Delivering our growth ambition
Through operational excellence and project delivery

Cynthia Carroll
Chief executive

Cynthia Carroll

Cynthia Carroll during a recent visit
to Kumba's Kolomela iron ore project

Financial performance

Anglo American performed strongly in 2010, a year in which we saw commodity prices continue to increase as demand growth was driven by the emerging economies, led by China and India, and by early stage recoveries in the developed world. Our focus on operational excellence has paid dividends by enhancing our financial performance and we have continued to deliver on our clear strategic objectives.

Within the structure we implemented in 2009, our seven focused commodity businesses are driving superior operating performances, through considerable productivity improvements, disciplined cost management and the benefits of our asset optimisation and global supply chain programmes. Anglo American’s EBITDA of $12.0 billion, operating profit of $9.8 billion and underlying earnings of $5.0 billion, reflects delivery on all fronts.

Focus on operational excellence

Anglo American has continued to deliver significant value from its global scale and organisational structure, striving for best in class operating efficiencies across all its operations. Two specific and Group-wide initiatives, namely the asset optimisation and global procurement programmes, are well advanced and continue to deliver ahead of expectations. These two programmes were targeted to deliver $2 billion in benefits by 2011 from Anglo American’s core businesses alone.

In 2010, $2.5 billion of benefits were delivered from our core businesses ($3.0 billion from the total Group). These benefits are valued employing 2010 commodity prices and exchange rates. Of the $2.5 billion, asset optimisation contributed $1.8 billion of value (including one-off benefits of $279 million), well in excess of the 2011 target for sustainable benefits of $1 billion, and global procurement contributed $713 million. The resulting year on year operating profit benefit for core businesses (at constant 2009 commodity prices and exchange rates) equates to a $170 million uplift in volumes and cash cost savings of $159 million.

This determined focus is bringing strong productivity improvements and driving our operations down their industry cost curves. We have transformed our Platinum business, moving it down the cost curve, with 23% productivity gains, cash operating costs controlled below inflation, and further safety improvements, while exceeding our refined platinum production target of 2.5 million ounces. Our Kumba Iron Ore, Metallurgical Coal, and Nickel businesses also delivered productivity gains, while the benefits of the restructuring of De Beers are clear to see, with the business reaping the rewards of the much improved environment for diamonds.

Project delivery driving significant near and long term growth

Anglo American will increase its organic production by 50% by 2015, an exceptionally strong near term growth position, led by our four major projects which are making excellent progress. Over the next three years, we will start up a new mining operation every six to nine months. The first such project, our 36,000 tonnes per year Barro Alto nickel project, will begin production on schedule in March, more than doubling our Nickel business’ production when it reaches full capacity. In the fourth quarter of this year, the expansion of our Los Bronces copper operation by 200,000 tonnes per year will begin production on schedule and will have highly attractive cash operating costs. Looking to the end of the second quarter of 2012, the 9 million tonne per year Kolomela iron ore project in South Africa will begin production with a very competitive cost position.

We have made substantial progress with our 26.5 million tonne per year Minas-Rio iron ore project in Brazil, securing a number of key approvals, including the mining permit and the second part of the installation licence for the mine, beneficiation plant and tailings dam. These approvals support a March 2011 start date for the civil works for the beneficiation plant and tailings dam construction and it should then take between 27 and 30 months to construct and commission the mine and plant, complete the project and deliver the first ore on ship.

We have also now secured an extremely competitive cost position for the project by reaching agreement with our partner at the Açu port on a fixed 25-year iron ore port tariff that gives us a clear, first quartile FOB cost position for Minas-Rio. Our optionality for port expansion and the priority rights we have for our iron ore shipments make this port facility a key strategic asset for Anglo American in Brazil. Anglo American has a truly world class resource base beyond our near and medium term projects, with the potential to double production over the next decade through our $70 billion pipeline of more than 60 projects. In the next three years alone, we expect to approve $16 billion of projects.

Refining our portfolio

Our programme to divest non-core businesses is well advanced, announcing and completing a number of sales during 2010 and into 2011. We have completed divestments of our non-core businesses, with announced proceeds of $3.3 billion to date, including our zinc portfolio, Moly-Cop and AltaSteel, five undeveloped coal assets in Australia and a number of Tarmac’s European businesses. On 18 February 2011, the Group and Lafarge announced their agreement to combine their cement, aggregates, ready-mixed concrete, asphalt and contracting businesses in the United Kingdom, Tarmac Limited and Lafarge Cement UK, Lafarge Aggregates and Concrete UK. The 50:50 joint venture will create a leading UK construction materials company, with a portfolio of high quality assets drawing on the complementary geographical distribution of operations and assets, the skills of two experienced management teams and a portfolio of well known and innovative brands. We have received strong interest in the remaining businesses and will divest those in a manner and on a timetable that maximise value.

Safety – setting the standard

We continue to focus on our safety performance day in, day out across the business. We are making a real difference to our people within Anglo American and across the industry, particularly in South Africa, by setting new benchmark standards for safety practices. We recorded further improvement during the year, with fatalities and lost time injury rates both continuing to reduce.

At Anglo American, we have now achieved a 68% reduction in the number of fatal incidents and a 51% improvement in lost time injury rates since 2006. This does represent significant progress but, regrettably, 14 people lost their lives while on company business in 2010. We have further to go in order to achieve our goal of zero harm and again have stepped up our efforts to achieve this.

Sustainable development leadership

I am pleased that Anglo American continues to lead change in the mining industry, ensuring that modern mining is wholly sustainable. Anglo American invests in mining operations and projects not for just the next 10 or 20 years, but for many generations. Our ability to positively impact those communities around our operations is therefore an area of major focus, to ensure a long term legacy built on respect, responsibility and integrity.

These characteristics have been particularly evident in our response to two unforeseen natural events during 2010. The fact that our Copper business was ready and able to build six fully equipped schools in such a short time after the earthquake in Chile, enabling 4,500 children to complete their school year, is testimony to the compassion and commitment of our employees. We have seen a similar response by our Metallurgical Coal business in Queensland, Australia following the devastating flooding over the New Year period, providing accommodation, meals and amenities to hundreds of evacuees. We are proud of our people and the difference they make.

Outlook

Mining is the lifeblood of global economic growth in the 21st century and Anglo American has the long-life resources of the right commodities to sustain the supply to fuel that growth. While there remain a number of uncertainties in the immediate term, not least in the developed economies, our medium to long term view of demand growth for our commodities remains very positive, driven by the resource intensive nature of economic growth in the emerging markets.

Cynthia Carroll

Cynthia Carrol
Chief Executive

Highlights

4

major strategic growth projects nearing production

6

schools built and fully equipped after the Chilean earthquake

7

core commodities

50%

production growth by 2015

$70bn

of project optionality

Increase in operating profit
From core operations

104%

Investments in four strategic growth projects
(2009: $2.1bn)

$2.3bn

Benefit delivered from asset optimisation and procurement programmes (core only)
(2009: $1.4bn)

$2.5bn

Non-core divestments completed

$3.3bn