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Angloamerican 2015
The document provides an agenda and overview for Mitsubishi analysts visiting Anglo American's Los Bronces copper mine in Chile. It summarizes Anglo American's copper business strategy, with a focus on operational and financial performance improvements at Los Bronces since 2012. Los Bronces is one of the largest copper mines in the world, with over 8 billion tonnes of reserves and resources, and the presentation highlights its world-class operating metrics and significant long-term potential.
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Angloamerican 2015
- 1. ANGLO AMERICAN COPPER MITSUBISHIANALYSTS VISIT 9 – 10 March 2015 Los Bronces mine
- 2. 2 AGENDA Our strategy HennieFaul CEO 3 Overview of the Copper business, Performance and Outlook Craig Fish CFO 9 Focus on Los Bronces Juan Carlos Roman VP – Operations Sur 16 Quellaveco Hennie Faul CEO 24 Key risks and Sustainability issues Hennie Faul CEO 26 Summary and Outlook Hennie Faul CEO 29
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- 4. 4 THE DIVERSIFIED MINER Ourstrategy and its component parts WE ARE ANGLO AMERICAN HOW WE WORK TOGETHER OUR WORLD OUR AMBITION HOW WE DELIVER The Diversified Miner that takes a values-based approach to business by together, creating sustainable value that makes a real difference to become partners in the future Responding to a changing world in which: • Mining remains important, but demand growth and prices are normalising • Anglo American has not delivered on its potential • A business turn-around is needed alongside long-term continuous improvement and profitable growth Double our 2014 operating profit by 2020 by: • Focusing on core mining assets with long-term value creation • Maintaining a highly competitive mind-set, with innovation and delivery at the forefront • Developing critical core skills to improve our returns Four strategic imperatives: • Deliver Driving Value • Focus the portfolio • Develop core business processes • Create a high performance culture Measure progress through a holistic Business Scorecard The right people in the right roles doing the right work (organisation model) and our structured approach for how we set targets, plan, execute and improve work (operating model)
- 5. 5 STRATEGY Our approach tobuilding performance is simple…and continuous… …establish stability…build a foundation for capability…realise potential. Value Time STABILITY CAPABILITY Realise Potential • Operations • Markets • People • Brownfield options • Debottleneck • Operating Model • Resource potential • Priority capital options • FutureSmartTM innovation 2013 2016 Build Capability Establish Stability
- 6. 6 PORTFOLIO AND RESOURCEOPTIONALITY We have focused on “Priority 1” opportunities to reshape the portfolio… …and we are prioritising our opportunity pipeline. Los Bronces Collahuasi Quellaveco Priority growth options • Los Bronces District • Quellaveco • Collahuasi further expansion Portfolio optimisation • Mantos Blancos/Mantoverde – Sale process to commence in H1 2015 • El Soldado/Chagres – in consultation with key stakeholders
- 7. 7 A STEP CHANGEIN SUSTAINABILITY PERFORMANCE Our ambition is spread across three time horizons… We aim to… …reset global conversations. 20162030+ 2030 Do No Harm Provide safe and healthy workplaces Respect the rights of local stakeholders Honour our licensing commitments Net positive impact… Change in mining approach to achieve community support Shared Purpose Employees are moved to realise our vision Relationships with business and social partners Delivering on all of our commitments Flourishing Ecosystems… Competitive companies, communities and countries all win together Clean, effective and efficient mines. From “extractive industry” to development partnerSupport employee wellbeing Employ leading designs and technology Work with others to reshape perception of mining To be a valued part of society Have a net positive impact on local communities …as we believe this work is “Mission Critical" in our industry. Integrated into operating model Environmental and social responsibility
- 8. 8 KEY CHALLENGES In lookingforward the key challenges are… …managing short-term priorities; delivering long-term value potential. • External environment – Prices reverting to marginal costs more quickly than expected …places focus on asset quality. • Operating performance – Continuing positive performance improvements …accelerating the pace of the operating model roll-out. • Capital management – Cash flow and balance sheet pressure …intense focus on capital discipline is key. • Restructuring – Refocusing the portfolio …to dedicate time and capital to priority assets.
- 9. OVERVIEW OF THE COPPERBUSINESS, PERFORMANCE AND OUTLOOK
- 10. 10 OUR COPPER ASSETS Quellavecoproject AA ownership: 81.9% Los Bronces AA ownership: 50.1% 2014 Cu production: 405kt Mantos Blancos AA ownership: 100% 2014 Cu production: 52kt Chagres (smelter) AA ownership: 50.1% 2014 anode production: 128kt Collahuasi AA ownership: 44% 2014 Cu production (44%): 207kt El Soldado AA ownership: 50.1% 2014 Cu production: 32kt Mantoverde AA ownership: 100% 2014 Cu production: 52kt 1 2 5 6 3 Q 4 Q
- 11. 11 COPPER RESULTS SUMMARY Copperturnaround since 2012… …has delivered excellent results. Los Bronces material mined turnaround (Mt)Driving value delivering results Production (kt)US$ million FY2012 FY2013 FY 2014 Revenue 5,122 5,392 4,827 EBITDA 2,288 2,402 1,902 EBIT 1,736 1,739 1,193 Underlying earnings 941 803 493 Capex – SIB(1)(2) 854 695 572 Capex – Growth(2) 360 264 156 Attributable ROCE 29% 25% 18% Realised price (c/lb) 364 326 300 C1 unit cash cost(3) (c/lb) 171 162 169 • Primary focus is first on stabilising, then optimising the operations • Los Bronces has stabilised the mine and plant, having caught up on waste backlogs from previous years. 2016 Asset Review targets already met, including: • Record material mined in 2014 of 145Mt vs. 129Mt in 2012 • Continuous ore feed from mine to plant, increasing plant throughput • Greater residence time in flotation plant leading to higher recoveries • Collahuasi mine has been stabilised, with the focus now shifting to the plant 0 50 100 150 200 20142012 2013 -12% -26% +6% Actual Plan (1) SIB includes development and stripping capex (2) Capital expenditure on PPE, net of proceeds from disposal of PPE and net of capital expenditure funded directly by non-controlling interests on a cash basis (3) Unit costs presented on a nominal basis 660 2015 720-750 2014 775 2012 748 2013 2016 Other 710-740 2017 AA Sur 720-750
- 12. 12 STRATEGY IN ACTION– LOS BRONCES CASE STUDY The business turnaround since 2012 has established stability in 2014… Value 2012 20152013 2014 2020+ Realise Potential Build Capability Establish Stability • Under-delivered on budgets • Waste backlog; development behind plan • Plant processing constraints • Strong focus on compliance to mine plan • Waste backlog caught up • Pit flexibility reinstated • Improve ore flow continuity; Debottleneck plants and increase total throughput • Implementation of Anglo American Operating Model • Optimise Contractor Services & Productivity • Operational efficiencies • Mitigate long term decline in ore grades • Massive resource endowment • Development of Los Bronces Underground project We transformed Los Bronces from this in 2010… …as we move to building capability and efficiency in 2015. To this in 2014…
- 13. 13 LOS BRONCES OPERATIONALPERFORMANCE Performance at the Los Bronces mine and plants has significantly improved… …waste stripping is now back on schedule and mine flexibility has been reinstated. 129 128 145 67% 78% 91% 201420132012 88% 92% 94% Mine compliance to planMaterial mined (Mt) 201420132012201420132012 Confluencia plant feed (ktpd) 27-09-201431-07-201428-05-201425-03-201420-01-201417-11-201314-09-201312-07-201309-05-201306-03-201301-01-2013 140 120 100 80 60 40 20 0 ktpd _ X=87,7 _ X=91,0 _ X=91,3 _ X=87,6 _ X=88,7 _ X=9 2013 Q 1 2013 Q 2 2013 Q 3 2013 Q 4 2014 Q 1 2014 Q 2 2014 Q 3 1 1 11 1 1 1 1 11 1111 1 1 11 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 1111 1 1 1 1 1 1 1 1 Control Chart: CF Plant Throughput (ktpd)Confluencia Plant Feed (ktpd) Summer Winter WinterSummer Major maintenance 27-09-201431-07-201428-05-201425-03-201420-01-201417-11-201314-09-201312-07-201309-05-201306-03-201301-01-2013 700 600 500 400 300 200 100 0 Control Chart: LB Mine Rock Extraction (ktpd) Summer Winter WinterSummer ktpd 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 11 1 1 1 1 1 1 1 1 1 1 1 1 11 1 11 1 1 1 1 1 1 1 1 1 1 1 Confluencia plant operating time (%) Mine extraction (ktpd) Establish Stability
- 14. 14 COMMODITY PRICES The near-termpressure induced by lower Copper prices… …gives further impetus to our imperative to optimise for the long-term. Indexed commodity price (1st Jan 2014 = 1) 1.2 1.1 0.7 1.0 0.9 0.8 0.6 0.5 0.4 31 Dec 1401 Oct 1401 Jul 1401 Apr 1401 Jan 14 Thermal Coal (-16%) Iron Ore (-47%) Met Coal (-16%) Platinum (basket) (-2%) Copper (-23%)
- 15. 15 • Sale ofsmaller-scale copper assets • Capital redeployed into Priority 1 asset developments RESPONSE TO WEAKENING MACRO ENVIRONMENT Our portfolio, operating and capital management strategies… …are contributing to the delivery of a more competitive business. Operating Model Capital Management Managing Margins The Portfolio • Operating model focuses improving labour productivity and waste cost • Reducing overhead and indirect costs improve cost base • Supply focus on strategic buyers reduces major OEM costs • Operating model improvements supports reduced capital spending • Improved planning requires less capital in mine developed inventory • Lower return projects are being deferred for re-work • Projects outside scope on marginal assets are cut • Mining process changes improve asset capability • Planning supports consistent delivery • Stability improves product recoveries • Technical focus on core business processes supports capability delivery
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- 17. 17 • Location: TheCordillera of the Andes, 3,500m above sea level and 65km east of Santiago • Type: Open pit mine with 2 processing plants, plus Las Tórtolas flotation plant Copper concentrate and Cathodes production, plus molybdenum and other by-products • Production 2014: 404.5kt fine copper • Employees: c.6,000 (own employees and contractors) • Ownership %: 50.1% Anglo American 20.4% Mitsubishi Corporation 20.0% Codelco 9.5% Mitsui SUMMARY One of the world´s largest copper mines… Details of the Reserve and Resource estimates appear in the Anglo American Annual Report - 31 December 2013. Mineral Resources are additional to the Ore Reserves. …with significant further potential. LB Reserves and Resources (2013) Tonnes (Mt) Grade (%TCu) Contained Metal (kt) Sulphide (flotation) Proved 721.4 0.69 4,977 Probable 724.1 0.53 3,838 Total Ore Reserves 1,445.4 0.61 8,815 Measured & Indicated 1,211.1 0.40 4,860 Total Inferred 3,576.9 0.37 13,101 Sulphide (dump leach) Proved 439.1 0.32 1,405 Probable 158.5 0.29 460 Total Ore Reserves 597.6 0.31 1,865 Total Inferred 175.0 0.28 490 Los Sulfatos Inferred 1,200.0 1.46 17,520 San Enrique Monolito Inferred 900.0 0.81 7,290
- 18. 18 RECENT HISTORY Is punctuatedby a series of quantum capacity expansions… …most recently with the Confluencia plant (LBDP) coming online in 2011.
- 19. 19 LOS BRONCES PERFORMANCEVS. PEERS Benchmarking Confluencia´s Sag Mill 40´… …shows its class-leading performance vs. peers. Note: Data shown as at H1 2014 unless stated otherwise; data based on encare Survey – Chile and Peru major private miners 71 47 86 79 encare benchmark 2013 Mine BMine ALos Bronces Total Los Bronces productivity (2013; cu t/person) Mine B 2.3 Mine A 1.9 Confluencia 0.6 Mean time to repair (hr) encare benchmark 2013 94.7% Mine B 92.7% Mine A 87.9% Confluencia 96.3% Availability (%) 90.7% Mine BMine A 86.1% Confluencia 93.8% Operating time (%)
- 20. 20 IMPLEMENTATION OF ANGLOAMERICAN OPERATING MODEL Anglo American Operating Model to be rolled out in 2015 at Los Bronces, going live in December Build Capability Project Set-up Project scope and schedule is agreed and signed-off and the project is set-up to ensure that it is adequately planned and resourced. Detailed Training Los Bronces Implementation team and support teams undergo training required to ensure successful implementation. Configure Workshop LB Senior management and implementation teams configure all flowsheets and assign responsibilities. Gap Analysis Social, technical, resources, metrics and measurement assessments . Critical Issue Resolution All barriers identified in gap analyses need to be addressed. Site Readiness The site is configured to new systems, roles and procedures. Role Holder Training Supervisors and operators undergo training required to ensure successful implementation. GO LIVE Date from which measurement of compliance will start. Stabilize Coaching, continued measurement, resolution of new items. 1 2 3 4 5 6 7 8 9 2014 2015 2016 2017 2018 Los Bronces
- 21. 21 LOS BRONCES ISA WORLD-CLASS ASSET With over 8BT of mineral reserves and resources, 65km from Chile’s capital Los Bronces Los Bronces Sur Los Sulfatos
- 22. 22 RESERVES AND RESOURCES LosBronces is one of the largest copper deposits in the world… ...and is well positioned for the future vs. its peers. Source: R&R database of Woodmac based on 2013 publicly available information. (1) Includes only inferred resources (1.2BT@1.46%) Details of the Reserve and Resource estimates appear in the Anglo American Annual Report - 31 December 2013. Due to the uncertainty associated with some Inferred resources it cannot be assumed that all or part of the Inferred Mineral Resources will necessarily be upgraded to Indicated or Measured Resources with continued exploration. Realise Potential Pebble Cobre Panama Cerro Colorado (Pn) Radomiro Tomic Phll Quebrada Blanca Mill Toromocho Quellaveco Golpu Sierra Gorda Relincho Kerr Sulphurets Mitchell Agua Rica Panantza Sentinel Namosi Michiquillay Caserones Haquira Canariaco Norte Galeno El Morro Galore Creek Rosemont Shaft Creek Cristalino Los sulfatos Ore body(1) 0.00 0.50 1.00 1.50 2.00 0 6,000 12,000 18,000 Oyu Tolgoi Contained Copper KT Cu(%)Grade Mill Reserves Base Case in Construction In Production, Reserves (Sources: Rio Tinto Chartbook September 2014) • High potential to expand capacity Top-20 copper project deposits by contained copper in Mill Reserves (Highly probable, possible, probable) Inferred Resources Project
- 23. 23 LOS BRONCES DISTRICT Significantresources to sustain production with expansion potential… …with studies being advanced for execution post-2020. • Main development focus is on the Los Sulfatos orebody, which is one of the largest untapped high-grade deposits in the world − Principally replacement ore for the current mine plan, to maintain copper production as grades decline − Initial studies indicate high grade underground mining possible − 8km exploration tunnel completed in 2012 to provide access − 15,000m of exploration drilling planned for 2015 and 84,000m by 2019 • A number of other options in the district show promising results - 5 10 15 20 Reserves Measured & Ind. Inferred San Enrique Monolito Inf. Los Sulfatos Inf. 0.61% 0.40% 0.37% 1.46% 0.81% Cu grade (flotation) ContainedCu(Mt,flotation) Los Bronces Los Sulfatos San Enrique MonolitoExploration tunnel Realise Potential Details of the Reserve and Resource estimates appear in the Anglo American Annual Report - 31 December 2013. Due to the uncertainty associated with some Inferred resources it cannot be assumed that all or part of the Inferred Mineral Resources will necessarily be upgraded to Indicated or Measured Resources with continued exploration.
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- 25. 25 QUELLAVECO PROJECT A significantorebody with attractive grades… …Quellaveco complements our quality re-shaped copper portfolio. Source: Wood Mackenzie 2020 cost curve data and Anglo American actual data. Quellaveco C1 cost averaged over the first six years of production Details of the Reserve and Resource estimates appear in the Anglo American Annual Report - 31 December 2013. • Located in southern Peru, at >3,500 metres in an established mining district - strong social/political support • An attractive cost curve position with CuEq grades over 0.90% in initial years • Reserves of 916Mt at 0.65% Cu, 0.019% Mo plus Ag and a 28 year LOM with production of ~220ktpa (~315ktpa in initial years) • Construction early works commenced in 2012 and the Feasibility Study is on schedule for completion in 2015 • Construction would result in a copper portfolio consisting of three major mines in the lower half of the cost curve • Given the magnitude of the project, Anglo American will look to syndicate the capital exposure Cost curve positioning (2020) Quellaveco cross section 0.01% 0.2% 0.3% 0.4% 0.6% > 1.0% GRADE -50 - 50 100 150 200 250 300 350 400 0% 25% 50% 75% 100% Quellaveco Collahuasi Los Bronces
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- 27. 27 • We willlead the industry in resource development, mining and operational innovation to drive margins that support the delivery of exceptional returns from our assets. • Our employees ‘are’ the business and we partner with our customers and our broader stakeholders across society to together, deliver sustainable value that makes a real difference. • Key risks to achieve sustainable value for Copper: – Environment (legislation and regulation reform) – Water (water security and extreme weather) – People (labour reforms and negotiations) APPROACH TO SUSTAINABILITY Together, we create sustainable value that makes a real difference …but recognise we have some key risks to address along the way. Pillars of Value KPI Safety and Health FIFR(1) NCOD(1) TRCFR(1) Environment Energy consumption GHG(2) emissions Total new water consumed Socio-political Corp. social investment Enterprise development People Voluntary labour t/o Gender diversity Production Production volume Cost C1 unit cash cost of production Financial Attributable ROCE (1) FIFR: Work-related fatal injury frequency rate; NCOD: New cases of occupational disease; TRCFR: Total recordable case frequency rate. Managed operations only (2) GHG: Greenhouse gas
- 28. 28 STRUCTURAL HEADWINDS ACHALLENGE AT LOS BRONCES Plans are in place to mitigate the impact… …offset by productivity gains and grade in 2015. Average haulage distance (km) Average haulage distance increase 80% from 2012 to 2016Grades are variable and declining Despite this, plant throughput levels will be maintainedOre hardness is increasing 2017 0.74% 2016 0.74% 2015 0.89% 2014 0.78% 2013 0.83% Grade % 20172016201520142013 142 146148 133 146 4.2 2017 +80% 6.3 5.2 5.6 3.5 20162015201420132012 5.8 ktpd 2012 126 2012 0.84% -11% +16% 2017 107 2016 122 2015 109 2014 82 2013 82 Ore hardness (SPI) 2012 85 +43%
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- 30. 30 OPERATIONAL IMPROVEMENTS HAVEBEEN EMBEDDED Increased production versus prior forecasts… ...although grade variability remains. Variable copper grades (% Cu)(1) (1) Grade shown is the weighted average grade for sulphide flotation across all assets Copper production increased to 2017 0.75% 0.80% 0.85% 0.90% 0.95% 2013 2014 2015 2016 2017 700 700 700 748 +7% 720-750720-750 710-740 2014E 2015 2016 2017 2013 guidance 2014 guidance
- 31. 31 STRATEGY Our approach tobuilding performance is simple…and continuous… …establish stability…build a foundation for capability…realise potential. Value Time STABILITY CAPABILITY Realise Potential • Operations • Markets • People • Brownfield options • Debottleneck • Operating Model • Resource potential • Priority capital options • FutureSmartTM innovation 2013 2016 Build Capability Establish Stability