REG - Anglo American PLC - Anglo American plc preliminary results 2016 <Origin Href="QuoteRef">AAL.L</Origin> - Part 2
21/02/2017 07:07
- Part 2: For the preceding part double click ID:nRSU3767Xa
the year.
Production decreased by 24% to 307,200 tonnes (2015: 401,700 tonnes), driven
by expected significantly lower grades (2016: 0.67% vs. 2015: 0.92%). The mine
returned to processing lower average grades than in 2015, when it had
prioritised the processing of higher grade areas in order to offset the impact
of water shortages. In 2016, in contrast, a series of unusual weather events
resulted in the operations having to cope with excess water. Snowfall late in
2015, and its subsequent melting, caused dewatering problems in the pit, while
significant snowfall in 2016 (when more than 10 metres was recorded, 30%
higher than average) interrupted ore extraction, particularly from the mine's
higher altitude and higher grade areas, which affected the ability to feed
high grade ore to the plants. In addition, a seven-day strike affected
production in September, and there were disruptions in November and December
owing to illegal industrial action by contractor unions. In spite of the
production challenges, unit costs were only 5% higher than in 2015, at 156
c/lb (2015: 148 c/lb), as cost-reduction initiatives across all areas of the
operation partly compensated for the lower output.
Record concentrate production was achieved at Collahuasi; Anglo American's
attributable production increased by 11% to 222,900 tonnes (2015: 200,300
tonnes). Strong, sustained plant performance, following rectification work
undertaken in 2015, was supported by higher grades (2016: 1.22% vs. 2015:
1.15%). This was offset by reduced cathode production following the closure of
the higher-cost oxide plant at the end of 2015. Unit costs decreased by 19% to
111 c/lb (2015: 137 c/lb), benefiting from the higher production as well as
from an ongoing focus on reducing costs at the operation.
Production at El Soldado increased by 31% to 47,000 tonnes (2015: 36,000
tonnes) as a result of improved throughput and higher grades. Unit costs
declined by 19% to 184 c/lb (2015: 228 c/lb), reflecting the benefits of both
the higher production and the implementation of the optimised mine plan from
the start of the year. In July 2016, the unionised workforce at El Soldado
went on a 13-day strike before agreement was reached with the company on a new
remuneration offer. Management continued to optimise the mine plan following
changes made to sequencing in response to low prices during 2016. The
redesigned mine plan for El Soldado is yet to receive permitting approval and
therefore we decided, in February 2017, to temporarily suspend mining
operations, pending appeal to the regulator and/or amendments being made to
the mine plan. Work continues with Sernageomin (Chile'
s National Geology and Mining Service) on securing appropriate licences for
this revised mine plan.
Operational outlook
Production in 2017 is expected to be in line with that in 2016. Higher
throughput at Collahuasi is expected to be offset by lower grades. At Los
Bronces, recovery from the weather- and strike-related stoppages in 2016 is
likely to be affected by increasing ore hardness, thereby constraining plant
performance. Production guidance for 2017 remains unchanged at 570,000-600,000
tonnes.
In the next two years it will be necessary to replace the stator motors on
each of the two ball mills on the key Line 3 at Collahuasi (responsible for
around 60% of plant throughput). This work is planned for 2018 and 2019;
however, this may be brought forward for operational reasons (estimated impact
of each change on attributable production of 20,000-25,000 tonnes).
NICKEL, NIOBIUM AND PHOSPHATES
Key performance indicators
Production volume Salesvolume Price Unit cost* Revenue* UnderlyingEBITDA* UnderlyingEBITDAmargin UnderlyingEBIT* Capex* ROCE*
t t c/lb c/lb(1) $m $m(2) $m(2) $m
Nickel segment 44,500 44,900 431 350 426 57 13% (15) 62 (1)%
Prior year 30,300 32,000 498 431 146 (3) (2)% (22) 26 (1)%
(1) C1 cash costs (c/lb).
(2) Nickel segment includes $10 million projects and corporate costs (2015:
$12 million).
Production volume Salesvolume Price Unit cost* Revenue* UnderlyingEBITDA* UnderlyingEBITDAmargin UnderlyingEBIT* Capex* ROCE*
kt kt $/t $/t $m $m(2) $m(2) $m
Niobium and Phosphates(1)) - - - - 495 118 24% 79 26 19%
Prior year - - - - 544 146 27% 119 50 14%
Niobium 4.7 4.6 - - 137 41 30% 21 - 6%
Prior year 6.3 5.1 - - 111 40 36% 33 26 6%
Phosphates 864 973 354 - 358 80 22% 61 26 50%
Prior year 1,111 1,060 479 - 433 111 26% 91 24 30%
(1) Metrics relating to 2016 include results up to the date of disposal, 30
September 2016. Prior year metrics include results for the full year to 31
December 2015.
(2) Niobium and Phosphates also include $3 million and $5 million of projects
and corporate costs for year to date September 2016 and full year 2015,
respectively.
Financial and operating overview
The sale of Niobium and Phosphates to China Molybdenum Co Ltd. was completed
on 30 September 2016.
Nickel
Nickel's underlying EBITDA was $57 million, reflecting lower cash costs and
higher volumes following the successful rebuild of Barro Alto's furnaces, with
the operation reaching nameplate capacity in the third quarter of 2016, as
well as the favourable impact of the weaker Brazilian real. These benefits
were partly offset by a decline in the average nickel price for the year, cost
inflation and lower energy surplus sales. Barro Alto's operating results were
capitalised until October 2015, when the project began commercial production.
Nickel unit costs decreased by 19% to 350 c/lb (2015: 431 c/lb), mainly
attributable to increased production volumes from Barro Alto, favourable
exchange rates, lower energy costs and consumables, partially offset by
inflation.
Niobium
Underlying EBITDA was flat year-on-year at $41 million (2015: $40 million),
with higher sales volumes from Boa Vista Fresh Rock (BVFR) and lower cash
costs offsetting lower prices and the impact of the sale of the business.
Underlying EBITDA from BVFR was capitalised during January and February 2016,
with commercial production being achieved in March 2016.
Phosphates
Underlying EBITDA of $80 million decreased by 28% (2015: $111 million), driven
primarily by the sale of the business, as well as lower sales pricing and
inflation, partially offset by a reduction in operating costs.
Markets
2016 2015
Average market price(1) (c/lb) 436 536
Average realised price(2) (c/lb) 431 498
(1) The average market price is the LME nickel price, from which
ferronickel pricing is derived. Ferronickel is traded based on discounts or
premiums to the LME price, depending on market conditions, supplier products
and consumer preferences.
(2) Differences between market prices and realised prices are largely due
to variances between the LME and ferronickel price.
Nickel
The average LME nickel cash settlement price decreased by 19% to 436 c/lb
(2015: 536 c/lb).
Concerns about global economic growth put significant downward pressure on
metal prices, particularly through the second half of 2015 and the first
quarter of 2016. Despite these concerns, nickel demand improved strongly
during the year, while supply contracted for the second consecutive year,
resulting in a market deficit. Demand, which had grown by 1.2% in 2015,
increased by 8.3% in 2016, supported by strong growth in global stainless
steel production, which rose by 5.3% (2015: 0.2%). With Chinese nickel pig
iron (NPI) production declining, price-led cutbacks at other nickel producers
and lower availability of nickel-bearing stainless steel scrap, the nickel
market tightened, while a shortage of nickel-iron units (ferronickel, NPI and
stainless steel scrap) led to ferronickel, which had traded at a discount to
the LME price, starting to command a premium to the LME price.
Niobium
Worldwide demand for ferroniobium decreased in 2016. Demand from the key
markets of China and North America was particularly muted at the beginning of
the year, attributable to overcapacity in steel production, and the effect of
the weaker oil and gas sector.
Phosphates
The average MAP CFR Brazil price was $354/tonne, 26% lower than for the
equivalent period in 2015 ($479/tonne), as a result of increased global supply
and weaker than expected demand in the major markets - the US, China and
India. In Brazil, demand for phosphate fertilisers from January to September
2016 was around 10.2 million tonnes, a 6.5% increase. This strong demand was
driven by favourable weather conditions, lower fertiliser prices, an
attractive barter ratio, the weaker Brazilian real (which supported farmers'
earnings) and increased availability of funding to farmers.
Operating performance
Nickel
Nickel output increased by 47% to 44,500 tonnes (2015: 30,300 tonnes)
following the successful rebuild of the Barro Alto furnaces, which are now
producing at close to nameplate capacity. Codemin's production of metal was in
line with the previous year at approximately 9,000 tonnes.
Niobium
At the point of disposal, production was in line with the prior year at 4,700
tonnes (Q3 2015: 4,700 tonnes; FY 2015: 6,300 tonnes). This was despite two
shutdowns; the first in the first quarter to reduce stock levels and
facilitate site maintenance and work on residue disposal; and the second, a
planned stoppage in May in order to implement the downstream metallurgy
project. Following the project's implementation, plant performance was strong,
with an all-time production record achieved in July.
Phosphates
At the time of disposal in the third quarter, fertiliser production was 0.9
million tonnes (Q3 2015: 0.8 million tonnes; FY 2015: 1.1 million tonnes),
with the increase being attributable to strong granulation plant performance
at both sites and favourable operational conditions, which allowed two
separate planned maintenance stoppages (scheduled for January and March 2016)
to be combined. Phosphoric acid production was also boosted as a result of
increased plant stability and higher equipment availability at both sites.
Dicalcium phosphate production was higher because of improved plant
performance (principally lower idle time at Cubatao and a reduction in time
spent on tank maintenance at Catalao), as well as higher phosphoric acid
availability.
Operational outlook
Nickel
Production guidance for 2017 is approximately 45,000 tonnes (previously
42,000-45,000 tonnes).
IRON ORE AND MANGANESE
Key performance indicators
Productionvolume Salesvolume Price Unit cost* Revenue* UnderlyingEBITDA* Underlying EBITDA margin UnderlyingEBIT* Capex* ROCE*
Mt(1) Mt $/t(2) $/t(3) $m $m $m $m
Iron Ore and - - - - 3,426 1,536 45% 1,275 269 12%
Manganese
Prior year - - - - 3,390 1,026 30% 671 1,422 5%
Kumba Iron Ore 41.5 42.5 64 27 2,801 1,347 48% 1,135 160 51%
Prior year 44.9 47.8 53 31 2,876 1,011 35% 739 523 26%
Iron Ore Brazil 16.1 16.2 54 28 - (6) - (6) 109 (1)%
Prior year 9.2 8.5 41 60 - (20) - (21) 899 (1)%
Samancor(4) 3.3 3.4 - - 625 258 41% 209 - 59%
Prior year 3.3 3.3 - - 514 104 20% 22 - 4%
Projects and Corporate - - - - - (63) - (63) - -
Prior year - - - - - (69) - (69) - -
(1) Iron Ore Brazil production is Mt (wet basis).
(2) Prices for Kumba Iron Ore are the average realised export basket price
(FOB Saldanha). Prices for Iron Ore Brazil are the average realised export
basket price (FOB Au) (wet basis).
(3) Unit costs for Kumba Iron Ore are on an FOB dry basis. Unit costs for
Iron Ore Brazil are on an FOB wet basis.
(4) Production, sales and financials include ore and alloy.
Financial and operating overview
Kumba
Underlying EBITDA increased by 33% to $1,347 million (2015: $1,011 million),
mainly due to a 21% increase in the average realised FOB export iron ore price
from $53/tonne to $64/tonne, partially offset by lower sales volumes. Lump-
and ore-quality benefits resulted in the average realised iron ore price of
$64/tonne being higher than the average iron ore benchmark price of $58/tonne.
Unit costs decreased by 13% to $27/tonne (2015: $31/tonne), driven by the pit
reconfiguration at Sishen to a lower cost shell, which included restructuring
the operation, and the benefit of the weaker South African rand. The pit
reconfiguration resulted in lower volumes, partially offset by productivity
gains in mining and processing operations. The average CFR break-even price
achieved was $29/tonne in 2016.
Sales volumes decreased by 11% to 42.5 Mt (2015: 47.8 Mt), reflecting the 10%
decline in production volumes at Sishen. Total finished product stock reduced
to 3.5 Mt (2015: 4.7 Mt), in line with the optimum level of around 3 Mt.
Iron Ore Brazil
Iron Ore Brazil's underlying EBITDA loss was $6 million (2015: $20 million
loss). Minas-Rio continued to capitalise its operating results in 2016, as the
asset remained in the ramp-up phase throughout the year. Iron Ore Brazil's
capitalised operating EBITDA amounted to $269 million (2015: $239 million
loss), reflecting higher total sales volumes and an improvement in realised
iron ore prices, as well as lower unit costs. Minas-Rio's average FOB realised
price in 2016 was $54 per wet metric tonne (equivalent to $59 per dry metric
tonne). Operating results ceased to be capitalised from January 2017.
Samancor
Underlying EBITDA increased by $154 million to $258 million (2015: $104
million), driven by a recovery in manganese ore prices, a 6% increase in ore
sales, and lower costs partly attributable from the restructuring of the South
African manganese operations.
The restructuring of the South African manganese operations was completed in
the first quarter of the year. This reduced the operating cost base and
increased production flexibility in response to the sharp decline in the
manganese index ore price in 2015, which carried through into the first half
of 2016. During the second six months, however, the price staged a dramatic
recovery from its lows.
Markets
Iron ore
2016 2015
Average market price (IODEX 62% Fe CFR China - $/tonne) 58 56
Average market price (MB 66% Fe Concentrate CFR- $/tonne) 69 67
Average realised price (Kumba export - $/tonne) (FOB Saldanha)(1) 64 53
Average realised price (Minas-Rio - $/tonne) (FOB wet basis)(2) 54 41
(1) Kumba's outperformance over the Platts 62% Fe CFR China index is
primarily representative of the superior iron (Fe) content and the relatively
high proportion (approximately 64%) of lump in the overall product portfolio.
(2) Iron Ore Brazil produces a higher grade product than the Platts 62% Fe
indices, with pricing reflecting the increased Fe content and lower gangue.
Platts 62% is referred to for comparison purposes only.
Iron ore prices fared better than in 2015, but with significant volatility
through the year. The IODEX 62% Fe CFR China spot price increased by 4% to an
average of $58/tonne, trading in a yearly range of
$40-$84/tonne. The improvement in downstream demand in China, combined with
steel capacity closures as part of the country's supply-side reforms and
environmental improvement drive, supported both steel and iron ore prices.
This positive demand environment and improved mill margins have driven an
increase in Chinese crude steel production, while the progressive withdrawal
of marginal domestic iron ore supply has boosted demand for seaborne iron ore
materials. Rallying metallurgical coal prices have also been supportive of
demand for high grade ores, with quality price premiums increasing through
most of the second half of 2016.
Manganese
Following a 57% reduction in the index ore price during 2015, the index ore
price increased by 341% during 2016, closing at $9.01/dmtu (44% Mn CIF China).
The price recovery was driven by demand from China, where strong
government-led infrastructure spending has resulted in higher steel prices.
Operating performance
Kumba
Sishen's production decreased by 10% to 28.4 Mt (2015: 31.4 Mt), consistent
with the mine's lower-cost pit configuration. Waste mined reduced to 137.1 Mt
(2015: 222.2 Mt), in line with lower production. Run rates for the year were
affected by the restructuring; higher levels of rainfall and safety stoppages
in the first six months also had an adverse impact on production. Following
successful completion of the restructuring, the second half of the year showed
a considerable improvement as benefits attributable to improved mining
productivity, as well as access to low strip ratio ore and higher plant
yields, started to come through.
Implementation of the mining work management element of the Operating Model at
Sishen resulted in significant improvements in the amount of ore and waste
mined. Work management for the reconfigured mining set-up is now under way.
Kolomela mine produced a record 12.7 Mt, 6% more than the 12.1 Mt produced in
2015, mainly owing to debottlenecking and optimisation of the plant. Waste
mining increased by 10% to 50.2 Mt, in line with higher production levels.
At Kolomela, implementation of the Operating Model in the plant area has seen
a marked improvement in work execution, with scheduled work completion now in
excess of 95%. Screening-tonnes throughput improved by 18% during the go-live
phase, and a further 18% during the stabilisation phase. The plantÕs process
stability has also improved significantly.
Mining activities at Thabazimbi ceased on 30 September 2015, and processing
activities on 31 March 2016. Closure of the mine has proceeded according to
plan. Sishen Iron Ore Company Proprietary Limited, a subsidiary of Kumba, and
ArcelorMittal South Africa Limited (AMSA) have signed an agreement for the
transfer of the Thabazimbi mine, including all remaining assets and
liabilities, to AMSA, which will become effective once all the conditions
precedent have been met.
The Dingleton project is substantially complete, with only a small number of
households still to be relocated.
Iron Ore Brazil
Iron ore production from Minas-Rio(1) increased by 76% to 16.1 Mt (2015: 9.2
Mt), as the operation continues its ramp-up. There has been an improved
operational performance since July 2016, when a licence was granted to access
the Step 2 area.
Samancor
Manganese ore production was broadly in line with the prior year at 3.1 Mt
(attributable basis). Production from the Australian operations was 2% lower
owing to certain ore feed constraints. This was offset by a 5% increase from
the South African operations following the draw-down on the Wessels
concentrate stockpiles in response to higher market prices.
Production of manganese alloys decreased by 35% to 137,800 tonnes
(attributable basis). This was due to power shortages in Tasmania, which
resulted in a five month suspension of production at two of the four furnaces.
The furnaces were subsequently brought back on line, with a return to full
production rates during September. In South Africa, manganese alloy production
declined by 46%, following the decision in May 2015 to temporarily close three
of the four furnaces there.
Operational outlook
Kumba
Production guidance for Sishen is 27-28 Mt for 2017, with a waste movement
target of 150-160 Mt. The restructuring is expected to contribute to annual
cost savings for 2017. In the medium term, the mine will continue to explore
opportunities to fill any spare plant capacity through the use of low grade
stockpiles. Further improvements in equipment efficiencies are expected over
the medium term.
At Kolomela, annual production is expected to be 13-14 Mt for 2017. Waste
removal is expected to increase to around 50-55 Mt in support of the increased
annual output.
Kumba has a target unit cost of c. $30/tonne. Full year total sales volume
guidance for 2017 is 40-42 Mt.
Iron Ore Brazil
Iron Ore Brazil continues to focus on operational stability and on obtaining
the Step 3 licences required for the operation to access the full range of
run-of-mine grades and reach its nameplate capacity of 26.5 Mt (wet basis).
Approval of the Step 2 licences, which had been expected in the first half of
2016, was provisionally granted in July 2016, with final approval in October
2016. The Step 2 area is expected to yield c. 45 million saleable tonnes of
ore, most of which is anticipated to be mined by the time the licences for
Step 3 (which had originally been expected in early 2018, and are now forecast
for late 2018) are secured.
As a result of these licensing delays, production guidance for 2017 has been
lowered to 16-18 Mt (previously 19-21 Mt), and for 2018 to 15-18 Mt
(previously 22-24 Mt), subject to the timing of the Step 3 licences approval.
After the Step 3 licences have been secured, the operation is expected to be
in a position to ramp-up to produce at its nameplate capacity rate of 26.5 Mt
per year.
In 2017, unit costs are expected to be approximately $27/tonne (wet basis, at
2016 average FX rate).
(1) Iron Ore Brazil production is on a wet basis, unless otherwise stated.
Samancor
Australian manganese ore production guidance of 2.1 Mwmt remains unchanged,
albeit with an increased proportion of Premium Concentrate ore (PCO2) in the
product mix. The PCO2 fines product has a manganese content of approximately
40%, which leads to both grade and product-type discounts when referenced to
the high grade 44% manganese lump ore index. South Africa Manganese ore
production will remain configured for an optimised production rate of 2.9 Mwmt
pa (100% basis), although the business will continue to act opportunistically
when market fundamentals are supportive.
Legal
Residual mining rights
On 12 October 2016, South Africa's Department of Mineral Resources (DMR)
granted the residual 21.4% undivided share of the mining right for the Sishen
mine to Sishen Iron Ore Company Proprietary Limited (SIOC). As a result of the
grant of the residual 21.4% undivided share, SIOC is now the sole and
exclusive holder of the right to mine iron ore and quartzite at the Sishen
mine. This residual mining right will be incorporated into the 78.6% Sishen
mining right that SIOC successfully converted in 2009.
Tax Matters
On 3 February 2017, the South African Revenue Service and Sishen Iron Ore
Company Proprietary Limited agreed on a R2.5 billion (approximately $185
million) settlement of a tax matter relating to the period covering 2006 to
2015 inclusive. The Group had previously provided for R1.5 billion and an
additional R1.0 billion has been provided for this year.
COAL
Key performance indicators
Production volume Salesvolume Price Unit cost* Revenue* Underlying EBITDA* Underlying EBITDA margin Underlying EBIT Capex* ROCE*
Mt(1) Mt(2) $/t(3) $/t(4) $m $m $m $m
Coal 94.8 94.7 - - 5,263 1,646 31% 1,112 613 29%
Prior year 94.9 96.8 - - 4,888 1,046 21% 457 941 9%
Australia and 30.4 30.3 112 51 2,547 996 39% 661 523 30%
Canada
Prior year 33.5 34.0 90 55 2,374 586 25% 190 837 6%
South Africa 53.8 53.6 60 34 2,109 473 22% 366 90 41%
Prior year 50.3 51.6 55 39 1,893 345 18% 230 104 19%
Colombia 10.7 10.8 56 28 607 235 39% 143 - 17%
Prior year 11.1 11.2 55 31 621 168 27% 90 - 11%
Projects and - - - - - (58) - (58) - -
corporate
Prior year - - - - - (53) - (53) - -
(1) Production volumes are saleable tonnes.
(2) South African sales volumes exclude non-equity traded sales volumes
of 6.1 Mt (2015: 3.4 Mt).
(3) Australia is the weighted average metallurgical coal sales price
achieved. South Africa is the weighted average export thermal coal price
achieved.
(4) FOB cost per saleable tonne, excluding royalties. Australia and Canada
excludes study costs and Callide. South Africa unit cost is for the export
operations.
Financial and operating overview
Australia and Canada
Underlying EBITDA increased by 70% to $996 million, reflecting a 24% increase
in the metallurgical coal realised price, and cost reductions across the
business. Underlying EBITDA further benefited from an increase in the
proportion of hard coking coal production to 65% of total export production
(2015: 60%). Although total production declined following a number of
divestments, unit costs decreased by 7% in US dollar terms (7% in local
currency) following the implementation of significant cost-reduction
initiatives, particularly at the opencut operations, and a corporate
restructure. Local currency (Australian dollar) unit costs were the lowest
since 2006.
Excluding the impact of divestments, total coal production was 4% lower than
in 2015. The decrease was attributable to a reduction in export thermal
production at Drayton, where mining activities ceased in October, following
the New South Wales Planning Assessment Commission decision not to support
approval of the Drayton South project. Excluding the divestment of Foxleigh
(completed on 29 August 2016), metallurgical coal production was in line with
the prior year.
The divestment of Callide was completed on 31 October 2016.
Grosvenor produced its first longwall coal in May 2016, seven months ahead of
schedule and more than $100 million under its total capital budget. While all
equipment has been fully commissioned, ramp-up to normal production is
currently being hampered by challenging geological conditions.
South Africa
Underlying EBITDA increased by 37% to $473 million. This was mainly
attributable to a 9% increase in the export thermal coal price,
notwithstanding 4% lower export sales volumes as a result of planned
destocking in 2015 (which was not repeated in 2016), facilitated by accessing
additional rail and port capacity. Despite continued inflationary pressure in
South Africa, unit costs reduced by 13% to $34/tonne owing to the weaker rand
and a 2% reduction in on-mine rand unit costs. On-mine local currency costs
have now reduced in line with those reported in 2013, as a result of the
business's cost-saving and productivity initiatives.
Production increased by 7%, with a 9% increase from the Export mines following
implementation of productivity improvement initiatives, and a 7% increase at
the Eskom-tied mines, due largely to the recommissioning of the third dragline
at New Vaal following a maintenance shutdown.
Colombia
Underlying EBITDA increased by 40% to $235 million, attributable mainly to
stronger prices and lower costs following planned lower production to remove
the highest cost capacity, and by the sustained benefits of significant
cost-reduction programmes implemented in 2015.
Markets
Metallurgical coal
2016 2015
Average market price for premium low-volatility hard coking coal ($/tonne)(1) 114 102
Average market price for premium low-volatility PCI ($/tonne)(1) 88 84
Average realised price for premium low-volatility hard coking coal ($/tonne) 119 94
Average realised price for PCI ($/tonne) 77 77
(1) Represents the quarterly average benchmark for premium low-volume hard
coking coal and PCI.
Metallurgical coal prices started to recover in the first six months, in a
balanced market. In the second half, China's imposition of safety,
environmental and working time controls on its domestic mines, along with
supply disruptions arising from geological difficulties encountered at several
mines in Australia, caused significant market tightness, resulting in a sharp
increase in both spot and contract prices. The spot metallurgical coal price
averaged $199/tonne (TSI Premium HCC FOB Australia East Coast Port $/tonne) in
the second half, 134% higher than in the first six months, with the premium
for high grade material increasing owing to tightness in the premium HCC
market. Supply controls on domestic production in China were relaxed towards
the end of the year, while exports from the US slowly increased in the second
half as some mines there came out of bankruptcy protection. Australian supply,
however, remained broadly stable throughout the year, with producers taking a
cautious view on capital investment.
Thermal coal
2016 2015
Average market price ($/t, FOB Australia)(1) 66 59
Average market price ($/t, FOB South Africa)(1) 64 57
Average market price ($/t, FOB Colombia)(1) 58 52
Average realised price - Export Australia ($/tonne, FOB) 55 55
Average realised price - Export South Africa ($/tonne, FOB) 60 55
Average realised price - Domestic South Africa ($/tonne) 17 19
Average realised price - Colombia ($/tonne, FOB) 56 55
(1) Thermal coal price and realised price will differ according to timing
and quality differences.
Chinese domestic supply rationalisation led to rises in the domestic thermal
coal price, thereby incentivising imports. Consequently, Chinese import demand
increased in the second half of the year, lifting global thermal coal prices.
In the Pacific, the globalCOAL Newcastle 6,000 kcal/kg FOB Australia index
increased by 12% to $66/tonne. This uplift in demand and subsequent increase
in price helped pull up both the South African (API4) and Colombian (API10)
indices by 12%. On the supply side, supply from Australia and Indonesia
decreased slightly, while Russian exports into the Pacific were marginally
higher on the back of increased Chinese import demand.
Operating performance
Australia and Canada
Excluding the impact of divestments, production from the Australian mines
decreased by 4% owing to the cessation of mining activities at Drayton
(thermal coal). Production from the remaining operations was flat year-on-year
as geological issues at Grasstree, and a planned reduction at Capcoal's open
cut, which moved to a five-day operation, were offset by the ramp-up of
Grosvenor, productivity improvements at Dawson and Jellinbah, as well as
another record year at Moranbah.
Excluding the divestment of Foxleigh, Australian export metallurgical coal
production was in line with 2015. HCC production increased by 2%, owing to the
ramp-up of Grosvenor (benchmark HCC producer), productivity gains and a change
in mix to higher value metallurgical coal production at Dawson.
South Africa
Total production from the export operations increased by 9% to 24.6 million
tonnes following the implementation of various productivity improvement
initiatives at all managed sites, the introduction of enhanced shift systems
at Goedehoop and Zibulo, and plant innovations at Kleinkopje and Goedehoop
that have delivered incremental saleable production from previously discarded
material.
Export sales at 19.1 Mt were the second highest recorded, albeit 4% below
2015, when prior year sales volumes benefited from a planned 1 Mt drawdown of
inventory.
Eskom mine production increased by 7%, with New Vaal's third dragline back in
production following maintenance in the second half of 2015, and an improved
performance at Kriel's underground operations.
Colombia
Anglo American's attributable output from its 33.3% shareholding in Cerrejon
decreased by 4% to 10.7 Mt, following heavy rainfall in May and June, and
ongoing planned reductions to remove the highest-cost capacity.
Operational outlook
Australia and Canada
Metallurgical coal production in 2017 is expected to be 19-21 Mt. This is
below previous guidance owing to the divestment of Foxleigh, the restructuring
of Dawson and Capcoal open cut to lower cost, lower volume operations, and
current geological issues at Grosvenor.
Export Thermal Coal
In 2017, export production from South Africa and Colombia has increased to
29-31 Mt (previously 28-30 Mt).
CORPORATE AND OTHER
Key performance indicators
Revenue UnderlyingEBITDA* UnderlyingEBIT* Capex*
$m $m $m $m
Segment 4 (123) (150) 14
Prior year 925 (11) (64) 16
Other Mining and Industrial - (2) (2) -
Prior year 921 110 64 3
Exploration - (107) (107) -
Prior year - (152) (154) -
Corporate activities and unallocated costs 4 (14) (41) 14
Prior year 4 31 26 13
Financial and operating overview
Corporate and Other reported an underlying EBITDA loss of $123 million (2015:
$11 million loss).
Other Mining and Industrial
Underlying EBITDA from Other Mining and Industrial fell from a contribution of
$110 million to a loss of $2 million following the disposal of Anglo
American's interest in the Lafarge Tarmac joint venture in July 2015.
Exploration
Exploration expenditure decreased to $107 million (2015: $152 million),
reflecting general reductions across all commodities. The decreases were
mainly attributable to an overall reduction in drilling activities.
Corporate activities and unallocated costs
Underlying EBITDA amounted to a $14 million loss (2015: $31 million gain),
driven primarily by a year-on-year loss of $62 million that was recognised in
the Group's self-insurance entity, reflecting lower premium income and higher
net claims and settlements during 2016.
This was offset to some extent by an 11% decrease in corporate costs ($57
million), of which $56 million represented a foreign exchange gain compared
with 2015. The reduction in corporate costs was mitigated by a 10% decrease in
the recharge and allocation of corporate costs to business units of $40
million, reflecting the lower corporate cost base.
For further information, please contact:
Media Investors
UKJames Wyatt-Tilbyjames.wyatt-tilby@angloamerican.comTel: +44 (0)20 7968 8759 UKPaul Gallowaypaul.galloway@angloamerican.comTel: +44 (0)20 7968 8718
Marcelo Esquivelmarcelo.esquivel@angloamerican.comTel: +44 (0)20 7968 8891 Trevor Dyertrevor.dyer@angloamerican.comTel: +44 (0)20 7968 8992
South AfricaPranill Ramchanderpranill.ramchander@angloamerican.comTel: +27 (0)11 638 2592 Ann Farndellann.farndell@angloamerican.comTel: +27 (0)11 638 2786 Sheena Jethwasheena.jethwa@angloamerican.comTel: +44 (0)20 7968 8680
Notes to editors:
Anglo American is a globally diversified mining business. Our portfolio of
world-class competitive mining operations and undeveloped resources provides
the raw materials to meet the growing consumer-driven demands of the world's
developed and maturing economies. Our people are at the heart of our business.
It is our people who use the latest technologies to find new resources, plan
and build our mines and who mine, process and move and market our products to
our customers around the world.
As a responsible miner - of diamonds (through De Beers), platinum and other
precious metals, copper, nickel, iron ore and coal - we are the custodians of
what are precious natural resources. We work together with our key partners
and stakeholders to unlock the long-term value that those resources represent
for our shareholders and for the communities and countries in which we operate
Ð creating sustainable value and making a real difference.
www.angloamerican.com
Webcast of presentation:
A live webcast of the results presentation, starting at 10.15am UK time on 21
February 2017, can be accessed through the Anglo American website at
www.angloamerican.com
Note: Throughout this results announcement, '$' denotes United States dollars
and 'cents' refers to United States cents. 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 Ore Reserves and Mineral
Resources), 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 AmericanÕs 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.
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