Description
A Balanced Portfolio With The Future In Mind
ANNUAL REPORT 2012
A BALANCED
PORTFOLIO
WITH THE FUTURE IN MIND
SUBHEAD
Copy to come.
A UNIQUE TRANSACTION
Our acquisition of a further
40% interest in De Beers
was a unique opportunity
to consolidate control of the
world’s leading diamond
company. The bene?ts of our
scale, expertise and ?nancial
resources, combined with
the De Beers business and
its iconic brand, will enhance
De Beers’ position across
the diamond pipeline and
capture the potential
presented by a rapidly
evolving diamond market.
Other sources
of information
You can ?nd this report
and additional information
about Anglo American
on our corporate website.
Although we have
chosen not to produce
an ‘integrated report’,
we have included a
comprehensive overview
of our non-?nancial
performance in this report.
More detailed information
on our sustainability
performance is provided
in our Sustainable
Development Report.
This can be found on our
corporate website.
WITH THE FUTURE IN MIND
At Anglo American, we will achieve our ambition
to be the leading mining company if we make
sound decisions that focus on delivering
long term value. It is these decisions made
by our talented workforce that are driving the
business forward with the future in mind.
For more information on this story
go to page 82 in this report
01 Preparation plant
assistant Jessica Smith
and environmentalist
Matt Goddard at the
train load-out facility
at Metallurgical
Coal’s Capcoal open
cut mine.
02 Molten platinum
being poured at
Platinum’s precious
metals re?nery.
03 Construction work
at Thermal Coal’s
eMalahleni water
treatment plant.
04 Reclaimer operator
Bobby Marthinus at
the reclaimer bucket
wheel at Kolomela
mine’s stack and
reclaim yard.
05 Arc furnace at
Codemin’s nickel
smelter in Brazil.
06 Anodes supervisor
Ricardo Villalon at
the anodes stockpile
at the Chagres
copper smelter.
Cover
De Beers’ sea
walker drill platform,
drilling the surf
zone on the Atlantic
coast in Namibia.
01 02
03
04 05 06
For more information visit
www.angloamerican.com/
reportingcentre
AT A GLANCE
AT A GLANCE
Anglo American’s portfolio of mining businesses spans bulk
commodities – iron ore and manganese, metallurgical coal
and thermal coal; base metals – copper and nickel; and
precious metals and minerals – in which we are a global
leader in both platinum and diamonds.
Revenue by origin:
North America
Global total: $32,785 million
$559 m
Revenue by origin:
Chile
Global total: $32,785 million
$5,122 m
Revenue by origin:
Other South America
Global total: $32,785 million
$1,131 m
Revenue by origin:
Brazil
Global total: $32,785 million
$1,274 m
Revenue by origin:
Other Africa
Global total: $32,785 million
$3,256 m
Headquarters Corporate and
representative of?ces
London,
United Kingdom
Beijing, China
Belo Horizonte, Brazil
Brisbane, Australia
Johannesburg, South Africa
Kinshasa, DRC
Luxembourg
Maputo, Mozambique
New Delhi, India
Rio de Janeiro, Brazil
Santiago, Chile
São Paulo, Brazil
Singapore
Ulan Bator, Mongolia
North America
South America
Africa
Australia and Asia
Iron Ore and Manganese
Metallurgical Coal
Thermal Coal
Copper
Nickel
Platinum
Diamonds
Other Mining and Industrial
Revenue by origin:
South Africa
Global total: $32,785 million
$14,592 m
Revenue by origin:
Australia and Asia
Global total: $32,785 million
$4,616 m
Revenue by origin:
Europe
Global total: $32,785 million
$2,235 m
Underlying operating pro?t
$ million
Iron Ore and Manganese: 2,949
Metallurgical Coal: 405
Thermal Coal: 793
Copper: 1,687
Nickel: 26
Platinum: (120)
Diamonds: 496
Other Mining and Industrial: 337
Exploration: (206)
Corporate: (203)
Total: $6,164 million
Net segment assets
$ million
Iron Ore and Manganese: 9,356
Metallurgical Coal: 5,219
Thermal Coal: 1,965
Copper: 8,536
Nickel: 2,509
Platinum: 10,419
Diamonds: 12,944
Other Mining and Industrial: 786
Exploration: 4
Corporate: (285)
Total: $51,453 million
Revenue by destination
$ million
South Africa 3,115
Other Africa 715
Brazil 1,093
Chile 1,241
Other South America 46
North America 1,274
Europe 8,846
China 5,927
Incorporating:
Australia 340
India 2,544
Japan 4,049
Other Asia 3,595
Total 32,785
PERFORMANCE HIGHLIGHTS CONTENTS
Overview
02 Chairman’s statement
04 Marketplace
08 Our strategy and business model
10 Chief Executive’s statement
Operating and ?nancial review
12 Key performance indicators (KPIs)
14 Strategy in action
36 Resources and technology
42 Group ?nancial performance
48 Risk
54 Iron Ore and Manganese
60 Metallurgical Coal
64 Thermal Coal
68 Copper
72 Nickel
76 Platinum
82 Diamonds
86 Other Mining and Industrial
Governance
90 Introduction
92 The Board
94 Executive management
96 Role of the Board
98 Board in action
104 Audit Committee report
108 Directors’ remuneration report
128 Directors’ report
134 Statement of directors’ responsibilities
Financial statements
136 Responsibility statement
137 Independent auditor’s report
138 Principal statements
142 Notes to the ?nancial statements
Ore Reserves and Mineral Resources
191 Introduction
192 Summary
196 Iron Ore
199 Manganese
200 Coal
208 Copper
213 Nickel
214 Platinum Group Metals
217 Diamonds
222 Phosphate products
223 Niobium
224 Reconciliation overview
228 De?nitions
229 Glossary
Other information
231 Production statistics
235 Quarterly production statistics
236 Exchange rates and commodity prices
237 Summary by business operation
238 Key ?nancial data
239 Non-?nancial data
240 Reconciliation of reported earnings
242 The business – an overview
244 Shareholder information
IBC Other Anglo American publications
SAFEGUARDING
VALUE
WITH THE FUTURE IN MIND
UNDERLYING
OPERATING PROFIT
(2011: $11.1bn)
$6.2 bn
UNDERLYING EARNINGS
(2011: $6.1bn)
$2.8 bn
UNDERLYING EARNINGS
PER SHARE
(2011: $5.06)
$2.26
(LOSS)/PROFIT
ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
(2011: $6.2 bn)
$(1.5) bn
Underlying operating pro?t includes
attributable share of associates’ operating
pro?t (before attributable share of
associates’ interest, tax, and non-controlling
interests) and is before special items and
remeasurements, unless otherwise stated.
See notes 2 and 4 to the ?nancial statements
for operating pro?t. For de?nition of special
items and remeasurements, see note 5 to
the ?nancial statements. See note 13 to the
?nancial statements for the basis of
calculation of underlying earnings.
‘Tonnes’ are metric tons, ‘Mt’ denotes
million tonnes, ‘kt’ denotes thousand tonnes
and ‘koz’ denotes thousand ounces;
‘$’ and ‘dollars’ denote US dollars and
‘cents’ denotes US cents.
Net debt includes related hedges and net
cash in disposal groups. See note 31 to the
?nancial statements.
Nil
Nil
44
25
2011
2010
2009
2008
DIVIDENDS PER SHARE
Cents
40
28
46
2012 32
53
Anglo American plc Annual Report 2012 01
2011
2010
2009
2008
CAPITAL EXPENDITURE
$ bn
4.8
5.3
5.0
2012
5.7
5.8
2011
2010
2009
2008
NET DEBT
$ m
11,280
11,340
7,384
2012
8,615
1,374
O
v
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v
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CHAIRMAN’S
STATEMENT
In a very tough year, we made signi?cant
progress in overcoming the most serious
challenges to our business, to the bene?t
of everyone invested, directly or indirectly,
in Anglo American.
02 Anglo American plc Annual Report 2012
Given the
increased
challenges
involved in
developing
large and
complex
green?eld
sites, the
Board will
apply a highly
disciplined
approach to
the allocation
of capital.
OUR PERFORMANCE
It was a dif?cult year for the mining industry and
Anglo American encountered its share of challenges.
Against a backdrop of a marked economic slowdown in
China, a troubled euro zone and only a sputtering recovery
in the US, the industry faced falling prices, while pro?tability
was further impacted as costs continued to rise well above
in?ation in many countries. In our own business, in South
Africa, we had to contend with lengthy illegal industrial action
at our Platinum and Kumba Iron Ore operations – which
ultimately had the effect of tipping Anglo American Platinum
into making a loss for the year. In the ?rst half of the year,
we also encountered operational setbacks in our Copper
business, where output is now stabilising. At our largest
capital project, the Minas-Rio iron ore project in Brazil, a
diversity of problems led to a revised delivery date and
capital-cost increases. This led us to review the carrying
value of the asset, writing it down by $4 billion (after tax).
DIVIDENDS AND CAPITAL ALLOCATION
In spite of all these challenges affecting cash ?ow, the Board
was able to recommend a ?nal dividend of 53 cents per share,
giving a rebased total dividend for the year of 85 cents, a 15%
increase, re?ecting our con?dence in the underlying business.
This increase completes the rebuilding of our dividend from
zero in 2009, to a new base level competitive with our
diversi?ed peer group.
The three major projects we commissioned in 2011 – Barro
Alto nickel, Los Bronces copper expansion and Kolomela iron
ore – have all been ramping up. At Minas-Rio, however, the
inevitable knock-on effect of permitting and other delays have
resulted in the project’s capital expenditure rising to an
expected $8.8 billion, if a Group-held risk contingency of
$600 million is consumed, with the ?rst iron ore shipment due
by the end of 2014. I am con?dent, however, that Minas-Rio
will become one of the world’s great high-quality iron ore
mines, with high potential cash generation and a published
resource base of well over 5 billion tonnes, a more than
fourfold increase since acquisition.
Anglo American’s objective is to maintain a strong investment
grade rating – which demands rigorous capital discipline. We
recognise that over the next two years we will bear a heavier
capital expenditure burden as we seek to complete the
development of Minas-Rio and Grosvenor in Australia, after
which we expect capital expenditure to be moderated.
We have a substantial potential pipeline of high-quality growth
options in the most attractive commodities. However, given
the increased challenges involved in developing large and
complex green?eld sites, the Board will apply a highly
disciplined approach to the allocation of capital, with smaller,
lower-risk brown?eld expansion projects more likely to ?nd
favour. Prior to Board approval of large green?eld projects
we will explore the merits of seeking suitable partners.
DELIVERING VALUE
In these volatile times, boards have a heightened
responsibility to ensure that management delivers enduring
value for shareholders. That is why, following almost a year
of studying various options and social plans, we have
announced a proposed major restructuring of our Platinum
business. We aim to return it to a sustainable pro?t and a more
secure future for the 45,000 employees who would remain.
I am glad to report we have had positive dialogue with the
South African government, with a joint commitment to work
together on this restructuring and the ?nalisation of our
recovery plans.
It is pleasing to report that, following the dispute with the
Chilean state copper producer, Codelco, we were able to
retain majority control of Anglo American Sur and to establish
a new relationship that positions us to build a strong future
for our business in Chile. We were also able to generate
$2.3 billion of incremental proceeds for shareholders
compared to the original option price.
Our acquisition from the Oppenheimer family of its 40%
shareholding in De Beers now gives shareholders greater
exposure to the world’s No. 1 diamond company. We believe
De Beers is well positioned to capitalise on the positive
fundamentals in diamonds, with the supply of gem diamonds
likely to fall well short of demand over the long term.
SAFETY AND SUSTAINABLE DEVELOPMENT
The number of people who lost their lives on company
business fell to 13; sadly, this is 13 too many. Our lost-time
injury frequency rate, which had reached a plateau in recent
years, also resumed a downward trend. Overall, during
Cynthia Carroll’s six-year watch, on a like-for-like basis, the
annual number of deaths Group-wide fell by half. This step
change in performance is great testimony to Cynthia’s
safety leadership, as well as the commitment of her senior
management team. Their tireless endeavours in leading the
safety agenda have brought about real and lasting change in
the way we approach our drive for zero harm. I know our
incoming chief executive Mark Cutifani, during whose watch
at AngloGold Ashanti, over a similar timeframe, the company’s
safety record improved signi?cantly, is also determined to take
the lead on this most fundamental of issues.
As a company, Anglo American takes climate-change
mitigation and water management particularly seriously –
with targets for these included in the performance contracts
Sir John Parker
OVERVIEW CHAIRMAN’S STATEMENT
Anglo American plc Annual Report 2012 03
O
v
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of our business unit CEOs. It is pleasing, therefore, that our
approach to sustainable development continues to receive
global recognition. At the Quellaveco copper project in
Peru – historically, a challenging environment in which to
conduct mining operations – we successfully concluded
a community ‘dialogue table’; this resulted in ground-
breaking agreements that satisfy our host communities
on water use, the environment and social responsibility. In
2012, Anglo American was recognised for the 10th year
running for excellence in sustainability by the Dow Jones
Sustainability Index, achieving the highest ranking in the
mining industry. We were also awarded a platinum ranking
in the 2012 Business in the Community Corporate
Responsibility Index, the UK’s leading voluntary benchmark
of corporate responsibility – the only mining group to secure
platinum status.
GOVERNANCE
Over the past few years, governance pressures on listed
companies have been growing in intensity. Shareholders,
institutional and individual alike, have sought to hold
underperforming managements and boards to account.
In the 3½ years I have been chairman of your company,
therefore, I have sought to refresh and strengthen the
Board by bringing in members with a range of skill-sets
and experiences that can add value to our business and
maintain capital discipline. It is in that light that we appointed
Anne Stevens in May 2012. Anne is an engineer with
extensive industrial experience, including operating in a
range of South American countries in which we are present.
I also wish to take this opportunity to thank Dr Mamphela
Ramphele, who stepped down in July, for the wealth of
experience and insight she brought to the Board’s affairs.
Mamphela, who was a key ?gure in South Africa’s struggle
for democracy, later had a distinguished career, including
serving as vice-chancellor of the University of Cape Town
and as a managing director of the World Bank.
Peter Woicke will also be standing down from the Board at the
forthcoming AGM. He has been a director since 2006 and
chairman of the Safety and Sustainable (S&SD) Committee
for the past three years. Peter has brought a wealth of
experience and knowledge about development in emerging
economies to our proceedings and has ensured that Anglo
American remains at the forefront of the major sustainability
issues facing our industry. We are indeed grateful for his
leadership in this important area of our operations.
We are fortunate to have Jack Thompson’s extensive
mining experience and knowledge of safety to take over
as chairman of the S&SD Committee and to build on
Peter Woicke’s excellent work.
The Board is also proposing the appointment of Dr Byron
Grote as a non-executive director at the forthcoming AGM.
Byron has more than three decades’ experience in the natural
resources sector, including nine years as chief ?nancial of?cer
of BP. He will be retiring from BP and stepping down from the
BP board in April. It is intended that Byron will, after a period of
induction, take over the chairmanship of the Audit Committee
from David Challen, who has rendered outstanding service in
this role. I am glad that David, whose independence is not in
doubt, has agreed, given the extensive changes to Board
membership since late 2009, to serve for at least another
year as the senior independent non-executive director.
In terms of the Board’s composition, the biggest change,
of course, was Cynthia Carroll’s decision in October to step
down as chief executive and from the Board, in April, with
the agreement of the Board. Cynthia’s leadership has had a
transformational impact on Anglo American. She developed
a clear strategy and created a strong and uni?ed culture and
a streamlined organisation.
Cynthia lived out Anglo American’s values to the full and her
legacy includes, among many other things, a step-change
improvement in safety, sustainability and the quality of
our dialogue with governments, communities and other
stakeholders around the world. As a Board, we not only
thank her but wish her all success and good wishes in the
years ahead.
I led the Board’s global search to identify the best possible
candidate for the role of chief executive. Mark Cutifani was
the Board’s unanimous choice to succeed Cynthia, and he
will take up his post on 3 April 2013. Mark comes to us from
AngloGold Ashanti, where he led the successful restructuring
and development of its business. He is an experienced
listed-company chief executive who has a focus on creating
value, and a seasoned miner, with broad experience of mining
operations and projects across a wide range of commodities
and geographies, including South Africa and the Americas, as
well as his native Australia. He is a highly respected leader in
the global mining industry, with values strongly aligned to
those of Anglo American.
In terms of enhancing the Board’s contribution to
Anglo American’s affairs, during the year the Board joined
the company’s most senior executives in an internal strategy
forum, and will do so again in June 2013. In addition, the
results of an external effectiveness review of the Board, which
I commissioned in 2011, were presented to the Board in
2012. The results of the review, together with details of all of
our governance arrangements, can be found in the Corporate
Governance section (pages 90–134) of this report.
OUTLOOK
During 2012 there were signi?cant macroeconomic policy
changes, which should support a stronger recovery in 2013
and beyond. There are now clear signs of an upturn in US
housing, which should reinforce a broader economic recovery
helped by ultra-loose monetary policy. In China, the
authorities have also eased policy to stimulate faster growth.
But the country’s newly installed leadership is mindful of the
need to rebalance the economy, which will restrain growth
over the next few years. In Europe and Japan, activity has
been weak, but there are signs of improvement and changes
in policy should boost growth in 2013. In the medium term,
we see continuing robust demand for industrial commodities
as emerging economies continue to industrialise and
advanced economies invest in upgrading their infrastructure.
Sir John Parker
Chairman
AN EVALUATION OF THE BOARD BY AN
EXTERNAL FACILITATOR, WITH NO PRIOR
RELATIONSHIP WITH ANGLO AMERICAN,
WAS COMPLETED IN FEBRUARY 2012.
For more information turn to page 96
REPRESENTATION OF WOMEN
ON THE BOARD
27%
For more information turn to page 91
The number
of people who
lost their lives
on company
business fell
to 13, while
our lost-time
injury frequency
rate, which
had reached
a plateau in
recent years,
also resumed
a downward
trend.
For more information
turn to page 27
A BRIGHTER OUTLOOK
FOR OUR KEY COMMODITIES
We expect a
gradual
strengthening
of economic
activity in 2013,
with the
emerging
economies
expected to
lead the
improvement.
THE ECONOMY
ECONOMIC SLOWDOWN
The world economy slowed in 2012.
According to the IMF, global real GDP
increased by 3¼ %, following 4%
in 2011 and 5% in 2010. There was
broad-based weakness, with both
advanced and developing economies
experiencing lower growth. In
aggregate, real GDP in the advanced
economies rose by 1¼ % in 2012,
after 1½ % in 2011 and 3% in 2010.
Emerging and developing economies
recorded aggregate real GDP growth
of 5% in 2012, down from 6¼ %
in 2011 and 7½ % in 2010. The growth
in world trade slowed more sharply, to
2¾ % in 2012, after 6% in 2011 and
12½ % in 2010.
In spite of the fragile global environment,
the US economy grew slightly more
strongly in 2012. The housing market
improved signi?cantly through the
year and rising sales and prices
encouraged a recovery in new housing
starts. The labour market also
improved, though more ?tfully. During
the year, the corporate sector scaled
back its investment spending owing to
increasing uncertainty about the path
of ?scal policy in 2013. This restrained
the economy’s growth rate to 2¼ % in
2012. The Federal Reserve responded
to the economy’s modest growth rate
with the implementation of open-
ended quantitative easing (‘QE3’)
in the autumn.
The European economy weakened
signi?cantly in 2012. In the euro zone,
real GDP contracted by ½ % following
growth of 1½ % in 2011. Economic
activity was particularly weak in the
heavily indebted countries that are
receiving ?nancial help from the EU
and the IMF. But there were also signs
of more broad-based weakness as
Germany and France slowed through
2012. Three factors have undermined
growth. First, the debt crisis has
signi?cantly increased risk premiums
on European ?nancial assets. Second,
the banking system remains impaired
in many economies. Third, many
governments are implementing
multi-year ?scal consolidation plans.
The Chinese economy slowed abruptly
in 2012. Real GDP grew by 7¾ %,
following 9¼ % in 2011 and 10½%
in 2010. The slowdown extended to
the third quarter, re?ecting two main
factors. First, there was signi?cant
weakness in China’s exports to the
US and Europe. Unsurprisingly, in the
light of Europe’s problems, China’s
exports to the EU fell during 2012.
Second, the downturn in the property
market undermined domestic
demand. The authorities responded
to the downturn with modest policy
stimulus. Policymakers brought
forward some spending on
infrastructure and the People’s Bank
of China eased monetary conditions
with several cuts in its required
reserve ratio for large banks. The
renminbi depreciated a little,
supporting exports. By the end of the
year, GDP growth had recovered.
Other large emerging economies
experienced notably weaker growth
in 2012. Concerns about stubborn
in?ation and government economic
reforms weighed on India’s growth.
OECD’s long-term GDP projections
Real GDP, at 2005 PPP, annual average % change
Source: OECD
1997–07
2020–30
2012–20
0 2 4 6 8 10 12
Japan
Euro zone
OECD
Brazil
US
S Africa
World
India
China
Industrial production
Trade
World trade and
industrial production
% change, latest three months on
previous three months
2012 2005
-15
-10
-5
0
5
10
Source: CPB Netherlands
Brazil’s economy was disappointingly
weak in spite of looser macro-
economic policies and currency
depreciation. Industrial unrest added
to the weakness of South Africa’s
economy late in 2012.
PROSPECTS
We expect a gradual strengthening
of economic activity in 2013. Global
GDP growth should be around 3½ %,
slightly below the longer term trend
rate, with the emerging economies
expected to lead the improvement.
China’s growth rate is likely to recover
to 8% in 2013, as export markets
stabilise and domestic demand
strengthens. India, Brazil and South
Africa should pick up in response to
improving external conditions, lower
in?ation and looser domestic policy.
The recovery will be patchier in the
advanced economies. The European
Central Bank has headed off the threat
of a euro breakdown, removing one
of the biggest downside risks. But
monetary and ?scal policy settings
will not stimulate economic growth.
The recovery in Europe looks as
though it will be painfully slow in 2013.
04 Anglo American plc Annual Report 2012
OVERVIEW MARKETPLACE
The US economy also faces a
more challenging domestic policy
environment. The recent debate
about the ‘?scal cliff’ has exposed the
absence of a credible medium term
plan to reduce the US’ federal budget
de?cit and arrest the rise in debt. In
coming years, US policymakers will
have to balance the need for signi?cant
?scal retrenchment against providing
support for economic activity in the
short term. This implies a prolonged
period of monetary accommodation
from the Federal Reserve and
sustained dollar weakness.
In the medium term, we expect the US
to return to its underlying trend growth
of around 2½ –3% a year. Europe’s
growth rate will remain more anaemic.
But economic growth should remain
more robust in the main emerging
economies. There is considerable
scope for further catch-up growth,
especially in China and India. But
China’s increasing scale implies the
new leadership must implement
reforms to rebalance growth gradually
away from investment towards
consumption. The next stage of the
country’s urbanisation will take place
in the western inland provinces, while
growth in coastal provinces should
slow modestly in the medium term.
COMMODITY
MARKETS
In an increasingly uncertain macro-
economic climate, 2012 was a year
of commodity price weakness and
heightened volatility. Average
annual prices were down for all of
Anglo American’s key commodities,
with falls ranging from 10% for copper
to 35% for hard coking coal.
Price weakness in 2012 was a
continuation of a trend that emerged
in the second half of 2011. Although
annual average prices were down
across the Group’s portfolio, a number
of commodities spent much of the year
at prices equal to or above those seen
in December 2011. In this respect there
was a marked contrast in performance
between the precious and base
metals and the bulk commodities,
with platinum and copper trading
above December 2011price levels for
much of 2012, while bulk commodity
prices weakened materially.
The platinum price increased by
8% during 2012, with higher prices
re?ecting not only the support
provided by South African supply
disruptions, but also the relatively
poor platinum pricing environment
seen in late 2011. The price moved
sharply upwards in both the ?rst and
third quarters of 2012, in response to
industrial action in South Africa, with
the resulting losses in output helping
to offset the impact of a generally
fragile demand environment, most
notably in the European auto sector.
The copper price also rose by 8%,
underpinned by stockpiling of cathodes
in Chinese bonded warehouses, which
‘sterilised’ a considerable amount of
metal. Estimated global stocks of
copper are still well below those of
other base metals and also somewhat
below ‘normal’ working levels, while
visible terminal market stocks are
also reasonably low. Investors and
speculators have therefore been
reluctant to ‘short’ the copper
market in the light of the relatively
low levels of readily available stocks,
the continued mine disruptions and
supply under performance.
In 2012, the fall in the prices of bulk
commodities, notably those used for
steel making, was signi?cant. Annual
average steel prices were down by
16% (HRC FOB Eur). However, 2012
iron ore and hard coking coal prices
were 24% and 35% lower respectively,
while molybdenum, which is also
used in steels, was down by 17%. The
slowdown in Chinese demand, which
has been magni?ed by destocking
activity, has been a principal factor in
these markets and, with the run-down
Indexed 2012 commodity prices
(1)
Dec 2011 Dec 2012 Oct 2012 Aug 2012 Feb 2012 Apr 2012 Jun 2012
P
r
i
c
e
I
n
d
e
x
,
D
e
c
e
m
b
e
r
2
0
1
1
=
1
0
0
40
70
60
50
110
100
90
80
120
140
130
(1)
Monthly average prices
Source: Anglo American Commodity Research
Iron Ore (FOB Aus)
Thermal Coal
Metallurgical Coal Nickel
Platinum
Copper
In an
increasingly
uncertain
macro-
economic
climate, 2012
was a year of
commodity
price weakness
and heightened
volatility.
of inventories having run its course and
even reversed, prices of both began
to improve from October, and, by
December, iron ore prices were back
to December 2011 levels.
Thermal coal prices also declined
markedly for most of 2012, but began
to improve during Q4 following the
closure of some US supply and an
increase in gas prices. European
prices continued to be dampened
by coal displaced by gas, while Asian
offtake has been muted. Globally,
supply cutbacks have been limited
and the near term outlook is for
continued supply additions from
Indonesia, exerting a drag effect
on any price recovery.
In 2013, the easing of macroeconomic
policy globally, renewed infrastructure
spending in China and stronger
manufacturing output should help
support commodity demand growth.
Coupled with price-induced project
deferral (constrained capex) and
supply curtailments, this should tighten
markets, thereby providing some
price support where there have been
recent lows. This expectation is
supported by the analysts’ consensus,
which forecasts 2013 average prices
above current levels for most of
Anglo American’s key commodities.
Anglo American plc Annual Report 2012 05
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WELL PLACED FOR ALL STAGES
OF THE ECONOMIC CYCLE
Anglo American’s current
portfolio is uniquely
diversi?ed, with material
exposure to commodities
that are key to the continued
early-stage industrialisation
of emerging economies,
such as metallurgical coal
and iron ore, as well as
having exposure to mid-
and late-cycle commodities,
such as copper, nickel,
platinum and diamonds.
Over the past decade, China and other emerging
economies have experienced an unprecedented
phase of industrialisation and urbanisation. In
spite of the current challenging global economic
environment, this growth is set to continue.
As the populations of the cities in these emerging
economies grow, so too do their incomes and
desire to spend.
Lower GDP/capita
METALLURGICAL
COAL
MANGANESE
IRON ORE THERMAL
COAL
INCREASE
IN GLOBAL
INFRASTRUCTURE
SPEND REQUIRED
BY 2030
60 %
600 GW
OF THERMAL COAL
POWER GENERATION
CAPACITY TO BE ADDED
BY CHINA OVER NEXT
17 YEARS
70%
OF CHINESE POPULATION
EXPECTED TO LIVE IN
URBAN AREAS BY 2030
VS. C. 50% TODAY
EARLY STAGE
Creating the building blocks of the urban environment
As economies start to develop and grow there is a need to expand
infrastructure, construct residential and commercial buildings and
build port capacity for the inevitable rise in import and export activity.
Sources:
NBS, UN, McKinsey Global Institute, FAO, NDRC, ICA, De Beers
06 Anglo American plc Annual Report 2012
OVERVIEW MARKETPLACE
Higher GDP/capita
NIOBIUM PHOSPHATES DIAMONDS
COPPER NICKEL PGMs
METRO LINES
WILL BE BUILT
IN 40 CHINESE
CITIES BY 2040,
WITH EACH KM
REQUIRING
107 TONNES
OF COPPER
FIRST-TIME
BRIDES IN CHINA
WHO RECEIVE
A DIAMOND
ENGAGEMENT
RING – A CAGR
*
OF ALMOST 24%
IN 16 YEARS
7,000 31 %
1 billion
PEOPLE WHO ARE
EXPECTED TO ENTER
THE GLOBAL ‘CONSUMING
CLASS’ BY 2025
40 Mt
OF EXPECTED FERTILISER
NUTRIENT DEMAND
GROWTH (C. 23%) OVER
THE NEXT DECADE AS
DIETS CHANGE IN
EMERGING ECONOMIES
1.7 billion
GLOBAL CAR FLEET TO
DOUBLE TO 1.7 BILLION
BY 2030
60 million
HOUSEHOLDS IN
EMERGING ECONOMIES
EXPECTED TO BE IN THE
HIGH INCOME BRACKET
(>$70,000 PA) BY 2025
MID STAGE
The rise of the consuming class
As developing economies mature, populations move to cities and
start to enjoy a higher disposable income and a more comfortable
standard of living. Households purchase ‘white goods’ and mobile
phone communication becomes widespread. Diets shift from being
grain based to being high in protein.
LATE STAGE
Aspiring to an af?uent lifestyle
As purchasing power increases, so too does the appetite for ‘luxury’
goods and services, including cars, jewellery, advanced technological
goods and travelling for leisure.
* Compound Annual Growth Rate
Anglo American plc Annual Report 2012 07
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Our exploration teams discover
ore deposits in a safe and
responsible way to replenish
the reserves that underpin our
future success.
Gaining and maintaining
our social and legal licence
to operate, through open
and honest engagement
with our stakeholders, is
critical to the sustainability
of our business.
Anglo American aims to become the leading global mining
company – the investment, the partner and the employer
of choice – through the operational excellence of world
class assets in the most attractive commodities, and
through a resolute commitment to the highest standards
of safe and sustainable mining.
As our business model illustrates, mining is only part of the story.
Our sector-leading exploration teams strive to ?nd the resources
we will mine in the future and we engage with a broad range of
stakeholders – from governments to local communities and
NGOs – to secure our right to mine those resources. Many of the
commodities we mine are processed and re?ned further before
we apply our market knowledge to deliver a quality product our
customers value.
We believe we can achieve our aim of becoming the leading
global mining company through our four strategic elements:
Investing in world class assets in those commodities that
we believe deliver the best returns through the economic
cycle and over the long term – namely, iron ore, metallurgical
coal, thermal coal, copper, nickel, platinum and diamonds.
Organising ef?ciently and effectively to outperform our
competition throughout our value chain.
Operating safely, sustainably and responsibly, in the belief
not only that this is fundamental to our licence to operate,
but also that this is an increasingly important source of
competitive advantage. The safety of our people is our key
core value and we are relentless in striving to achieve our
goal of zero harm.
Employing the best people. We recognise that attracting,
developing and retaining the best talent is essential to
achieving our ambition.
Our strategic elements are put into action across our
business model.
OUR STRATEGY AND
BUSINESS MODEL
SECURE FIND
OPERATING
The LT-SQUID has been
employed by our ?eld teams to
help search for so-called blind
deposits that have no visible
expression on the ground
surface. It has revolutionised
how we look at and model the
picture beneath the ground
surface, particularly at depth.
Go to page 41 for more
information on this story
OPERATING
Securing our licence to build
and operate a mine depends
on winning the trust of many
stakeholders. We participated
in an extensive, structured
‘dialogue table’ with local and
national stakeholders in our
Quellaveco copper project in
Peru, which helped us to reach
agreement with the local
community and regional
government to develop the
project.
Go to page 22 for more
information on this story
INVESTING
During the year, outstanding
injunctions were lifted at our
Minas-Rio iron ore project in
Brazil. Following a detailed
review, capital expenditure has
increased to $8.8 billion and
?rst ore on ship is expected at
the end of 2014.
Go to page 58 for more
information on this story
INVESTING
World class assets
in the most attractive
commodities
EMPLOYING
The best people
OPERATING
Safely,
sustainably
and
responsibly
ORGANISING
Ef?ciently
and
effectively
BECOMING
THE LEADING
MINING
COMPANY
08 Anglo American plc Annual Report 2012
OVERVIEW OUR STRATEGY AND BUSINESS MODEL
We apply more than 95 years
of opencast and deep-level
mining experience along with
unique in-house technological
expertise to extract mineral
resources in the safest, most
ef?cient way.
We generate extra value by
processing and re?ning many
of our commodities.
Whether providing innovative
haulage solutions within a
mine, or coordinating global
cargo deliveries, we offer
ef?cient and effective
transport of our commodities.
We collaborate with our
customers around the world
to tailor products to their
speci?c needs.
MINE PROCESS MOVE SELL
ORGANISING
The technical team at our
Phosphates business
proposed an innovative
solution to re-use phosphate
waste in the fertiliser
production process. The
technique was put into full-
scale production during 2012,
with 40% of phosphate waste
being re-used in the year,
resulting in lower production
costs and a signi?cant
environmental bene?t.
Go to page 87 for more
information on this story
ORGANISING
In September 2012, our
recently installed ?exible
conveyor train produced
116,708 tonnes of thermal coal
at Greenside mine, achieving
the highest monthly coal
output ever recorded outside
the US.
Go to page 36 for more
information on this story
OPERATING
Working with the aerospace
industry, Sishen developed
a unique collision avoidance
system for mining vehicles,
dramatically reducing the
number of vehicle-related
accidents at the mine.
Go to page 55 for more
information on this story
EMPLOYING
Our Nickel business is
addressing the shortage
of quali?ed people at its
operations in Brazil by tailoring
a trainee graduate programme
to develop the businesses
engineers and leaders of
the future. On successful
completion of the programme,
the trainees will be ready
to start their career at
Anglo American.
Go to page 73 for more
information on this story
INVESTING
Our Kolomela mine,
commissioned ?ve months
ahead of schedule in 2011,
produced 8.5 Mt of iron ore
in 2012, above expectations
of 4–5 Mt.
Go to page 14 for more
information on this story
ORGANISING
During 2012, we opened our
new sales and marketing hub
in Singapore, enabling us to be
closer to our customers in the
Asia-Paci?c market and be
more agile and responsive to
their needs.
Go to page 18 for more
information on this story
OPERATING
Following completion of the
Los Bronces expansion in
Chile, our Copper business
implemented a water
recirculation system to help
reduce the water requirement
in an already stretched
catchment area.
Go to page 69 for more
information on this story
Anglo American plc Annual Report 2012 09
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The new mining
operations and
expansions
delivered and
commissioned
during 2011
contributed
to production
growth and
generated
$1.2 billion
of underlying
operating pro?t.
As a result of markedly weaker
commodity prices, ongoing
cost pressures and an operating
loss in our Platinum business,
Anglo American reported an
underlying operating pro?t of
$6.2 billion, a 44% decrease.
Underlying EBITDA decreased by
35% to $8.7 billion and underlying
earnings decreased by 54% to
$2.8 billion.
Our safety performance has always
been my ?rst priority and our efforts
continue to build on the progress we
have made since 2006, both in terms
of lives lost and lost time injuries
sustained. I am deeply saddened that
13 of our colleagues lost their lives in
2012 – a constant reminder that we
must persevere to achieve zero harm.
Anglo American continued its drive
for strong operational performance
throughout 2012 in an environment
of tough macroeconomic headwinds
and a number of industry-wide
and company-speci?c challenges.
Record volumes of metallurgical coal,
achieving benchmark equipment
performance levels, and of iron ore
and increased volumes of export
thermal coal and copper helped
offset the impact of illegal industrial
action, declining grades and higher
waste stripping.
The new mining operations
and expansions delivered and
commissioned during 2011
contributed to production growth and
generated $1.2 billion of underlying
operating pro?t. The Los Bronces
expansion contributed 196,100 tonnes
of copper in 2012 and has achieved
full ramp up since August 2012, while
Kumba’s Kolomela mine exceeded
expectations by producing 8.5 million
tonnes for the year – both considerable
achievements – while we have been
slowly ramping up Barro Alto.
Beyond organic growth, we have
completed our acquisition of the
Oppenheimer family’s 40% interest
in De Beers, taking our holding to
85%. In Chile, our joint ownership of
Anglo American Sur (AA Sur) with
Codelco, Mitsubishi and Mitsui, while
we retain control of the business, ?rmly
aligns our interests in one of the most
exciting producing and prospective
copper orebodies in the world – the
Los Bronces district. During the year,
we also increased our shareholding in
CHIEF EXECUTIVE’S
STATEMENT
Cynthia Carroll
UNDERLYING OPERATING PROFIT
(2011: $11.1 bn)
$6.2 bn
FINAL DIVIDEND PER SHARE
(2011: 46 cents)
53 cents
Kumba Iron Ore, lifting our ownership
by 4.5% to 69.7%, re?ecting our view
on the quality of the business and its
highly attractive performance and
growth pro?le.
Our divestment programme has
generated proceeds as announced
of $4 billion on a debt and cash free
basis, which excludes $7.4 billion cash
generated from the sale of 49.9% of
AA Sur. In line with our divestment
programme of non-core businesses as
set out in October 2009, I am delighted
that Tarmac’s UK joint venture with
Lafarge was completed in January
2013, creating a leading UK
construction materials company
with signi?cant synergies expected.
We are focused on delivering
shareholder value and returns through
the cycle by maintaining a prudent
and disciplined approach to managing
our businesses and capital allocation.
Despite the macroeconomic
headwinds and likely sustained higher
capital and operating cost environment
for the industry, we are committed to
returning cash to shareholders and
have recommended an increase to our
?nal dividend of 15% to 53 cents per
share, bringing total dividends for the
year to 85 cents per share, a 15%
For more information
turn to page 42
10 Anglo American plc Annual Report 2012
OVERVIEW CHIEF EXECUTIVE’S STATEMENT
01
In Platinum,
we completed
our review
and have
put forward
proposals
to create a
sustainable,
competitive
and pro?table
business.
increase. This re?ects our con?dence
in the underlying business and
completes the reinstatement journey
to rebase our dividends to be
competitive with our diversi?ed peers.
We recorded impairments
totalling $4.6 billion (post-tax) in
relation to Minas-Rio and a number
of platinum projects that are
uneconomical, which is disappointing.
In Platinum, we completed our review
in January 2013 and have put forward
proposals to create a sustainable,
competitive and pro?table business.
We, of course, regret the potential
impact on jobs and communities and
have designed an extensive social plan
to more than offset any such impact. In
Brazil, Minas-Rio is a world class iron
ore project of rare magnitude and
quality, representing one of the world’s
largest undeveloped resources. The
published resource has increased
more than fourfold since acquisition,
of which we have subsequently
converted 1.45 billion tonnes to Ore
Reserves; we anticipate increases in
the resource con?dence and further
conversion of resources to reserves
through our ongoing in?ll drilling
programme. Despite the dif?culties
we have faced that have caused a
signi?cant increase in capital
expenditure, we continue to be
con?dent of the medium and long
term attractiveness and strategic
positioning of Minas-Rio and we
remain committed to the project.
The ?rst phase of the project will begin
its ramp up at the end of 2014, with
operating costs expected to be highly
competitive in the ?rst quartile of the
FOB cash cost curve, generating
signi?cant free cash ?ow for many
decades to come.
We continue to sequence investment
by prioritising capital to commodities
with the most attractive market
dynamics and projects with the lowest
execution risks. The 5 Mtpa Grosvenor
metallurgical coal project in Australia
is under way and on schedule while,
in Peru, successful completion of our
community dialogue process at the
Quellaveco copper project will allow us
to target submission to the Board for
approval in 2013.
Managing the social, economic
and environmental impacts of our
operations is essential to our success.
Our approach to sustainability is a
key differentiator for Anglo American,
is fundamental to the way we do
business and is embedded in
everything we do.
Together with the safety and
well-being of employees, our primary
sustainability issues are adapting to
climate change, securing access to
water and energy, and managing
relationships with stakeholders,
particularly communities. During 2012,
we made good progress implementing
our long term water and energy
strategies. To date, more than 70% of
our operational water requirements
are met by recycling/re-using water.
In support of our commitments to
protect and enhance the health of our
people, contractors and communities,
we are extending our industry-leading
health and wellness programmes,
which include HIV/AIDS and TB
treatment and care, to long term
contract employees in South Africa.
Looking ahead, recent months have
brought a degree of renewed optimism
to the economic prospects. While
European and Japanese economic
activity remains weak, recent policy
changes ought to stimulate growth in
2013. Alongside a continuing recovery
in the US, we expect robust growth in
the major emerging economies –
especially China and India – as they
bene?t from continuing urbanisation.
Rising living standards and an
expanding middle class should support
demand for our products across our
diversi?ed mix.
I step down from my role as chief
executive after six years knowing that
Anglo American is a safer place to
work, with a clear strategy and a much
changed culture of performance.
There is no doubt in my mind that
Anglo American’s people and asset
base are unmatched in the industry
and I wish my successor, Mark Cutifani,
every success in leading this great
company. I sincerely thank the
Board of directors, my executive
management team and all our
employees for their support and
relentless effort since 2007.
Cynthia Carroll
Chief Executive
01 At Thermal coal’s
Highveld hospital in
Mpumalanga province in
South Africa, Sister Evah
Molefe takes a sputum
sample to test for
TB from Kleinkopje
colliery plant operator
Sipho Mhlabane.
02 Cleaning copper
anodes in the tank house
at Los Bronces in Chile.
03 As part of the Board’s
visit to Minas-Rio in
October, the directors
visited the CRCA
(Cultural and
Environment Centre),
which houses specialist
information in the ?elds
of archaeology,
biodiversity and water.
04 Specialist asset strategy
engineer Sylvester
Hennessy monitoring
data at Metallurgical
Coal’s of?ces in
Brisbane, Australia.
Anglo American plc Annual Report 2012 11
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02
03
04
(1)
With the exception of corporate social investment, which includes the results of De Beers from the date of acquisition,
the results and targets for the Operating and Employing strategic elements include wholly owned subsidiaries and
joint ventures over which Anglo American has management control, and does not include De Beers or other major
non-managed operations such as Collahuasi, Cerrejón and Samancor. In addition, results for the Employing strategic
element exclude OMI – non-core operations.
(2)
2012 HIV/AIDS statistics exclude Scaw Metals South Africa.
12 Anglo American plc Annual Report 2012
OPERATING AND FINANCIAL REVIEW KEY PERFORMANCE INDICATORS
MEASUREMENT
AND TARGETS
Strategic elements KPI targets
INVESTING
In world class assets in the
most attractive commodities
Turn to page 14
Total shareholder return (TSR)
Share price growth plus dividends reinvested
over the performance period. A performance
period of three years is used and TSR is
calculated annually
Return on capital employed (ROCE)
Total underlying operating pro?t before
impairments for the year divided by the average
total capital less other investments and adjusted
for impairments
Capital projects and investment
Optimise the pipeline of projects and ensure
that new capital is only committed to projects
that deliver the best value to the Group on a risk
adjusted net present value basis
Underlying earnings per share
Underlying earnings are net pro?t attributable
to equity shareholders, before special items
and remeasurements
ORGANISING
Ef?ciently and effectively
Turn to page 18
In two vital areas of our business – asset
optimisation (AO) and supply chain – we have
beaten our own expectations. By the end of 2011,
we had exceeded our targets for both AO and
supply chain, each of which delivered more than
$1 billion from core businesses since 2009. As a
result, we no longer report against Group-wide
AO and supply chain targets
We do, however, continue to deliver on both
programmes and examples of how our operations
are achieving and surpassing ‘industry benchmark’
performance are detailed throughout this report.
Further details on the AO and supply chain
functions can be found on pages 18–21
OPERATING
(1)
Safely, sustainably
and responsibly
Turn to page 22
Work-related fatal injury
frequency rate (FIFR)
FIFR is calculated as the number of fatal
injuries to employees or contractors per
200,000 hours worked
Lost-time injury frequency rate (LTIFR)
The number of lost-time injuries (LTIs) per
200,000 hours worked. An LTI is an occupational
injury which renders the person unable to
perform his/her regular duties for one full shift
or more the day after the injury was incurred,
whether a scheduled workday or not
Energy consumption
Measured in gigajoules (GJ)
Greenhouse gas (GHG) emissions
Measured in tonnes of CO
2
equivalent emissions
Total water use
Total water use includes only water used for
primary activities, measured in million m
3
Corporate social investment
Social investment as de?ned by the London
Benchmarking Group includes donations, gifts in
kind and staff time for administering community
programmes and volunteering in company time
and is shown as a percentage of pro?t before tax
Enterprise development
Number of companies supported and number
of jobs sustained by companies supported by
Anglo American enterprise development initiatives
Voluntary HIV counselling and testing (VCT)
(2)
Percentage of employees in southern Africa
undertaking voluntary annual HIV tests with
compulsory counselling and support
EMPLOYING
(1)
The best people
Turn to page 32
Voluntary labour turnover
Number of permanent employee resignations
as a percentage of total permanent employees
Gender diversity
Percentage of women, and female managers,
employed by the Group
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(3)
CSI expenditure for 2011 was restated from $122 million
to $129 million due to increased expenditure reported by
Kumba following publication of the 2011 Anglo American
Annual Report.
Anglo American plc Annual Report 2012 13
Results and targets
Capital projects and investment
Total shareholder return (TSR)
2011
2012
Return on capital employed (ROCE)
13.3%
26.5%
$2.26
2011
2012
$5.06
Underlying earnings per share
2.4%
2011
2012
3.0%
Voluntary labour turnover
15% females
2011
2012
23% female managers
15% females
22% female managers
Gender diversity
82%
2011
2012
92%
Voluntary HIV counselling and testing (VCT)
Target: Over 90% of employees in high disease
burden countries
13 fatalities, 0.008 FIFR
2011
2012
17 fatalities, 0.009 FIFR
Work-related fatal injury
frequency rate (FIFR)
Target: Zero fatal incidents
108 million GJ
total energy used
2011
2012
102 million GJ
total energy used
Energy consumption
0.60
0.64
2011
2012
Lost-time injury frequency rate (LTIFR)
Target: Zero incidents – the ultimate goal
of zero harm remains
$154m,
3% of pro?t before tax
2011
2012
$129m,
1% of pro?t before tax
Corporate social investment
(3)
18 Mt CO
2
equivalent
2011
2012
19 Mt CO
2
equivalent
GHG emissions
17,598 businesses supported
2011
2012
64,927 jobs sustained
38,681 businesses supported
47,070 jobs sustained
Enterprise development
Target: Businesses supported: 3,500
Jobs sustained: 18,000
122 Mm
3
115 Mm
3
2011
2012
Total water use
Target: Under revision
For a summary of the Group’s capital
projects and investments
turn to pages 14–17
Please refer to the Remuneration report
turn to pages 108–127
14 Anglo American plc Annual Report 2012
OPERATING AND FINANCIAL REVIEW STRATEGY IN ACTION
SURPASSING
STANDARDS
WITH THE FUTURE IN MIND
STRATEGIC ELEMENT: Investing in world class assets and the most attractive commodities
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Anglo American plc Annual Report 2012 15
We have a clear strategy of deploying
capital in those commodities with
strong fundamentals and the most
attractive risk-return pro?les that deliver
long term, through-the-cycle returns
for our shareholders.
718
HOMES ARE BEING BUILT TO ACCOMMODATE
KOLOMELA’S EMPLOYEES. BY THE END OF
2012, 615 HAD BEEN COMPLETED, WITH THE
REMAINDER DUE BY Q2 2013.
“It is such occasions as today, the
opening of a new mine, the creation
of new economic activity and
jobs which makes one proud and
emphasises the importance of
mining in our country.”
Susan Shabangu
South Africa’s Minister
of Mineral Resources
EXCEEDING EXPECTATIONS
Kumba’s Kolomela mine, which was brought into
production ?ve months ahead of schedule in
December 2011, is a key element of our South
African iron ore growth strategy. Although, initially
the operation was expected to ramp up through
2012 to produce between 4 and 5 Mt of saleable
product, it surpassed expectations to achieve
design capacity by the third quarter, shipping
8.5 Mt of iron ore to customers in the year. Safety
performance at Kolomela has been outstanding;
the project and operations achieved a combined
29 million man hours, without a fatal incident
or lost-time injury between March 2010 and
October 2012, setting a new benchmark for
the Group and for projects of this nature in
South Africa.
c. 85%
OF PERMANENT EMPLOYEES
ARE FROM THE NORTHERN CAPE
PROVINCE, VERSUS A TARGET
OF 75%.
IRON ORE PRODUCTION FOR KUMBA (MT)
70 Mtpa
Kumba plans to grow organically to achieve production
of 70 Mtpa from South Africa.
2009 2010 2012 2011 Target
41.9
43.4
41.3
43.1
70.0
Main Fitter Martha
Zenda at Kolomela
iron ore plant’s
load-out station
feed conveyor. The
conveyor transfers
iron ore from the
stacker reclaimer
yard to bins
which feed the
Sishen-Saldanha
export rail system.
01 The Kumba/
Kolomela rail loading
facility is designed
to transfer iron ore
rapidly to rail wagons
on the export rail
system.
02 Maintenance
operator Mattieus
Dikwidi at the
Kolomela plant.
“Kumba is studying
opportunities to
expand Kolomela’s
production through a
bene?ciation process,
which could add a
further 6 Mtpa of production.”
Norman Mbazima
CEO, Kumba Iron Ore
63.7% Fe
AVERAGE GRADE OF
UNBENEFICIATED ORE – KOLOMELA.
02
01
The Group’s extensive portfolio
of undeveloped world class
resources and pipeline of growth
options span its chosen core
commodities. It offers the
Group ?exibility to sequence
investment in line with the Group’s
view of market dynamics and
the geopolitical environment.
Capital is prioritised to maximise
value accretion while minimising
risk exposure, taking into
consideration the Group’s
resulting funding capacity.
We have a number of projects in the
execution phase and are progressing
with the development of other growth
projects, including the 225,000 tonnes
per annum (tpa) Quellaveco green?eld
copper project in Peru.
The Minas-Rio iron ore project
in Brazil is expected to capture a
signi?cant part of the pellet feed
market with its premium product
featuring high iron content and
low contaminants. Phase 1 of the
Minas-Rio project is expected to
produce 26.5 million tonnes per
annum (Mtpa), with potential
optimisation to 29.8 Mtpa.
During the year Anglo American
completed a detailed cost and
schedule review of the project. The
review included third party input and
examined the outstanding capital
expenditure requirements in light of
current development progress and
the disruptive challenges faced by the
project. The review included a detailed
re-evaluation of all aspects of the
outstanding schedule, with a focus on
maximising value and mitigating risk.
Following completion of the review,
estimated capital expenditure for
the Minas-Rio project increased to
$8.8 billion, if a centrally held risk
contingency of $600 million
is utilised in full. On the basis of
the revised capital expenditure
requirements and assessment of the
full potential of Phase 1 of the project
(excluding at this stage the potential
for future expansions up to 90 Mtpa),
Anglo American will record an
impairment charge of $4 billion at
PROJECT DELIVERY TO
CONTINUE TO DRIVE HIGH
QUALITY PRODUCTION GROWTH
31 December 2012, on a post-tax
basis. The ?rst phase of the project will
begin its ramp up at the end of 2014.
The published resource has increased
more than fourfold since acquisition to
5.77 billion tonnes in 2011, of which we
have recently converted 1.45 billion
tonnes to Ore Reserves. We anticipate
increases in the resource con?dence
and further conversion of resources
to reserves through our ongoing in?ll
drilling programme.
In Colombia, the brown?eld expansion
project, P40, aims to increase value
by increasing export thermal coal
production capacity by 8 Mtpa to
40 Mtpa (100% basis), through
additional mining equipment and
the debottlenecking of key logistics
infrastructure along the coal chain.
The project was approved by
Cerrejón’s shareholders in the third
quarter of 2011. The project is
progressing well and is expected to
be delivered on schedule, with ?rst
coal expected in 2013.
The green?eld Grosvenor
metallurgical coal project is situated
immediately to the south of
Anglo American’s Moranbah North
metallurgical coal mine in the Bowen
Basin of Queensland, Australia. The
mine is expected to produce 5 Mtpa
of high quality metallurgical coal from
its underground longwall operation
over a projected life of 26 years and
to bene?t from operating costs in the
lower half of the cost curve.
Grosvenor forms a major part of the
Group’s strategy of tripling hard coking
coal production from its Australian
assets, using a standard longwall and
coal handling and preparation plant
(CHPP) design. In its ?rst phase of
development, Grosvenor will consist
of a single new underground longwall
mine, targeting the same well
understood Goonyella Middle coal
seam as Moranbah North, and will
process its coal through the existing
Moranbah North CHPP and train
loading facilities. The Grosvenor
project is currently in execution, with
engineering work progressing to plan,
construction under way and longwall
The Group’s
extensive
portfolio of
undeveloped
world class
resources
and pipeline
of growth
opportunities
spans our
chosen core
commodities.
16 Anglo American plc Annual Report 2012
OPERATING AND FINANCIAL REVIEW STRATEGY IN ACTION
IN BRIEF
•Cerrejón P40 8 Mtpa export
thermal coal expansion in
Colombia – ?rst coal in 2013.
•Minas-Rio 26.5 Mtpa iron ore
project in Brazil – injunctions
lifted and ?rst ore on ship
(FOOS) end of 2014.
•Grosvenor 5 Mtpa
metallurgical coal project
in Australia – longwall
production in 2016.
STRATEGIC ELEMENT: Investing in world class assets and the most attractive commodities
2011
2012
2010
CAPEX: 4 strategic
growth projects
$ bn
1.7
2.4
2.3
2011
2012
2010
CAPEX: Other projects
$ bn
1.3
1.0
1.0
2011
2012
2010
CAPEX: Stay in business
$ bn
2.7
2.4
1.7
O
p
e
r
a
t
i
n
g
a
n
d
?
n
a
n
c
i
a
l
r
e
v
i
e
w
production targeted to begin in 2016.
A pre-feasibility study for expansion
by adding a second longwall at
Grosvenor is under way.
Quellaveco is a green?eld copper
project in the Moquegua region of
southern Peru that has the potential
to produce 225,000 tpa of copper
from an open pit over a mine life of
approximately 28 years. The project
is expected to operate in the lower
half of the cash operating cost curve,
bene?ting from attractive ore
grades, low waste stripping and
molybdenum by-product production.
Anglo American completed the
feasibility study for the project in late
2010, and took the decision to suspend
progress in order to engage more
actively with the local communities
through a formal dialogue table
process, following requests from local
stakeholders. The dialogue process
reached agreement in early July
2012 in relation to water usage,
environmental responsibility and
Anglo American’s social contribution
over the life of the mine, and has been
held as a model for stakeholder
engagement in Peru. The project
received three critical permits during
the fourth quarter of 2012 and
Anglo American is targeting
submission to the Board for approval
in 2013.
Anglo American plc Annual Report 2012 17
SELECTED MAJOR PROJECTS
Approved
Sector Project Country
Green?eld (G)/
Brown?eld (B)
First
production
date
Full
production
date Capex $ bn
(1)
Production volume
(2)
Iron Ore and Manganese Minas-Rio Phase 1 Brazil G 2014 2016 8.8
(3)
26.5 Mtpa iron ore
Groote Eylandt Expansion Project Australia B 2013 2013
A Balanced Portfolio With The Future In Mind
ANNUAL REPORT 2012
A BALANCED
PORTFOLIO
WITH THE FUTURE IN MIND
SUBHEAD
Copy to come.
A UNIQUE TRANSACTION
Our acquisition of a further
40% interest in De Beers
was a unique opportunity
to consolidate control of the
world’s leading diamond
company. The bene?ts of our
scale, expertise and ?nancial
resources, combined with
the De Beers business and
its iconic brand, will enhance
De Beers’ position across
the diamond pipeline and
capture the potential
presented by a rapidly
evolving diamond market.
Other sources
of information
You can ?nd this report
and additional information
about Anglo American
on our corporate website.
Although we have
chosen not to produce
an ‘integrated report’,
we have included a
comprehensive overview
of our non-?nancial
performance in this report.
More detailed information
on our sustainability
performance is provided
in our Sustainable
Development Report.
This can be found on our
corporate website.
WITH THE FUTURE IN MIND
At Anglo American, we will achieve our ambition
to be the leading mining company if we make
sound decisions that focus on delivering
long term value. It is these decisions made
by our talented workforce that are driving the
business forward with the future in mind.
For more information on this story
go to page 82 in this report
01 Preparation plant
assistant Jessica Smith
and environmentalist
Matt Goddard at the
train load-out facility
at Metallurgical
Coal’s Capcoal open
cut mine.
02 Molten platinum
being poured at
Platinum’s precious
metals re?nery.
03 Construction work
at Thermal Coal’s
eMalahleni water
treatment plant.
04 Reclaimer operator
Bobby Marthinus at
the reclaimer bucket
wheel at Kolomela
mine’s stack and
reclaim yard.
05 Arc furnace at
Codemin’s nickel
smelter in Brazil.
06 Anodes supervisor
Ricardo Villalon at
the anodes stockpile
at the Chagres
copper smelter.
Cover
De Beers’ sea
walker drill platform,
drilling the surf
zone on the Atlantic
coast in Namibia.
01 02
03
04 05 06
For more information visit
www.angloamerican.com/
reportingcentre
AT A GLANCE
AT A GLANCE
Anglo American’s portfolio of mining businesses spans bulk
commodities – iron ore and manganese, metallurgical coal
and thermal coal; base metals – copper and nickel; and
precious metals and minerals – in which we are a global
leader in both platinum and diamonds.
Revenue by origin:
North America
Global total: $32,785 million
$559 m
Revenue by origin:
Chile
Global total: $32,785 million
$5,122 m
Revenue by origin:
Other South America
Global total: $32,785 million
$1,131 m
Revenue by origin:
Brazil
Global total: $32,785 million
$1,274 m
Revenue by origin:
Other Africa
Global total: $32,785 million
$3,256 m
Headquarters Corporate and
representative of?ces
London,
United Kingdom
Beijing, China
Belo Horizonte, Brazil
Brisbane, Australia
Johannesburg, South Africa
Kinshasa, DRC
Luxembourg
Maputo, Mozambique
New Delhi, India
Rio de Janeiro, Brazil
Santiago, Chile
São Paulo, Brazil
Singapore
Ulan Bator, Mongolia
North America
South America
Africa
Australia and Asia
Iron Ore and Manganese
Metallurgical Coal
Thermal Coal
Copper
Nickel
Platinum
Diamonds
Other Mining and Industrial
Revenue by origin:
South Africa
Global total: $32,785 million
$14,592 m
Revenue by origin:
Australia and Asia
Global total: $32,785 million
$4,616 m
Revenue by origin:
Europe
Global total: $32,785 million
$2,235 m
Underlying operating pro?t
$ million
Iron Ore and Manganese: 2,949
Metallurgical Coal: 405
Thermal Coal: 793
Copper: 1,687
Nickel: 26
Platinum: (120)
Diamonds: 496
Other Mining and Industrial: 337
Exploration: (206)
Corporate: (203)
Total: $6,164 million
Net segment assets
$ million
Iron Ore and Manganese: 9,356
Metallurgical Coal: 5,219
Thermal Coal: 1,965
Copper: 8,536
Nickel: 2,509
Platinum: 10,419
Diamonds: 12,944
Other Mining and Industrial: 786
Exploration: 4
Corporate: (285)
Total: $51,453 million
Revenue by destination
$ million
South Africa 3,115
Other Africa 715
Brazil 1,093
Chile 1,241
Other South America 46
North America 1,274
Europe 8,846
China 5,927
Incorporating:
Australia 340
India 2,544
Japan 4,049
Other Asia 3,595
Total 32,785
PERFORMANCE HIGHLIGHTS CONTENTS
Overview
02 Chairman’s statement
04 Marketplace
08 Our strategy and business model
10 Chief Executive’s statement
Operating and ?nancial review
12 Key performance indicators (KPIs)
14 Strategy in action
36 Resources and technology
42 Group ?nancial performance
48 Risk
54 Iron Ore and Manganese
60 Metallurgical Coal
64 Thermal Coal
68 Copper
72 Nickel
76 Platinum
82 Diamonds
86 Other Mining and Industrial
Governance
90 Introduction
92 The Board
94 Executive management
96 Role of the Board
98 Board in action
104 Audit Committee report
108 Directors’ remuneration report
128 Directors’ report
134 Statement of directors’ responsibilities
Financial statements
136 Responsibility statement
137 Independent auditor’s report
138 Principal statements
142 Notes to the ?nancial statements
Ore Reserves and Mineral Resources
191 Introduction
192 Summary
196 Iron Ore
199 Manganese
200 Coal
208 Copper
213 Nickel
214 Platinum Group Metals
217 Diamonds
222 Phosphate products
223 Niobium
224 Reconciliation overview
228 De?nitions
229 Glossary
Other information
231 Production statistics
235 Quarterly production statistics
236 Exchange rates and commodity prices
237 Summary by business operation
238 Key ?nancial data
239 Non-?nancial data
240 Reconciliation of reported earnings
242 The business – an overview
244 Shareholder information
IBC Other Anglo American publications
SAFEGUARDING
VALUE
WITH THE FUTURE IN MIND
UNDERLYING
OPERATING PROFIT
(2011: $11.1bn)
$6.2 bn
UNDERLYING EARNINGS
(2011: $6.1bn)
$2.8 bn
UNDERLYING EARNINGS
PER SHARE
(2011: $5.06)
$2.26
(LOSS)/PROFIT
ATTRIBUTABLE TO EQUITY
SHAREHOLDERS
(2011: $6.2 bn)
$(1.5) bn
Underlying operating pro?t includes
attributable share of associates’ operating
pro?t (before attributable share of
associates’ interest, tax, and non-controlling
interests) and is before special items and
remeasurements, unless otherwise stated.
See notes 2 and 4 to the ?nancial statements
for operating pro?t. For de?nition of special
items and remeasurements, see note 5 to
the ?nancial statements. See note 13 to the
?nancial statements for the basis of
calculation of underlying earnings.
‘Tonnes’ are metric tons, ‘Mt’ denotes
million tonnes, ‘kt’ denotes thousand tonnes
and ‘koz’ denotes thousand ounces;
‘$’ and ‘dollars’ denote US dollars and
‘cents’ denotes US cents.
Net debt includes related hedges and net
cash in disposal groups. See note 31 to the
?nancial statements.
Nil
Nil
44
25
2011
2010
2009
2008
DIVIDENDS PER SHARE
Cents
40
28
46
2012 32
53
Anglo American plc Annual Report 2012 01
2011
2010
2009
2008
CAPITAL EXPENDITURE
$ bn
4.8
5.3
5.0
2012
5.7
5.8
2011
2010
2009
2008
NET DEBT
$ m
11,280
11,340
7,384
2012
8,615
1,374
O
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CHAIRMAN’S
STATEMENT
In a very tough year, we made signi?cant
progress in overcoming the most serious
challenges to our business, to the bene?t
of everyone invested, directly or indirectly,
in Anglo American.
02 Anglo American plc Annual Report 2012
Given the
increased
challenges
involved in
developing
large and
complex
green?eld
sites, the
Board will
apply a highly
disciplined
approach to
the allocation
of capital.
OUR PERFORMANCE
It was a dif?cult year for the mining industry and
Anglo American encountered its share of challenges.
Against a backdrop of a marked economic slowdown in
China, a troubled euro zone and only a sputtering recovery
in the US, the industry faced falling prices, while pro?tability
was further impacted as costs continued to rise well above
in?ation in many countries. In our own business, in South
Africa, we had to contend with lengthy illegal industrial action
at our Platinum and Kumba Iron Ore operations – which
ultimately had the effect of tipping Anglo American Platinum
into making a loss for the year. In the ?rst half of the year,
we also encountered operational setbacks in our Copper
business, where output is now stabilising. At our largest
capital project, the Minas-Rio iron ore project in Brazil, a
diversity of problems led to a revised delivery date and
capital-cost increases. This led us to review the carrying
value of the asset, writing it down by $4 billion (after tax).
DIVIDENDS AND CAPITAL ALLOCATION
In spite of all these challenges affecting cash ?ow, the Board
was able to recommend a ?nal dividend of 53 cents per share,
giving a rebased total dividend for the year of 85 cents, a 15%
increase, re?ecting our con?dence in the underlying business.
This increase completes the rebuilding of our dividend from
zero in 2009, to a new base level competitive with our
diversi?ed peer group.
The three major projects we commissioned in 2011 – Barro
Alto nickel, Los Bronces copper expansion and Kolomela iron
ore – have all been ramping up. At Minas-Rio, however, the
inevitable knock-on effect of permitting and other delays have
resulted in the project’s capital expenditure rising to an
expected $8.8 billion, if a Group-held risk contingency of
$600 million is consumed, with the ?rst iron ore shipment due
by the end of 2014. I am con?dent, however, that Minas-Rio
will become one of the world’s great high-quality iron ore
mines, with high potential cash generation and a published
resource base of well over 5 billion tonnes, a more than
fourfold increase since acquisition.
Anglo American’s objective is to maintain a strong investment
grade rating – which demands rigorous capital discipline. We
recognise that over the next two years we will bear a heavier
capital expenditure burden as we seek to complete the
development of Minas-Rio and Grosvenor in Australia, after
which we expect capital expenditure to be moderated.
We have a substantial potential pipeline of high-quality growth
options in the most attractive commodities. However, given
the increased challenges involved in developing large and
complex green?eld sites, the Board will apply a highly
disciplined approach to the allocation of capital, with smaller,
lower-risk brown?eld expansion projects more likely to ?nd
favour. Prior to Board approval of large green?eld projects
we will explore the merits of seeking suitable partners.
DELIVERING VALUE
In these volatile times, boards have a heightened
responsibility to ensure that management delivers enduring
value for shareholders. That is why, following almost a year
of studying various options and social plans, we have
announced a proposed major restructuring of our Platinum
business. We aim to return it to a sustainable pro?t and a more
secure future for the 45,000 employees who would remain.
I am glad to report we have had positive dialogue with the
South African government, with a joint commitment to work
together on this restructuring and the ?nalisation of our
recovery plans.
It is pleasing to report that, following the dispute with the
Chilean state copper producer, Codelco, we were able to
retain majority control of Anglo American Sur and to establish
a new relationship that positions us to build a strong future
for our business in Chile. We were also able to generate
$2.3 billion of incremental proceeds for shareholders
compared to the original option price.
Our acquisition from the Oppenheimer family of its 40%
shareholding in De Beers now gives shareholders greater
exposure to the world’s No. 1 diamond company. We believe
De Beers is well positioned to capitalise on the positive
fundamentals in diamonds, with the supply of gem diamonds
likely to fall well short of demand over the long term.
SAFETY AND SUSTAINABLE DEVELOPMENT
The number of people who lost their lives on company
business fell to 13; sadly, this is 13 too many. Our lost-time
injury frequency rate, which had reached a plateau in recent
years, also resumed a downward trend. Overall, during
Cynthia Carroll’s six-year watch, on a like-for-like basis, the
annual number of deaths Group-wide fell by half. This step
change in performance is great testimony to Cynthia’s
safety leadership, as well as the commitment of her senior
management team. Their tireless endeavours in leading the
safety agenda have brought about real and lasting change in
the way we approach our drive for zero harm. I know our
incoming chief executive Mark Cutifani, during whose watch
at AngloGold Ashanti, over a similar timeframe, the company’s
safety record improved signi?cantly, is also determined to take
the lead on this most fundamental of issues.
As a company, Anglo American takes climate-change
mitigation and water management particularly seriously –
with targets for these included in the performance contracts
Sir John Parker
OVERVIEW CHAIRMAN’S STATEMENT
Anglo American plc Annual Report 2012 03
O
v
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of our business unit CEOs. It is pleasing, therefore, that our
approach to sustainable development continues to receive
global recognition. At the Quellaveco copper project in
Peru – historically, a challenging environment in which to
conduct mining operations – we successfully concluded
a community ‘dialogue table’; this resulted in ground-
breaking agreements that satisfy our host communities
on water use, the environment and social responsibility. In
2012, Anglo American was recognised for the 10th year
running for excellence in sustainability by the Dow Jones
Sustainability Index, achieving the highest ranking in the
mining industry. We were also awarded a platinum ranking
in the 2012 Business in the Community Corporate
Responsibility Index, the UK’s leading voluntary benchmark
of corporate responsibility – the only mining group to secure
platinum status.
GOVERNANCE
Over the past few years, governance pressures on listed
companies have been growing in intensity. Shareholders,
institutional and individual alike, have sought to hold
underperforming managements and boards to account.
In the 3½ years I have been chairman of your company,
therefore, I have sought to refresh and strengthen the
Board by bringing in members with a range of skill-sets
and experiences that can add value to our business and
maintain capital discipline. It is in that light that we appointed
Anne Stevens in May 2012. Anne is an engineer with
extensive industrial experience, including operating in a
range of South American countries in which we are present.
I also wish to take this opportunity to thank Dr Mamphela
Ramphele, who stepped down in July, for the wealth of
experience and insight she brought to the Board’s affairs.
Mamphela, who was a key ?gure in South Africa’s struggle
for democracy, later had a distinguished career, including
serving as vice-chancellor of the University of Cape Town
and as a managing director of the World Bank.
Peter Woicke will also be standing down from the Board at the
forthcoming AGM. He has been a director since 2006 and
chairman of the Safety and Sustainable (S&SD) Committee
for the past three years. Peter has brought a wealth of
experience and knowledge about development in emerging
economies to our proceedings and has ensured that Anglo
American remains at the forefront of the major sustainability
issues facing our industry. We are indeed grateful for his
leadership in this important area of our operations.
We are fortunate to have Jack Thompson’s extensive
mining experience and knowledge of safety to take over
as chairman of the S&SD Committee and to build on
Peter Woicke’s excellent work.
The Board is also proposing the appointment of Dr Byron
Grote as a non-executive director at the forthcoming AGM.
Byron has more than three decades’ experience in the natural
resources sector, including nine years as chief ?nancial of?cer
of BP. He will be retiring from BP and stepping down from the
BP board in April. It is intended that Byron will, after a period of
induction, take over the chairmanship of the Audit Committee
from David Challen, who has rendered outstanding service in
this role. I am glad that David, whose independence is not in
doubt, has agreed, given the extensive changes to Board
membership since late 2009, to serve for at least another
year as the senior independent non-executive director.
In terms of the Board’s composition, the biggest change,
of course, was Cynthia Carroll’s decision in October to step
down as chief executive and from the Board, in April, with
the agreement of the Board. Cynthia’s leadership has had a
transformational impact on Anglo American. She developed
a clear strategy and created a strong and uni?ed culture and
a streamlined organisation.
Cynthia lived out Anglo American’s values to the full and her
legacy includes, among many other things, a step-change
improvement in safety, sustainability and the quality of
our dialogue with governments, communities and other
stakeholders around the world. As a Board, we not only
thank her but wish her all success and good wishes in the
years ahead.
I led the Board’s global search to identify the best possible
candidate for the role of chief executive. Mark Cutifani was
the Board’s unanimous choice to succeed Cynthia, and he
will take up his post on 3 April 2013. Mark comes to us from
AngloGold Ashanti, where he led the successful restructuring
and development of its business. He is an experienced
listed-company chief executive who has a focus on creating
value, and a seasoned miner, with broad experience of mining
operations and projects across a wide range of commodities
and geographies, including South Africa and the Americas, as
well as his native Australia. He is a highly respected leader in
the global mining industry, with values strongly aligned to
those of Anglo American.
In terms of enhancing the Board’s contribution to
Anglo American’s affairs, during the year the Board joined
the company’s most senior executives in an internal strategy
forum, and will do so again in June 2013. In addition, the
results of an external effectiveness review of the Board, which
I commissioned in 2011, were presented to the Board in
2012. The results of the review, together with details of all of
our governance arrangements, can be found in the Corporate
Governance section (pages 90–134) of this report.
OUTLOOK
During 2012 there were signi?cant macroeconomic policy
changes, which should support a stronger recovery in 2013
and beyond. There are now clear signs of an upturn in US
housing, which should reinforce a broader economic recovery
helped by ultra-loose monetary policy. In China, the
authorities have also eased policy to stimulate faster growth.
But the country’s newly installed leadership is mindful of the
need to rebalance the economy, which will restrain growth
over the next few years. In Europe and Japan, activity has
been weak, but there are signs of improvement and changes
in policy should boost growth in 2013. In the medium term,
we see continuing robust demand for industrial commodities
as emerging economies continue to industrialise and
advanced economies invest in upgrading their infrastructure.
Sir John Parker
Chairman
AN EVALUATION OF THE BOARD BY AN
EXTERNAL FACILITATOR, WITH NO PRIOR
RELATIONSHIP WITH ANGLO AMERICAN,
WAS COMPLETED IN FEBRUARY 2012.
For more information turn to page 96
REPRESENTATION OF WOMEN
ON THE BOARD
27%
For more information turn to page 91
The number
of people who
lost their lives
on company
business fell
to 13, while
our lost-time
injury frequency
rate, which
had reached
a plateau in
recent years,
also resumed
a downward
trend.
For more information
turn to page 27
A BRIGHTER OUTLOOK
FOR OUR KEY COMMODITIES
We expect a
gradual
strengthening
of economic
activity in 2013,
with the
emerging
economies
expected to
lead the
improvement.
THE ECONOMY
ECONOMIC SLOWDOWN
The world economy slowed in 2012.
According to the IMF, global real GDP
increased by 3¼ %, following 4%
in 2011 and 5% in 2010. There was
broad-based weakness, with both
advanced and developing economies
experiencing lower growth. In
aggregate, real GDP in the advanced
economies rose by 1¼ % in 2012,
after 1½ % in 2011 and 3% in 2010.
Emerging and developing economies
recorded aggregate real GDP growth
of 5% in 2012, down from 6¼ %
in 2011 and 7½ % in 2010. The growth
in world trade slowed more sharply, to
2¾ % in 2012, after 6% in 2011 and
12½ % in 2010.
In spite of the fragile global environment,
the US economy grew slightly more
strongly in 2012. The housing market
improved signi?cantly through the
year and rising sales and prices
encouraged a recovery in new housing
starts. The labour market also
improved, though more ?tfully. During
the year, the corporate sector scaled
back its investment spending owing to
increasing uncertainty about the path
of ?scal policy in 2013. This restrained
the economy’s growth rate to 2¼ % in
2012. The Federal Reserve responded
to the economy’s modest growth rate
with the implementation of open-
ended quantitative easing (‘QE3’)
in the autumn.
The European economy weakened
signi?cantly in 2012. In the euro zone,
real GDP contracted by ½ % following
growth of 1½ % in 2011. Economic
activity was particularly weak in the
heavily indebted countries that are
receiving ?nancial help from the EU
and the IMF. But there were also signs
of more broad-based weakness as
Germany and France slowed through
2012. Three factors have undermined
growth. First, the debt crisis has
signi?cantly increased risk premiums
on European ?nancial assets. Second,
the banking system remains impaired
in many economies. Third, many
governments are implementing
multi-year ?scal consolidation plans.
The Chinese economy slowed abruptly
in 2012. Real GDP grew by 7¾ %,
following 9¼ % in 2011 and 10½%
in 2010. The slowdown extended to
the third quarter, re?ecting two main
factors. First, there was signi?cant
weakness in China’s exports to the
US and Europe. Unsurprisingly, in the
light of Europe’s problems, China’s
exports to the EU fell during 2012.
Second, the downturn in the property
market undermined domestic
demand. The authorities responded
to the downturn with modest policy
stimulus. Policymakers brought
forward some spending on
infrastructure and the People’s Bank
of China eased monetary conditions
with several cuts in its required
reserve ratio for large banks. The
renminbi depreciated a little,
supporting exports. By the end of the
year, GDP growth had recovered.
Other large emerging economies
experienced notably weaker growth
in 2012. Concerns about stubborn
in?ation and government economic
reforms weighed on India’s growth.
OECD’s long-term GDP projections
Real GDP, at 2005 PPP, annual average % change
Source: OECD
1997–07
2020–30
2012–20
0 2 4 6 8 10 12
Japan
Euro zone
OECD
Brazil
US
S Africa
World
India
China
Industrial production
Trade
World trade and
industrial production
% change, latest three months on
previous three months
2012 2005
-15
-10
-5
0
5
10
Source: CPB Netherlands
Brazil’s economy was disappointingly
weak in spite of looser macro-
economic policies and currency
depreciation. Industrial unrest added
to the weakness of South Africa’s
economy late in 2012.
PROSPECTS
We expect a gradual strengthening
of economic activity in 2013. Global
GDP growth should be around 3½ %,
slightly below the longer term trend
rate, with the emerging economies
expected to lead the improvement.
China’s growth rate is likely to recover
to 8% in 2013, as export markets
stabilise and domestic demand
strengthens. India, Brazil and South
Africa should pick up in response to
improving external conditions, lower
in?ation and looser domestic policy.
The recovery will be patchier in the
advanced economies. The European
Central Bank has headed off the threat
of a euro breakdown, removing one
of the biggest downside risks. But
monetary and ?scal policy settings
will not stimulate economic growth.
The recovery in Europe looks as
though it will be painfully slow in 2013.
04 Anglo American plc Annual Report 2012
OVERVIEW MARKETPLACE
The US economy also faces a
more challenging domestic policy
environment. The recent debate
about the ‘?scal cliff’ has exposed the
absence of a credible medium term
plan to reduce the US’ federal budget
de?cit and arrest the rise in debt. In
coming years, US policymakers will
have to balance the need for signi?cant
?scal retrenchment against providing
support for economic activity in the
short term. This implies a prolonged
period of monetary accommodation
from the Federal Reserve and
sustained dollar weakness.
In the medium term, we expect the US
to return to its underlying trend growth
of around 2½ –3% a year. Europe’s
growth rate will remain more anaemic.
But economic growth should remain
more robust in the main emerging
economies. There is considerable
scope for further catch-up growth,
especially in China and India. But
China’s increasing scale implies the
new leadership must implement
reforms to rebalance growth gradually
away from investment towards
consumption. The next stage of the
country’s urbanisation will take place
in the western inland provinces, while
growth in coastal provinces should
slow modestly in the medium term.
COMMODITY
MARKETS
In an increasingly uncertain macro-
economic climate, 2012 was a year
of commodity price weakness and
heightened volatility. Average
annual prices were down for all of
Anglo American’s key commodities,
with falls ranging from 10% for copper
to 35% for hard coking coal.
Price weakness in 2012 was a
continuation of a trend that emerged
in the second half of 2011. Although
annual average prices were down
across the Group’s portfolio, a number
of commodities spent much of the year
at prices equal to or above those seen
in December 2011. In this respect there
was a marked contrast in performance
between the precious and base
metals and the bulk commodities,
with platinum and copper trading
above December 2011price levels for
much of 2012, while bulk commodity
prices weakened materially.
The platinum price increased by
8% during 2012, with higher prices
re?ecting not only the support
provided by South African supply
disruptions, but also the relatively
poor platinum pricing environment
seen in late 2011. The price moved
sharply upwards in both the ?rst and
third quarters of 2012, in response to
industrial action in South Africa, with
the resulting losses in output helping
to offset the impact of a generally
fragile demand environment, most
notably in the European auto sector.
The copper price also rose by 8%,
underpinned by stockpiling of cathodes
in Chinese bonded warehouses, which
‘sterilised’ a considerable amount of
metal. Estimated global stocks of
copper are still well below those of
other base metals and also somewhat
below ‘normal’ working levels, while
visible terminal market stocks are
also reasonably low. Investors and
speculators have therefore been
reluctant to ‘short’ the copper
market in the light of the relatively
low levels of readily available stocks,
the continued mine disruptions and
supply under performance.
In 2012, the fall in the prices of bulk
commodities, notably those used for
steel making, was signi?cant. Annual
average steel prices were down by
16% (HRC FOB Eur). However, 2012
iron ore and hard coking coal prices
were 24% and 35% lower respectively,
while molybdenum, which is also
used in steels, was down by 17%. The
slowdown in Chinese demand, which
has been magni?ed by destocking
activity, has been a principal factor in
these markets and, with the run-down
Indexed 2012 commodity prices
(1)
Dec 2011 Dec 2012 Oct 2012 Aug 2012 Feb 2012 Apr 2012 Jun 2012
P
r
i
c
e
I
n
d
e
x
,
D
e
c
e
m
b
e
r
2
0
1
1
=
1
0
0
40
70
60
50
110
100
90
80
120
140
130
(1)
Monthly average prices
Source: Anglo American Commodity Research
Iron Ore (FOB Aus)
Thermal Coal
Metallurgical Coal Nickel
Platinum
Copper
In an
increasingly
uncertain
macro-
economic
climate, 2012
was a year of
commodity
price weakness
and heightened
volatility.
of inventories having run its course and
even reversed, prices of both began
to improve from October, and, by
December, iron ore prices were back
to December 2011 levels.
Thermal coal prices also declined
markedly for most of 2012, but began
to improve during Q4 following the
closure of some US supply and an
increase in gas prices. European
prices continued to be dampened
by coal displaced by gas, while Asian
offtake has been muted. Globally,
supply cutbacks have been limited
and the near term outlook is for
continued supply additions from
Indonesia, exerting a drag effect
on any price recovery.
In 2013, the easing of macroeconomic
policy globally, renewed infrastructure
spending in China and stronger
manufacturing output should help
support commodity demand growth.
Coupled with price-induced project
deferral (constrained capex) and
supply curtailments, this should tighten
markets, thereby providing some
price support where there have been
recent lows. This expectation is
supported by the analysts’ consensus,
which forecasts 2013 average prices
above current levels for most of
Anglo American’s key commodities.
Anglo American plc Annual Report 2012 05
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WELL PLACED FOR ALL STAGES
OF THE ECONOMIC CYCLE
Anglo American’s current
portfolio is uniquely
diversi?ed, with material
exposure to commodities
that are key to the continued
early-stage industrialisation
of emerging economies,
such as metallurgical coal
and iron ore, as well as
having exposure to mid-
and late-cycle commodities,
such as copper, nickel,
platinum and diamonds.
Over the past decade, China and other emerging
economies have experienced an unprecedented
phase of industrialisation and urbanisation. In
spite of the current challenging global economic
environment, this growth is set to continue.
As the populations of the cities in these emerging
economies grow, so too do their incomes and
desire to spend.
Lower GDP/capita
METALLURGICAL
COAL
MANGANESE
IRON ORE THERMAL
COAL
INCREASE
IN GLOBAL
INFRASTRUCTURE
SPEND REQUIRED
BY 2030
60 %
600 GW
OF THERMAL COAL
POWER GENERATION
CAPACITY TO BE ADDED
BY CHINA OVER NEXT
17 YEARS
70%
OF CHINESE POPULATION
EXPECTED TO LIVE IN
URBAN AREAS BY 2030
VS. C. 50% TODAY
EARLY STAGE
Creating the building blocks of the urban environment
As economies start to develop and grow there is a need to expand
infrastructure, construct residential and commercial buildings and
build port capacity for the inevitable rise in import and export activity.
Sources:
NBS, UN, McKinsey Global Institute, FAO, NDRC, ICA, De Beers
06 Anglo American plc Annual Report 2012
OVERVIEW MARKETPLACE
Higher GDP/capita
NIOBIUM PHOSPHATES DIAMONDS
COPPER NICKEL PGMs
METRO LINES
WILL BE BUILT
IN 40 CHINESE
CITIES BY 2040,
WITH EACH KM
REQUIRING
107 TONNES
OF COPPER
FIRST-TIME
BRIDES IN CHINA
WHO RECEIVE
A DIAMOND
ENGAGEMENT
RING – A CAGR
*
OF ALMOST 24%
IN 16 YEARS
7,000 31 %
1 billion
PEOPLE WHO ARE
EXPECTED TO ENTER
THE GLOBAL ‘CONSUMING
CLASS’ BY 2025
40 Mt
OF EXPECTED FERTILISER
NUTRIENT DEMAND
GROWTH (C. 23%) OVER
THE NEXT DECADE AS
DIETS CHANGE IN
EMERGING ECONOMIES
1.7 billion
GLOBAL CAR FLEET TO
DOUBLE TO 1.7 BILLION
BY 2030
60 million
HOUSEHOLDS IN
EMERGING ECONOMIES
EXPECTED TO BE IN THE
HIGH INCOME BRACKET
(>$70,000 PA) BY 2025
MID STAGE
The rise of the consuming class
As developing economies mature, populations move to cities and
start to enjoy a higher disposable income and a more comfortable
standard of living. Households purchase ‘white goods’ and mobile
phone communication becomes widespread. Diets shift from being
grain based to being high in protein.
LATE STAGE
Aspiring to an af?uent lifestyle
As purchasing power increases, so too does the appetite for ‘luxury’
goods and services, including cars, jewellery, advanced technological
goods and travelling for leisure.
* Compound Annual Growth Rate
Anglo American plc Annual Report 2012 07
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Our exploration teams discover
ore deposits in a safe and
responsible way to replenish
the reserves that underpin our
future success.
Gaining and maintaining
our social and legal licence
to operate, through open
and honest engagement
with our stakeholders, is
critical to the sustainability
of our business.
Anglo American aims to become the leading global mining
company – the investment, the partner and the employer
of choice – through the operational excellence of world
class assets in the most attractive commodities, and
through a resolute commitment to the highest standards
of safe and sustainable mining.
As our business model illustrates, mining is only part of the story.
Our sector-leading exploration teams strive to ?nd the resources
we will mine in the future and we engage with a broad range of
stakeholders – from governments to local communities and
NGOs – to secure our right to mine those resources. Many of the
commodities we mine are processed and re?ned further before
we apply our market knowledge to deliver a quality product our
customers value.
We believe we can achieve our aim of becoming the leading
global mining company through our four strategic elements:
Investing in world class assets in those commodities that
we believe deliver the best returns through the economic
cycle and over the long term – namely, iron ore, metallurgical
coal, thermal coal, copper, nickel, platinum and diamonds.
Organising ef?ciently and effectively to outperform our
competition throughout our value chain.
Operating safely, sustainably and responsibly, in the belief
not only that this is fundamental to our licence to operate,
but also that this is an increasingly important source of
competitive advantage. The safety of our people is our key
core value and we are relentless in striving to achieve our
goal of zero harm.
Employing the best people. We recognise that attracting,
developing and retaining the best talent is essential to
achieving our ambition.
Our strategic elements are put into action across our
business model.
OUR STRATEGY AND
BUSINESS MODEL
SECURE FIND
OPERATING
The LT-SQUID has been
employed by our ?eld teams to
help search for so-called blind
deposits that have no visible
expression on the ground
surface. It has revolutionised
how we look at and model the
picture beneath the ground
surface, particularly at depth.
Go to page 41 for more
information on this story
OPERATING
Securing our licence to build
and operate a mine depends
on winning the trust of many
stakeholders. We participated
in an extensive, structured
‘dialogue table’ with local and
national stakeholders in our
Quellaveco copper project in
Peru, which helped us to reach
agreement with the local
community and regional
government to develop the
project.
Go to page 22 for more
information on this story
INVESTING
During the year, outstanding
injunctions were lifted at our
Minas-Rio iron ore project in
Brazil. Following a detailed
review, capital expenditure has
increased to $8.8 billion and
?rst ore on ship is expected at
the end of 2014.
Go to page 58 for more
information on this story
INVESTING
World class assets
in the most attractive
commodities
EMPLOYING
The best people
OPERATING
Safely,
sustainably
and
responsibly
ORGANISING
Ef?ciently
and
effectively
BECOMING
THE LEADING
MINING
COMPANY
08 Anglo American plc Annual Report 2012
OVERVIEW OUR STRATEGY AND BUSINESS MODEL
We apply more than 95 years
of opencast and deep-level
mining experience along with
unique in-house technological
expertise to extract mineral
resources in the safest, most
ef?cient way.
We generate extra value by
processing and re?ning many
of our commodities.
Whether providing innovative
haulage solutions within a
mine, or coordinating global
cargo deliveries, we offer
ef?cient and effective
transport of our commodities.
We collaborate with our
customers around the world
to tailor products to their
speci?c needs.
MINE PROCESS MOVE SELL
ORGANISING
The technical team at our
Phosphates business
proposed an innovative
solution to re-use phosphate
waste in the fertiliser
production process. The
technique was put into full-
scale production during 2012,
with 40% of phosphate waste
being re-used in the year,
resulting in lower production
costs and a signi?cant
environmental bene?t.
Go to page 87 for more
information on this story
ORGANISING
In September 2012, our
recently installed ?exible
conveyor train produced
116,708 tonnes of thermal coal
at Greenside mine, achieving
the highest monthly coal
output ever recorded outside
the US.
Go to page 36 for more
information on this story
OPERATING
Working with the aerospace
industry, Sishen developed
a unique collision avoidance
system for mining vehicles,
dramatically reducing the
number of vehicle-related
accidents at the mine.
Go to page 55 for more
information on this story
EMPLOYING
Our Nickel business is
addressing the shortage
of quali?ed people at its
operations in Brazil by tailoring
a trainee graduate programme
to develop the businesses
engineers and leaders of
the future. On successful
completion of the programme,
the trainees will be ready
to start their career at
Anglo American.
Go to page 73 for more
information on this story
INVESTING
Our Kolomela mine,
commissioned ?ve months
ahead of schedule in 2011,
produced 8.5 Mt of iron ore
in 2012, above expectations
of 4–5 Mt.
Go to page 14 for more
information on this story
ORGANISING
During 2012, we opened our
new sales and marketing hub
in Singapore, enabling us to be
closer to our customers in the
Asia-Paci?c market and be
more agile and responsive to
their needs.
Go to page 18 for more
information on this story
OPERATING
Following completion of the
Los Bronces expansion in
Chile, our Copper business
implemented a water
recirculation system to help
reduce the water requirement
in an already stretched
catchment area.
Go to page 69 for more
information on this story
Anglo American plc Annual Report 2012 09
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The new mining
operations and
expansions
delivered and
commissioned
during 2011
contributed
to production
growth and
generated
$1.2 billion
of underlying
operating pro?t.
As a result of markedly weaker
commodity prices, ongoing
cost pressures and an operating
loss in our Platinum business,
Anglo American reported an
underlying operating pro?t of
$6.2 billion, a 44% decrease.
Underlying EBITDA decreased by
35% to $8.7 billion and underlying
earnings decreased by 54% to
$2.8 billion.
Our safety performance has always
been my ?rst priority and our efforts
continue to build on the progress we
have made since 2006, both in terms
of lives lost and lost time injuries
sustained. I am deeply saddened that
13 of our colleagues lost their lives in
2012 – a constant reminder that we
must persevere to achieve zero harm.
Anglo American continued its drive
for strong operational performance
throughout 2012 in an environment
of tough macroeconomic headwinds
and a number of industry-wide
and company-speci?c challenges.
Record volumes of metallurgical coal,
achieving benchmark equipment
performance levels, and of iron ore
and increased volumes of export
thermal coal and copper helped
offset the impact of illegal industrial
action, declining grades and higher
waste stripping.
The new mining operations
and expansions delivered and
commissioned during 2011
contributed to production growth and
generated $1.2 billion of underlying
operating pro?t. The Los Bronces
expansion contributed 196,100 tonnes
of copper in 2012 and has achieved
full ramp up since August 2012, while
Kumba’s Kolomela mine exceeded
expectations by producing 8.5 million
tonnes for the year – both considerable
achievements – while we have been
slowly ramping up Barro Alto.
Beyond organic growth, we have
completed our acquisition of the
Oppenheimer family’s 40% interest
in De Beers, taking our holding to
85%. In Chile, our joint ownership of
Anglo American Sur (AA Sur) with
Codelco, Mitsubishi and Mitsui, while
we retain control of the business, ?rmly
aligns our interests in one of the most
exciting producing and prospective
copper orebodies in the world – the
Los Bronces district. During the year,
we also increased our shareholding in
CHIEF EXECUTIVE’S
STATEMENT
Cynthia Carroll
UNDERLYING OPERATING PROFIT
(2011: $11.1 bn)
$6.2 bn
FINAL DIVIDEND PER SHARE
(2011: 46 cents)
53 cents
Kumba Iron Ore, lifting our ownership
by 4.5% to 69.7%, re?ecting our view
on the quality of the business and its
highly attractive performance and
growth pro?le.
Our divestment programme has
generated proceeds as announced
of $4 billion on a debt and cash free
basis, which excludes $7.4 billion cash
generated from the sale of 49.9% of
AA Sur. In line with our divestment
programme of non-core businesses as
set out in October 2009, I am delighted
that Tarmac’s UK joint venture with
Lafarge was completed in January
2013, creating a leading UK
construction materials company
with signi?cant synergies expected.
We are focused on delivering
shareholder value and returns through
the cycle by maintaining a prudent
and disciplined approach to managing
our businesses and capital allocation.
Despite the macroeconomic
headwinds and likely sustained higher
capital and operating cost environment
for the industry, we are committed to
returning cash to shareholders and
have recommended an increase to our
?nal dividend of 15% to 53 cents per
share, bringing total dividends for the
year to 85 cents per share, a 15%
For more information
turn to page 42
10 Anglo American plc Annual Report 2012
OVERVIEW CHIEF EXECUTIVE’S STATEMENT
01
In Platinum,
we completed
our review
and have
put forward
proposals
to create a
sustainable,
competitive
and pro?table
business.
increase. This re?ects our con?dence
in the underlying business and
completes the reinstatement journey
to rebase our dividends to be
competitive with our diversi?ed peers.
We recorded impairments
totalling $4.6 billion (post-tax) in
relation to Minas-Rio and a number
of platinum projects that are
uneconomical, which is disappointing.
In Platinum, we completed our review
in January 2013 and have put forward
proposals to create a sustainable,
competitive and pro?table business.
We, of course, regret the potential
impact on jobs and communities and
have designed an extensive social plan
to more than offset any such impact. In
Brazil, Minas-Rio is a world class iron
ore project of rare magnitude and
quality, representing one of the world’s
largest undeveloped resources. The
published resource has increased
more than fourfold since acquisition,
of which we have subsequently
converted 1.45 billion tonnes to Ore
Reserves; we anticipate increases in
the resource con?dence and further
conversion of resources to reserves
through our ongoing in?ll drilling
programme. Despite the dif?culties
we have faced that have caused a
signi?cant increase in capital
expenditure, we continue to be
con?dent of the medium and long
term attractiveness and strategic
positioning of Minas-Rio and we
remain committed to the project.
The ?rst phase of the project will begin
its ramp up at the end of 2014, with
operating costs expected to be highly
competitive in the ?rst quartile of the
FOB cash cost curve, generating
signi?cant free cash ?ow for many
decades to come.
We continue to sequence investment
by prioritising capital to commodities
with the most attractive market
dynamics and projects with the lowest
execution risks. The 5 Mtpa Grosvenor
metallurgical coal project in Australia
is under way and on schedule while,
in Peru, successful completion of our
community dialogue process at the
Quellaveco copper project will allow us
to target submission to the Board for
approval in 2013.
Managing the social, economic
and environmental impacts of our
operations is essential to our success.
Our approach to sustainability is a
key differentiator for Anglo American,
is fundamental to the way we do
business and is embedded in
everything we do.
Together with the safety and
well-being of employees, our primary
sustainability issues are adapting to
climate change, securing access to
water and energy, and managing
relationships with stakeholders,
particularly communities. During 2012,
we made good progress implementing
our long term water and energy
strategies. To date, more than 70% of
our operational water requirements
are met by recycling/re-using water.
In support of our commitments to
protect and enhance the health of our
people, contractors and communities,
we are extending our industry-leading
health and wellness programmes,
which include HIV/AIDS and TB
treatment and care, to long term
contract employees in South Africa.
Looking ahead, recent months have
brought a degree of renewed optimism
to the economic prospects. While
European and Japanese economic
activity remains weak, recent policy
changes ought to stimulate growth in
2013. Alongside a continuing recovery
in the US, we expect robust growth in
the major emerging economies –
especially China and India – as they
bene?t from continuing urbanisation.
Rising living standards and an
expanding middle class should support
demand for our products across our
diversi?ed mix.
I step down from my role as chief
executive after six years knowing that
Anglo American is a safer place to
work, with a clear strategy and a much
changed culture of performance.
There is no doubt in my mind that
Anglo American’s people and asset
base are unmatched in the industry
and I wish my successor, Mark Cutifani,
every success in leading this great
company. I sincerely thank the
Board of directors, my executive
management team and all our
employees for their support and
relentless effort since 2007.
Cynthia Carroll
Chief Executive
01 At Thermal coal’s
Highveld hospital in
Mpumalanga province in
South Africa, Sister Evah
Molefe takes a sputum
sample to test for
TB from Kleinkopje
colliery plant operator
Sipho Mhlabane.
02 Cleaning copper
anodes in the tank house
at Los Bronces in Chile.
03 As part of the Board’s
visit to Minas-Rio in
October, the directors
visited the CRCA
(Cultural and
Environment Centre),
which houses specialist
information in the ?elds
of archaeology,
biodiversity and water.
04 Specialist asset strategy
engineer Sylvester
Hennessy monitoring
data at Metallurgical
Coal’s of?ces in
Brisbane, Australia.
Anglo American plc Annual Report 2012 11
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02
03
04
(1)
With the exception of corporate social investment, which includes the results of De Beers from the date of acquisition,
the results and targets for the Operating and Employing strategic elements include wholly owned subsidiaries and
joint ventures over which Anglo American has management control, and does not include De Beers or other major
non-managed operations such as Collahuasi, Cerrejón and Samancor. In addition, results for the Employing strategic
element exclude OMI – non-core operations.
(2)
2012 HIV/AIDS statistics exclude Scaw Metals South Africa.
12 Anglo American plc Annual Report 2012
OPERATING AND FINANCIAL REVIEW KEY PERFORMANCE INDICATORS
MEASUREMENT
AND TARGETS
Strategic elements KPI targets
INVESTING
In world class assets in the
most attractive commodities
Turn to page 14
Total shareholder return (TSR)
Share price growth plus dividends reinvested
over the performance period. A performance
period of three years is used and TSR is
calculated annually
Return on capital employed (ROCE)
Total underlying operating pro?t before
impairments for the year divided by the average
total capital less other investments and adjusted
for impairments
Capital projects and investment
Optimise the pipeline of projects and ensure
that new capital is only committed to projects
that deliver the best value to the Group on a risk
adjusted net present value basis
Underlying earnings per share
Underlying earnings are net pro?t attributable
to equity shareholders, before special items
and remeasurements
ORGANISING
Ef?ciently and effectively
Turn to page 18
In two vital areas of our business – asset
optimisation (AO) and supply chain – we have
beaten our own expectations. By the end of 2011,
we had exceeded our targets for both AO and
supply chain, each of which delivered more than
$1 billion from core businesses since 2009. As a
result, we no longer report against Group-wide
AO and supply chain targets
We do, however, continue to deliver on both
programmes and examples of how our operations
are achieving and surpassing ‘industry benchmark’
performance are detailed throughout this report.
Further details on the AO and supply chain
functions can be found on pages 18–21
OPERATING
(1)
Safely, sustainably
and responsibly
Turn to page 22
Work-related fatal injury
frequency rate (FIFR)
FIFR is calculated as the number of fatal
injuries to employees or contractors per
200,000 hours worked
Lost-time injury frequency rate (LTIFR)
The number of lost-time injuries (LTIs) per
200,000 hours worked. An LTI is an occupational
injury which renders the person unable to
perform his/her regular duties for one full shift
or more the day after the injury was incurred,
whether a scheduled workday or not
Energy consumption
Measured in gigajoules (GJ)
Greenhouse gas (GHG) emissions
Measured in tonnes of CO
2
equivalent emissions
Total water use
Total water use includes only water used for
primary activities, measured in million m
3
Corporate social investment
Social investment as de?ned by the London
Benchmarking Group includes donations, gifts in
kind and staff time for administering community
programmes and volunteering in company time
and is shown as a percentage of pro?t before tax
Enterprise development
Number of companies supported and number
of jobs sustained by companies supported by
Anglo American enterprise development initiatives
Voluntary HIV counselling and testing (VCT)
(2)
Percentage of employees in southern Africa
undertaking voluntary annual HIV tests with
compulsory counselling and support
EMPLOYING
(1)
The best people
Turn to page 32
Voluntary labour turnover
Number of permanent employee resignations
as a percentage of total permanent employees
Gender diversity
Percentage of women, and female managers,
employed by the Group
O
p
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t
i
n
g
a
n
d
?
n
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c
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(3)
CSI expenditure for 2011 was restated from $122 million
to $129 million due to increased expenditure reported by
Kumba following publication of the 2011 Anglo American
Annual Report.
Anglo American plc Annual Report 2012 13
Results and targets
Capital projects and investment
Total shareholder return (TSR)
2011
2012
Return on capital employed (ROCE)
13.3%
26.5%
$2.26
2011
2012
$5.06
Underlying earnings per share
2.4%
2011
2012
3.0%
Voluntary labour turnover
15% females
2011
2012
23% female managers
15% females
22% female managers
Gender diversity
82%
2011
2012
92%
Voluntary HIV counselling and testing (VCT)
Target: Over 90% of employees in high disease
burden countries
13 fatalities, 0.008 FIFR
2011
2012
17 fatalities, 0.009 FIFR
Work-related fatal injury
frequency rate (FIFR)
Target: Zero fatal incidents
108 million GJ
total energy used
2011
2012
102 million GJ
total energy used
Energy consumption
0.60
0.64
2011
2012
Lost-time injury frequency rate (LTIFR)
Target: Zero incidents – the ultimate goal
of zero harm remains
$154m,
3% of pro?t before tax
2011
2012
$129m,
1% of pro?t before tax
Corporate social investment
(3)
18 Mt CO
2
equivalent
2011
2012
19 Mt CO
2
equivalent
GHG emissions
17,598 businesses supported
2011
2012
64,927 jobs sustained
38,681 businesses supported
47,070 jobs sustained
Enterprise development
Target: Businesses supported: 3,500
Jobs sustained: 18,000
122 Mm
3
115 Mm
3
2011
2012
Total water use
Target: Under revision
For a summary of the Group’s capital
projects and investments
turn to pages 14–17
Please refer to the Remuneration report
turn to pages 108–127
14 Anglo American plc Annual Report 2012
OPERATING AND FINANCIAL REVIEW STRATEGY IN ACTION
SURPASSING
STANDARDS
WITH THE FUTURE IN MIND
STRATEGIC ELEMENT: Investing in world class assets and the most attractive commodities
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Anglo American plc Annual Report 2012 15
We have a clear strategy of deploying
capital in those commodities with
strong fundamentals and the most
attractive risk-return pro?les that deliver
long term, through-the-cycle returns
for our shareholders.
718
HOMES ARE BEING BUILT TO ACCOMMODATE
KOLOMELA’S EMPLOYEES. BY THE END OF
2012, 615 HAD BEEN COMPLETED, WITH THE
REMAINDER DUE BY Q2 2013.
“It is such occasions as today, the
opening of a new mine, the creation
of new economic activity and
jobs which makes one proud and
emphasises the importance of
mining in our country.”
Susan Shabangu
South Africa’s Minister
of Mineral Resources
EXCEEDING EXPECTATIONS
Kumba’s Kolomela mine, which was brought into
production ?ve months ahead of schedule in
December 2011, is a key element of our South
African iron ore growth strategy. Although, initially
the operation was expected to ramp up through
2012 to produce between 4 and 5 Mt of saleable
product, it surpassed expectations to achieve
design capacity by the third quarter, shipping
8.5 Mt of iron ore to customers in the year. Safety
performance at Kolomela has been outstanding;
the project and operations achieved a combined
29 million man hours, without a fatal incident
or lost-time injury between March 2010 and
October 2012, setting a new benchmark for
the Group and for projects of this nature in
South Africa.
c. 85%
OF PERMANENT EMPLOYEES
ARE FROM THE NORTHERN CAPE
PROVINCE, VERSUS A TARGET
OF 75%.
IRON ORE PRODUCTION FOR KUMBA (MT)
70 Mtpa
Kumba plans to grow organically to achieve production
of 70 Mtpa from South Africa.
2009 2010 2012 2011 Target
41.9
43.4
41.3
43.1
70.0
Main Fitter Martha
Zenda at Kolomela
iron ore plant’s
load-out station
feed conveyor. The
conveyor transfers
iron ore from the
stacker reclaimer
yard to bins
which feed the
Sishen-Saldanha
export rail system.
01 The Kumba/
Kolomela rail loading
facility is designed
to transfer iron ore
rapidly to rail wagons
on the export rail
system.
02 Maintenance
operator Mattieus
Dikwidi at the
Kolomela plant.
“Kumba is studying
opportunities to
expand Kolomela’s
production through a
bene?ciation process,
which could add a
further 6 Mtpa of production.”
Norman Mbazima
CEO, Kumba Iron Ore
63.7% Fe
AVERAGE GRADE OF
UNBENEFICIATED ORE – KOLOMELA.
02
01
The Group’s extensive portfolio
of undeveloped world class
resources and pipeline of growth
options span its chosen core
commodities. It offers the
Group ?exibility to sequence
investment in line with the Group’s
view of market dynamics and
the geopolitical environment.
Capital is prioritised to maximise
value accretion while minimising
risk exposure, taking into
consideration the Group’s
resulting funding capacity.
We have a number of projects in the
execution phase and are progressing
with the development of other growth
projects, including the 225,000 tonnes
per annum (tpa) Quellaveco green?eld
copper project in Peru.
The Minas-Rio iron ore project
in Brazil is expected to capture a
signi?cant part of the pellet feed
market with its premium product
featuring high iron content and
low contaminants. Phase 1 of the
Minas-Rio project is expected to
produce 26.5 million tonnes per
annum (Mtpa), with potential
optimisation to 29.8 Mtpa.
During the year Anglo American
completed a detailed cost and
schedule review of the project. The
review included third party input and
examined the outstanding capital
expenditure requirements in light of
current development progress and
the disruptive challenges faced by the
project. The review included a detailed
re-evaluation of all aspects of the
outstanding schedule, with a focus on
maximising value and mitigating risk.
Following completion of the review,
estimated capital expenditure for
the Minas-Rio project increased to
$8.8 billion, if a centrally held risk
contingency of $600 million
is utilised in full. On the basis of
the revised capital expenditure
requirements and assessment of the
full potential of Phase 1 of the project
(excluding at this stage the potential
for future expansions up to 90 Mtpa),
Anglo American will record an
impairment charge of $4 billion at
PROJECT DELIVERY TO
CONTINUE TO DRIVE HIGH
QUALITY PRODUCTION GROWTH
31 December 2012, on a post-tax
basis. The ?rst phase of the project will
begin its ramp up at the end of 2014.
The published resource has increased
more than fourfold since acquisition to
5.77 billion tonnes in 2011, of which we
have recently converted 1.45 billion
tonnes to Ore Reserves. We anticipate
increases in the resource con?dence
and further conversion of resources
to reserves through our ongoing in?ll
drilling programme.
In Colombia, the brown?eld expansion
project, P40, aims to increase value
by increasing export thermal coal
production capacity by 8 Mtpa to
40 Mtpa (100% basis), through
additional mining equipment and
the debottlenecking of key logistics
infrastructure along the coal chain.
The project was approved by
Cerrejón’s shareholders in the third
quarter of 2011. The project is
progressing well and is expected to
be delivered on schedule, with ?rst
coal expected in 2013.
The green?eld Grosvenor
metallurgical coal project is situated
immediately to the south of
Anglo American’s Moranbah North
metallurgical coal mine in the Bowen
Basin of Queensland, Australia. The
mine is expected to produce 5 Mtpa
of high quality metallurgical coal from
its underground longwall operation
over a projected life of 26 years and
to bene?t from operating costs in the
lower half of the cost curve.
Grosvenor forms a major part of the
Group’s strategy of tripling hard coking
coal production from its Australian
assets, using a standard longwall and
coal handling and preparation plant
(CHPP) design. In its ?rst phase of
development, Grosvenor will consist
of a single new underground longwall
mine, targeting the same well
understood Goonyella Middle coal
seam as Moranbah North, and will
process its coal through the existing
Moranbah North CHPP and train
loading facilities. The Grosvenor
project is currently in execution, with
engineering work progressing to plan,
construction under way and longwall
The Group’s
extensive
portfolio of
undeveloped
world class
resources
and pipeline
of growth
opportunities
spans our
chosen core
commodities.
16 Anglo American plc Annual Report 2012
OPERATING AND FINANCIAL REVIEW STRATEGY IN ACTION
IN BRIEF
•Cerrejón P40 8 Mtpa export
thermal coal expansion in
Colombia – ?rst coal in 2013.
•Minas-Rio 26.5 Mtpa iron ore
project in Brazil – injunctions
lifted and ?rst ore on ship
(FOOS) end of 2014.
•Grosvenor 5 Mtpa
metallurgical coal project
in Australia – longwall
production in 2016.
STRATEGIC ELEMENT: Investing in world class assets and the most attractive commodities
2011
2012
2010
CAPEX: 4 strategic
growth projects
$ bn
1.7
2.4
2.3
2011
2012
2010
CAPEX: Other projects
$ bn
1.3
1.0
1.0
2011
2012
2010
CAPEX: Stay in business
$ bn
2.7
2.4
1.7
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production targeted to begin in 2016.
A pre-feasibility study for expansion
by adding a second longwall at
Grosvenor is under way.
Quellaveco is a green?eld copper
project in the Moquegua region of
southern Peru that has the potential
to produce 225,000 tpa of copper
from an open pit over a mine life of
approximately 28 years. The project
is expected to operate in the lower
half of the cash operating cost curve,
bene?ting from attractive ore
grades, low waste stripping and
molybdenum by-product production.
Anglo American completed the
feasibility study for the project in late
2010, and took the decision to suspend
progress in order to engage more
actively with the local communities
through a formal dialogue table
process, following requests from local
stakeholders. The dialogue process
reached agreement in early July
2012 in relation to water usage,
environmental responsibility and
Anglo American’s social contribution
over the life of the mine, and has been
held as a model for stakeholder
engagement in Peru. The project
received three critical permits during
the fourth quarter of 2012 and
Anglo American is targeting
submission to the Board for approval
in 2013.
Anglo American plc Annual Report 2012 17
SELECTED MAJOR PROJECTS
Approved
Sector Project Country
Green?eld (G)/
Brown?eld (B)
First
production
date
Full
production
date Capex $ bn
(1)
Production volume
(2)
Iron Ore and Manganese Minas-Rio Phase 1 Brazil G 2014 2016 8.8
(3)
26.5 Mtpa iron ore
Groote Eylandt Expansion Project Australia B 2013 2013