REG - Anglo American PLC - Anglo American H1 2015 Results <Origin Href="QuoteRef">AAL.L</Origin> - Part 2

Anglo AmericanAnnouncement

24/07/2015 07:00

- Part 2: For the preceding part double click  ID:nRSX9640Ta 

H1 2014,
the weakening of the South African rand against the US dollar, and an annual
stock adjustment which improved underlying EBIT by $181 million (H1 2014: $(5)
million, see note 2). The comparative period in 2014 was affected by the
five-month industrial action in South Africa, which had a material impact on
production and sales. 
 
Year on year cash operating costs per equivalent refined platinum ounce
decreased by 30% to R19,386 per ounce, owing primarily to the impact of the
industrial action on costs in the first half of last year. On a 2014 financial
year strike-adjusted unit-cost basis, cash operating costs per equivalent
refined platinum ounce increased owing to employment and electricity costs. 
 
Markets 
 
                                                                                                                                                                                                          2015                           2014                           
 Average platinum market price ($/oz)Average palladium market price ($/oz)Average rhodium market price ($/oz)Average gold market price ($/oz)US$ basket price - ($/Pt oz)Rand basket price - (ZAR/Pt oz)  1,1607731,1111,2062,15725,748  1,4377791,0771,2912,47426,493  
 
 
The average US dollar basket price per platinum ounce sold decreased by 13% in
H1 2015 to $2,157 as a period of dollar strength has weighed on all
commodities. This occurred despite a supportive demand environment, with
western European vehicle sales increasing by 8% in H1 2015 versus H1 2014.
Platinum production from South Africa has ramped back up after the prolonged
industrial action that ended in June 2014; supply, however, remains below 2013
levels. Growth expectations in supply from recycling have been revised down
owing to evidence of autocatalyst scrap hoarding and a decline in jewellery
recycling in China. Platinum and palladium markets are expected to remain in
deficit, with the opportunity for increased rhodium demand should automakers
seek to secure cost benefits associated with higher use in petrol
autocatalysts. 
 
Operating performance 
 
Total equivalent refined platinum production rose by 55% to 1,108,000 ounces
(2014: 715,000 ounces). The increase in production was due to a strong mining
performance at Mogalakwena and Rustenburg, as well as a return to normal
production following 2014's industrial action. 
 
Mogalakwena mine, which was unaffected by strike action, continued its strong
operational performance, with an increase in production resulting from higher
head grade (3.13 g/t4e vs 3.07g/t4e), an increase in total tonnes mined and
greater concentrator throughput. Tonnes mined rose by 4% owing to increased
utilisation and improved fleet-availability management. On-mine production of
equivalent refined production increased by 10% to 190,000 ounces, while toll
concentrating activities at a third-party concentrator yielded 11,000 ounces.
As a result, unit cost per equivalent refined platinum ounce decreased by 7%
to R16,478 per platinum ounce. 
 
Production at Amandelbult increased by 148,000 ounces year on year to 182,000
ounces, but was 12% down on a strike-adjusted basis, owing to section 54
safety stoppages and municipal water-supply issues. 
 
Rustenburg had a strong production performance, with output up by 177,000
ounces to 237,000 ounces, largely driven by the recovery from the industrial
action, as well as improved productivity and the implementation of the
optimised mine plan. 
 
Despite safety stoppages, Union mine also recovered well, producing 62,000
ounces, an increase of 51,000 ounces. Union's continued focus is on ensuring
it improves performance in line with its optimised mine plan. 
 
Section 54 safety stoppages have impacted production in the period across
almost all operations. The Principal and Chief Inspectors have been engaged to
ensure the impact of these notices can be limited and that Section 54s are
used as a last resort by the regulator. 
 
Unki mine in Zimbabwe produced 32,000 ounces of equivalent refined platinum, a
6% increase. Only 23,000 ounces of concentrate were dispatched to Polokwane
smelter, however, owing to Platinum's suspension, from 10 April this year, of
exports of concentrate from Zimbabwe while negotiations took place with the
government over export taxes. Following the agreement reached to postpone the
taxes, the export of concentrate recommenced on 3 July 2015. 
 
Output from the Joint Venture Operation portfolio production decreased by 4%
to 355,000 ounces - again on account of section 54 safety stoppages as well as
lower headgrades. 
 
Refined platinum production increased by 29% to 1,103,000 ounces (H1 2014:
856,000 ounces) due to a return to normal production following the 2014
strike. 
 
In line with the return to normal production levels, refined palladium output
also increased by 33%, while refined production of rhodium increased by 30%. 
 
Sales volumes exceeded production volumes, increasing by 11%. 
 
Operational outlook 
 
Equivalent refined Platinum production in H2 2015 will be higher than H1 2015
in line with the Platinum's normal seasonal production profile. It is
estimated that Platinum will produce and sell within the guided range of 2.3
million and 2.4 million platinum ounces in 2015. 
 
Due to the nature of the escalation of costs during the second half of the
year, it is estimated that cash unit costs will approximate R19,250 to R19,750
per equivalent refined ounce for 2015. 
 
DE BEERS 
 
 Key performance indicators  
                             Production volume(1)  Consolidated SalesVolume(2)  Price(3)  Revenue  UnderlyingEBITDA  UnderlyingEBIT  Capex  ROCE(4)  
                             '000 carats           '000 carats                  $/ct      $m       $m                $m              $m              
 De Beers                    15,628                13,323                       206       3,021    792               576             363    12%      
 Prior period                16,046                18,138                       192       3,823    983               765             311    11%      
 
 
  
 
(1)    Represents diamond production on a 100% basis and is not directly
comparable to consolidated sales volumes. 
 
(2)    Sales volumes (100% basis) were 14.0 million carats in H1 2015 (H1
2014: 19.0 million carats). 
 
(3)    Average realised price. 
 
(4)    Underlying EBIT used in the calculation of De Beers' attributable
return on capital employed is based on the last 12 months rather than on an
annualisation of the first six months' performance. This is due to the
seasonal sales and underlying EBIT profile of De Beers. 
 
Financial and operational overview 
 
De Beers' underlying EBIT decreased by 25% to $576 million (H1 2014: $765
million). This was due primarily to softer rough diamond demand, resulting in
weaker revenue, which was partly offset by lower operating costs and
favourable exchange rates. Unit costs declined by approximately 10% in
comparison with H1 2014, with the effects of inflation being more than offset
by foreign exchange benefits and cost control. 
 
Total sales decreased by 21% to $3.0 billion (H1 2014: $3.8 billion), with
rough diamond sales decreasing by 21% to $2.7 billion. Lower rough diamond
revenue reflected a 27% reduction in consolidated sales volumes to 13.3
million carats (H1 2014: 18.1 million carats). Average realised diamond prices
increased by 7% to $206/carat (H1 2014: $192/carat) owing to the sale of a
stronger product mix, despite a 4% lower average rough price index for the
period. 
 
In response to prevailing market conditions, De Beers has utilised operational
flexibility at some mines to make marginal adjustments to production plans.
Production costs and overheads are being tightly managed in order to minimise
the profit impact of the lower sales. 
 
Markets 
 
Consumer demand for diamond jewellery (measured in US dollar terms) slowed
towards the end of 2014 and into the first half of 2015, driven by slower
global economic growth, a weaker than expected Q1 in the US (weather related)
and dollar strength. Diamond jewellery retailers experienced lower than
expected sales growth over this period, which led to polished stock build-up
and, accordingly, weaker polished diamond purchases from the midstream and a
decline in polished prices. This, combined with liquidity and working capital
challenges, has put pressure on midstream finances, negatively affecting rough
diamond sales in the first half of the year. 
 
Rough diamond demand in the second half of the year will be dependent upon the
level of retailer restocking that takes place in preparation for the main
jewellery selling season in the fourth quarter. In the meantime, working
capital concerns in the midstream are likely to cause some short-term
volatility in rough diamond demand. 
 
Global demand for diamond jewellery (in US dollar terms) is predicted to be
stable in 2015. Downside risks remain, especially related to diamond jewellery
demand growth in China, as the country grapples with slower economic growth
and asset price challenges. 
 
Operating performance 
 
Mining and manufacturing 
 
De Beers' half-year production decreased by 3% to 15.6 million carats (H1
2014: 16.0 million carats). This was mainly attributable to lower grades and
reduced plant availability at Orapa. In addition, operational flexibility at
the Venetia and Jwaneng tailings treatment plants was utilised to reduce
production marginally in response to softer trading conditions. 
 
Debswana's production decreased by 4% to 11.5 million carats mainly as a
result of lower production at Orapa, offset by a 17% increase in output at
Jwaneng on the back of more consistent production and resultant improved
volumes at lower unit costs. Jwaneng Cut-8 waste mining continues to progress
well, with 60% of the 500 Mt of waste stripping required to expose the ore now
complete. Cut-8 will become Jwaneng's main source of ore in 2018. 
 
In South Africa, production at DBCM increased by 3%, mainly due to higher
production at Kimberley as a result of improved plant efficiencies and
improved resource performance. 
 
Production in Namibia decreased slightly, as higher grades and throughput at
the marine operations were offset by lower grades and throughput at the land
operations, largely as a result of short-term industrial action. The
construction of a new evaluation vessel for Debmarine Namibia is progressing
well, with delivery expected in 2017. In July, De Beers and the Government of
the Republic of Namibia announced agreement, in principle, on the terms of a
new 10-year sales agreement for the sorting, valuing and sales of all of
Namdeb Holdings' diamonds (production from Namdeb and Debmarine Namibia). 
 
In Canada, productivity improvements were partially offset by reduced grade at
both Victor and Snap Lake. Victor's grade was lower because of the scheduled
mining of a lower-grade area in line with the mine plan. Snap Lake's grade
reduced as a consequence of mining through a complex portion of the orebody;
the effect of this was accentuated by the challenges of storing water pending
amendment of the mine's discharge-water permit conditions. A temporary
amendment to the relevant conditions is now in place. 
 
Element Six experienced challenging trading conditions in H1 2015, due
primarily to pressure on revenues arising from the sharp contraction in
activity in the oil and gas drilling sector. Other key markets continue to
develop well, in particular those servicing the consumer electronics,
automotive and aerospace markets. The adverse impact of lower revenue on
profitability was partially offset by a cost-containment programme (including
a targeted restructuring programme) and favourable foreign exchange rates. The
previously announced manufacturing footprint optimisation programme is
progressing well and according to plan. 
 
Projects 
 
Construction of the Venetia underground mine in South Africa continues to
progress well, with the production and services shaft pre-sink both complete.
The project is 18% complete and remains on track for first production in 2021.
In Canada, the Gahcho KuŽ project in the Northwest Territories is also making
good progress. The project is 62% complete and is on track for first
production during H2 2016. 
 
Brands 
 
Forevermark continues to expand; the number of retail outlets where the brand
has a presence has increased by 13% over the last 12 months and it is now
available in more than 1,600 retail outlets in 35 markets. Inscription and
grading volumes have also increased as Forevermark increases penetration into
the key growth markets of China and India. In March 2015, Forevermark opened a
new inscription and grading facility in Surat, India, which has the potential
to process up to $500 million worth of diamonds annually. 
 
De Beers Diamond Jewellers maintains its portfolio focus on fast-growing
markets, with 36 stores (of which 13 are franchises) in 12 key consumer
markets around the world. 
 
Operational outlook 
 
Given the challenges faced in the midstream during the first half of 2015,
rough diamond demand is likely to remain constrained for the year as a whole,
with demand conditions in the second half of the year dependent upon the level
of retailer restocking that takes place. 
 
The continued strength of the US dollar, coupled with lower consumer diamond
demand growth in China, is likely to lead to stable global diamond jewellery
demand for the full year. In the mid- to long-term, the prospects for the
industry remain positive as the rise in the world's middle class is expected
to underpin stronger growth in demand for diamonds, outstripping growth in
production. 
 
Production guidance for 2015 has been revised to 29 to 31 million carats (on a
100% basis), subject to trading conditions. 
 
CORPORATE AND OTHER 
 
 Key performance indicators                  
                                             Revenue  UnderlyingEBITDA  UnderlyingEBIT  Capex  
                                             $m       $m                $m              $m     
 Segment                                     901      57                11              9      
 Prior period                                917      (98)              (150)           15     
 Other Mining and Industrial                 899      108               62              2      
 Prior period                                914      58                11              2      
 Exploration                                 -        (71)              (71)            -      
 Prior period                                -        (75)              (76)            -      
 Corporate activities and unallocated costs  2        20                20              7      
 Prior period                                3        (81)              (85)            13     
 
 
Financial and operating overview 
 
Other Mining and Industrial 
 
Underlying EBIT of $62 million represented a significant improvement of $51
million, mainly attributable to a stronger performance from the Lafarge Tarmac
joint venture. 
 
Lafarge Tarmac joint venture 
 
Anglo American's share in the underlying EBIT of the joint venture was $60
million, a $39 million increase. Improved market conditions, combined with
operating efficiencies and savings in input costs, led to improved margins and
cash generation. The outlook for the UK construction market remains positive
for H2 2015. 
 
Following the announcement on 7 July 2014 of an agreement in principle, the
Group reached a binding agreement on 24 July 2014 to sell its 50% ownership
interest in Lafarge Tarmac Holdings Limited (Lafarge Tarmac) to Lafarge SA
(Lafarge) for a minimum value of £885 million in cash, on a debt and cash-free
basis, and subject to other customary working capital adjustments. 
 
On 17 July 2015, Anglo American announced that it had completed the sale of
its 50% ownership interest in Lafarge Tarmac to Lafarge. Anglo American has
received cash proceeds of approximately £992 million ($1,559 million),
constituting the agreed minimum consideration of £885 million set out in the
July 2014 binding agreement and approximately £107 million of working capital
and other adjustments, subject to certain post-closing adjustments. 
 
Exploration 
 
Anglo American exploration expenditure of $71 million represented a decrease
of 5%, following reductions in diamonds, iron ore and nickel exploration
costs. Decreases are mainly attributable to an overall reduction in drilling
activities. 
 
Corporate activities and unallocated costs 
 
Underlying EBIT was a $20 million gain, an increase of $105 million. This is
primarily due to lower claims and settlements in the captive insurance company
in 2015 compared to the prior year. 
 
For further information, please contact: 
 
 Media                                                                                             Investors                                
 UKJames Wyatt-TilbyTel: +44 (0)20 7968 8759                                                       UKPaul GallowayTel: +44 (0)20 7968 8718  
 Emily BlythTel: +44 (0)20 7968 8481                                                               Edward KiteTel: +44 (0)20 7968 2178      
 South AfricaPranill RamchanderTel: +27 (0)11 638 2592 Shamiela LetsoaloTel: +27 (0)11 638 3112    Sarah McNallyTel: +44 (0)20 7968 8747    
 
 
Notes to editors: 
 
Anglo American is a global and diversified mining business that provides the
raw materials essential for economic development and modern life. Our people
are at the heart of our business. It is our people who use the latest
technologies to find new resources, plan and build our mines and who mine,
process and move and market our products - from bulk commodities and base
metals to precious metals and diamonds (through De Beers) - to our customers
around the world. Our diversified portfolio of products spans the economic
development cycle and, as a responsible miner, we are the custodians of
precious resources. We work together with our key partners and stakeholders to
unlock the long-term value that those resources represent for our
shareholders, but also for the communities and countries in which we operate -
creating sustainable value and making a real difference. Our mining
operations, growth projects and exploration and marketing activities extend
across southern Africa, South America, Australia, North America, Asia and
Europe. 
 
www.angloamerican.com 
 
Webcast of presentation: 
 
A live webcast of the results presentation, starting at 9.00am UK time on 24
July 2015, can be accessed through the Anglo American website at
www.angloamerican.com 
 
Note: Throughout this results announcement, '$' denotes United States dollars
and 'cents' refers to United States cents; underlying EBIT is operating profit
presented before special items and remeasurements and includes the Group's
attributable share of associates' and joint ventures' underlying EBIT; special
items and remeasurements are defined in note 7 to the Condensed financial
statements. Underlying earnings, is calculated as set out in note 10 to the
Condensed financial statements. Underlying EBITDA is underlying EBIT before
depreciation and amortisation in subsidiaries and joint operations and
includes the Group's attributable share of underlying EBITDA of associates and
joint ventures before depreciation and amortisation. Tonnes are metric tons,
'Mt' denotes million tonnes and 'kt' denotes thousand tonnes, unless otherwise
stated. 
 
Forward-looking statements: 
 
This announcement includes forward-looking statements. All statements other
than statements of historical facts included in this announcement, including,
without limitation, those regarding Anglo American's financial position,
business and acquisition strategy, plans and objectives of management for
future operations (including development plans and objectives relating to
Anglo American's products, production forecasts and reserve and resource
positions), are forward-looking statements. By their nature, such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Anglo American, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding Anglo American's present and future business
strategies and the environment in which Anglo American will operate in the
future. Important factors that could cause Anglo American's actual results,
performance or achievements to differ materially from those in the
forward-looking statements include, among others, levels of actual production
during any period, levels of global demand and commodity market prices,
mineral resource exploration and development capabilities, recovery rates and
other operational capabilities, the availability of mining and processing
equipment, the ability to produce and transport products profitably, the
impact of foreign currency exchange rates on market prices and operating
costs, the availability of sufficient credit, the effects of inflation,
political uncertainty and economic conditions in relevant areas of the world,
the actions of competitors, activities by governmental authorities such as
changes in taxation or safety, health, environmental or other types of
regulation in the countries where Anglo American operates, conflicts over land
and resource ownership rights and such other risk factors identified in Anglo
American's most recent Annual Report. Forward-looking statements should,
therefore, be construed in light of such risk factors and undue reliance
should not be placed on forward-looking statements. These forward-looking
statements speak only as of the date of this announcement. Anglo American
expressly disclaims any obligation or undertaking (except as required by
applicable law, the City Code on Takeovers and Mergers (the 'Takeover Code'),
the UK Listing Rules, the Disclosure and Transparency Rules of the Financial
Conduct Authority, the Listings Requirements of the securities exchange of the
JSE Limited in South Africa, the SWX Swiss Exchange, the Botswana Stock
Exchange and the Namibian Stock Exchange and any other applicable regulations)
to release publicly any updates or revisions to any forward-looking statement
contained herein to reflect any change in Anglo American's expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statement is based. 
 
Nothing in this announcement should be interpreted to mean that future
earnings per share of Anglo American will necessarily match or exceed its
historical published earnings per share. 
 
Certain statistical and other information about Anglo American included in
this announcement is sourced from publicly available third party sources. As
such, it presents the views of those third parties, though these may not
necessarily correspond to the views held by Anglo American. 
 
Click on, or paste the following link into your web browser, to view the
associated PDF document. 
 
http://www.rns-pdf.londonstockexchange.com/rns/9640T_-2015-7-23.pdf 
 
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