Other Mining and Industrial

Financial highlights
US$ million (unless otherwise stated)
2010 2009
Operating profit 661 506
Tarmac 48 101
Zinc 321 175
Scaw metals 170 131
Copbrãs 81 (40)
Catalão 67 106
Coal Americas (3) (8)
Other (23) 41
EBITDA 912 878
Net operating assets 3,807 5,029
Capital expenditure 224 268
Share of Group operating profit 7% 10%
Share of Group net operating assets 9% 13%

Tarmac

Tarmac generated an operating profit of $48 million, a 52% decrease, reflecting difficult trading conditions in the UK and the sale of the majority of Tarmac’s European businesses during 2010. On a like-for-like basis, operating profit decreased by 17%. There was strong downward price pressure during the year and Tarmac continued to deliver cost savings to mitigate the impacts of these difficult trading conditions.

In the UK Quarry Materials businesses, volumes remained at similar levels to 2009, but unusual weather patterns resulted in a greater degree of seasonal variation over the year. Tarmac’s work to maximise operational efficiency continues and a newly revised management structure continues the good progress made in recent years.

Weak demand in the housing and commercial sectors put considerable pressure on the Tarmac Building Products business, which continued its cost reduction and business rationalisation initiatives.

The 2011 outlook remains relatively weak for the construction sector as a whole, but underlying fundamental demand remains and will turn to orders when economic conditions are more conducive to construction activity.

Zinc

  2010 2009
Attributable zinc production (tonnes) 349,700(1) 350,400
Attributable lead production (tonnes) 71,200 68,300
Average market price – zinc (c/lb) 98 75
Average market price – lead (c/lb) 97 78

Zinc generated an 83% increase in operating profit to $321 million, mainly as a result of higher metal prices, improved efficiencies and tightly controlled costs.

Production at Skorpion increased by 1% to 151,700 tonnes on a full year basis, although only 138,500 tonnes is reported due to the disposal of the operation on 3 December 2010. While electricity constraints, mill motor failures and cell repairs affected production, the combined impact was more than offset by a number of asset optimisation initiatives.

At Lisheen, ore processed increased by 4% and zinc metal production increased by 2% to 175,100 tonnes. Lead metal production increased by 7% to 20,600 tonnes.

At Black Mountain, good progress was made with the improvements to the underground infrastructure, which resulted in an increase of 13% in total ore hoisted. Tonnes milled increased by 7%, with improved feed grades on all metals other than silver. This resulted in strong metal in concentrate production increases of 28% for zinc to 36,100 tonnes, 3% for lead to 50,600 tonnes, 14% for copper to 2,500 tonnes and 4% for silver to 56,600 kg.

Anglo American announced the sale of its zinc portfolio to Vedanta on 10 May 2010 for a total consideration(2) of $1,338 million. The sale of Skorpion was completed on 3 December 2010, resulting in a net cash inflow of $570 milion.

  • (1)Allowing for Skorpion’s full year production, total attributable zinc production was 362,900 tonnes, a 4% increase over the previous period.
  • (2)The agreed consideration was based on profits and cash flows for the zinc businesses being for the benefit of the purchaser from 1 January 2010, subject to completion.

Scaw metals

Scaw Metals increased its operating profit by 30% to $170 million.

Moly-Cop and AltaSteel performed well, assisted by strong demand for grinding media and increased vertical integration with the Canadian rolling mills. Production of steel products at 794,200 tonnes exceeded the prior year, notwithstanding the earthquake in Chile in February 2010 impacting production in Talcahuano. In November, Anglo American announced the sale of Moly-Cop and AltaSteel to OneSteel. The transaction was completed on 31 December 2010, resulting in a net cash inflow of $993 million.

In the South African managed businesses, certain key steel markets remained under pressure, resulting in a lower operating profit. The reduction was attributable to selling price pressure, rising input costs and the effect of a strong rand. Despite this, the integrated nature of the business allowed the rolling mills to maintain reasonable levels of output to supply the downstream businesses. Grinding media demand remained strong, albeit with some pricing pressure. Production of steel products at Scaw South Africa was 710,000 tonnes, a 2% increase over the prior year.

Copebrás

Copebrás recorded an operating profit of $81 million, a $121 million improvement over 2009, as a result of improved market conditions and operational improvement initiatives. Strong prices for soft commodities during the second half of 2010 served as a sound foundation for increased demand for fertilisers in Brazil. Sales volumes at 998,100 tonnes of fertilisers were virtually in line with those achieved in 2009, but higher operating margins were achieved, with record sales for certain products.

Catalão

Catalão generated an operating profit of $67 million for the year, 37% lower than 2009 as a result of lower niobium grades and overall recoveries, partially offset by improved realised prices. Sales in 2010 reached 4,100 tonnes. Following a landslide in the pit in late 2009, operations at Catalão started to improve by mid-year when access was re-established in richer parts of the pit. The subsequent discovery of water in certain parts of the pit in the third quarter required a revision of the mining plan. Normal levels of production were reached towards the end of the year.

Anglo American has conducted a drilling programme at its Catalão ferroniobium business in Brazil which has delineated additional niobium resources. In conjunction with the application of improved processing technology, this may result in the significant extension of Catalão’s life of mine and production capacity, which would enable Anglo American to take advantage of the attractive dynamics of, and long term demand outlook for, the niobium market. Anglo American has therefore decided to retain the business in its portfolio and is progressing a feasibility study for Catalão.

Coal Americas

Peace River Coal (PRC) in Canada had a much improved operating performance in 2010, delivering a 44% increase in run of mine coal and a 35% increase in clean metallurgical coal production. This was due to improved mining and plant operations and improved coal recovery, coupled with the successful implementation of Phase 1 of the Trend Mine Plant Upgrade project in May 2010, which improved and stabilised plant performance. Phases 2 and 3 of the project are progressing on schedule and will be commissioned in the first quarter of 2011, delivering a further 30% capacity improvement in plant throughput.

The business was impacted by temporary port constraints during December 2010, which led to the delay of two cargoes into the first week of 2011, with the result that metallurgical coal sales volume for 2010 ended 18% lower than coal production. As a result of the impact on revenue of these delayed cargoes, PRC reported an operating loss of $3 million for the year. However, given the current market strength and the strong trading conditions anticipated for 2011, coupled with increasing production from PRC, a substantial uplift in profitability is forecast for 2011.

The Environmental Assessment Application for the Roman Mountain Brownfield project was submitted in 2010. This project will consist of an integrated plant and mining operation of up to 5 Mtpa capacity with the Trend mine.

The business continues to develop strong relationships with the community and the key First Nations in the area, which was reflected in the successful launch of mining fundamentals and a truck driver training programme in 2010. The programme is delivering promising results and has had a positive impact on the workforce in the area.

Duncan Wanblad
Group director Other Mining and Industrial

Duncan Wanblad

Completed divestments

$3.3bn

Increase in scaw metals operating profit

30%

Increase in run of mine coal at peace river coal

44%