REG - Anglo American PLC - Anglo American Preliminary Results 2017 <Origin Href="QuoteRef">AAL.L</Origin> - Part 2
22/02/2018 07:07
- Part 2: For the preceding part double click ID:nRSV5842Fa
Unit cost* Revenue* UnderlyingEBITDA* Underlying EBITDA margin UnderlyingEBIT* Capex* ROCE*
Mt(1) Mt $/t(2) $/t(3) $m $m $m $m
Iron Ore and - - - - 5,831 2,357 40% 1,978 252 21%
Manganese
Prior year - - - - 3,426 1,536 45% 1,275 269 12%
Kumba Iron Ore 45.0 44.9 71 31 3,486 1,474 42% 1,246 229 47%
Prior year 41.5 42.5 64 27 2,801 1,347 48% 1,135 160 51%
Iron Ore Brazil 16.8 16.5 65 30 1,405 435 31% 335 23(5) 6%
Prior year 16.1 16.2 54 28 - (6) - (6) 109 (1)%
Samancor(4) 3.6 3.6 - - 940 529 56% 478 - 115%
Prior year 3.3 3.4 - - 625 258 41% 209 - 59%
Projects and corporate - - - - - (81) - (81) - -
Prior year - - - - - (63) - (63) - -
(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 Açu) (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.
(5) $80 million of capital expenditure offset by capitalised cash inflows
of $31 million relating to working capital in place at 31 December 2016, in
addition to a $25 million inflow relating to capex hedges.
Financial and operating overview
Kumba
Underlying EBITDA of $1,474 million was 9% higher (2016: $1,347 million), with
a 6% improvement in total sales volumes and an 11% increase in the realised
price being offset by a 15% increase in FOB unit costs. The increase in unit
costs was largely driven by the impact of the stronger South African rand
(rand FOB unit costs increased by 2%) and cost inflation, including higher
rail costs. This was partly offset, however, by productivity gains in mining
and processing that led to an 8% rise in production, and through a higher
premium achieved for lump product.
In line with higher production volumes, export sales volumes increased by 7%
to 41.6 Mt (2016: 39.1 Mt). Total finished product stock also increased to 4.3
Mt (2016: 3.5 Mt), reflecting the increase in output.
Iron Ore Brazil
Underlying EBITDA amounted to $435 million (2016: $6 million loss), reflecting
the operation's continued ramp-up to its current operating capacity and the
cessation of capitalisation of operating results since January 2017. The
average FOB realised price of $65/wet metric tonne (equivalent to $71/dry
metric tonne) was $11/tonne, or 20%, higher than that achieved in 2016. FOB
unit costs increased by 7% to $30/wet metric tonne (2016: $28/wet metric
tonne) as higher production volumes and the implementation of cost reduction
initiatives only partly offset the strengthening of the Brazilian real.
Samancor
Underlying EBITDA increased by $271 million to $529 million (2016: $258
million), driven mainly by significantly higher realised manganese ore and
alloy prices and a 7% increase in ore sales.
Markets
Iron ore
2017 2016
Average market price (IODEX 62% Fe CFR China - $/tonne) 71 58
Average market price (MB 66% Fe Concentrate CFR - $/tonne) 87 69
Average realised price (Kumba export - $/tonne) (FOB Saldanha) 71 64
Average realised price (Minas-Rio - $/tonne) (FOB wet basis) 65 54
Kumba's outperformance over the IODEX (Platts) 62% Fe CFR China index is
primarily representative of the higher iron (Fe) content and the relatively
high proportion (approximately 66%) of lump in the overall product portfolio.
Minas-Rio produces higher grade products than the reference product used for
the IODEX 62% Fe index. The pricing of Minas-Rio's products reflects the
higher Fe content and lower gangue of those products compared with the IODEX
62% reference. IODEX 62% is referred to for comparison purposes only.
Manganese
During 2017, the average benchmark manganese ore price (benchmark CRU 44% CIF
China) increased by 36% to $5.97/dmtu (2016: $4.38/dmtu), largely attributable
to higher Chinese steel production and limited ore supply in the market,
resulting from production cuts made in late 2015 and early 2016.
Operating performance
Kumba
Sishen's production increased by 10% to 31.1 Mt (2016: 28.4 Mt) following
improvements in mining productivity resulting from fleet efficiencies and
higher plant yields, brought about from the implementation of the Operating
Model. Consequently, the amount of waste mined rose, as planned, to 162 Mt
(2016: 137 Mt), an 18% increase. Additional operator training, changed shift
patterns, together with higher workforce attendance rates, yielded positive
results in the form of increased direct operating hours, enabling the mine to
reduce its reliance on contractors.
Kolomela's production increased by 9% to 13.9 Mt (2016: 12.7 Mt), also
reflecting productivity improvements following the roll-out of the Operating
Model. Waste mining volumes grew by 11% to 55.6 Mt (2016: 50.2 Mt), supporting
higher production levels. The Kolomela modular plant delivered 0.5 Mt,
although performance was affected by delays in the ramp-up of the crushing
plant.
Iron Ore Brazil
Minas-Rio's production of 16.8 Mt (wet basis) was 4% higher (2016: 16.1 Mt) as
the operation continued to ramp up its current operating capacity. The ramp-up
schedule was affected as mining operations were restricted to the remaining
Ore Reserves in the Step 2 licence area, which included lower grade ore.
Samancor
Manganese ore output increased by 11% to 3.5 Mt (attributable basis) (2016:
3.1 Mt). Production from the Australian operations was 7% higher owing to
increased concentrator throughput and higher yields as a result of favourable
weather and the availability of suitable feed types. The South African
operations increased production by 18%, taking advantage of stronger demand
and pricing and the sale of lower quality fines product.
Production of manganese alloys increased by 8% to 149,200 tonnes (attributable
basis)
(2016: 137,800 tonnes), mainly as a result of improved power availability at
the Australian operations. In South Africa, manganese alloy production
continued to utilise only one of the operation's four furnaces.
Operational outlook
Kumba
Kumba's full year production guidance for 2018 has been increased to 44-45 Mt
following the recent strong performance at both Sishen and Kolomela.
Sishen is expected to produce 30-31 Mt of product and mine 170-180 Mt of
waste.
Kolomela is expected to produce around 14 Mt, while waste removal, in support
of the increased annual output, is expected to be around 55-57 Mt.
Iron Ore Brazil
Minas-Rio continues to focus on obtaining the Step 3 operating licence
required for the operation to access the full range of run-of-mine ore grades
and target the operation's nameplate capacity of 26.5 Mt (wet basis). The Step
3 installation licence was granted in January 2018, following delays during
2017, which will allow the Step 3 construction work to proceed. As a
consequence of receiving the installation licence, the Provisional Operational
Authorisation ('APO') is expected before November 2018 and the full Step 3
operational licence by mid-2019.
Production guidance for 2018 has been lowered to 13-15 Mt (previously 15-18
Mt) as a result of the lower ore grades at the remaining Step 2 area and the
delays to the Step 3 operational licence process.
In 2018, unit costs are expected to increase as a result of lower production
volumes, and to be in the region of $35/wet metric tonne.
Samancor
Australian manganese ore production guidance of 2.1 Mwmt (100% basis) for 2018
remains unchanged. South African manganese ore production guidance has
increased by 8% to 3.4 Mwmt (100% basis), subject to continued strong market
demand.
Legal
Sishen consolidated mining right granted
Sishen's application to extend the mining right by the inclusion of the
adjacent Prospecting Rights was granted on 6 July 2017, and the process to
amend the Sishen mining right continues. Mining operations in this area will
only commence once the required environmental authorisation has been approved,
which is expected soon. The grant allows Sishen mine to expand its current
mining operations within the adjacent Dingleton area.
COAL
Financial and operational metrics
Productionvolume Salesvolume Price Unit cost* Revenue* UnderlyingEBITDA* Underlying EBITDA margin(5) UnderlyingEBIT* Capex* ROCE*
Mt(1) Mt(2) $/t(3) $/t(4) $m $m $m $m
Coal 48.9 49.0 - - 7,211 2,868 46% 2,274 568 67%
Prior year 50.7 50.6 - - 5,263 1,646 36% 1,112 613 29%
Metallurgical Coal 19.7 19.8 185 61 3,675 1,977 54% 1,594 416 86%
Prior year 20.9 20.7 112 51 2,547 996 39% 661 523 30%
Coal South Africa 18.6 18.6 76 44 2,746 588 32% 466 152 54%
Prior year 19.1 19.1 60 34 2,109 473 33% 366 90 41%
Cerrejón 10.6 10.6 75 31 790 385 49% 296 - 35%
Prior year 10.7 10.8 56 28 607 235 39% 143 - 17%
Projects and corporate - - - - - (82) - (82) - -
Prior year - - - - - (58) - (58) - -
(1) Production volumes are saleable tonnes. South African production volume
is export production only and excludes Eskom-tied operations volumes of 23.9
Mt (2016: 24.8 Mt) and other domestic production of 7.5 Mt (2016: 9.9 Mt).
Metallurgical Coal production volumes excludes thermal coal production volumes
of 1.6 Mt (2016: 9.5 Mt, including 5.6 Mt of domestic thermal coal).
(2) South African sales volumes exclude all domestic sales of 32.0 Mt (2016:
34.5 Mt) and non-equity traded sales of 7.6 Mt (2016: 6.1 Mt). Metallurgical
Coal sales volumes exclude thermal coal sales of 1.8 Mt (2016: 9.6 Mt,
including 5.4 Mt of domestic thermal coal).
(3) Metallurgical Coal is the weighted average hard coking coal and PCI
sales price achieved. Coal South Africa is the weighted average export thermal
coal price achieved.
(4) FOB cost per saleable tonne, excluding royalties. Metallurgical Coal
excludes study costs and Callide. Coal South Africa unit cost is for the
export operations.
(5) Excludes impact of third-party sales and Eskom-tied operations.
Financial and operating overview
Metallurgical Coal
Underlying EBITDA doubled to $1,977 million (2016: $996 million), owing to a
65% increase in the metallurgical coal realised price and higher production at
all three underground operations. This was partly offset by planned production
cuts at Dawson and Capcoal open cut operations and the impact of divestments
on output. Following the divestments of Foxleigh (a PCI producer) and Callide
(a domestic and export thermal coal producer), and the cessation of mining
activities at Drayton (an export thermal coal producer), the business now
produces a greater proportion of higher-margin hard coking coal (80% of total
production, compared with 53% in 2016).
Coal South Africa
Underlying EBITDA increased by 24% to $588 million (2016: $473 million),
mainly attributable to a 27% increase in the export thermal coal price. US
dollar unit costs for the export trade operations increased by 29% to
$44/tonne (2016: $34/tonne), owing to the stronger South African rand
($4/tonne impact), lower production ($4/tonne impact), mainly at Khwezela, and
cost-inflation pressures ($2/tonne).
The sale of the Eskom-tied domestic thermal coal operations consisting of New
Vaal, New Denmark, and Kriel collieries, as well as four closed collieries
(together, 'Eskom-tied operations') by Anglo Operations Proprietary Limited
and Anglo American Inyosi Coal Proprietary Limited to a wholly owned
subsidiary of Seriti Resources Holdings Proprietary Limited was announced on
10 April 2017 for a consideration payable, as at 1 January 2017, of R2.3
billion (approximately $164 million). The transaction is expected to complete
on 1 March 2018.
The sale of the New Largo thermal coal project and Old New Largo closed
colliery in South Africa (together, 'New Largo') by Anglo American Inyosi Coal
Proprietary Limited to New Largo Coal Proprietary Limited for R850 million
(approximately $71 million), was announced on 29 January 2018. The sale is
subject to conditions precedent customary for a transaction of this nature,
including regulatory approvals in South Africa. The transaction is expected to
close in the second half of 2018.
The financial results reported for the period ended 31 December 2017 include
the Eskom-tied domestic thermal coal operations and New Largo.
Cerrejón
Underlying EBITDA increased to $385 million (2016: $235 million), owing mainly
to higher export thermal coal prices, partly offset by a 2% decrease in sales
volumes.
Markets
Metallurgical coal
2017 2016
Average market price for premium low-volatility hard coking coal ($/tonne)(1) 188 143
Average market price for premium low-volatility PCI ($/tonne)(1) 119 97
Average realised price for premium low-volatility hard coking coal ($/tonne) 187 119
Average realised price for PCI ($/tonne) 125 77
(1) Represents average spot prices. Prior year prices were previously based on
the quarterly average benchmark and have been restated accordingly.
Average realised prices differ from the average market price owing to
differences in material grade and timing of contracts.
Prices in 2017 were supported by higher steel prices and strong demand
globally, as well as by supply constraints arising from wet weather in
Queensland in the second quarter.
Thermal coal
2017 2016
Average market price ($/tonne, FOB Australia) 89 66
Average market price ($/tonne, FOB South Africa) 84 64
Average market price ($/tonne, FOB Colombia) 78 58
Average realised price - Export Australia ($/tonne, FOB) 91 55
Average realised price - Export South Africa ($/tonne, FOB) 76 60
Average realised price - Domestic South Africa ($/tonne) 21 17
Average realised price - Colombia ($/tonne, FOB) 75 56
The average realised price for thermal coal will differ from the average
market price owing to timing and quality differences relative to the industry
benchmark. The difference in the realised price compared with the benchmark
price, between 2016 and 2017, reflects changing quality mix owing to a higher
proportion of secondary products being sold into the export market.
The thermal coal market saw the positive price effects of the Chinese domestic
coal production rationalisation, which supported coal imports into China and
lifted seaborne pricing. On the supply side, Australia was stable, while
Indonesia was constrained owing to mining issues associated with ongoing wet
weather. The Atlantic region saw coal prices supported by higher electricity
prices, partly driven by nuclear outages in France.
Operating performance
Metallurgical Coal
Production from the underground longwall operations was 14% higher at 12.3 Mt
(2016: 10.8 Mt), and included 0.3 Mt from the ramp-up of Grosvenor and record
production of 5.4 Mt from Moranbah. Both Capcoal open cut and Dawson recorded
lower production as the sites established alternative pit areas and removed
higher-cost production.
Following a recovery from the geological issues experienced in the first six
months, and a strong operational performance through the third quarter,
Grosvenor completed its first longwall panel during the final quarter of 2017,
and also completed an extended longwall move in order to rectify defective
components identified during the first panel. Production on the second
longwall panel commenced in December and is in line with the ramp-up plan.
Coal South Africa
Export production decreased by 3% to 18.6 Mt (2016: 19.1 Mt), with continued
productivity improvements at the underground operations more than offset by a
self-enforced 100-hour safety stoppage at all operations following the third
fatality of the year. In addition, at Khwezela there were operational
challenges with the waste fleet and coal recovery operations. Total production
from trade mines decreased by 11% to 22.0 Mt (2016: 24.6 Mt), mainly owing to
the planned ramp-down of Khwezela's Eskom pit, which reached its end of life
in the first half of 2017.
Production from Eskom-tied operations decreased by 4% to 23.9 Mt (2016: 24.8
Mt) due to lower Eskom offtake from New Vaal and reserve constraints at Kriel
as it approaches the end of its mine life.
Cerrejón
Anglo American's attributable output from its 33.3% shareholding in Cerrejón
was 10.6 Mt, in line with the prior year.
Operational outlook
Metallurgical Coal
Export metallurgical coal production guidance for 2018 is unchanged at 20-22
Mt.
Export thermal coal
Full year production guidance for 2018 for export thermal coal from South
Africa and Cerrejón is unchanged at 29-31 Mt.
NICKEL
Financial and operational metrics
Productionvolume Salesvolume Price C1 unitcost* Revenue* UnderlyingEBITDA* Underlying EBITDA margin UnderlyingEBIT* Capex* ROCE*
t t c/lb c/lb $m $m(1) $m(1) $m
Nickel 43,800 43,000 476 365 451 81 18% 0 28 0%
Prior year 44,500 44,900 431 350 426 57 13% (15) 62 (1)%
(1) Nickel segment includes $3 million projects and corporate costs (2016:
$10 million).
Financial and operating overview
Underlying EBITDA increased by 42% to $81 million (2016: $57 million),
reflecting a higher nickel price, partly offset by the unfavourable impact of
the stronger Brazilian real and cost inflation.
Nickel unit costs increased by 4% to 365 c/lb (2016: 350 c/lb) as adverse
exchange rates and inflation were only partly compensated by other cost-saving
efforts, including lower energy costs.
Markets
2017 2016
Average market price (c/lb) 472 436
Average realised price (c/lb) 476 431
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.
Differences between market prices and realised prices are largely due to
variances between the LME and the ferronickel price.
Operating performance
Nickel output decreased by 2% to 43,800 tonnes (2016: 44,500 tonnes) as
instabilities at both smelting operations negatively affected Barro Alto's
production performance in February 2017. The root causes were addressed and
the operations returned to stable performance from the second quarter.
Codemin's production of metal was in line with the prior year at 9,000
tonnes.
Operational outlook
Production guidance for 2018 has been lowered to 42,000-44,000 tonnes, as a
result of planned maintenance at Barro Alto's plant.
CORPORATE AND OTHER
Financial metrics
Revenue* UnderlyingEBITDA* UnderlyingEBIT* Capex*
$m $m $m $m
Segment 5 (292) (313) 9
Prior year 499 (5) (71) 40
Niobium and Phosphates - - - -
Prior year 495 118 79 26
Exploration - (103) (103) -
Prior year - (107) (107) -
Corporate activities and unallocated costs 5 (189) (210) 9
Prior year 4 (16) (43) 14
Financial and operating overview
Corporate and other reported an underlying EBITDA loss of $292 million (2016:
$5 million loss).
Niobium and Phosphates
The sale of the Niobium and Phosphates business to China Molybdenum Co Ltd.
was completed on 30 September 2016.
Exploration
Exploration expenditure decreased to $103 million (2016: $107 million),
reflecting a general reduction across most of the commodities, driven
primarily by lower drilling activities.
Corporate activities and unallocated costs
Underlying EBITDA amounted to a $189 million loss (2016: $16 million loss),
driven primarily by a year-on-year loss recognised in the Group's
self-insurance entity, reflecting lower premium income and higher net claims
and settlements during 2017.
For further information, please contact:
Media Investors
UKJames Wyatt-Tilbyjames.wyatt-tilby@angloamerican.comTel: +44 (0)20 7968 8759 UKPaul Gallowaypaul.galloway@angloamerican.comTel: +44 (0)20 7968 8718
Marcelo Esquivelmarcelo.esquivel@angloamerican.comTel: +44 (0)20 7968 8891 Trevor Dyertrevor.dyer@angloamerican.comTel: +44 (0)20 7968 8992
South AfricaPranill Ramchanderpranill.ramchander@angloamerican.comTel: +27 (0)11 638 2592 Ann Farndellann.farndell@angloamerican.comTel: +27 (0)11 638 2786 Sheena Jethwasheena.jethwa@angloamerican.comTel: +44 (0)20 7968 8680
Notes to editors:
Anglo American is a globally diversified mining business. Our portfolio of
world-class competitive mining operations and undeveloped resources provides
the raw materials to meet the growing consumer-driven demands of the world's
developed and maturing economies. Our people are at the heart of our business.
It is our people who use the latest technologies to find new resources, plan
and build our mines and who mine, process and move and market our products to
our customers around the world.
As a responsible miner - of diamonds (through De Beers), copper, platinum and
other precious metals, iron ore, coal and nickel - we are the custodians of
what are precious natural resources. We work together with our key partners
and stakeholders to unlock the long-term value that those resources represent
for our shareholders and for the communities and countries in which we operate
- creating sustainable value and making a real difference.
www.angloamerican.com
Webcast of presentation:
A live webcast of the results presentation, starting at 9.00am UK time on 22
February 2018, can be accessed through the Anglo American website at
www.angloamerican.com
Note: Throughout this results announcement, '$' 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, acquisition and divestment strategy, dividend policy, 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 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.
Anglo American plc
20 Carlton House Terrace London SW1Y 5AN United Kingdom
Registered office as above. Incorporated in England and Wales under the
Companies Act 1985.
Registered Number: 3564138 Legal Entity Identifier: 549300S9XF92D1X8ME43
This information is provided by RNS
The company news service from the London Stock Exchange
- Part 2: For the preceding part double click ID:nRSV5842Fa
in unit
costs was largely driven by the impact of the stronger South African rand
(rand FOB unit costs increased by 2%) and cost inflation, including higher
rail costs. This was partly offset, however, by productivity gains in mining
and processing that led to an 8% rise in production, and through a higher
premium achieved for lump product.
In line with higher production volumes, export sales volumes increased by 7%
to 41.6 Mt (2016: 39.1 Mt). Total finished product stock also increased to 4.3
Mt (2016: 3.5 Mt), reflecting the increase in output.
Iron Ore Brazil
Underlying EBITDA amounted to $435 million (2016: $6 million loss), reflecting
the operation's continued ramp‑up to its current operating capacity and the
cessation of capitalisation of operating results since January 2017. The
average FOB realised price of $65/wet metric tonne (equivalent to $71/dry
metric tonne) was $11/tonne, or 20%, higher than that achieved in 2016. FOB
unit costs increased by 7% to $30/wet metric tonne (2016: $28/wet metric
tonne) as higher production volumes and the implementation of cost reduction
initiatives only partly offset the strengthening of the Brazilian real.
Samancor
Underlying EBITDA increased by $271 million to $529 million (2016: $258
million), driven mainly by significantly higher realised manganese ore and
alloy prices and a 7% increase in ore sales.
Markets
Iron ore
2017 2016
Average market price (IODEX 62% Fe CFR China - $/tonne) 71 58
Average market price (MB 66% Fe Concentrate CFR - $/tonne) 87 69
Average realised price (Kumba export - $/tonne) (FOB Saldanha) 71 64
Average realised price (Minas-Rio - $/tonne) (FOB wet basis) 65 54
Kumba's outperformance over the IODEX (Platts) 62% Fe CFR China index is
primarily representative of the higher iron (Fe) content and the relatively
high proportion (approximately 66%) of lump in the overall product portfolio.
Minas-Rio produces higher grade products than the reference product used for
the IODEX 62% Fe index. The pricing of Minas-Rio's products reflects the
higher Fe content and lower gangue of those products compared with the IODEX
62% reference. IODEX 62% is referred to for comparison purposes only.
Manganese
During 2017, the average benchmark manganese ore price (benchmark CRU 44% CIF
China) increased by 36% to $5.97/dmtu (2016: $4.38/dmtu), largely attributable
to higher Chinese steel production and limited ore supply in the market,
resulting from production cuts made in late 2015 and early 2016.
Operating performance
Kumba
Sishen's production increased by 10% to 31.1 Mt (2016: 28.4 Mt) following
improvements in mining productivity resulting from fleet efficiencies and
higher plant yields, brought about from the implementation of the Operating
Model. Consequently, the amount of waste mined rose, as planned, to 162 Mt
(2016: 137 Mt), an 18% increase. Additional operator training, changed shift
patterns, together with higher workforce attendance rates, yielded positive
results in the form of increased direct operating hours, enabling the mine to
reduce its reliance on contractors.
Kolomela's production increased by 9% to 13.9 Mt (2016: 12.7 Mt), also
reflecting productivity improvements following the roll-out of the Operating
Model. Waste mining volumes grew by 11% to 55.6 Mt (2016: 50.2 Mt), supporting
higher production levels. The Kolomela modular plant delivered 0.5 Mt,
although performance was affected by delays in the ramp-up of the crushing
plant.
Iron Ore Brazil
Minas-Rio's production of 16.8 Mt (wet basis) was 4% higher (2016: 16.1 Mt) as
the operation continued to ramp up its current operating capacity. The ramp-up
schedule was affected as mining operations were restricted to the remaining
Ore Reserves in the Step 2 licence area, which included lower grade ore.
Samancor
Manganese ore output increased by 11% to 3.5 Mt (attributable basis) (2016:
3.1 Mt). Production from the Australian operations was 7% higher owing to
increased concentrator throughput and higher yields as a result of favourable
weather and the availability of suitable feed types. The South African
operations increased production by 18%, taking advantage of stronger demand
and pricing and the sale of lower quality fines product.
Production of manganese alloys increased by 8% to 149,200 tonnes (attributable
basis) (2016: 137,800 tonnes), mainly as a result of improved power
availability at the Australian operations. In South Africa, manganese alloy
production continued to utilise only one of the operation's four furnaces.
Operational outlook
Kumba
Kumba's full year production guidance for 2018 has been increased to 44-45 Mt
following the recent strong performance at both Sishen and Kolomela.
Sishen is expected to produce 30-31 Mt of product and mine 170-180 Mt of
waste.
Kolomela is expected to produce around 14 Mt, while waste removal, in support
of the increased annual output, is expected to be around 55-57 Mt.
Iron Ore Brazil
Minas-Rio continues to focus on obtaining the Step 3 operating licence
required for the operation to access the full range of run-of-mine ore grades
and target the operation's nameplate capacity of 26.5 Mt (wet basis). The Step
3 installation licence was granted in January 2018, following delays during
2017, which will allow the Step 3 construction work to proceed. As a
consequence of receiving the installation licence, the Provisional Operational
Authorisation ('APO') is expected before November 2018 and the full Step 3
operational licence by mid-2019.
Production guidance for 2018 has been lowered to 13-15 Mt (previously 15-18
Mt) as a result of the lower ore grades at the remaining Step 2 area and the
delays to the Step 3 operational licence process.
In 2018, unit costs are expected to increase as a result of lower production
volumes, and to be in the region of $35/wet metric tonne.
Samancor
Australian manganese ore production guidance of 2.1 Mwmt (100% basis) for 2018
remains unchanged. South African manganese ore production guidance has
increased by 8% to 3.4 Mwmt (100% basis), subject to continued strong market
demand.
Legal
Sishen consolidated mining right granted
Sishen's application to extend the mining right by the inclusion of the
adjacent Prospecting Rights was granted on 6 July 2017, and the process to
amend the Sishen mining right continues. Mining operations in this area will
only commence once the required environmental authorisation has been approved,
which is expected soon. The grant allows Sishen mine to expand its current
mining operations within the adjacent Dingleton area.
COAL
Financial and operational metrics
Production Sales Price Unit Revenue* Underlying Underlying EBITDA margin((5)) Underlying Capex* ROCE*
volume volume cost* EBITDA* EBIT*
Mt((1)) Mt((2)) $/t((3)) $/t((4)) $m $m $m $m
Coal 48.9 49.0 - - 7,211 2,868 46% 2,274 568 67%
Prior year 50.7 50.6 - - 5,263 1,646 36% 1,112 613 29%
Metallurgical Coal 19.7 19.8 185 61 3,675 1,977 54% 1,594 416 86%
Prior year 20.9 20.7 112 51 2,547 996 39% 661 523 30%
Coal South Africa 18.6 18.6 76 44 2,746 588 32% 466 152 54%
Prior year 19.1 19.1 60 34 2,109 473 33% 366 90 41%
Cerrejón 10.6 10.6 75 31 790 385 49% 296 - 35%
Prior year 10.7 10.8 56 28 607 235 39% 143 - 17%
Projects and corporate - - - - - (82) - (82) - -
Prior year - - - - - (58) - (58) - -
( )
((1) ) Production volumes are saleable tonnes. South African production
volume is export production only and excludes Eskom-tied operations volumes of
23.9 Mt (2016: 24.8 Mt) and other domestic production of 7.5 Mt (2016: 9.9
Mt). Metallurgical Coal production volumes excludes thermal coal production
volumes of 1.6 Mt (2016: 9.5 Mt, including 5.6 Mt of domestic thermal coal).
((2)) South African sales volumes exclude all domestic sales of 32.0 Mt
(2016: 34.5 Mt) and non-equity traded sales of 7.6 Mt (2016: 6.1 Mt).
Metallurgical Coal sales volumes exclude thermal coal sales of 1.8 Mt (2016:
9.6 Mt, including 5.4 Mt of domestic thermal coal).
((3) ) Metallurgical Coal is the weighted average hard coking coal and
PCI sales price achieved. Coal South Africa is the weighted average export
thermal coal price achieved.
((4)) FOB cost per saleable tonne, excluding royalties. Metallurgical Coal
excludes study costs and Callide. Coal South Africa unit cost is for the
export operations.
((5)) Excludes impact of third-party sales and Eskom-tied operations.
Financial and operating overview
Metallurgical Coal
Underlying EBITDA doubled to $1,977 million (2016: $996 million), owing to a
65% increase in the metallurgical coal realised price and higher production at
all three underground operations. This was partly offset by planned production
cuts at Dawson and Capcoal open cut operations and the impact of divestments
on output. Following the divestments of Foxleigh (a PCI producer) and Callide
(a domestic and export thermal coal producer), and the cessation of mining
activities at Drayton (an export thermal coal producer), the business now
produces a greater proportion of higher-margin hard coking coal (80% of total
production, compared with 53% in 2016).
Coal South Africa
Underlying EBITDA increased by 24% to $588 million (2016: $473 million),
mainly attributable to a 27% increase in the export thermal coal price. US
dollar unit costs for the export trade operations increased by 29% to
$44/tonne (2016: $34/tonne), owing to the stronger South African rand
($4/tonne impact), lower production ($4/tonne impact), mainly at Khwezela, and
cost-inflation pressures ($2/tonne).
The sale of the Eskom-tied domestic thermal coal operations consisting of New
Vaal, New Denmark, and Kriel collieries, as well as four closed collieries
(together, 'Eskom-tied operations') by Anglo Operations Proprietary Limited
and Anglo American Inyosi Coal Proprietary Limited to a wholly owned
subsidiary of Seriti Resources Holdings Proprietary Limited was announced on
10 April 2017 for a consideration payable, as at 1 January 2017, of R2.3
billion (approximately $164 million). The transaction is expected to complete
on 1 March 2018.
The sale of the New Largo thermal coal project and Old New Largo closed
colliery in South Africa (together, 'New Largo') by Anglo American Inyosi Coal
Proprietary Limited to New Largo Coal Proprietary Limited for R850 million
(approximately $71 million), was announced on 29 January 2018. The sale is
subject to conditions precedent customary for a transaction of this nature,
including regulatory approvals in South Africa. The transaction is expected to
close in the second half of 2018.
The financial results reported for the period ended 31 December 2017 include
the Eskom-tied domestic thermal coal operations and New Largo.
Cerrejón
Underlying EBITDA increased to $385 million (2016: $235 million), owing mainly
to higher export thermal coal prices, partly offset by a 2% decrease in sales
volumes.
Markets
Metallurgical coal
2017 2016
Average market price for premium low-volatility hard coking coal 188 143
($/tonne)((1))
Average market price for premium low-volatility PCI ($/tonne)((1)) 119 97
Average realised price for premium low-volatility hard coking coal ($/tonne) 187 119
Average realised price for PCI ($/tonne) 125 77
((1)) Represents average spot prices. Prior year prices were previously based on the quarterly average benchmark and have been restated accordingly.
Average realised prices differ from the average market price owing to
differences in material grade and timing of contracts.
Prices in 2017 were supported by higher steel prices and strong demand
globally, as well as by supply constraints arising from wet weather in
Queensland in the second quarter.
Thermal coal
2017 2016
Average market price ($/tonne, FOB Australia) 89 66
Average market price ($/tonne, FOB South Africa) 84 64
Average market price ($/tonne, FOB Colombia) 78 58
Average realised price - Export Australia ($/tonne, FOB) 91 55
Average realised price - Export South Africa ($/tonne, FOB) 76 60
Average realised price - Domestic South Africa ($/tonne) 21 17
Average realised price - Colombia ($/tonne, FOB) 75 56
The average realised price for thermal coal will differ from the average
market price owing to timing and quality differences relative to the industry
benchmark. The difference in the realised price compared with the benchmark
price, between 2016 and 2017, reflects changing quality mix owing to a higher
proportion of secondary products being sold into the export market.
The thermal coal market saw the positive price effects of the Chinese domestic
coal production rationalisation, which supported coal imports into China and
lifted seaborne pricing. On the supply side, Australia was stable, while
Indonesia was constrained owing to mining issues associated with ongoing wet
weather. The Atlantic region saw coal prices supported by higher electricity
prices, partly driven by nuclear outages in France.
Operating performance
Metallurgical Coal
Production from the underground longwall operations was 14% higher at 12.3 Mt
(2016: 10.8 Mt), and included 0.3 Mt from the ramp-up of Grosvenor and record
production of 5.4 Mt from Moranbah. Both Capcoal open cut and Dawson recorded
lower production as the sites established alternative pit areas and removed
higher-cost production.
Following a recovery from the geological issues experienced in the first six
months, and a strong operational performance through the third quarter,
Grosvenor completed its first longwall panel during the final quarter of 2017,
and also completed an extended longwall move in order to rectify defective
components identified during the first panel. Production on the second
longwall panel commenced in December and is in line with the ramp‑up plan.
Coal South Africa
Export production decreased by 3% to 18.6 Mt (2016: 19.1 Mt), with continued
productivity improvements at the underground operations more than offset by a
self-enforced 100-hour safety stoppage at all operations following the third
fatality of the year. In addition, at Khwezela there were operational
challenges with the waste fleet and coal recovery operations. Total production
from trade mines decreased by 11% to 22.0 Mt (2016: 24.6 Mt), mainly owing
to the planned ramp-down of Khwezela's Eskom pit, which reached its end of
life in the first half of 2017.
Production from Eskom-tied operations decreased by 4% to 23.9 Mt (2016: 24.8
Mt) due to lower Eskom offtake from New Vaal and reserve constraints at Kriel
as it approaches the end of its mine life.
Cerrejón
Anglo American's attributable output from its 33.3% shareholding in Cerrejón
was 10.6 Mt, in line with the prior year.
Operational outlook
Metallurgical Coal
Export metallurgical coal production guidance for 2018 is unchanged at 20-22
Mt.
Export thermal coal
Full year production guidance for 2018 for export thermal coal from South
Africa and Cerrejón is unchanged at 29-31 Mt.
NICKEL
Financial and operational metrics
Production Sales Price C1 unit Revenue* Underlying Underlying EBITDA margin Underlying Capex* ROCE*
volume volume cost* EBITDA* EBIT*
t t c/lb c/lb $m $m((1)) $m((1)) $m
Nickel 43,800 43,000 476 365 451 81 18% 0 28 0%
Prior year 44,500 44,900 431 350 426 57 13% (15) 62 (1)%
((1)) Nickel segment includes $3 million projects and corporate costs (2016:
$10 million).
Financial and operating overview
Underlying EBITDA increased by 42% to $81 million (2016: $57 million),
reflecting a higher nickel price, partly offset by the unfavourable impact of
the stronger Brazilian real and cost inflation.
Nickel unit costs increased by 4% to 365 c/lb (2016: 350 c/lb) as adverse
exchange rates and inflation were only partly compensated by other cost-saving
efforts, including lower energy costs.
Markets
2017 2016
Average market price (c/lb) 472 436
Average realised price (c/lb) 476 431
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.
Differences between market prices and realised prices are largely due to
variances between the LME and the ferronickel price.
Operating performance
Nickel output decreased by 2% to 43,800 tonnes (2016: 44,500 tonnes) as
instabilities at both smelting operations negatively affected Barro Alto's
production performance in February 2017. The root causes were addressed and
the operations returned to stable performance from the second quarter.
Codemin's production of metal was in line with the prior year at 9,000 tonnes.
Operational outlook
Production guidance for 2018 has been lowered to 42,000-44,000 tonnes, as a
result of planned maintenance at Barro Alto's plant.
CORPORATE AND OTHER
Financial metrics
Revenue* Underlying Underlying Capex*
EBITDA* EBIT*
$m $m $m $m
Segment 5 (292) (313) 9
Prior year 499 (5) (71) 40
Niobium and Phosphates - - - -
Prior year 495 118 79 26
Exploration - (103) (103) -
Prior year - (107) (107) -
Corporate activities and unallocated costs 5 (189) (210) 9
Prior year 4 (16) (43) 14
Financial and operating overview
Corporate and other reported an underlying EBITDA loss of $292 million (2016:
$5 million loss).
Niobium and Phosphates
The sale of the Niobium and Phosphates business to China Molybdenum Co Ltd.
was completed on 30 September 2016.
Exploration
Exploration expenditure decreased to $103 million (2016: $107 million),
reflecting a general reduction across most of the commodities, driven
primarily by lower drilling activities.
Corporate activities and unallocated costs
Underlying EBITDA amounted to a $189 million loss (2016: $16 million loss),
driven primarily by a year‑on‑year loss recognised in the Group's
self-insurance entity, reflecting lower premium income and higher net claims
and settlements during 2017.
For further information, please contact:
Media Investors
UK UK
James Wyatt-Tilby Paul Galloway
james.wyatt-tilby@angloamerican.com paul.galloway@angloamerican.com
Tel: +44 (0)20 7968 8759 Tel: +44 (0)20 7968 8718
Marcelo Esquivel Trevor Dyer
marcelo.esquivel@angloamerican.com trevor.dyer@angloamerican.com
Tel: +44 (0)20 7968 8891 Tel: +44 (0)20 7968 8992
South Africa Sheena Jethwa
Pranill Ramchander sheena.jethwa@angloamerican.com (mailto:sheena.jethwa@angloamerican.com)
pranill.ramchander@angloamerican.com Tel: +44 (0)20 7968 8680
Tel: +27 (0)11 638 2592
Ann Farndell
ann.farndell@angloamerican.com (mailto:ann.farndell@angloamerican.com)
Tel: +27 (0)11 638 2786
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), copper, platinum and
other precious metals, iron ore, coal and nickel - 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
- creating sustainable value and making a real difference.
www.angloamerican.com (http://www.angloamerican.com)
Webcast of presentation:
A live webcast of the results presentation, starting at 9.00am UK time on 22
February 2018, can be accessed through the Anglo American website at
www.angloamerican.com (http://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, acquisition and divestment strategy, dividend policy, 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 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.
Anglo American plc
20 Carlton House Terrace London SW1Y 5AN United Kingdom
Registered office as above. Incorporated in England and Wales under the
Companies Act 1985.
Registered Number: 3564138 Legal Entity Identifier: 549300S9XF92D1X8ME43
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