 billion
(2016: $1.0 billion), primarily owing to the inclusion of
expenditure at these newly commissioned assets and stronger
producer currencies.
Capital expenditure on our expansionary projects during the year
was focused on the ongoing development of De Beers' Venetia
underground mine in South Africa. The project is now well under
way, with the underground operation expected to be the mine's
principal source of ore during 2023, extending the life of mine to
2046.
In 2018, we expect capital expenditure to increase to between
$2.6 and $2.8 billion.
DIVIDS
Our materially improved balance sheet supported the decision to
resume dividend payments at the half year, six months earlier than
expected, and a dividend based on 40% of first half underlying
earnings was paid in September 2017.
The payout ratio based dividend policy provides shareholders
with exposure to improvements in product prices, while retaining
cash flow flexibility during periods of weaker pricing. In line
with the policy, the Board proposes a final dividend of 40% of
second half underlying earnings, equal to 54 US cents per share,
bringing the total dividends paid and proposed in the year to $1.02
per share.
PORTFOLIO UPGRADE
Disposals announced and completed
During 2017, we completed the disposal of our 83.3% interest in
the Dartbrook coal mine (Metallurgical Coal) to Australian Pacific
Coal Limited, our 42.5% interest in the Pandora mine (Platinum) and
certain Amandelbult resources (Platinum). In February 2018, we
completed the disposal of Platinum's 85% interest in Union Mine and
50.1% interest in Masa Chrome Company Proprietary Limited in South
Africa to a subsidiary of Siyanda Resources Proprietary
Limited.
Anglo American entered into several sale agreements, the
completion of which are subject to, among other things, regulatory
approvals, including our 88.2% interest in the Drayton thermal coal
mine and Drayton South project in Australia to Malabar Coal
Limited. The sale of the Eskom-tied domestic thermal coal
operations in South Africa to a wholly owned subsidiary of Seriti
Resources Holdings Proprietary Limited is expected to complete on 1
March 2018. In addition, in January 2018, we agreed the sale of the
New Largo thermal coal project and Old New Largo closed colliery in
South Africa to New Largo Coal Proprietary Limited, which is owned
by Seriti Resources Holdings Proprietary Limited, Coalzar
Proprietary Limited and the Industrial Development Corporation.
Other portfolio changes
Bokoni mine (Platinum) in South Africa was placed onto care and
maintenance by Platinum's joint venture partner, Atlatsa Resources,
during the year.
Damtshaa diamond mine in Botswana, which was placed onto care
and maintenance from 1 January 2016, successfully achieved a
restart in the fourth quarter of 2017, in preparation for 2018
production.
Having exceeded its original diamond production forecast over
its expected lifespan, De Beers' Victor mine in Canada is due to
close in 2019, when the open pit will have been depleted.
THE BOARD
With effect from the conclusion of the Annual General Meeting
held on 24 April 2017, Nolitha Fakude joined the Board as a
non-executive director and Stephen Pearce succeeded René Médori as
finance director. Mr Médori left the Board with effect from that
date. Ian Ashby was appointed to the Board as a non-executive
director on 25 July 2017.
Mr Stuart Chambers joined the Board as a non-executive director
and chairman designate on 1 September 2017. Sir John Parker retired
from the Board on 31 October 2017 and was succeeded as chairman by
Mr Chambers with effect from 1 November 2017.
PRINCIPAL RISKS AND UNCERTAINTIES
Anglo American plc is exposed to a variety of risks and
uncertainties which may have a financial, operational or
reputational impact on the Group, and which may also have an impact
on the achievement of social, economic and environmental
objectives.
The principal risks and uncertainties facing the Group at the
2017 year-end are set out in detail in the strategic report section
of the Annual Report 2017. The principal risks relate to the
following:
-- Catastrophic risks
-- Political and regulatory
-- Competitive position
-- Investor activism
-- Future demand for diamonds
-- Future demand for PGMs
-- Cyber security
-- Safety
-- Commodity prices
-- Corruption
-- Operational performance including delivery of cash targets
The Group is exposed to changes in the economic environment, as
with any other business. Details of any key risks and uncertainties
specific to the period are covered in the Operations review
section.
The Annual Report 2017 will be available on the Group's website
from 5 March 2018.
www.angloamerican.com
Operations review for the year ended 31 December 2017
DE BEERS
Financial and operational metrics(1)
--------------------------------------------------------------------------------------------------------------------
Underlying
Production Sales Unit Underlying EBITDA Underlying
volume volume Price cost* Revenue* EBITDA* margin EBIT* Capex* ROCE*
------------- ---------- ---------- ------- ------- -------- ---------- ---------- ---------- ------ -----
'000 '000
carats carats(2) $/ct(3) $/ct(4) $m(5) $m $m $m(6)
------------- ---------- ---------- ------- ------- -------- ---------- ---------- ---------- ------ -----
De Beers 33,454 32,455 162 63 5,841 1,435 25% 873 273 9%
Prior year 27,339 29,965 187 67 6,068 1,406 23% 1,019 526 11%
Botswana
(Debswana) 22,684 - 159 28 - 484 - 447 86 -
Prior year 20,501 - 152 26 - 571 - 543 90 -
Namibia
(Namdeb
Holdings) 1,805 - 539 257 - 176 - 146 33 -
Prior year 1,573 - 528 245 - 184 - 163 65 -
South Africa
(DBCM) 5,208 - 129 62 - 267 - 119 114 -
Prior year 4,234 - 121 53 - 268 - 172 156 -
Canada(7) 3,757 - 235 57 - 205 - 58 (5) -
Prior year 1,031 - 271 212 - 79 - 13 184 -
Trading - - - - - 449 - 443 1 -
Prior year - - - - - 378 - 371 3 -
Other(8) - - - - - (146) - (340) 44 -
Prior year - - - - - (74) - (243) 28 -
------------- ---------- ---------- ------- ------- -------- ---------- ---------- ---------- ------ -----
(1) Prepared on a consolidated accounting basis, except for
production, which is stated on a 100% basis except for the Gahcho
Kué joint venture in Canada, which is on an attributable 51%
basis.
(2) Consolidated sales volumes (2017: 33.1 million carats; 2016:
30.0 million carats) exclude pre-commercial production sales
volumes from Gahcho Kué. Total sales volumes (100%), which are
comparable to production, were 35.1 million carats (2016: 32.0
million carats). Total sales volumes (100%) include pre-commercial
production sales volumes from Gahcho Kué and De Beers' JV partners'
50% proportionate share of sales to entities outside De Beers from
the Diamond Trading Company Botswana and the Namibia Diamond
Trading Company.
(3) Pricing for the mining business units is based on 100%
selling value post-aggregation of goods. The De Beers realised
price includes the price impact of the sale of non-equity product
and, as a result, is not directly comparable to De Beers unit
costs, which relate to equity production only.
(4) Unit cost is based on consolidated production and operating
costs, excluding depreciation and operating special items, divided
by carats recovered.
(5) Includes rough diamond sales of $5.2 billion (2016: $5.6 billion).
(6) Includes pre-commercial production capitalised operating cash inflows from Gahcho Kué.
(7) For Canada, price excludes Gahcho Kué contribution from
sales related to pre-commercial production, which were capitalised
in the first half of 2017. Unit costs include Gahcho Kué
contribution following achievement of commercial production on 2
March 2017.
(8) Other includes Element Six, downstream, acquisition
accounting adjustments, projects and corporate.
Financial and operational overview
Underlying EBITDA increased by 2% to $1,435 million (2016:
$1,406 million) despite lower revenue following the one-off
industry midstream restocking in 2016. This performance was driven
by improved margins, which benefited from lower unit costs
(supported by higher production and efficiency drives across the
business), a strong contribution from Canada (driven by Gahcho
Kué's ramp-up and the closure of Snap Lake), and Element Six (which
benefited from a recovery in oil and gas markets). This was partly
offset by unfavourable exchange rates, and an increasing proportion
of waste mining costs being expensed rather than capitalised, owing
to an improved strip ratio at Venetia in South Africa.
Total revenue declined by 4% to $5.8 billion (2016: $6.1
billion) - as expected, given the benefit of strong midstream
restocking in the first half of 2016. The average realised rough
diamond price decreased by 13% to $162/carat (2016: $187/carat)
mainly owing to a lower value mix; this was partly offset by an 8%
increase in consolidated sales volumes to 32.5 million carats
(2016: 30.0 million carats). This reflected stronger demand for
lower-value goods in Sight 1 of 2017, following a recovery from the
initial impact of India's demonetisation programme in late 2016, as
well as the ramp-up of production from lower value per carat but
high margin operations, including Orapa and Gahcho Kué. The
lower-value mix was compensated in part by a higher average rough
price index, which was 3% above that of 2016.
Capital expenditure reduced by 48% to $273 million (2016: $526
million), mainly owing to the completion of major projects,
including Gahcho Kué; Debmarine Namibia's new exploration and
sampling vessel, the SS Nujoma; and planned lower waste
capitalisation at Venetia. The SS Nujoma, which was delivered three
months ahead of schedule and under budget, was officially
inaugurated in June 2017 and is fully operational.
Markets
Early signs are that global consumer demand for diamond
jewellery registered positive growth in 2017 in US dollar terms,
following a marginal increase in 2016. Sustained diamond jewellery
demand growth in the US was once again the main contributor to this
positive outcome. Demand for diamond jewellery by Chinese consumers
grew marginally, in local currency and dollar terms. In contrast,
consumer demand for diamonds softened in India and the Gulf states,
both in local currency and dollar terms, while Japan's consumer
demand growth was flat in local currency and lower in dollars.
Diamond producers' primary stocks are estimated to have reduced
considerably during the first half of 2017, as sentiment in the
midstream improved and rough and polished inventories normalised
for businesses in this segment of the value chain. However, as a
result of US retailers tightly managing their inventories and the
earlier timing of Diwali in India, there was a slight seasonal
build-up of polished inventory in the midstream going into the
fourth quarter. Overall, early indications are that additional
consumer marketing undertaken during the main selling season had a
positive effect on polished demand in the US, China and India in
the final quarter of the year, leading to a positive impact on
overall polished inventories.
Operating performance
Mining and manufacturing
Rough diamond production increased by 22% to 33.5 million carats
(2016: 27.3 million carats), reflecting stronger underlying trading
conditions as well as the contribution from the ramp-up of Gahcho
Kué.
Botswana (Debswana) increased production by 11% to 22.7 million
carats (2016: 20.5 million carats). Production at Orapa was 28%
higher, mainly driven by planned increases in plant performance and
the ramp--up of Plant 1, which was previously on partial care and
maintenance in response to trading conditions in late 2015. In June
2017, Jwaneng processed its first ore from Cut-8, which is expected
to become the mine's main source of ore during 2018.
In Namibia (Namdeb Holdings), production increased by 15% to 1.8
million carats (2016: 1.6 million carats), primarily owing to
higher production from Debmarine Namibia's Mafuta vessel, driven by
higher mining rates following an extended scheduled in-port during
2016. At Namdeb's land operations, production rose by 6%, despite
challenging conditions, including grade variability owing to the
nature of alluvial deposits, structural cost pressures, and some
operations nearing the end of their lives.
In South Africa (DBCM), production increased by 23% to 5.2
million carats (2016: 4.2 million carats), primarily owing to
Venetia, driven by higher grades as well as improved operational
performance benefiting tonnes treated. Construction continues on
the Venetia Underground mine, which is expected to become the
mine's principal source of production during 2023.
In Canada, production increased to 3.8 million carats (2016: 1.0
million carats) owing to the ramp-up of Gahcho Kué, which entered
commercial production in March 2017. During the year, Gahcho Kué
benefited from higher than expected grades, partly offset by a
lower average value of production. Owing to the differences in lobe
characteristics across different kimberlite pipes, the average
grade and realised price will continue to vary and will be
dependent on the area mined. Production at Victor increased by 21%
to 0.7 million carats as a result of higher grades. Victor, which
has been operating successfully since 2008, is due to close in
2019, when the open pit is expected to have been depleted. The
closure of Snap Lake, which is currently on care and maintenance,
is progressing, with flooding having been completed, thereby
minimising holding costs while preserving the long term viability
of the orebody.
Other revenue includes Element Six, which grew strongly, driven
primarily by a recovery in the oil and gas business but also
supported by the automotive and consumer electronics segments.
Brands
In March 2017, De Beers acquired its joint venture partner's 50%
shareholding in De Beers Jewellers (DBJ). With full ownership of
the business (and the De Beers corporate brand), the process of
integrating the DBJ brand and network of 30 stores in 16 key
consumer markets around the world is well under way.
Forevermark(TM) continued to expand its retailer network and is
now available in more than 2,200 outlets in 25 markets, an increase
of 10% since the end of 2016. By May 2017, Forevermark(TM) had
inscribed its
two-millionth diamond, the second million having taken only half
the time it took to inscribe the first million. For the peak
holiday sales period, the brand launched "Forevermark Tribute(TM)
Collection", a significant marketing investment across multiple
channels in the key US market. The Tribute(TM) Collection, and its
supporting campaign, symbolises and celebrates the many facets of
the wearer, and reflects the growing trend for women to
self-purchase.
In February 2017, De Beers unveiled its next-generation
automated melée screening instrument (AMS2(TM)), which is
significantly less expensive, screens 10 times faster, can handle
stones three times smaller, and has lower referral rates than its
predecessor. In addition, an industry-first synthetic-screening
device for stones in set jewellery (SYNTHdetect(TM)) was launched
in June 2017, along with the roll-out by the International
Institute of Diamond Grading & Research of a
synthetics-detection training course.
During 2017, De Beers invested more than $140 million in
marketing (19% more than in 2016) through a combination of
proprietary and partnership activity centred on the US, China and
India. De Beers also substantially increased its investment in the
Diamond Producers Association, a producer-wide body that works to
enhance consumer demand by promoting the appeal, integrity and
reputation of diamonds.
De Beers also began the development of a new digital platform
for the diamond industry, backed by highly secure blockchain
technology, which will provide a single immutable record for every
diamond that is registered. Currently in the pilot phase, this
initiative is being designed to underpin confidence in diamonds and
the diamond industry for all stakeholders, while streamlining
existing manual processes and creating new efficiencies in the
value chain.
Outlook
Improving global macro-economic conditions remain supportive of
consumer demand growth for polished diamonds in 2018. The degree of
global economic growth, however, will be dependent upon a number of
factors, including the extent of the positive impact on growth in
consumer spending from US tax cuts, the strength of the dollar on
consumer demand in non-dollar-denominated countries, and how
successfully China manages its adjustment to a more domestic
consumer-driven economy.
For 2018, forecast diamond production (on a 100% basis except
Gahcho Kué on an attributable 51% basis) is expected to be in the
range of 34-36 million carats, subject to trading conditions.
COPPER
Financial and operational metrics
----------------------------------------------------------------------------------------------------------------------
C1 Underlying
Production Sales unit Underlying EBITDA Underlying
volume volume Price cost* Revenue* EBITDA* margin(3) EBIT* Capex* ROCE*
---------------- ---------- ------- ----- ------- -------- ---------- -------------- ---------- ------ -----
kt kt(1) c/lb c/lb(2) $m $m $m $m
---------------- ---------- ------- ----- ------- -------- ---------- -------------- ---------- ------ -----
Copper 579 580 290 147 4,233 1,508 41% 923 665 16%
Prior year 577 578 225 137 3,066 903 31% 261 563 6%
Los Bronces 308 307 - 169 1,839 737 40% 401 245 -
Prior year 307 308 - 156 1,386 326 24% (49) 241 -
Collahuasi(4) 231 232 - 113 1,314 806 61% 594 243 -
Prior year 223 223 - 111 1,068 569 53% 342 144 -
Other operations 40 41 - - 1,080 76 16% 39 177 -
Prior year 47 47 - - 612 83 18% 43 178 -
Projects and
corporate - - - - - (111) - (111) - -
Prior year - - - - - (75) - (75) - -
---------------- ---------- ------- ----- ------- -------- ---------- -------------- ---------- ------ -----
(1) Excludes 111 kt third-party sales.
(2) C1 unit cost includes by-product credits.
(3) Excludes impact of third-party sales.
(4) 44% share of Collahuasi production, sales and financials.
Financial and operating overview
Underlying EBITDA increased by 67% to $1,508 million (2016: $903
million), primarily as a result of a 27% increase in the average
LME copper price, as well as a continued focus on cost-reduction
initiatives. Production increased to 579,300 tonnes, with solid
performances at Los Bronces and Collahuasi partly offset by the
impact of lost production at El Soldado, owing to the temporary
suspension of mining operations in the first half. At 31 December
2017, 108,000 tonnes of copper were provisionally priced at 328
c/lb.
Markets
2017 2016
------------------------------- ----- -----
Average market price (c/lb) 280 221
Average realised price (c/lb) 290 225
------------------------------- ----- -----
The differences between market price and realised price are
largely a function of the timing of sales across the year and
provisional pricing adjustments.
The increase in price in 2017 reflects improved demand and a
slowdown in mine supply, stimulating more favourable investor
sentiment.
Operating performance
At Los Bronces, production in 2017 increased marginally to
308,300 tonnes (2016: 307,200 tonnes). Higher grades (2017: 0.71%
vs 2016: 0.67%) were partly offset by lower throughput, following a
failure in the ball mill stator at the processing plant during the
third and fourth quarters. C1 unit costs increased by 8% to 169
c/lb (2016: 156 c/lb), reflecting the effect of the stronger
Chilean peso and cost inflation.
At Collahuasi, Anglo American's attributable share of copper
production was 230,500 tonnes, an increase of 3% (2016: 222,900
tonnes). It was another year of record copper in concentrate
production for the operation, building on 2016's record output.
Production benefited from higher grades, as well as strong
sustained plant performance following the completion of a two-month
planned maintenance at the processing plant in the second quarter.
C1 unit costs were 113 c/lb (2016: 111c/lb), with the increase in
production and continued cost-saving initiatives partly offsetting
the effects of the stronger Chilean peso, cost inflation and lower
by--product credits.
Production at El Soldado decreased by 14% to 40,500 tonnes
(2016: 47,000 tonnes), owing largely to the temporary suspension of
mine operations from 18 February to 28 April 2017, which resulted
in 6,000 tonnes of lost production. C1 unit costs increased by 27%
to 233 c/lb (2016: 184 c/lb) as a result of the lower output, the
stronger Chilean peso and cost inflation.
Operational outlook
Production in 2018 is expected to increase with the planned
mining of higher ore grades at Collahuasi and Los Bronces.
Production guidance for 2018 has been tightened to 630,000-660,000
tonnes.
PLATINUM
Financial and operational metrics
------------------------------------------------------------------------------------------------------------------------ -----
Production Production Sales Underlying
volume volume volume Basket Unit Underlying EBITDA Underlying
platinum palladium platinum price cost* Revenue* EBITDA* margin EBIT* Capex* ROCE*
$/Pt $/Pt
koz(1) koz(1) koz oz(2) oz(3) $m $m $m $m
--------------- ---------- ---------- ---------- ------ ----- -------- ---------- ---------- ---------- ------ -----
Platinum 2,397 1,557 2,505 1,966 1,443 5,078 866 17% 512 355 10%
Prior
year 2,382 1,539 2,416 1,753 1,330 4,394 532 12% 185 314 4%
Mogalakwena 464 509 467 2,590 1,179 1,211 578 48% 448 151 -
Prior
year 412 452 415 2,345 1,257 968 393 41% 269 157 -
Amandelbult(4) 438 202 459 1,868 1,596 858 88 10% 34 34 -
Prior
year 459 207 466 1,567 1,254 727 97 13% 41 25 -
Purchase
of
concentrate(5) 1,021 549 1,082 - - 1,884 173 9% 145 - -
Prior
year 652 388 656 - - 1,033 96 9% 77 - -
Other
operations 474 297 497 - - 1,125 83 7% (59) 170 -
Prior
year 859 492 879 - - 1,666 (14) (1)% (162) 129 -
Projects
and corporate - - - - - - (56) - (56) - -
Prior
year - - - - - - (40) - (40) 3 -
--------------- ---------- ---------- ---------- ------ ----- -------- ---------- ---------- ---------- ------ -----
(1) Production disclosure reflects own-mined production and
purchase of metal in concentrate.
(2) Average US$ basket price.
(3) Total cash operating costs - includes on-mine, smelting and refining costs only.
(4) Excludes 8 koz (2016: 8 koz) of platinum production now included in purchase of concentrate.
(5) Purchase of concentrate from joint ventures, associates and
third parties for processing into refined metal.
Financial and operating overview
Underlying EBITDA increased by 63% to $866 million (2016: $532
million), largely as a result of higher sales volumes (platinum,
palladium and some minor metals) and stronger prices for palladium
and rhodium. Lower local currency costs, driven by ongoing cost
improvement initiatives, were offset by the stronger South African
rand, resulting in an 8% increase in US dollar costs to
$1,443/ounce (2016: $1,330/ounce).
Markets
2017 2016
--------------------------------------- ------- -------
Average platinum market price ($/oz) 950 989
Average palladium market price ($/oz) 871 615
Average rhodium market price ($/oz) 1,097 681
Average gold market price ($/oz) 1,258 1,248
US$ realised basket price ($/Pt oz) 1,966 1,753
Rand realised basket price (R/Pt oz) 26,213 25,649
--------------------------------------- ------- -------
An increase in palladium and rhodium prices, driven by strong
demand, supported a stronger basket price in both dollars and rand,
despite a lower average platinum price during the year.
Operating performance
Total platinum production (metal in concentrate), including both
own-mined production and purchase of concentrate, increased by 1%
to 2,397,400 ounces (2016: 2,381,900 ounces). Total palladium
production (metal in concentrate), including both own-mined
production and purchase of concentrate, was also 1% higher at
1,557,300 ounces (2016: 1,538,700 ounces).
Production from own-managed mines
Platinum produced from own-managed mines, excluding projects,
increased by 3% to 1,130,900 ounces (2016: 1,096,200 ounces), while
palladium production grew by 7% to 847,200 ounces (2016: 789,600
ounces).
Platinum's flagship Mogalakwena mine produced a record 463,800
ounces of platinum (2016: 411,900 ounces) and 508,900 ounces of
palladium (2016: 452,000 ounces), a 13% increase for both. The
increase resulted from improved concentrator throughput and
recoveries following implementation of the North concentrator plant
optimisation project, as well as higher average grades.
Amandelbult complex yielded 438,000 ounces of platinum (2016:
458,600 ounces) and 202,500 ounces of palladium (2016: 207,300
ounces), representing decreases of 4% and 2% respectively. This was
caused primarily by excessive rainfall in the first quarter, which
constrained production from the surface operations, lower
immediately available Ore Reserves, and increased development as
the mine makes its transition from the Tumela Upper to the Dishaba
Lower mining areas. Production was further affected by three fatal
incidents and their subsequent associated safety stoppages.
Unki mine in Zimbabwe maintained its platinum production level
for the year at 74,600 ounces
(2016: 74,500 ounces), while raising its palladium output by 5%
to 64,400 ounces (2016: 61,400 ounces). This performance was
largely driven by more efficient mining, which reduced waste
mining, resulting in higher--grade ore being delivered to the
concentrator. Owing to planned maintenance at the concentrator in
the fourth quarter, Unki had an ore stockpile at the end of 2017,
which will be processed in 2018.
Union mine produced 154,500 ounces of platinum (2016: 151,200
ounces) and 71,400 ounces of palladium (2016: 68,900 ounces),
increases of 2% and 4% respectively, as a result of improved
stoping efficiencies. As announced by Platinum on 26 January 2018,
Union mine has now been sold to Siyanda Resources Proprietary
Limited, effective 1 February 2018. With effect from this date,
Union mine's output is being recognised as third--party purchase of
concentrate.
Joint venture production
Platinum and palladium production from the Mototolo, Modikwa and
Kroondal joint ventures, inclusive of both own-mined share and
purchase of concentrate production, decreased by 3% and 1%
respectively, to 490,600 ounces of platinum (2016: 505,600 ounces)
and 323,100 ounces of palladium (2016: 327,800 ounces). The
decrease was largely due to the stoppage of the Mototolo
concentrator for remedial work to stabilise the tailings storage
facility. This resulted in a 27% reduction in platinum output to
85,300 ounces (2016: 116,700 ounces) and a 26% reduction in
palladium output to 52,500 ounces (2016: 70,700 ounces).
Modikwa platinum production rose by 10% to 126,700 ounces (2016:
114,800 ounces), and palladium production by 9% to 122,700 ounces
(2016: 112,200 ounces) on the back of increased underground mining
efficiencies and improved concentrator recoveries. Kroondal's
production was slightly higher owing to increased underground
productivity, with platinum and palladium production both 2% higher
at 278,600 ounces (2016: 274,100 ounces) and 147,900 ounces (2016:
144,900 ounces) respectively.
Purchase of concentrate from associates
Total platinum production from associates decreased by 5% to
265,500 ounces (2016: 279,300 ounces), while palladium production
was 10% lower at 127,900 ounces (2016: 141,700 ounces).
BRPM produced 211,900 ounces of platinum (2016: 195,900 ounces)
and 87,600 ounces of palladium (2016: 81,300 ounces), both
increasing by 8%, as the Styldrift project continued its
ramp-up.
On 31 October 2017, Bokoni mine was placed onto care and
maintenance by Platinum's joint venture partner, Atlatsa Resources,
resulting in a 36% reduction in platinum output to 53,600 ounces
(2016: 83,400 ounces) and a 33% decrease in palladium output to
40,300 ounces (2016: 60,400 ounces). No further loss-making
production will be produced from Bokoni while the mine and
concentrator remain on care and maintenance.
Purchase of concentrate from third parties
Increased third-party purchases of concentrate led to a yearly
total of 510,400 ounces of platinum
(2016: 119,800 ounces) and 259,200 ounces of palladium (2016:
82,600 ounces). Production from Rustenburg has been purchased since
1 November 2016, when the operation was sold to Sibanye. The Maseve
operation, owned by Platinum Group Metals, was placed onto care and
maintenance in the third quarter. No further third--party purchase
of concentrate is currently expected from the Maseve mine.
Refined production
Refined platinum production increased by 8% to 2,511,900 ounces
(2016: 2,334,700 ounces), and refined palladium production by 14%
to 1,668,500 ounces (2016: 1,464,200 ounces). Refined production in
2016 was materially affected by a Section 54 safety stoppage at the
Precious Metals Refinery, as well as by a run-out at the Waterval
smelter in September of that year; the subsequent recovery from
these developments was largely responsible for the increase in
output in 2017.
The planned rebuild of the Waterval No. 2 furnace in the first
quarter of 2017, and a high-pressure water leak at the converter
plant in June 2017, delayed refining the backlog of material from
2016 to the second half of the year, with the full additional
100,000 ounces refined by year end.
Platinum sales volumes increased by 4% to 2,504,600 ounces
(2016: 2,415,700 ounces), while palladium sales volumes rose by 3%
to 1,571,700 ounces (2016: 1,532,100 ounces), in line with higher
refined production.
Operational outlook
Platinum production (metal in concentrate) for 2018 is expected
to be 2.3-2.4 million ounces.
Palladium production (metal in concentrate) for 2018 is expected
to be 1.5-1.6 million ounces.
IRON ORE AND MANGANESE
Financial and operational metrics
----------------------------------------------------------------------------------------------------------------------
Production Sales Unit Underlying Underlying Underlying
volume volume Price cost* Revenue* EBITDA* EBITDA margin EBIT* Capex* ROCE*
--------------- ---------- ------- ------ ------- -------- ---------- -------------- ---------- ------ -----
Mt(1) Mt $/t(2) $/t(3) $m $m $m $m
--------------- ---------- ------- ------ ------- -------- ---------- -------------- ---------- ------ -----
Iron Ore and
Manganese - - - - 5,831 2,357 40% 1,978 252 21%
Prior year - - - - 3,426 1,536 45% 1,275 269 12%
Kumba Iron Ore 45.0 44.9 71 31 3,486 1,474 42% 1,246 229 47%
Prior year 41.5 42.5 64 27 2,801 1,347 48% 1,135 160 51%
Iron Ore
Brazil 16.8 16.5 65 30 1,405 435 31% 335 23(5) 6%
Prior year 16.1 16.2 54 28 - (6) - (6) 109 (1)%
Samancor(4) 3.6 3.6 - - 940 529 56% 478 - 115%
Prior year 3.3 3.4 - - 625 258 41% 209 - 59%
Projects and
corporate - - - - - (81) - (81) - -
Prior year - - - - - (63) - (63) - -
--------------- ---------- ------- ------ ------- -------- ---------- -------------- ---------- ------ -----
(1) Iron Ore Brazil production is Mt (wet basis).
(2) Prices for Kumba Iron Ore are the average realised export
basket price (FOB Saldanha). Prices for Iron Ore Brazil are the
average realised export basket price (FOB Açu) (wet basis).
(3) Unit costs for Kumba Iron Ore are on an FOB dry basis. Unit
costs for Iron Ore Brazil are on an FOB wet basis.
(4) Production, sales and financials include ore and alloy.
(5) $80 million of capital expenditure offset by capitalised
cash inflows of $31 million relating to working capital in place at
31 December 2016, in addition to a $25 million inflow relating to
capex hedges.
Financial and operating overview
Kumba
Underlying EBITDA of $1,474 million was 9% higher (2016: $1,347
million), with a 6% improvement in total sales volumes and an 11%
increase in the realised price being offset by a 15% increase in
FOB unit costs. The increase in unit costs was largely driven by
the impact of the stronger South African rand (rand FOB unit costs
increased by 2%) and cost inflation, including higher rail costs.
This was partly offset, however, by productivity gains in mining
and processing that led to an 8% rise in production, and through a
higher premium achieved for lump product.
In line with higher production volumes, export sales volumes
increased by 7% to 41.6 Mt (2016: 39.1 Mt). Total finished product
stock also increased to 4.3 Mt (2016: 3.5 Mt), reflecting the
increase in output.
Iron Ore Brazil
Underlying EBITDA amounted to $435 million (2016: $6 million
loss), reflecting the operation's continued ramp--up to its current
operating capacity and the cessation of capitalisation of operating
results since January 2017. The average FOB realised price of
$65/wet metric tonne (equivalent to $71/dry metric tonne) was
$11/tonne, or 20%, higher than that achieved in 2016. FOB unit
costs increased by 7% to $30/wet metric tonne (2016: $28/wet metric
tonne) as higher production volumes and the implementation of cost
reduction initiatives only partly offset the strengthening of the
Brazilian real.
Samancor
Underlying EBITDA increased by $271 million to $529 million
(2016: $258 million), driven mainly by significantly higher
realised manganese ore and alloy prices and a 7% increase in ore
sales.
Markets
Iron ore
2017 2016
---------------------------------------------------------------- ----- -----
Average market price (IODEX 62% Fe CFR China - $/tonne) 71 58
Average market price (MB 66% Fe Concentrate CFR - $/tonne) 87 69
Average realised price (Kumba export - $/tonne) (FOB Saldanha) 71 64
Average realised price (Minas-Rio - $/tonne) (FOB wet basis) 65 54
---------------------------------------------------------------- ----- -----
Kumba's outperformance over the IODEX (Platts) 62% Fe CFR China
index is primarily representative of the higher iron (Fe) content
and the relatively high proportion (approximately 66%) of lump in
the overall product portfolio.
Minas-Rio produces higher grade products than the reference
product used for the IODEX 62% Fe index. The pricing of Minas-Rio's
products reflects the higher Fe content and lower gangue of those
products compared with the IODEX 62% reference. IODEX 62% is
referred to for comparison purposes only.
Manganese
During 2017, the average benchmark manganese ore price
(benchmark CRU 44% CIF China) increased by 36% to $5.97/dmtu (2016:
$4.38/dmtu), largely attributable to higher Chinese steel
production and limited ore supply in the market, resulting from
production cuts made in late 2015 and early 2016.
Operating performance
Kumba
Sishen's production increased by 10% to 31.1 Mt (2016: 28.4 Mt)
following improvements in mining productivity resulting from fleet
efficiencies and higher plant yields, brought about from the
implementation of the Operating Model. Consequently, the amount of
waste mined rose, as planned, to 162 Mt (2016: 137 Mt), an 18%
increase. Additional operator training, changed shift patterns,
together with higher workforce attendance rates, yielded positive
results in the form of increased direct operating hours, enabling
the mine to reduce its reliance on contractors.
Kolomela's production increased by 9% to 13.9 Mt (2016: 12.7
Mt), also reflecting productivity improvements following the
roll-out of the Operating Model. Waste mining volumes grew by 11%
to 55.6 Mt (2016: 50.2 Mt), supporting higher production levels.
The Kolomela modular plant delivered 0.5 Mt, although performance
was affected by delays in the ramp-up of the crushing plant.
Iron Ore Brazil
Minas-Rio's production of 16.8 Mt (wet basis) was 4% higher
(2016: 16.1 Mt) as the operation continued to ramp up its current
operating capacity. The ramp-up schedule was affected as mining
operations were restricted to the remaining Ore Reserves in the
Step 2 licence area, which included lower grade ore.
Samancor
Manganese ore output increased by 11% to 3.5 Mt (attributable
basis) (2016: 3.1 Mt). Production from the Australian operations
was 7% higher owing to increased concentrator throughput and higher
yields as a result of favourable weather and the availability of
suitable feed types. The South African operations increased
production by 18%, taking advantage of stronger demand and pricing
and the sale of lower quality fines product.
Production of manganese alloys increased by 8% to 149,200 tonnes
(attributable basis)
(2016: 137,800 tonnes), mainly as a result of improved power
availability at the Australian operations. In South Africa,
manganese alloy production continued to utilise only one of the
operation's four furnaces.
Operational outlook
Kumba
Kumba's full year production guidance for 2018 has been
increased to 44-45 Mt following the recent strong performance at
both Sishen and Kolomela.
Sishen is expected to produce 30-31 Mt of product and mine
170-180 Mt of waste.
Kolomela is expected to produce around 14 Mt, while waste
removal, in support of the increased annual output, is expected to
be around 55-57 Mt.
Iron Ore Brazil
Minas-Rio continues to focus on obtaining the Step 3 operating
licence required for the operation to access the full range of
run-of-mine ore grades and target the operation's nameplate
capacity of 26.5 Mt (wet basis). The Step 3 installation licence
was granted in January 2018, following delays during 2017, which
will allow the Step 3 construction work to proceed. As a
consequence of receiving the installation licence, the Provisional
Operational Authorisation ('APO') is expected before November 2018
and the full Step 3 operational licence by mid-2019.
Production guidance for 2018 has been lowered to 13-15 Mt
(previously 15-18 Mt) as a result of the lower ore grades at the
remaining Step 2 area and the delays to the Step 3 operational
licence process.
In 2018, unit costs are expected to increase as a result of
lower production volumes, and to be in the region of $35/wet metric
tonne.
Samancor
Australian manganese ore production guidance of 2.1 Mwmt (100%
basis) for 2018 remains unchanged. South African manganese ore
production guidance has increased by 8% to 3.4 Mwmt (100% basis),
subject to continued strong market demand.
Legal
Sishen consolidated mining right granted
Sishen's application to extend the mining right by the inclusion
of the adjacent Prospecting Rights was granted on 6 July 2017, and
the process to amend the Sishen mining right continues. Mining
operations in this area will only commence once the required
environmental authorisation has been approved, which is expected
soon. The grant allows Sishen mine to expand its current mining
operations within the adjacent Dingleton area.
COAL
Financial and operational metrics
-----------------------------------------------------------------------------------------------------------------
Underlying
Production Sales Unit Underlying EBITDA Underlying
volume volume Price cost* Revenue* EBITDA* margin(5) EBIT* Capex* ROCE*
--------------- ---------- ------- ------ ------ -------- ---------- ---------- ---------- ------ -----
Mt(1) Mt(2) $/t(3) $/t(4) $m $m $m $m
--------------- ---------- ------- ------ ------ -------- ---------- ---------- ---------- ------ -----
Coal 48.9 49.0 - - 7,211 2,868 46% 2,274 568 67%
Prior year 50.7 50.6 - - 5,263 1,646 36% 1,112 613 29%
Metallurgical
Coal 19.7 19.8 185 61 3,675 1,977 54% 1,594 416 86%
Prior year 20.9 20.7 112 51 2,547 996 39% 661 523 30%
Coal South
Africa 18.6 18.6 76 44 2,746 588 32% 466 152 54%
Prior year 19.1 19.1 60 34 2,109 473 33% 366 90 41%
Cerrejón 10.6 10.6 75 31 790 385 49% 296 - 35%
Prior year 10.7 10.8 56 28 607 235 39% 143 - 17%
Projects
and corporate - - - - - (82) - (82) - -
Prior year - - - - - (58) - (58) - -
--------------- ---------- ------- ------ ------ -------- ---------- ---------- ---------- ------ -----
(1) Production volumes are saleable tonnes. South African
production volume is export production only and excludes Eskom-tied
operations volumes of 23.9 Mt (2016: 24.8 Mt) and other domestic
production of 7.5 Mt (2016: 9.9 Mt). Metallurgical Coal production
volumes excludes thermal coal production volumes of 1.6 Mt (2016:
9.5 Mt, including 5.6 Mt of domestic thermal coal).
(2) South African sales volumes exclude all domestic sales of
32.0 Mt (2016: 34.5 Mt) and non-equity traded sales of 7.6 Mt
(2016: 6.1 Mt). Metallurgical Coal sales volumes exclude thermal
coal sales of 1.8 Mt (2016: 9.6 Mt, including 5.4 Mt of domestic
thermal coal).
(3) Metallurgical Coal is the weighted average hard coking coal
and PCI sales price achieved. Coal South Africa is the weighted
average export thermal coal price achieved.
(4) FOB cost per saleable tonne, excluding royalties.
Metallurgical Coal excludes study costs and Callide. Coal South
Africa unit cost is for the export operations.
(5) Excludes impact of third-party sales and Eskom-tied operations.
Financial and operating overview
Metallurgical Coal
Underlying EBITDA doubled to $1,977 million (2016: $996
million), owing to a 65% increase in the metallurgical coal
realised price and higher production at all three underground
operations. This was partly offset by planned production cuts at
Dawson and Capcoal open cut operations and the impact of
divestments on output. Following the divestments of Foxleigh (a PCI
producer) and Callide (a domestic and export thermal coal
producer), and the cessation of mining activities at Drayton (an
export thermal coal producer), the business now produces a greater
proportion of higher-margin hard coking coal (80% of total
production, compared with 53% in 2016).
Coal South Africa
Underlying EBITDA increased by 24% to $588 million (2016: $473
million), mainly attributable to a 27% increase in the export
thermal coal price. US dollar unit costs for the export trade
operations increased by 29% to $44/tonne (2016: $34/tonne), owing
to the stronger South African rand ($4/tonne impact), lower
production ($4/tonne impact), mainly at Khwezela, and
cost-inflation pressures ($2/tonne).
The sale of the Eskom-tied domestic thermal coal operations
consisting of New Vaal, New Denmark, and Kriel collieries, as well
as four closed collieries (together, 'Eskom-tied operations') by
Anglo Operations Proprietary Limited and Anglo American Inyosi Coal
Proprietary Limited to a wholly owned subsidiary of Seriti
Resources Holdings Proprietary Limited was announced on 10 April
2017 for a consideration payable, as at 1 January 2017, of R2.3
billion (approximately $164 million). The transaction is expected
to complete on 1 March 2018.
The sale of the New Largo thermal coal project and Old New Largo
closed colliery in South Africa (together, 'New Largo') by Anglo
American Inyosi Coal Proprietary Limited to New Largo Coal
Proprietary Limited for R850 million (approximately $71 million),
was announced on 29 January 2018. The sale is subject to conditions
precedent customary for a transaction of this nature, including
regulatory approvals in South Africa. The transaction is expected
to close in the second half of 2018.
The financial results reported for the period ended 31 December
2017 include the Eskom-tied domestic thermal coal operations and
New Largo.
Cerrejón
Underlying EBITDA increased to $385 million (2016: $235
million), owing mainly to higher export thermal coal prices, partly
offset by a 2% decrease in sales volumes.
Markets
Metallurgical coal
2017 2016
------------------------------------------------- ----- -----
Average market price for premium low-volatility
hard coking coal ($/tonne)(1) 188 143
Average market price for premium low-volatility
PCI ($/tonne)(1) 119 97
Average realised price for premium
low-volatility hard coking coal ($/tonne) 187 119
Average realised price for PCI ($/tonne) 125 77
------------------------------------------------- ----- -----
(1) Represents average spot prices. Prior year prices were
previously based on the quarterly average benchmark and have been
restated accordingly.
Average realised prices differ from the average market price
owing to differences in material grade and timing of contracts.
Prices in 2017 were supported by higher steel prices and strong
demand globally, as well as by supply constraints arising from wet
weather in Queensland in the second quarter.
Thermal coal
2017 2016
------------------------------------------------------------- ----- -----
Average market price ($/tonne, FOB Australia) 89 66
Average market price ($/tonne, FOB South Africa) 84 64
Average market price ($/tonne, FOB Colombia) 78 58
Average realised price - Export Australia ($/tonne, FOB) 91 55
Average realised price - Export South Africa ($/tonne, FOB) 76 60
Average realised price - Domestic South Africa ($/tonne) 21 17
Average realised price - Colombia ($/tonne, FOB) 75 56
------------------------------------------------------------- ----- -----
The average realised price for thermal coal will differ from the
average market price owing to timing and quality differences
relative to the industry benchmark. The difference in the realised
price compared with the benchmark price, between 2016 and 2017,
reflects changing quality mix owing to a higher proportion of
secondary products being sold into the export market.
The thermal coal market saw the positive price effects of the
Chinese domestic coal production rationalisation, which supported
coal imports into China and lifted seaborne pricing. On the supply
side, Australia was stable, while Indonesia was constrained owing
to mining issues associated with ongoing wet weather. The Atlantic
region saw coal prices supported by higher electricity prices,
partly driven by nuclear outages in France.
Operating performance
Metallurgical Coal
Production from the underground longwall operations was 14%
higher at 12.3 Mt (2016: 10.8 Mt), and included 0.3 Mt from the
ramp-up of Grosvenor and record production of 5.4 Mt from Moranbah.
Both Capcoal open cut and Dawson recorded lower production as the
sites established alternative pit areas and removed higher-cost
production.
Following a recovery from the geological issues experienced in
the first six months, and a strong operational performance through
the third quarter, Grosvenor completed its first longwall panel
during the final quarter of 2017, and also completed an extended
longwall move in order to rectify defective components identified
during the first panel. Production on the second longwall panel
commenced in December and is in line with the ramp--up plan.
Coal South Africa
Export production decreased by 3% to 18.6 Mt (2016: 19.1 Mt),
with continued productivity improvements at the underground
operations more than offset by a self-enforced 100-hour safety
stoppage at all operations following the third fatality of the
year. In addition, at Khwezela there were operational challenges
with the waste fleet and coal recovery operations. Total production
from trade mines decreased by 11% to 22.0 Mt (2016: 24.6 Mt),
mainly owing to the planned ramp-down of Khwezela's Eskom pit,
which reached its end of life in the first half of 2017.
Production from Eskom-tied operations decreased by 4% to 23.9 Mt
(2016: 24.8 Mt) due to lower Eskom offtake from New Vaal and
reserve constraints at Kriel as it approaches the end of its mine
life.
Cerrejón
Anglo American's attributable output from its 33.3% shareholding
in Cerrejón was 10.6 Mt, in line with the prior year.
Operational outlook
Metallurgical Coal
Export metallurgical coal production guidance for 2018 is
unchanged at 20-22 Mt.
Export thermal coal
Full year production guidance for 2018 for export thermal coal
from South Africa and Cerrejón is unchanged at 29-31 Mt.
NICKEL
Financial and operational metrics
-------------------------------------------------------------------------------------------------------------
C1 Underlying
Production Sales unit Underlying EBITDA Underlying
volume volume Price cost* Revenue* EBITDA* margin EBIT* Capex* ROCE*
------------ ---------- ------- ----- ------ -------- ---------- ---------- ---------- ------ -----
t t c/lb c/lb $m $m(1) $m(1) $m
------------ ---------- ------- ----- ------ -------- ---------- ---------- ---------- ------ -----
Nickel 43,800 43,000 476 365 451 81 18% 0 28 0%
Prior year 44,500 44,900 431 350 426 57 13% (15) 62 (1)%
------------ ---------- ------- ----- ------ -------- ---------- ---------- ---------- ------ -----
(1) Nickel segment includes $3 million projects and corporate costs (2016: $10 million).
Financial and operating overview
Underlying EBITDA increased by 42% to $81 million (2016: $57
million), reflecting a higher nickel price, partly offset by the
unfavourable impact of the stronger Brazilian real and cost
inflation.
Nickel unit costs increased by 4% to 365 c/lb (2016: 350 c/lb)
as adverse exchange rates and inflation were only partly
compensated by other cost-saving efforts, including lower energy
costs.
Markets
2017 2016
------------------------------- ----- -----
Average market price (c/lb) 472 436
Average realised price (c/lb) 476 431
------------------------------- ----- -----
The average market price is the LME nickel price, from which
ferronickel pricing is derived. Ferronickel is traded based on
discounts or premiums to the LME price, depending on market
conditions, supplier products and consumer preferences.
Differences between market prices and realised prices are
largely due to variances between the LME and the ferronickel
price.
Operating performance
Nickel output decreased by 2% to 43,800 tonnes (2016: 44,500
tonnes) as instabilities at both smelting operations negatively
affected Barro Alto's production performance in February 2017. The
root causes were addressed and the operations returned to stable
performance from the second quarter. Codemin's production of metal
was in line with the prior year at 9,000 tonnes.
Operational outlook
Production guidance for 2018 has been lowered to 42,000-44,000
tonnes, as a result of planned maintenance at Barro Alto's
plant.
CORPORATE AND OTHER
Financial metrics
--------------------------------------------------------------------
Underlying Underlying
Revenue* EBITDA* EBIT* Capex*
---------------------- --------- ----------- ----------- -------
$m $m $m $m
---------------------- --------- ----------- ----------- -------
Segment 5 (292) (313) 9
Prior year 499 (5) (71) 40
Niobium and - - - -
Phosphates
Prior year 495 118 79 26
Exploration - (103) (103) -
Prior year - (107) (107) -
Corporate activities
and unallocated
costs 5 (189) (210) 9
Prior year 4 (16) (43) 14
---------------------- --------- ----------- ----------- -------
Financial and operating overview
Corporate and other reported an underlying EBITDA loss of $292
million (2016: $5 million loss).
Niobium and Phosphates
The sale of the Niobium and Phosphates business to China
Molybdenum Co Ltd. was completed on 30 September 2016.
Exploration
Exploration expenditure decreased to $103 million (2016: $107
million), reflecting a general reduction across most of the
commodities, driven primarily by lower drilling activities.
Corporate activities and unallocated costs
Underlying EBITDA amounted to a $189 million loss (2016: $16
million loss), driven primarily by a year--on--year loss recognised
in the Group's self-insurance entity, reflecting lower premium
income and higher net claims and settlements during 2017.
For further information, please contact:
Media Investors
UK UK
James Wyatt-Tilby Paul Galloway
james.wyatt-tilby@angloamerican.com paul.galloway@angloamerican.com
Tel: +44 (0)20 7968 8759 Tel: +44 (0)20 7968
8718
Marcelo Esquivel Trevor Dyer
marcelo.esquivel@angloamerican.com trevor.dyer@angloamerican.com
Tel: +44 (0)20 7968 8891 Tel: +44 (0)20 7968
8992
South Africa Sheena Jethwa
Pranill Ramchander sheena.jethwa@angloamerican.com
pranill.ramchander@angloamerican.com Tel: +44 (0)20 7968
Tel: +27 (0)11 638 2592 8680
Ann Farndell
ann.farndell@angloamerican.com
Tel: +27 (0)11 638 2786
Notes to editors:
Anglo American is a globally diversified mining business. Our
portfolio of world-class competitive mining operations and
undeveloped resources provides the raw materials to meet the
growing consumer-driven demands of the world's developed and
maturing economies. Our people are at the heart of our business. It
is our people who use the latest technologies to find new
resources, plan and build our mines and who mine, process and move
and market our products to our customers around the world.
As a responsible miner - of diamonds (through De Beers), copper,
platinum and other precious metals, iron ore, coal and nickel - we
are the custodians of what are precious natural resources. We work
together with our key partners and stakeholders to unlock the
long-term value that those resources represent for our shareholders
and for the communities and countries in which we operate -
creating sustainable value and making a real difference.
www.angloamerican.com
Webcast of presentation:
A live webcast of the results presentation, starting at 9.00am
UK time on 22 February 2018, can be accessed through the Anglo
American website at www.angloamerican.com
Note: Throughout this results announcement, '$' denotes United
States dollars and 'cents' refers to United States cents. Tonnes
are metric tons, 'Mt' denotes million tonnes and 'kt' denotes
thousand tonnes, unless otherwise stated.
Forward-looking statements:
This announcement includes forward-looking statements. All
statements other than statements of historical facts included in
this announcement, including, without limitation, those regarding
Anglo American's financial position, business, acquisition and
divestment strategy, dividend policy, plans and objectives of
management for future operations (including development plans and
objectives relating to Anglo American's products, production
forecasts and Ore Reserves and Mineral Resources), are
forward-looking statements. By their nature, such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of Anglo American, or industry results, to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such forward-looking statements are based on numerous
assumptions regarding Anglo American's present and future business
strategies and the environment in which Anglo American will operate
in the future. Important factors that could cause Anglo American's
actual results, performance or achievements to differ materially
from those in the forward-looking statements include, among others,
levels of actual production during any period, levels of global
demand and commodity market prices, mineral resource exploration
and development capabilities, recovery rates and other operational
capabilities, the availability of mining and processing equipment,
the ability to produce and transport products profitably, the
impact of foreign currency exchange rates on market prices and
operating costs, the availability of sufficient credit, the effects
of inflation, political uncertainty and economic conditions in
relevant areas of the world, the actions of
competitors, activities by governmental authorities such as
changes in taxation or safety, health, environmental or other types
of regulation in the countries where Anglo American operates,
conflicts over land and resource ownership rights and such other
risk factors identified in Anglo American's most recent Annual
Report. Forward-looking statements should, therefore, be construed
in light of such risk factors and undue reliance should not be
placed on forward-looking statements. These forward-looking
statements speak only as of the date of this announcement. Anglo
American expressly disclaims any obligation or undertaking (except
as required by applicable law, the City Code on Takeovers and
Mergers (the "Takeover Code"), the UK Listing Rules, the Disclosure
and Transparency Rules of the Financial Conduct Authority, the
Listings Requirements of the securities exchange of the JSE Limited
in South Africa, the SWX Swiss Exchange, the Botswana Stock
Exchange and the Namibian Stock Exchange and any other applicable
regulations) to release publicly any updates or revisions to any
forward-looking statement contained herein to reflect any change in
Anglo American's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
Nothing in this announcement should be interpreted to mean that
future earnings per share of Anglo American will necessarily match
or exceed its historical published earnings per share.
Certain statistical and other information about Anglo American
included in this announcement is sourced from publicly available
third party sources. As such, it presents the views of those third
parties, though these may not necessarily correspond to the views
held by Anglo American.
Anglo American plc
20 Carlton House Terrace London SW1Y 5AN United Kingdom
Registered office as above. Incorporated in England and Wales
under the Companies Act 1985.
Registered Number: 3564138 Legal Entity Identifier:
549300S9XF92D1X8ME43
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR MMGZZLMZGRZM
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February 22, 2018 02:00 ET (07:00 GMT)
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