organising
efficiently and effectively

We now have an organisational structure aligned to serve our ambition to be the leading global mining company – one that facilitates the delivery of performance and efficiencies to outperform the competition.

Unlocking the optimum value from our worl class assets

Metallurgical Coal has grown to become Australia’s 4th biggest coal producer and No. 2 exporter of metallurgical coal. Here, maintenance work is being carried out on the longwall at the Grasstree mine in Queensland, Australia.

Organising - efficiently and effectively

Metallurgical Coal’s Longwall Productivity Improvement Project (LW108 Project) demonstrates how asset optimisation projects that are fully integrated into an operation are able to deliver sustainable value. Following a detailed performance analysis, several opportunities for performance improvement were identified.

A number of inter-related key elements were identified to enable delivery of a significant improvement in longwall cutting hours and cutting rate: people, reliability, development, operational assurance and critical Infrastructure.

From each key element value adding projects were derived and allocated to a member of the site leadership team. The combined projects aim to improve longwall utilisation and cutting rate.

In 2010, the LW108 Project yielded an additional 1,031,365 tonnes of high value metallurgical coal by increasing cutting hours by 25% and improving the cutting rate by 14.5%. This result was only achievable through managing LW108 as an integrated project, involving multi-disciplinary teams in weekly analysis and reviews, going after the quick wins early on and engaging every level of the workforce in root cause resolution. In 2010, the project delivered $131 million in benefits and will continue to add value as the operation strives towards its target of 100 cutting hours per week and 1,500t/hr.

Supply Chain Case Study – Heavy Mining Equipment

Prior to Strategic Sourcing teams being mobilised, there was little comparative information on fleet operating performance and total cost information across the Group for heavy mining equipment (HME). For suppliers, working with Anglo American meant managing multiple contracts and customer interfaces rather than a single relationship covering the entire Group.

The HME category team worked with our business units’ cross-functional teams, as well as technical and continuous improvement departments, to conduct Total Cost of Ownership benchmarking and understand future demand plans. This identified potential cost saving initiatives and led to the development of a co-ordinated category strategy for the Group. The team then conducted a supplier selection process, which involved comparisons of product life-cycle cost and supplier capabilities, and also efforts to gain a better understanding of how aligned suppliers were to our values, including those relating to safety and sustainable development.

Through this process, the HME category team was able to clearly identify the criteria needed to become our preferred supplier, as part of an overall global framework agreement. In future, the preferred supplier of HME equipment will be formally involved in both the Group’s capital expenditure and capital project initiative planning.

Asset Optimisation

In 2010, we continued to reap the benefit of our asset optimisation (AO) programme which continues to unlock value from our existing assets across the Group.

The AO agenda is designed around a holistic approach to both the health (skills development, mindsets and behaviours) and the performance (cost and productivity improvements) of our operations. It creates a business culture whereby employees can work in close collaboration with each other and where they are encouraged to come forward with, and follow through on, initiatives to improve our business.

A key feature of development within the programme during 2010 was the design, piloting and introduction of a formalised internal Operation Review (OR) process.

The OR process, run entirely with internal resources, combines the strength of our central technical capacity with our operational expertise from across the Group to create a team focused on delivering value from operational improvement. Teams are constituted in such a manner that the company is able to leverage our global best practice across the Group’s complete mining value chain. The ORs apply a structured evaluation process in three functional areas: operational improvement (revenue enhancement and cost reduction); technical assessment (technical risk and adherence to technical standards); and a safety and sustainable development assessment (S&SD risks and value opportunities) in order to identify opportunities for value improvement. The OR process assists operation managers as well as business unit management, by providing a framework against which identified value opportunities can be realised while putting in place value enabling processes to identify further possibilities for business improvement.

During 2010, ORs were conducted at Drayton (Metallurgical Coal), Greenside (Thermal Coal), Los Bronces (Copper), Codemin (Nickel) and Mogalakwena (Platinum).

In 2010, $1,548 million of sustainable benefits were delivered from our core businesses, representing the additional operating profit realised in the year over and above the performance expected had the programmes not been initiated. These benefits are valued employing 2010 commodity prices and exchange rates. This strong performance was driven by increased volumes realised from the portfolio of projects and increased cost savings, with benefits from prior period initiatives being enhanced by higher market prices in 2010, partially offset by regional currency strengths.

A further amount of $279 million was delivered from one-off projects during 2010.

Similarly, our Other Mining and Industrial asset portfolio delivered $286 million in sustainable benefit and an additional $37 million from one-off projects.

Busines Unit $m*
Total core assets 1,548
Other Mining and Industrial 286
Total 1,834
Platinum 482
Copper 316
Nickel 5
Kumba Iron Ore 236
Metallurgic Coal 331
Thermal Coal 178

* In 2010 terms.

We have now developed more than 600 AO projects. These projects continue to be prioritised for resourcing and implementation on a value adding basis.

Supply Chain

In February 2008, the Group set out a programme to transform Anglo American’s procurement and supply chain operations globally, with the target of becoming the industry leader and global benchmark for supply chain value creation. The aim is to create $1 billion of additional value by the end of 2011 through more effective management of purchased materials and services. The three main focus areas have been value delivery, supplier relationship management, and local procurement.

In 2010, $800 million of procurement benefits were delivered, of which $713 million were from core businesses. Benefits comprised $552 million from operating profit and $248 million from capital spend. The substantial progress made in the past year has been the result of effective cross-functional collaboration throughout the Group.

Busines Unit $m*
Total core assets 713
Other Mining and Industrial 87
Total 800
Platinum 188
Copper 90
Nickel 58
Kumba Iron Ore 89
Metallurgic Coal 74
Thermal Coal 97
Iron Ore Brazil 90
Corporate 24
De Beers 3

* In 2010 terms.

Supplier relationships are integral to our supply chain process. From developing new technologies to integrating sustainable local procurement and global sourcing strategies, together with suppliers we are tackling the most pressing issues impacting our supply chain and examining how we can continue to raise the bar. Supplier awards were launched to recognise supplier performance and achievement and build a better appreciation of our priorities with suppliers in the areas of safety, sustainability, innovation and partnership. Presented at the annual Supplier Conference, these awards demonstrate the progress of the Group and its partners since the transformation began.

Global framework agreements (GFA) with major suppliers provide enhanced security of supply and improved commercial terms, both of which are critical in a high demand market. With a strong production growth pipeline, strength of relationships with suppliers is key to ensuring on-time delivery of projects. Procurement collaborated with Projects Engineering to progress several GFAs and improve evaluation, selection and management of engineering, procurement and construction management (EPCM) and major equipment suppliers. Value is being realised through this approach in other categories of spend, including heavy mining equipment, tyres, fuels and lubricants, and professional services.

Local procurement plays a key role in securing and maintaining our right to mine, developing thriving and healthy host communities, creating efficiencies in our supply chain and ensuring reliable access to critical supplies. A Group-wide policy for local procurement was launched in 2010 with the objective of improving access by local businesses to supply chain opportunities that arise from the presence of our projects and operations.

Asset Optimisation Case Study – Platinum

The Stirred Milling Technology of the Concentrator team was the overall winner in the team award for innovation at the 2010 Anglo American Applaud awards. This project involves leveraging high intensity, stirred-milling technology using inert grinding media to increase metal recovery rates and produce higher grade products. Large scale IsaMill™ stirred milling technology became commercially available for fine grinding in platinum group metals (PGM) concentrator circuits around 2000 and currently, Platinum has the largest number of installed stirred mills in world mining. When deployed in a concentrate regrind application, concentrates are ground and polished to enhance floatability, remove excess waste and thus reduce mass pull. This has the benefit of availing additional furnace capacity and reducing smelting energy consumption and costs. When deployed in a mainstream inert grinding application (MIG), the tails from conventional milling circuits are further milled to liberate PGM particles locked up in waste minerals and hence improve recovery.

Platinum has commissioned 18 MIG projects to improve liberation of value minerals before discard to tailings. In addition, four ultrafine grinding (UFG) applications were implemented to improve recovery from flotation concentrates.

Since the introduction of IsaMill™ technology, the expected PGM recovery rate has increased, depending on site, by an additional 2% to 5%. Some concentrators are now operating at the 90% recovery level for Merensky ore and the 88% level for UG2 ore, setting industry benchmarks. Tailings PGM values at Rustenburg and Amandelbult, Platinum’s biggest production facilities, are now at their lowest levels. The project contributed an additional operating profit of $27 million in 2010.

$131m

value delivered by the lw108 project in Australia

25%

improvement in Longwall cutting hours as a result of lw108 project

1,031,365

additional tonnes of high value metallurgical coal produced by lw108 project in 2010

$1.5bn

Core sustainable benefits from Asset optimisation
(2009: $749m)

$713m

core benefit from procurement
(2009: $445m)