Anglo American: UBS European Conference


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Chief Executive Cynthia Carroll presented at the UBS European Conference in London.

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Anglo American: UBS European Conference

  1. 1. UBS EUROPEAN CONFERENCECynthia Carroll, Chief Executive15 November 2011
  2. 2. CAUTIONARY STATEMENTDisclaimer: This presentation has been prepared by Anglo American plc (“Anglo American”) and comprises the written materials/slides for a presentation concerning AngloAmerican. By attending this presentation and/or reviewing the slides you agree to be bound by the following conditions.This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Anglo American. Further, it does not constitutea recommendation by Anglo American or any other party to sell or buy shares in Anglo American or any other securities. All written or oral forward-looking statements attributable toAnglo American or persons acting on their behalf are qualified in their entirety by these cautionary statements.Forward-Looking StatementsThis presentation includes forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, thoseregarding Anglo American’s financial position, business and acquisition strategy, plans and objectives of management for future operations (including development plans andobjectives relating to Anglo American’s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involveknown and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Anglo American, or industry results, to be materiallydifferent from any future results, performance or achievements expressed or implied by such forward-looking statements.Such forward-looking statements are based on numerous assumptions regarding Anglo American’s present and future business strategies and the environment in which AngloAmerican will operate in the future. Important factors that could cause Anglo American’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of global demand and commodity market prices, mineral resource exploration anddevelopment capabilities, recovery rates and other operational capabilities, the availability of mining and processing equipment, the ability to produce and transport productsprofitably, the impact of foreign currency exchange rates on market prices and operating costs, the availability of sufficient credit, the effects of inflation, political uncertainty andeconomic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or safety, health, environmental orother types of regulation in the countries where Anglo American operates, conflicts over land and resource ownership rights and such other risk factors identified in Anglo American’smost recent Annual Report. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-lookingstatements. These forward-looking statements speak only as of the date of this presentation. Anglo American expressly disclaims any obligation or undertaking (except as requiredby applicable law, the City Code on Takeovers and Mergers (the “Takeover Code”), the UK Listing Rules, the Disclosure and Transparency Rules of the Financial Services Authority,the Listings Requirements of the securities exchange of the JSE Limited in South Africa, the SWX Swiss Exchange, the Botswana Stock Exchange and the Namibian StockExchange and any other applicable regulations) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in AngloAmerican’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.Nothing in this presentation should be interpreted to mean that future earnings per share of Anglo American will necessarily match or exceed its historical published earnings pershare.Certain statistical and other information about Anglo American included in this presentation is sourced from publicly available third party sources. As such it presents the views ofthose third parties, but may not necessarily correspond to the views held by Anglo American.No Investment AdviceThis presentation has been prepared without reference to your particular investment objectives, financial situation, taxation position and particular needs. It is important that you viewthis presentation in its entirety. If you are in any doubt in relation to these matters, you should consult your stockbroker, bank manager, solicitor, accountant, taxation adviser or otherindependent financial adviser (where applicable, as authorised under the Financial Services and Markets Act 2000 in the UK, or in South Africa, under the Financial Advisory andIntermediary Services Act 37 of 2002.). 2
  3. 3. HIGHLIGHTS • 1 A consistent strategy and simplified organisation delivering results 2 Long term fundamentals remain robust. Anglo American is uniquely positioned to benefit with a strong exposure to the late cycle development of the emerging economies • 3 Delivering shareholders value through recent acquisition and disposal transactions 4 Well placed to deliver future growth through material organic growth pipeline 3
  4. 4. A CONSISTENT STRATEGY AND SIMPLIFIEDORGANISATION DELIVERING RESULTS Well diversified portfolio(1) Improving productivity performance(3) Diamonds Iron Ore 150 & Manganese Copper 11% 140 26% 130 Kumba Platinum 23% 120 110 Met Coal 11% Platinum Met Coal 100 2% Nickel 11% 90 16% Thermal Coal 80 Copper 2008 2009 2010 Q1 Q2 11 11 Structurally attractive commodities(2) Delivering commodity positions in China’s share of global consumption 2010 (%) lower half of cost curves(4) 0% 20% 40% 60% 80% 100% Met Coal 62% 2008 Iron Ore 54% Export Iron Ore 2011 Steel 41% Export Hard 2008 Coking Coal 2011 Copper 38% 2008 Nickel 33% Copper 2011 Platinum 25% Nickel(5) 2011 Palladium 21% Thermal Coal 2009 11% Platinum 2011 Imports (1) Core revenue split (2) Source: AME, Brook Hunt - a Wood Mackenzie company, Johnson Matthey. Thermal Coal represents share of internationally traded market, nickel and copper represent share of world mined production (3) Productivity based on material moved, mined or processed per operational headcount, excluding projects. Kumba refers to 4 Sishen only (4) Source: AME, Brook Hunt - a Wood Mackenzie company, Anglo American Platinum. Represents % of attributable production in lower half of the cost curve (5) In 2008 all Nickel operations in H2
  5. 5. LONG TERM DEMAND GROWTH REMAINS HEALTHY Chinese Regional Urbanisation(1) 2009 China’s expected growth 2010 to 2018 Heilongjiang Truck output 100% Jilin Inner Mongolia Liaoning Xinjiang Huang River Beijing Car output 85% Tianjin Hebei Shanxi Qinghai Shandong Ningxia Gansu Jiangsu Urban floor space 84% Shaanxi Henan Anhui Tibet Shanghai Hubei Chongqing Sichuan Zhejiang Yangtze River Hunan Jiangxi Steel for ship building 82% Guizhou Fujian Xun River Yunnan Guangdong Guangxi Macau Hong Kong Expressways (Km) 78% >80% 70%-80% Hainan 60%-70% 50-60% <50%(1) The analysis excludes Taiwan. Source: NBS, CEIC, Anglo American Analysis 5
  6. 6. UNIQUE EXPOSURE TO THE LATE CYCLEDEVELOPMENT OF EMERGING ECONOMIES2010 portfolio composition5 China’s share of global demand 60% Nickel Anglo Copper American 50% Finished BHP Steel 40% Light duty vehicles Rio Tinto 30% 20% Vale Polished diamonds 10% Xstrata 0% 0% 20% 40% 60% 80% 100% 2000 2005 2010 2015 2020 Investment¹ Consumption² Late cycle³ Other4Source: Company informationNotes:1 Includes iron ore, met coal, thermal coal, manganese2 Includes aluminium, copper, nickel, zinc3 Includes petroleum, platinum, diamonds4 Includes other mining & industrial (Anglo American), Other (Rio Tinto), fertilisers & logistics (Vale), Other (Xstrata)5 Based on 2010 EBITDA contribution (operating profit in the case of Vale). Anglo American is based on pro-forma full consolidation of De Beers 2010 EBITDA. 6
  7. 7. SUPPLY CONSISTENTLY UNDER DELIVERS Infrastructure project delays Copper industry grade declines, Copper mine a long term downward trend underperformance ‘04 – ‘11e 3 1.7 9.0 1.6 8.0 2 2 ? 2010 1.5 7.0 2 planned Copper grade Cu % 6.0 1.4 5.0Years 1.3 4.0 1 1.2 1 3.0 1.1 2.0 1.0 1.0 0 0.9 0.0 DBCT 7X Northern RBCT Oakajee 1990 2000 2010 2020 2004 2005 2006 2007 2008 2009 2010 2011 Missing Port & Link Rail Pit Walls Strikes Technical Ramp-up Weather Grades Other Source: Anglo American, Brook Hunt - a Wood Mackenzie Company 7
  8. 8. FUTURE SUPPLY WILL BE IMPACTEDBY INCREASING CAPITAL INTENSITY$ per t/yr Cu 25,000 Conc Producers SxEw Annual Prod Scale kt/yr Cu 20,000 Projects Under Construction Projects Probable 15,000 10,000, 30 5,000 15 5 0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025Source: Brook Hunt – Wood Mackenzie 8
  9. 9. DE BEERS’ TRANSACTION SUMMARY  Anglo American would increase its shareholding in De Beers from 45% to 85% for a total cash Consideration consideration of US$5.1 billion assuming the Government of the Republic of Botswana (GRB) does not exercise pre-emptive rights  Recently renewed 10-year sales agreement  Under shareholders agreement GRB has a pre-emption right enabling it to participate in the sales GRB process and to increase its interest in De Beers pro-rata up to 25%  In the event of the GRB exercising its pre-emption right in full Anglo American would acquire 75% of De Beers and the consideration payable would be reduced proportionately  Transaction expected to be accretive to underlying earnings before depreciation and amortisation Financial implications on fair value adjustments in the year of acquisition1  Transaction remains subject to shareholder as well as customary regulatory and other approvals Closing conditions – shareholder vote expected in January 2012 – closing expected in the H2 2012Note:1 See note 9 to the Condensed financial statements for basis of calculation of underlying earnings 9
  10. 10. LARGE SCALE, HIGHER MARGIN ASSETSLarge scale1 Higher margin assetsAccess to significant reserve base and sustainable 70% of De Beers production is located on the lower half ofproduction / competitive growth position the cost curve 2.5 Hope Alrosa 2.0 Rio Tinto 1.5 Cost/revenue (x) Snap lake Namdeb operations Petra Gahcho Kue (project) 1.0 Damtshaa BHP Billiton Orapa Venetia Jwaneng 0.5 Gem Harry Winston 0.0 0 12,000 2,000 4,000 6,000 8,000 10,000 14,000 16,000Source: De Beers, Company reports and announcements Cumulative revenue (US$m)Note: Source: De Beers (2010)1 Inclusive of reserves and resources 10
  11. 11. HIGHLY ATTRACTIVE INDUSTRY FUNDAMENTALS Key suppliers (by value)1 Demand growth driven by emerging economies2 7% CAGR 100% Others4, 25% De Beers, 36% 80% Emerging economies 60%Zimbabwe, 3% 36% Petra, 1% Gem, 1% 40%Harry Winston, 2% Rio Tinto, 4% Developed BHP Billiton, 4% economies 20% 43% Catoca, 6% Alrosa3, 18% 0% 2005 2010 2015 USA Japan India China HK, Taiw an Gulf ROW  Demand growth led by emerging economies  Emerging economies are expected to account for c.36% by 2015, which is approximately the size of US Source: De Beers Notes: 1 Share of estimated total production (US$) by main producers 2 Share of diamond demand at Polished Wholesale Prices (PWP); 2010 are preliminary numbers 3 Alrosa figures exclude company’s share in Catoca production 4 Artisanal, junior and informal producers 11
  12. 12. STRONG LONG TERM FUNDAMENTALS BASEDON STRUCTURAL SUPPLY DEFICITMajor diamond discoveries1 Emerging supply demand gap2 New production unable to keep pace with 125 growing demand Siberia 1960’s Orapa 100 1971 Jwaneng Expected demand 1982 (nominal pipeline call) PWP (polished wholesale price) 75(US$bn) . Supply 50 (at constant prices) Catoca 1957 International South Africa 1999 Argyle 25 early 1900’s Ekati 1983 1998 Dlavik 2003 Victor 2008 0 14 1870 1906 1940 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: Anglo American; De Beers exploration data; as estimated from company reports Note: 1 Year on top of bars are the date mining began 2 Indicative supply demand view based on current assumptions 12
  13. 13. DISPOSAL OF 24.5% ANGLO AMERICAN SUR FOR $5.39 BILLION • Sale of Anglo American Sur (AAS) demonstrates commitment to delivering value for our shareholders • 24.5% disposal of AAS to Mitsubishi Corporation for $5.39 billion, valuing AAS at US$22 billion • Sale completed on 9 November 2011 • Transaction is fully compliant with the provisions of the option agreement between Anglo American, certain of its affiliates and Codelco, which expressly contemplates the eventuality of Anglo American disposing of its AAS shares at any time prior to the date on which the option may be exercised and therefore no longer holding 100% of the shares in AAS Broker 2011 EBITDA Estimates Recent Transactions 12 2,000 Equinox 10 / Lundin Transaction EV/ EBITDA multiple of 17.6x (1) 1,600 9.6x EV/ EBITDA multiple 8 Invecture / 1,200 7.5xUS$’000 6 Frontera 800 5.5x 4 400 2 0 0 High Low Median High Low Median (1) Calculated based on implied transaction EV of $23 billion (including $0.9 billion debt) and 2011 EBITDA median broker consensus. 13
  14. 14. MATERIAL ORGANIC GROWTH IN THE SHORT ANDLONG TERM 220 >100% 200 180Indexed production growth (2010 = 100) >65% 160 >35% 140 120 Continuing to 100 Nickel Existing invest in Future growth Copper operations Near term exploration options 80 & approved approvals and projects restocking the PGM pipeline 60 40 Met Coal 20 Thermal Coal Iron Ore 0 2010 2014 Medium term Future options growth Indexed production growth charts exclude Diamonds, Manganese, niobium and phosphates as at 29 July 2011. 14
  15. 15. DELIVERING VALUE FROM A CONSISTENT STRATEGY• Consistent strategy and simple organisational Operational improvements realised across businesses structure delivering results Indexed productivity(2) (2008 = 100) 150 Copper – Comprehensive improvements undertaken 140 over the last three years 130 Kumba 120 – Delivering on key near-term growth projects, 110 Met coal major volume growth is under way Platinum 100 – Operations moving down the cost curve 90 80• Longer term fundamentals remain unchanged 2008 2009 2010 Q1 11 Q2 11• Supply challenges and increasing capital Material growth in the short and long term intensity underpinned longer term Indexed production growth (2010 = 100) >100% fundamentals 220 200 180 >65%• Unique exposure to late cycle development of 160 >35% 140 emerging economies 120 Existing Near term Future operations 100 & approved approvals growth• Delivering shareholders value through 80 60 projects ($16bn) options acquisition and divestment transactions 40 20• Well placed to deliver material future growth 0 2010 2014 Medium term Future options growth (1) 100% basis (2) Productivity based on material moved, mined or processed per operational headcount, excluding projects. Kumba refers to Sishen only 15
  17. 17. STRONG DOWNSTREAM EXPERTISE AND TRACKRECORD IN CREATING DEMAND WILL UNLOCKFURTHER VALUEDe Beers has a track record of creating demand for diamonds in different countries% of first time brides who receive a diamond only engagement ringUSA … … Japan … … and now China 50 years 30 years 16 years CAGR: 4.2% CAGR: 9.5% CAGR: 23.9% Peak Peak(%) (%) (%) 80% 77% ? 31% 10% 5% 1940 1990 1965 1995 1994 2010 Peak year 1Source: De Beers 17
  18. 18. MOVING TO INDUSTRY LEADING COST POSITIONS Export Hard Copper Nickel Platinum Export Iron Ore Coking Coal100%80% 2nd half cost60% curve40% 1st half20% cost curve 0% 2008 2015 2008 2015 2009 2015 2008 2015 2008 2015 Anglo American Platinum cost curve based on internal estimates; all other data sourced from 3rd party data providers. Source: AME, Brook Hunt - a Wood Mackenzie company, Anglo American Platinum 18