REG - Anglo American PLC - Anglo American accelerates delivery of strategy

Anglo AmericanAnnouncement

14/05/2024 07:00

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RNS Number : 3183O  Anglo American PLC  14 May 2024

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

 14 May 2024
 Anglo American accelerates delivery of strategy to unlock significant value

 Radically simplified portfolio of world-class assets in copper, premium iron
 ore

 and crop nutrients

Anglo American plc ("Anglo American") is today setting out a clear, compelling
and decisive plan to unlock significant value from its portfolio and
accelerate the delivery of consistently stronger shareholder returns.

 

Following completion of the asset review initiated during 2023, Anglo American
plans to implement a number of major structural changes to accelerate delivery
against its strategic priorities of operational excellence, portfolio
simplification, and growth:

 

Undiluted Anglo American shareholder participation in a simpler portfolio of
world-class assets with full value transparency

·       Copper

o 3 of the top 10 producing copper mines in South America, with outstanding
resource endowments

o Set for multiple decades of competitive production and growth, with a
defined pathway to >1mtpa of copper production

·       Premium iron ore

o Focused producer of 100% premium product, ideally suited to support steel
decarbonisation

o Attractive resource endowments in Brazil and South Africa

·       Crop nutrients

o Slow down development to support balance sheet deleveraging, while critical
technical studies are completed in 2025, to then support syndication. Capex
reduced to $200 million in 2025 and no capex in 2026

o Preserving long term value from high quality asset with multi-generational
resource scale

 

Compelling value proposition exclusively for Anglo American's shareholders

·      Portfolio and structure transformation - 100% future-enabling
portfolio, including 54% copper production, in products that support the
energy transition, improving global living standards and food security

·       Outstanding organic growth - Proven project delivery and
sustainability leadership

·       High quality financial profile - EBITDA margin increases to 46%
from 31% on a 2023 pro forma basis(1)

·      Efficiency and accountability - $1.7 billion lower cost of new
portfolio configuration. This includes $0.8 billion of additional pre-tax
recurring annual run rate cost benefits from the end of 2025(2)

·    Disciplined capital allocation - less than 1.5x net debt:EBITDA
leverage at bottom of the cycle, with 40% dividend payout maintained

 

Clear pathway for portfolio value delivery - in the right way and for value

·       Steelmaking Coal - To be divested and currently responding to
strong buyer interest

·       Nickel - Exploring options for care and maintenance and
divestment

·       Anglo American Platinum - To be demerged in a responsible and
orderly way to optimise value for both Anglo American's and Anglo American
Platinum's shareholders

·       De Beers - To be divested or demerged, to improve strategic
flexibility for both De Beers and Anglo American

 

Duncan Wanblad, Chief Executive of Anglo American, said:

 

"We set out our clear strategic priorities earlier this year - operational
excellence, portfolio simplification, and growth. Our decision to focus Anglo
American's portfolio in our world-class resource asset base in copper and
premium iron ore - while retaining our crop nutrients optionality at Woodsmith
- marks a major new phase in executing our strategy.

 

"We expect that a radically simpler business will deliver sustainable
incremental value creation through a step change in operational performance
and cost reduction.

 

"Anglo American's shareholders will see the full undiluted upside from these
extensive changes, with the value of our copper and iron ore assets brought to
the fore. This next step in the transformation of Anglo American's portfolio
is set to accelerate the recognition of value that has been inherent in our
business for many years and provide Anglo American's shareholders with
undiluted and differentiated participation in the major structural demand
trends, while minimising any frictional costs associated with this major
portfolio transformation.

 

"These actions represent the most radical changes to Anglo American in
decades. I believe these are the right decisions to position Anglo American to
capitalise on the outstanding resource endowment opportunities within our
portfolio today. Our proven and differentiated capabilities within Anglo
American, our global relationship networks and our longstanding reputation as
a responsible mining company will help us unlock numerous of these and other
opportunities in the jurisdictions where our experience and track record are
most valuable and most valued, namely in South America and Southern Africa.

 

"Of course, we are conscious of the impacts of making such far-reaching
changes, particularly on our employees. We see considerable opportunities for
our employees, both in delivering the full potential of Anglo American and in
the businesses that we will be divesting or demerging, all of which are high
quality businesses in their own right. By implementing these portfolio changes
ourselves, we will be able to do so in a manner that is respectful of our
employees, host communities and countries, including ensuring that in South
Africa in particular Anglo American continues to play its role as a
responsible business leader to support the country's national priorities.

 

"We are taking clear and decisive action to deliver value - safely,
responsibly and reliably - in the long term interests of our shareholders and
other stakeholders, and to deliver the products that are so critical to
enabling the energy transition and supporting improved global living standards
and food security."

 

 

Three strategic priorities

 

Operational excellence

 

·      Simplification of structure and portfolio to facilitate step
change in performance

 

Anglo American is focused on operational and cost performance to deliver
superior margins. The organisational re-design simplifies work execution and
provides clear accountabilities for delivery. Anglo American is on track to
achieve the previously announced run rate of US$1 billion annual savings in
operating expenditure in 2024.  Additionally, a further $0.8 billion of cost
out from the end of 2025(2) is targeted. The capital expenditure reduction of
US$1.6 billion over the next three years set out in December 2023 is also on
track. Technology is being deployed into each operation in a targeted fashion
to deliver improvements in safety, costs and productivity.

 

These initiatives are creating a more focused and robust platform to deliver
consistent operational performance and give confidence in the effectiveness of
further change. The portfolio simplification and organisation streamlining
will also support greater focus on operational excellence and value creation.

 

 

Portfolio simplification

 

·      Transformation of the portfolio to focus on world class assets in
copper, premium iron ore and crop nutrients

·      Changes implemented in the most effective manner, with timing to
optimise shareholder and stakeholder value

 

A comprehensive asset review been completed. Each asset was assessed for
competitiveness and performance optimisation potential, and for its role in
the portfolio. The review examined how the portfolio as a whole can deliver
the most attractive through the cycle returns for Anglo American's
shareholders considering asset competitive positioning, commodity outlook and
the cash flow required to realise both growth potential and sustainable
shareholder returns. The impact of portfolio composition on the recognition of
the value of the underlying assets by the market has also been considered.

 

The principle behind the portfolio changes is to deliver the best value
outcome for assets and businesses over time, leading to decisions relating to
the following businesses, to be implemented as separate transactions and for
value:

 

Steelmaking coal -. Anglo American intends to divest its high quality
Steelmaking Coal business, with proceeds used to reset Anglo American's
balance sheet.

 

Anglo American Platinum - Anglo American Platinum's assets have exceptional
geological potential and Anglo American is currently setting up Anglo American
Platinum to be resilient and deliver sustainable returns through the cycle as
one of the world's leading PGMs producers, despite the current cyclical
downturn. Anglo American and Anglo American Platinum are working together to
transform Anglo American Platinum to generate multi-decade cash flows, high
returns and delivering its full potential. The ongoing reconfiguration of
Anglo American Platinum and associated employee consultation process,
announced in February 2024, continue and are not affected by this
announcement.

 

It is, however, increasingly clear that if Anglo American were to retain Anglo
American Platinum in its portfolio, it limits the ability to have the full
value of both businesses fully reflected, limiting the ability of both Anglo
American and Anglo American Platinum to achieve their full potential. Anglo
American's portfolio and structure are simpler without Anglo American
Platinum, Anglo American's portfolio will have strong geographic balance and
less complexity in future capital allocation. As a standalone business, Anglo
American Platinum will be best positioned to set its own priorities to deliver
its full potential, with Anglo American's shareholders able to participate in
full through the demerger.

 

De Beers - Having made significant progress towards finalising the sales
agreement with the Government of the Republic of Botswana, Anglo American is
exploring the full range of options to separate the business in order to set
it up for success in unlocking full value from its new Origins strategy, its
world-class assets and its iconic brand. This will provide both Anglo American
and De Beers with a new level of strategic flexibility to maximise value for
both company's shareholders.

 

 

Growth

 

·  Outstanding growth potential across the portfolio with well-sequenced,
value accretive opportunities in copper, premium iron ore and crop nutrients

·   Leveraging differentiated and proven technical and sustainability
capabilities, and multi-decade relationship networks in South America and
Southern Africa

·     A proven track record of major copper greenfield project delivery

·     On plan and on budget with Woodsmith development

 

Each of the three portfolio verticals has the benefit of a number of value
accretive growth and replacement options already owned by Anglo American and
that can be developed at the right time.

 

Integral to Anglo American's growth trajectory is the Woodsmith crop nutrients
project. Anglo American will continue to work towards the completion of the
feasibility study in the first half of 2025, as an essential building block
for syndication to a strategic partner. In the meantime, we will slow the
investment - which we now expect to be reduced to $0.2 billion in 2025 and no
capex in 2026, to support balance sheet deleveraging.

 

 

Three major benefits for Anglo American's shareholders

 

1.  Undiluted Anglo American shareholder participation in a simpler portfolio
of world-class assets with value transparency

 

The streamlined portfolio is underpinned by strong industrial logic, with each
asset playing a clear role, and is uniquely positioned to enable and benefit
from global decarbonisation, the ongoing pull for improved living standards,
and food security.

 

·      Copper

 

2023 EBITDA US$3.2 billion

2022 EBITDA US$2.2 billion

o  Copper is critical for ongoing global economic development and the
decarbonisation of the global economy through electrification. Copper demand
is therefore expected to grow strongly whilst there are key constraints on the
supply side including increasing timelines and requirements for licensing and
permitting. Anglo American has an established track record of successfully
developing such new supply, responsibly and profitably.

 

o  Anglo American's market position: Anglo American has an outstanding copper
endowment through its interests in three world class copper assets -
Quellaveco, Los Bronces and Collahuasi - set for multiple decades of
competitive production and growth. In 2024 Anglo American has set guidance of
730-790kt of production with well-sequenced and self-funded brownfield and
greenfield prospects (including at Sakatti) for value-accretive growth to more
than 1 million tonnes of annual copper production in the next decade and for
decades to come. For example, at Quellaveco, the 35-year current life of mine
is based on Reserves of ~8 million tonnes of contained copper, but there are
an additional ~8 million tonnes in Resources and further Exploration Targets
with upside estimated at up to ~59 million tonnes of copper.

 

Anglo American's differentiated technical, project delivery and sustainability
capabilities built over many decades, coupled with its global relationship
networks and longstanding reputation as a responsible mining company, are
critical to unlocking the value of these endowments and supplying the copper
needed for the energy transition and improved living standards.

 

This is expected to be achieved through faster permitting, mutually
reinforcing community and stakeholder relationships, and seamless execution,
as demonstrated most recently at Quellaveco - a $5.5 billion greenfield
investment delivered on time and on budget - while many comparable projects
across the industry remain undeveloped due to social and environmental
challenges, face significant delays and cost overruns, or experience ongoing
operational disruptions.

 

 

·      Premium iron ore

 

2023 EBITDA US$4.0 billion

2022 EBITDA US$3.5 billion

 

o  Premium iron ore, in particular the types suitable for the transition
towards green steel and for direct reduction iron ("DRI"), is essential for
steel industry decarbonisation and is expected to experience growth an order
of magnitude more than that of lower quality iron ore, while benefitting from
meaningful price premium potential.

 

o  Anglo American's market position: Anglo American's portfolio is
exceptionally well-positioned to benefit from this trend through its
integrated Minas-Rio operation in Brazil that produces a 67% Fe product ideal
for DRI pellet feed. Kumba in South Africa also produces premium quality lump
iron ore at 63% Fe that generates product premium with excellent thermal shock
resistance, lower fines formation in the blast furnace and increased sinter
plant productivity, with potential for further upgrading of product quality.
Both Minas-Rio and Kumba assets have contributed significantly to group cash
flow in recent years and are well set to underpin shareholder returns and
growth ambitions across the portfolio. The recently announced addition to
Minas-Rio of the Serpentina endowment, with a strike length more than double
that of Minas-Rio's, provides a high value option to double Minas-Rio
production by the mid-2030s, with meaningful synergies.

 

·      Woodsmith

 

Woodsmith is a Tier 1 resource entirely aligned with the demand trends of
decarbonisation and food security. Woodsmith has outstanding long term
potential given the sheer scale and thickness of the polyhalite orebody,
lending itself to fully mechanised, low cost bulk mining, with minimal
processing required. This is as close as you can get to a mine-to-field
multi-nutrient fertiliser product, translating into its organic status and
lower carbon footprint, ideally suited to the long term demand trend caused by
threats to food security and the increasing challenges around access to arable
land and the need to increase crop yield and support improved soil health.

 

Anglo American has high confidence, backed by its proven track record in
project delivery, to develop the Woodsmith project, which is currently on plan
and on budget. In the near term, Anglo American will slow the development of
the Woodsmith project to support Anglo American's balance sheet deleveraging,
with capex for critical studies and other activities expected to total $200
million in 2025 and no capex in 2026.  Anglo American continues to recognise
the asset's unique resource and long term value potential and will complete
critical technical studies in 2025 to then enable syndication for value with
one or more strategic partners.

 

 

·      Proven capabilities for value delivery:

 

Supporting Anglo American's more focused portfolio will be an aligned
organisation structure that is fit for purpose to leverage Anglo American's
differentiated capabilities and global relationship networks to deliver the
full potential of the portfolio and each asset within it. The organisation
will be set up to unlock numerous future resource opportunities in the
jurisdictions where Anglo American's experience is most valuable and valued,
in two of the most prospective mining regions - South America and Southern
Africa.

 

Such proven capabilities include the projects, technical and sustainability
expertise that was integral to delivering the Quellaveco project on time and
budget despite numerous headwinds over many years, including the global
pandemic. This also benefited from Anglo American's deep-seated regional
capabilities that provide confidence in future project execution - these
capabilities will be of increasing importance given the social and
environmental challenges associated with bringing to the market new sources of
critical raw materials, such as copper, particularly given the likely
locations of new high quality assets. Anglo American's global Marketing
business will also be focused accordingly and will continue to ensure the
optimisation of Anglo American's products across the value chain.

 

 

2.  Compelling value proposition exclusively for Anglo American shareholders

 

This simplification of the portfolio stands to accelerate - and step up -
value delivery exclusively for Anglo American shareholders:

 

·      Portfolio and structure transformation - 100% future-enabling
product portfolio including 54% of pro forma production from copper (2023 CuEq
production basis), focused solely on products that support the energy
transition, improving global living standards, and food security.

·      Outstanding organic growth - Defined pathway to >1mtpa copper
by early 2030s through growth options within the portfolio, with proven
sustainability and project delivery capabilities.

·       High quality financial profile - EBITDA margin increases from
31% to 46% on a 2023 pro forma basis(1).

·     Efficiency and accountability - $1.7 billion lower cost with new
portfolio configuration. This includes an additional $0.8 billion of cost out
from the end of 2025(2). The additional cost out will be achieved from:
additional reductions in operating expenditure; reduced corporate initiatives
and other funding commitments; implementing a fit for purpose organisation at
the headquarters and country offices to leverage Anglo American's
differentiated capabilities and global relationship networks to deliver the
portfolio's full potential; and delivering the targeted operating model for
the simplified Anglo American portfolio.

·       Disciplined capital allocation - less than 1.5x net debt:EBITDA
leverage at the bottom of the cycle, with 40% dividend payout maintained.

 

3.  Clear pathway for portfolio value delivery - in the right way and for
value

 

The pathway to portfolio simplification is designed to have shareholder value
at its centre, with actions intended to ensure that Anglo American's
shareholders can maximise their participation in value creation, while
minimising frictional costs and mitigating execution risks. Anglo American
intends to execute with urgency, but not at the expense of shareholder value
or without due regard to Anglo American's stakeholders.

 

The key steps will include:

 

·       Steelmaking Coal: Divest Anglo American's high quality
steelmaking coal interests. Proceeds will be used to reset Anglo American's
balance sheet.

 

·      Nickel: Urgent action is being taken to limit the impact of
short term market pressure on cash flow and, in parallel, exploring options
for care and maintenance and divestment.

 

·       Anglo American Platinum: Demerger of Anglo American Platinum in
a way that both optimises value for Anglo American shareholders and Anglo
American Platinum shareholders, and ensures that such separation is
implemented in a responsible and orderly way, with due regard for ensuring
Anglo American Platinum's ongoing positive stakeholder value contribution. The
demerger will enable Anglo American's shareholders to gain direct
participation in strong PGMs fundamentals and Anglo American Platinum's
leading competitive and market positions.

 

·       De Beers: Having made significant progress towards finalising
the sales agreement with the Government of the Republic of Botswana, Anglo
American is exploring the full range of options to separate the De Beers
business. This will give both Anglo American and De Beers a new level of
strategic flexibility to maximise value for both Anglo American and the
Government of the Republic of Botswana, as De Beers' shareholders.

 

 

 

Workforce considerations

 

·       Anglo American acknowledges that many of the intended portfolio
and other changes set out above may create uncertainty for Anglo American's
workforce, recognising the scale of the portfolio transformation. Anglo
American intends to implement the changes in a manner that recognises the
impact of such changes on its employees, with appropriate planning and
engagement with relevant stakeholders.

·       However, Anglo American also expects the changes to present
numerous opportunities for Anglo American's workforce, particularly in
relation to the acceleration of Anglo American's strategy and the
differentiated skills and capabilities required to deliver that strategy, as
well as in the standalone businesses that Anglo American plans to separate
and/or divest. Anglo American's workforce will be key in the delivery of the
changes, and in the sustained success of all the businesses.

·      Anglo American expects to take steps to retain the skills and
talent required to deliver Anglo American's full potential, as part of its
review of its workforce arrangements to ensure alignment with these portfolio
changes.

·      Anglo American will need to consider its global workforce
arrangements to realise the opportunities for its employees and to ensure
delivery of the accelerated strategy. All options will be considered and if
any restructuring is proposed in due course, Anglo American will comply with
all consultation requirements contained in collective agreements and relevant
legislation.

·   The ongoing workforce and wider reconfigurations of Anglo American
Platinum and Kumba, and their associated employee consultation processes, as
set out in February 2024, continue and are not affected by this announcement.

 

Webcast of presentation:

A webcast of the presentation, starting at 11.00am UK time on 14 May 2024, can
be accessed through the Anglo American website at www.angloamerican.com
(http://www.angloamerican.com)

 

 

Footnotes:

 

(1) 2023 Pro-forma financials represent 2023 reported performance of the
retained business adjusted for the incremental $0.6bn of Corporate cost
savings (relating to Corporate and business overheads and Corporate projects
and initiatives) included in the QFBS and $0.2bn of previously announced
Corporate cost savings not already recognised in 2023, reflecting the cost of
the ongoing Corporate business supporting the retained businesses.

 

(2) The statements above labelled by way of footnote 2 include a quantified
financial benefits statement (the "QFBS Footnoted Statements") for the
purposes of Rule 28 of the City Code on Takeovers and Mergers (the "Takeover
Code"), which have been reported on in accordance with the requirements of the
Takeover Code in the form set out in Part A to the Appendix (the "Quantified
Financial Benefits Statement"). Further information on the Quantified
Financial Benefits Statement, including the basis of preparation and principal
assumptions, are set out in the Appendix to this announcement. As required by
Rule 28.1(a) of the Takeover Code, the Quantified Financial Benefits Statement
has been reported on by KPMG LLP ("KPMG"), as reporting accountant to Anglo
American, and Centerview Partners UK LLP ("Centerview"), Goldman Sachs
International ("Goldman Sachs") and Morgan Stanley & Co. International plc
("Morgan Stanley"), as financial advisers to Anglo American, have provided the
relevant reports required under that Rule. Copies of these reports are
included in Parts B and C of the Appendix to this announcement and references
in this announcement to the QFBS Footnoted Statements should be read in
conjunction with those parts of the Appendix. As required by Rule 28.1(a) of
the Takeover Code, KPMG, as reporting accountant to Anglo American, has
provided a report (set out in Part B of the Appendix) stating that, in its
opinion, the Quantified Financial Benefits Statement has been properly
compiled on the basis stated. In addition, Centerview, Goldman Sachs and
Morgan Stanley, as financial advisers to Anglo American, have provided a
report (set out in Part C of the Appendix) for the purposes of the Takeover
Code stating that, in their opinion and subject to the terms of the report,
the Quantified Financial Benefits Statement, for which the Anglo American
directors are responsible, has been prepared with due care and consideration.
Each of KPMG, Centerview Partners, Goldman Sachs and Morgan Stanley has given
and has not withdrawn its consent to the publication of its report in the form
and context in which it is included.

 

 

 

For further information, please contact:

 

Anglo American

 

 Media                                                                              Investors

 UK                                                                                 UK

 James Wyatt-Tilby                                                                  Tyler Broda

 james.wyatt-tilby@angloamerican.com                                                tyler.broda@angloamerican.com
 (mailto:james.wyatt-tilby@angloamerican.com)

                                                                                  Tel: +44 (0)20 7968 1470
 Tel: +44 (0)20 7968 8759

                                                                                  Emma Waterworth
 Marcelo Esquivel                                                                   emma.waterworth@angloamerican.com (mailto:emma.waterworth@angloamerican.com)

Tel: +44 (0) 20 7968 8574
 marcelo.esquivel@angloamerican.com (mailto:marcelo.esquivel@angloamerican.com)

 Tel: +44 (0)20 7968 8891

                                                                                  Juliet Newth

                                                                                  juliet.newth@angloamerican.com (mailto:juliet.newth@angloamerican.com)
 Rebecca Meeson-Frizelle

                                                                                  Tel: +44 (0)20 7968 8830
 rebecca.meeson-frizelle@angloamerican.com

 (mailto:rebecca.meeson-frizelle@angloamerican.com)

 Tel: + 44 (0)20 7968 1374                                                          Michelle Jarman

                                                                                    michelle.jarman@angloamerican.com (mailto:michelle.jarman@angloamerican.com)

 South Africa

                                                                                  Tel: +44 (0)20 7968 1494
 Nevashnee Naicker

 nevashnee.naicker@angloamerican.com

 Tel: +27 (0)11 638 3189

 Sibusiso Tshabalala

 sibusiso.tshabalala@angloamerican.com
 (mailto:sibusiso.tshabalala@angloamerican.com)

 Tel: +27 (0)11 638 2175

 

 Centerview Partners UK LLP (Financial Adviser to Anglo American)

James Hartop   Tel: +44 (0) 20 7409 9700
 Edward Rowe
 Fiona McHardy

 

 Goldman Sachs International (Financial Adviser to Anglo American)

Mark Sorrell      Tel: +44 (0) 20 7774 1000
 David Hammond
 Bertie Whitehead

 

 Morgan Stanley & Co. International plc (Financial Adviser to Anglo
 American)

Simon Smith     Tel: +44 (0) 20 7425 8000
 Anthony Zammit
 Tom Perry

 

Goldman Sachs International (Financial Adviser to Anglo American)

 Mark Sorrell      Tel: +44 (0) 20 7774 1000
 David Hammond
 Bertie Whitehead

 

Morgan Stanley & Co. International plc (Financial Adviser to Anglo
American)

 Simon Smith     Tel: +44 (0) 20 7425 8000
 Anthony Zammit
 Tom Perry

 

 

The person responsible for this announcement is Richard Price, Legal &
Corporate Affairs Director (Company Secretary), Anglo American plc.

 

 

IMPORTANT NOTICES

 

Centerview Partners UK LLP ("Centerview"), which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively as financial adviser to Anglo American and no one else in
connection with the matters set out in this announcement and will not be
responsible to anyone other than Anglo American for providing the protections
afforded to its clients or for providing advice in relation to the contents of
this announcement or any other matters referred to in this announcement.
Neither Centerview nor any of its affiliates, nor any of Centerview's and such
affiliates' respective members, directors, officers, controlling persons or
employees owes or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, consequential, whether in contract, in tort, in
delict, under statute or otherwise) to any person who is not a client of
Centerview in connection with this announcement, any statement contained
herein or otherwise.

Goldman Sachs International, ("Goldman Sachs") which is authorised by the
Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority in the United Kingdom, is
acting exclusively for Anglo American and no one else in connection with the
matters referred to in this announcement and will not be responsible to anyone
other than Anglo American for providing the protections afforded to clients of
Goldman Sachs International, or for providing advice in relation to the
matters referred to in this announcement.

Morgan Stanley & Co. International plc ("Morgan Stanley") which is
authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority in the UK
is acting as financial adviser to Anglo American and no one else in connection
with the matters set out in this announcement. In connection with such
matters, Morgan Stanley, its affiliates and their respective directors,
officers, employees and agents will not regard any other person as their
client, nor will they be responsible to any other person for providing the
protections afforded to their clients or for providing advice in relation to
the contents of this announcement or any other matter referred to herein.

 

Forward-looking statements and third party information

 

This document includes forward-looking statements. All statements other than
statements of historical facts included in this document, including, without
limitation, those regarding Anglo American's financial position, business,
acquisition and divestment strategy, dividend policy, plans and objectives of
management for future operations, prospects and projects (including
development plans and objectives relating to Anglo American's products,
production forecasts and Ore Reserve and Mineral Resource positions) and
sustainability performance related (including environmental, social and
governance) goals, ambitions, targets, visions, milestones and aspirations,
are forward-looking statements. By their nature, such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Anglo
American or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.

 

Such forward-looking statements are based on numerous assumptions regarding
Anglo American's present and future business strategies and the environment in
which Anglo American will operate in the future. Important factors that could
cause Anglo American's actual results, performance or achievements to differ
materially from those in the forward-looking statements include, among others,
levels of actual production during any period, levels of global demand and
commodity market prices, unanticipated downturns in business relationships
with customers or their purchases from Anglo American, mineral resource
exploration and project development capabilities and delivery, recovery rates
and other operational capabilities, safety, health or environmental incidents,
the effects of global pandemics and outbreaks of infectious diseases, the
impact of attacks from third parties on our information systems, natural
catastrophes or adverse geological conditions, climate change and extreme
weather events, the outcome of litigation or regulatory proceedings, the
availability of mining and processing equipment, the ability to obtain key
inputs in a timely manner, the ability to produce and transport products
profitably, the availability of necessary infrastructure (including
transportation) services, the development, efficacy and adoption of new or
competing technology, challenges in realising resource estimates or
discovering new economic mineralisation, the impact of foreign currency
exchange rates on market prices and operating costs, the availability of
sufficient credit, liquidity and counterparty risks, the effects of inflation,
terrorism, war, conflict, political or civil unrest, uncertainty, tensions and
disputes and economic and financial conditions around the world, evolving
societal and stakeholder requirements and expectations, shortages of skilled
employees, unexpected difficulties relating to acquisitions or divestitures,
competitive pressures and the actions of competitors, activities by courts,
regulators and governmental authorities such as in relation to permitting or
forcing closure of mines and ceasing of operations or maintenance of Anglo
American's assets and changes in taxation or safety, health, environmental or
other types of regulation in the countries where Anglo American operates,
conflicts over land and resource ownership rights and such other risk factors
identified in Anglo American's most recent Annual Report. Forward-looking
statements should, therefore, be construed in light of such risk factors and
undue reliance should not be placed on forward-looking statements. These
forward-looking statements speak only as of the date of this document. Anglo
American expressly disclaims any obligation or undertaking (except as required
by applicable law, the City Code on Takeovers and Mergers, the UK Listing
Rules, the Disclosure and Transparency Rules of the Financial Conduct
Authority, the Listings Requirements of the securities exchange of the JSE
Limited in South Africa, the SIX Swiss Exchange, the Botswana Stock Exchange
and the Namibian Stock Exchange and any other applicable regulations) to
release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in Anglo American's expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based.

 

No statement in this announcement constitutes, or should be construed, as a
profit forecast for the purposes of Rule 28 of the City Code on Takeovers and
Mergers (the "City Code") for any period, and nothing in this document should
be interpreted, or construed, to mean that future earnings for Anglo American
or future earnings per share of Anglo American, as appropriate, for the
current or future financial years will necessarily match or exceed its
historical published earnings for Anglo American or per Anglo American share.
Certain statistical and other information included in this document is sourced
from third party sources (including, but not limited to, externally conducted
studies and trials). As such it has not been independently verified and
presents the views of those third parties, but may not necessarily correspond
to the views held by Anglo American and Anglo American expressly disclaims any
responsibility for, or liability in respect of, such information.

 

General information

 

In accordance with Rule 26.1 of the Code, a copy of this announcement will be
available subject to certain restrictions relating to persons resident in
restricted jurisdictions on Anglo American's website at www.anglo american.com
by no later than 12 noon (London time) on the business day following the date
of this announcement. The content of the website referred to in this
announcement is not incorporated into and does not form part of this
announcement.

 

The release, publication or distribution of this announcement in jurisdictions
outside the United Kingdom may be restricted by law or regulation and
therefore persons into whose possession this announcement comes should inform
themselves about, and observe, such restrictions. Any failure to comply with
the restrictions may constitute a violation of the securities laws or
regulations of any such jurisdictions.

 

This document is for information purposes only and does not constitute, nor is
to be construed as, an offer to sell or the recommendation, solicitation,
inducement or offer to buy, subscribe for or sell shares in Anglo American or
any other securities by Anglo American or any other party. Further, it should
not be treated as giving investment, legal, accounting, regulatory, taxation
or other advice and has no regard to the specific investment or other
objectives, financial situation or particular needs of any recipient.

 

Quantified Financial Benefits Statement

Except as expressly stated, nothing in this announcement constitutes a
quantified financial benefits statement for the purposes of Rule 28 of the
City Code. The statements which are labelled as containing a quantified
financial benefits statement relate to future actions and circumstances which,
by their nature, involve risks, uncertainties and contingencies. As a result,
any targets, actions or outcomes referred to may not be achieved, may be
achieved later or sooner than estimated, or those achieved could be materially
different from those estimated. Further details are set out in the Appendix to
this announcement.

 

Disclosure requirements of the Code

 

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of
any class of relevant securities of an offeree company or of any securities
exchange offeror (being any offeror other than an offeror in respect of which
it has been announced that its offer is, or is likely to be, solely in cash)
must make an Opening Position Disclosure following the commencement of the
offer period and, if later, following the announcement in which any securities
exchange offeror is first identified. An Opening Position Disclosure must
contain details of the person's interests and short positions in, and rights
to subscribe for, any relevant securities of each of (i) the offeree company
and (ii) any securities exchange offeror(s). An Opening Position Disclosure by
a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm
(London time) on the 10th business day following the commencement of the offer
period and, if appropriate, by no later than 3.30 pm (London time) on the 10th
business day following the announcement in which any securities exchange
offeror is first identified. Relevant persons who deal in the relevant
securities of the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead make a
Dealing Disclosure.

 

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1%
or more of any class of relevant securities of the offeree company or of any
securities exchange offeror must make a Dealing Disclosure if the person deals
in any relevant securities of the offeree company or of any securities
exchange offeror. A Dealing Disclosure must contain details of the dealing
concerned and of the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree company and
(ii) any securities exchange offeror(s), save to the extent that these details
have previously been disclosed under Rule 8. A Dealing Disclosure by a person
to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London
time) on the business day following the date of the relevant dealing.

 

If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.

 

Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).

 

Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. You should contact the Panel's Market Surveillance Unit on
+44 (0) 20 7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing Disclosure.

 

Appendix

 

Part A

 

Quantified Financial Benefits Statement

 

"The Anglo American Directors expect that corporate restructuring intended as
part of simplifying the Anglo American portfolio and incremental opex
opportunities can deliver at least $800 million of pre-tax recurring cost
benefits on an annual run-rate basis from the end of 2025.

 

The quantified cost benefits are expected to be realised primarily from:

 

·     Corporate and business overheads: Right-sizing support functions
and delivering the target operating model for the simplified Anglo American
portfolio (approximately 42%);

 

·      Corporate projects and initiatives: Targeted savings from third
party spend, investment prioritisation and reduction of change initiatives
within Group and corporate functions (approximately 39%);

 

·   Opex benefits: Incremental sustainable unit cost benefits driven by
operational rightsizing and restructuring in certain existing cost savings
programmes (expected to contribute approximately 19% of full run-rate pre-tax
cost benefits).

 

The Directors estimate that the realisation of the quantified cost benefits
will result in one-off costs to achieve of approximately $400 million,
incurred by the end of 2025.

 

Potential areas of dis-benefit have been considered in quantifying the
expected cost benefits and none have been identified or are expected to arise.

 

The identified cost benefits reflect both the beneficial elements and relevant
costs.

 

In addition to the quantified benefits identified above, The Directors also
believe that incremental value can be created through evolving to a more
operationally and asset-focused structure.

 

Bases of belief, assumptions and sources

 

·    The assessment and quantification of the potential cost benefits has
been informed by the Anglo American Group's experience of assessing and
executing past cost savings programmes and organisational restructuring
activities.

·      There is no assumed change to ownership or control of the Anglo
American Group.

·      Estimated opex benefits are expected to arise from the Anglo
American underlying businesses (excluding portfolio rationalisation as
announced in the Regulated News Service document "Anglo American accelerates
delivery of strategy to unlock significant value" published on 14 May 2024),
and are incremental to previously announced savings estimates. Additionally,
the baselines used for the basis of the Quantified Financial Benefits
Statement have been adjusted to reflect this.

·      The cost base used as the basis for the Quantified Financial
Benefits Statement are Anglo American audited financial results for the year
ending 31 December 2023 (with adjustments made to reflect expected future
changes in certain costs) and headcount information as at 31 March 2024.

·      The expected benefits have been assessed and are stated on a
pre-recharge and allocation basis.

·      Ongoing costs and dis-benefits of delivery have been considered.

·      Stretch case of benefits has also been prepared, alongside
several potential unquantified upsides.

·      The Anglo American Directors have assumed that the cost benefits
are substantively within their control, albeit that certain elements are
dependent in part on negotiations with third parties.

·      The Anglo American Directors have, in addition, made the
following assumptions, each of which is outside the influence of the Anglo
American Board:

o  there will be no material change to macroeconomic, political,
inflationary, regulatory or legal conditions in the markets or regions in
which the Anglo American Group operates that will materially impact the
implementation of the benefits plans or costs to achieve the proposed cost
savings;

o  there will be no material change in current foreign exchange rates or
interest rates;

o  there will be no material change in accounting standards; and

o  there will be no change in tax legislation or tax rates or other
legislation or regulation in the countries in which the Anglo American Group
operate that could materially impact the ability to achieve any benefits."

 

 

Reporting

 

As required by Rule 28.1(a) of the Code, KPMG, as reporting accountants to
Anglo American, have provided a report (set out in Part B of the Appendix)
stating that, in their opinion, the Quantified Financial Benefits Statement
has been properly compiled on the basis stated. In addition, Centerview
Partners UK LLP ("Centerview"), Goldman Sachs International ("Goldman Sachs")
and Morgan Stanley & Co. International plc ("Morgan Stanley"), as
financial advisers to Anglo American have provided a report (set out in Part C
of the Appendix) stating that, in their opinion, and subject to the terms of
the report, the Quantified Financial Benefits Statement, for which the
Directors of Anglo American are responsible, has been prepared with due care
and consideration. Copies of these reports are included in the next parts of
this Appendix below.  Each of KPMG, Centerview, Goldman Sachs and Morgan
Stanley have given and not withdrawn their consent to the publication of their
reports in the form and context in which they are included.

 

Notes

 

The assessment and quantification of the potential cost savings relate to
future actions and circumstances which, by their nature, involve risks,
uncertainties and contingencies. As a result, the potential cost savings may
not be achieved, or may be achieved later or sooner than estimated, or those
achieved could be materially different from those estimated. As a result, and
given the fact that the changes relate to the future, the resulting cost
savings may be materially greater or less than those estimated. No statement
in the Quantified Financial Benefits Statement or in this announcement
generally should be construed as a profit forecast or interpreted to mean that
Anglo American's earnings in the year to 31 December 2024, or any subsequent
period, would necessarily match or be greater than or be less than those of
Anglo American for the relevant preceding financial period or any other
period.

 

 

Part B

 

Accountant's Report on Quantified Financial Benefits Statement

 

The Directors

Anglo American plc

17 Charterhouse Street

London

EC1N 6RA

 

Centerview Partners UK LLP

1 Sherwood Street

London

W1F 7BL

 

Goldman Sachs International

25 Shoe Lane

London

EC4A 4AU

 

Morgan Stanley & Co. International plc

25 Cabot Square

Canary Wharf

London

E14 4QA

14 May 2024

 

Ladies and Gentlemen

Anglo American plc

We report on the statement ('the Statement') made by the directors of Anglo
American plc ('the Directors') in Appendix Part A of the Regulated News
Service document "Anglo American accelerates delivery of strategy to unlock
significant value" published on 14 May 2024 ('the Announcement') to the effect
that:

"The Anglo American Directors expect that corporate restructuring intended as
part of simplifying the Anglo American portfolio and incremental opex
opportunities can deliver at least $800 million of pre-tax recurring cost
benefits on an annual run-rate basis from the end of 2025.

 

The quantified cost benefits are expected to be realised primarily from:

 

·     Corporate and business overheads: Right-sizing support functions
and delivering the target operating model for the simplified Anglo American
portfolio (approximately 42%);

 

·      Corporate projects and initiatives: Targeted savings from third
party spend, investment prioritisation and reduction of change initiatives
within Group and corporate functions (approximately 39%);

 

·   Opex benefits: Incremental sustainable unit cost benefits driven by
operational rightsizing and restructuring in certain existing cost savings
programmes (expected to contribute approximately 19% of full run-rate pre-tax
cost benefits).

 

The Directors estimate that the realisation of the quantified cost benefits
will result in one-off costs to achieve of approximately $400 million,
incurred by the end of 2025.

 

Potential areas of dis-benefit have been considered in quantifying the
expected cost benefits and none have been identified or are expected to arise.

 

The identified cost benefits reflect both the beneficial elements and relevant
costs.

 

In addition to the quantified benefits identified above, The Directors also
believe that incremental value can be created through evolving to a more
operationally and asset-focused structure."

This report is required by Rule 28.1(a) of the City Code on Takeovers and
Mergers ('the City Code') and is given for the purpose of complying with that
requirement and for no other purpose.

Opinion

In our opinion, the Statement has been properly compiled on the basis stated.

The Statement has been made in the context of the disclosures in Appendix Part
A of the Announcement setting out, inter alia, the basis of the Directors'
belief (including the principal assumptions and sources of information)
supporting the Statement and their analysis and explanation of the underlying
constituent elements.

Responsibilities

It is the responsibility of the Directors to prepare the Statement in
accordance with the requirements of Rule 28 of the City Code.

It is our responsibility to form an opinion, as required by Rule 28.1(a) of
the City Code as to whether the Statement has been properly compiled on the
basis stated and to report that opinion to you.

Save for any responsibility which we may have to those persons to whom this
report is expressly addressed, to the fullest extent permitted by law we do
not assume any responsibility and will not accept any liability to any other
person for any loss suffered by any such other person as a result of, arising
out of, or in connection with this report or our statement, required by and
given solely for the purposes of complying with Rule 23.2 of the City Code,
consenting to its inclusion in the Announcement.

Basis of preparation of the Statement

The Statement has been prepared on the basis stated in Appendix Part A of the
Announcement.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting
issued by the Financial Reporting Council in the United Kingdom (the 'FRC').

We are independent, and have fulfilled our other ethical responsibilities, in
accordance with the relevant ethical requirements of the FRC's Ethical
Standard as applied to Investment Circular Reporting Engagements.

We have discussed the Statement, together with the underlying plans, with the
Directors and Centerview Partners UK LLP, Goldman Sachs International and
Morgan Stanley & Co. International plc. Our work did not involve any
independent examination of any of the financial or other information
underlying the Statement.

We planned and performed our work so as to obtain the information and
explanations we considered necessary in order to provide us with reasonable
assurance that the Statement has been properly compiled on the basis stated.

Our work has not been carried out in accordance with auditing or other
standards and practices generally accepted in other jurisdiction(s) and
accordingly should not be relied upon as if it had been carried out in
accordance with those standards and practices.

We do not express any opinion as to the achievability of the benefits
identified by the Directors in the Statement.  The Statement is subject to
uncertainty as described in the Appendix to the Announcement. Since the
Statement relates to the future and may therefore be affected by unforeseen
events, we express no opinion as to whether the actual benefits achieved will
correspond to those anticipated in the Statement and the differences may be
material.

 

Yours faithfully

 

KPMG LLP

 

KPMG LLP

15 Canada Square, Canary Wharf

London

E14 5GL

United Kingdom

Part C

 

Report from Centerview Partners UK LLP, Goldman Sachs International and Morgan
Stanley & Co. International plc

 

The Board of Directors

Anglo American plc (the "Company")

17 Charterhouse Street

London

EC1N 6RA

 

14 May 2024

 

Dear Sirs/Madams,

 

We refer to the quantified financial benefits statement, the bases of belief
thereof and the notes thereto (the "Statement") set out in Part A of the
Appendix of the announcement issued by the Company (the "Announcement"), for
which the board of directors of the Company (the "Directors") are solely
responsible under Rule 28.3 of the City Code on Takeovers and Mergers (the
"Code").

 

We have discussed the Statement (including the assumptions, bases of
calculation and sources of information referred to therein), with the
Directors and those officers and employees of the Company who have developed
the financial forecasts underlying the estimated cost savings. The Statement
is subject to uncertainty as described in the Announcement and our work did
not involve an independent examination, or verification, of any of the
financial or other information underlying the Statement.

 

We have relied upon the accuracy and completeness of all the financial and
other information provided to us by or on behalf of the Company, or otherwise
discussed with or reviewed by us, in connection with the Statement, and we
have assumed such accuracy and completeness for the purposes of providing this
letter.

 

We do not express any view as to the achievability of the quantified financial
benefits, whether on the basis identified by the Directors in the Statement,
or otherwise.

 

We have also reviewed the work carried out by KPMG LLP ("KPMG") and have
discussed with KPMG its opinion addressed to you and us on this matter and
which is set out in Part B of the Appendix to the Announcement.

 

On the basis of the foregoing, we consider that the Statement, for which the
Directors are solely responsible, has been prepared with due care and
consideration.

 

This letter is provided to you solely having regard to the requirements of,
and in connection with, Rule 28.1(a)(ii) of the Code and for no other purpose.
We accept no responsibility to the Company, its shareholders or to any person
other than the Directors in respect of the contents of this letter. We are
acting exclusively as financial advisers to the Company and no one else and it
was for the purpose of complying with Rule 28.1(a)(ii) of the Code that the
Company requested us to prepare this letter relating to the Statement. No
person other than the Directors can rely on the contents of, or the work
undertaken in connection with, this letter, and to the fullest extent
permitted by law, we expressly exclude and disclaim all liability (whether in
contract, tort or otherwise) to any other person, in respect of this letter,
its contents or the work undertaken in connection with this letter or any of
the results or conclusions that may be derived from this letter or any written
or oral information provided in connection with this letter, and any such
liability is expressly disclaimed except to the extent that such liability
cannot be excluded by law.

 

Yours faithfully,

 

For and on behalf of
 
            For and on behalf of

Centerview Partners UK
LLP
                Goldman Sachs International

 

For and on behalf of

Morgan Stanley & Co. International plc

 

 

 

 

 

 

Legal Entity Identifier: 549300S9XF92D1X8ME43

 

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