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Anglo American plc
20 Carlton House Terrace
London SW1Y 5AN
England
Tel +44 (0)20 7968 8888
Fax +44 (0)20 7968 8500
Registered number 3564138
www.angloamerican.co.uk
A global business
fit for the future
Annual Report 2008
Anglo American is committed
to delivering operational
excellence in a safe and
responsible way, adding value
for shareholders, customers,
employees and the communities
in which we operate
Highlights
$10.1 bn
Operating profit (2007: $10.1 bn)
$5.2 bn
Underlying earnings (2007: $5.8 bn)
$4.36
Earnings per share (2007: $4.40)
• Group operating profit of $10.1 billion, with operating
profit from core operations up 10% to $9.8 billion
• Strong performances from Coal and Ferrous Metals
with increased production of coal and iron ore
• 2009 capital expenditure reduced by more than
50% to $4.5 billion
• $2 billion target by 2011 from cost saving and
efficiency initiatives
Above: Bucket-wheel excavator at Kumba Iron Ore’s Sishen open pit in South Africa’s Northern Cape.
Measuring 11 kilometres by 1.5 kilometres and almost 400 metres deep, this is one of the world’s largest
open pits, producing around 34 million tonnes of iron ore in 2008
FIND OUT MORE>>
www.angloamerican.co.uk
Underlying earnings per share
US$
Dividends per share
US cents
Cover: Martin van Heerden, mine overseer (left) and
Jacques Nortier, supervisor at Anglo Coal South Africa’s
Kriel Colliery, inspect a new type of fan. Much quieter
than previous models, the new fans are helping to make
the workplace less stressful and reduce the potential for
noise induced hearing loss
Excludes discontinued operations
4.40 4.36
3.73
4.18
3.42
2.58
1.87
2.30
1.52
04 05 06 07 08
Interim
Final
Special
86
33
62
75
67
51
28
19
33
38
44
04
05
06
07
0
08
Operating profit includes share of associates’ operating profit (before share of associates’ tax, finance
charges and minority interest) and is before special items and remeasurements, unless otherwise stated.
See note 3 to the financial statements for operating profit on a total Group basis. For definition of special
items and remeasurements see note 7 to the financial statements and see note 35 for information on
discontinued operations.
Operations considered core to the Group are Base Metals, Platinum, Ferrous Metals’ core businesses
(Kumba Iron Ore, Scaw Metals, Samancor Manganese and Anglo Ferrous Brazil), Coal and Diamonds.
Unless otherwise stated tonnes are metric tons, ‘Mt’ denotes million tonnes and ‘kt’ denotes thousand tonnes.
Unless otherwise stated ‘$’ and ‘dollar’ denote US dollars.
Printed on Revive 50:50 Silk and Revive 100
Uncoated paper. Revive 50:50 Silk is made from
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• group operating profit of $10.1 billion, with operating
profit from core operations up 10% to $9.8 billion
• strong performances from coal and ferrous metals
with increased production of coal and iron ore
• 2009 capital expenditure reduced by more than
50% to $4.5 billion
• $2 billion target by 2011 from cost saving and
efficiency initiatives
Operating profit includes share of associates’ operating profit (before share of associates’ tax, finance
charges and minority interest) and is before special items and remeasurements, unless otherwise stated.
See note 3 to the financial statements for operating profit on a total Group basis. For definition of special
items and remeasurements see note 7 to the financial statements and see note 35 for information on
discontinued operations.
Operations considered core to the Group are Base Metals, Platinum, Ferrous Metals’ core businesses
(Kumba Iron Ore, Scaw Metals, Samancor Manganese and Anglo Ferrous Brazil), Coal and Diamonds.
Capital expenditure relates to total Group cash expenditure on tangible assets.
Unless otherwise stated tonnes are metric tons, ‘Mt’ denotes million tonnes and ‘kt’ denotes thousand tonnes.
Unless otherwise stated ‘$’ and ‘dollar’ denote US dollars.
Capital expenditure
US$ billion
5.1
4.5
4.1
3.7
3.2 3.3
04 05 06 07 08 09*
*Forecast
2008 operating profit
by business unit US$ million
Platinum
Diamonds
Base Metals
Ferrous Metals
Coal
Industrial Minerals
5
3
9
,
2
5
0
5
,
2
0
4
2
,
2
6
2
2
,
2
8
0
5
8
2
2
About Anglo American
02 Chairman’s statement
04 Chief executive’s statement
08 Introduction to Asset Optimisation
10 operating and financial review
10 Group overview
12 A global business fit for the future
14 Key performance indicators (KPIs)
16 Performance against KPIs
26 Resources
28 Group financial performance
32 Business unit overview
33 Platinum
37 Diamonds
40 Base Metals
45 Ferrous Metals
48 Coal
52 Industrial Minerals
54 Principal risks and uncertainties
58 governance
58 The Board
60 Executive Committee
61 Directors’ report
64 Corporate governance
69 Remuneration report
79 Independent remuneration report review
80 Statement of directors’ responsibilities
81 financial statements
82 Responsibility statements
83 Independent auditors’ report
84 Principal statements
88 Notes to the financial statements
136 ore reserves and mineral
resources estimates
136 Introduction
138 Platinum
142 Base Metals
149 Ferrous Metals
152 Coal
162 other information
162 Production statistics
168 Exchange rates and commodity prices
169 Key financial data
170 Summary by business segment
171 Reconciliations of reported earnings
172 The business – an overview
174 Shareholder information
175 Other Anglo American publications
Anglo American plc Annual Report 2008
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About Anglo American
Chairman’s statement
2008 marked the end to the sustained upswing in commodity
prices, with a particularly steep price decline in the second half
of the year. thus, the nature of the challenge for management
changed markedly from managing the problems of plenty –
delivering expansion projects in an overheated market –
to reducing costs and maximising efficiencies in the existing
business without compromising the significant long term
growth options that the group retains
The Group achieved a strong financial
performance for the year and management
moved fast to adapt the business to the new
circumstances as recession began to take hold.
Indeed, several initiatives started over the past
two years, designed to create more rigorous
management systems and a more aligned
‘One Anglo’ approach, have positioned the
Group well for the current environment. Value
based management, the Asset Optimisation
programme, the move to a more unified model
for procurement and the development of a shared
services approach to a number of support
functions are expected to deliver significant
savings and contributions to operating profit.
In spite of the strong results in 2008, the
Board has decided to suspend the final dividend
payment. The reduction of capital expenditure
in 2009 will nonetheless allow us to complete
the three major world class, low cost projects
already well underway in iron ore and base
metals. These will now start to come on stream
in 2011 when market conditions should be more
balanced. The Board believes that suspension
of the dividend will preserve for shareholders
these future major growth opportunities.
Dividends will be resumed as soon as market
conditions permit.
Against a background of rapid change,
I should like to thank our employees at every
level for their hard work and commitment.
They have delivered an excellent financial
performance during 2008 and our thanks are
no less due to them as they continue to deliver
in the face of the harsh and sudden impacts of
the economic downturn.
Anglo American has a diversified portfolio
of low cost, long life assets, with attractive
growth opportunities and strong technical
and project delivery skills. The Group has a
compelling portfolio of projects which provides
long term value creating opportunities for
growth once commodity markets recover.
In the interim, the Group has prudently reduced
capital spending on expansion projects by
around a half, predominantly through the
rephasing of several major projects to better
align them with the commodity cycle. A further
key challenge in the short term will be to ensure
we gain the maximum benefit from reductions
in many input prices without undue delay, for
fuel and raw materials, for example.
Anglo American plc Annual Report 2008
The Board is very supportive of the strong
drive on safety that our chief executive has
led and of her strong personal commitment.
Although a great deal still remains to be done,
the Board has been impressed by the progress
made during 2008 in enhancing safety
performance, including a reduction of around
one-third in fatalities and one-fifth in lost time
injuries. We expect to see this progress built
upon in 2009. The issue has been correctly
elevated to the top of management’s priorities
and is being tackled in an increasingly holistic
way, including through improved systems and
an emphasis on leadership and behaviours.
We particularly welcome the development of
a tripartite approach to safety in South Africa
involving both trade unions and government.
The Group also defined, for the first time, six
core values – safety, care and respect, integrity,
accountability, collaboration and innovation.
Such values forge a closer sense of identification
with the Group and its objectives amongst
employees irrespective of the business units
or geographies they work in. Such identification
is fundamental to ensuring both that common
standards are applied consistently and that we
maximise our intellectual resources through
effective talent management, collaboration
and knowledge sharing.
mining and development
Anglo American was in the vanguard of the
companies that signed the Millennium
Development Goals ‘Call to Action’ in June
2008. This recognised both the pre-eminent
role of governments in defining development
frameworks and the importance of other actors,
including business, in maximising our own
beneficial development impacts. It has long
been a core objective for Anglo American to
ensure that we produce sustainable benefits
for the communities where we work. Indeed, in
light of the growth of resource nationalism and
concerns about the potential ‘resource curse’,
we now need also to be a willing partner, with
governments and civil society, in addressing
issues relating to the governance of natural
resources. Thus we attach importance to our
involvement in programmes such as the
Extractive Industries Transparency Initiative,
the Voluntary Principles on Security and Human
Rights and the Investment Climate Facility for
Africa. We continue to be committed to
participation in the work of the UN Global
Compact and adhere to its ten core principles.
We also improved our engagement with our
host governments, with the benefits of such an
approach being evidenced by the achievement
of our mineral rights conversions in South
Africa and our Memorandum of Understanding
with the China Development Bank about the
potential for us to work together, especially
in Africa. The management of political risk,
however, continues to be a significant factor
for our business in judging whether to enter
new geographies and in some countries where
we have existing activities, such as Venezuela
and Zimbabwe. In the latter case, we were
erroneously reported in the British media to be
making a major new investment in Zimbabwe
when, in fact, we have been building the Unki
platinum project since 2003. We welcome the
recent formation of a unity government and
hope that it may create more favourable
circumstances for Zimbabwe’s recovery.
In terms of our socio-economic impacts,
more than 400 managers within the Group
have been trained on the implementation of
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particularly during times of low rainfall. It is
also in evidence at our Los Bronces expansion
project in Chile where we plan to reduce water
use by approximately 40% per lb of copper
produced, and by the Emalahleni water scheme
in South Africa which is supplying 20% of the
water needs of the municipality of Witbank
from treated mine water.
Although we continued to make progress
on energy efficiency and improving the
measurement of our energy intensity in 2008,
our ability to move forward in our management
of the current and future impacts of climate
change was influenced by three factors. Firstly,
much of our energy expertise was absorbed by
the need to manage energy security concerns,
especially in South Africa and Chile. Secondly,
the absence of clarity about the shape of
international frameworks to combat climate
change and about the regime for regulating
carbon capture and storage is a major inhibitor
of our ability to take a judgement on potential
long term investments, such as the Monash
Energy coal-to-liquids project in Australia.
Thirdly, the unprecedented escalation in project
costs, coupled with rapidly changing oil prices,
has made the economics of such projects even
less predictable, although the costs of certain
key raw materials for the construction of
projects can be expected to fall. Coal will
remain a critical source of energy for many
years but the rapid development of clean coal
technologies is vital if this is to occur within an
environmentally acceptable framework.
corporate governance
During the year, as part of the ongoing
refreshment of the Board, Sir CK Chow joined
the Board. We are delighted to have the
contribution of Sir CK’s experience and insight.
Bobby Godsell retired from the Board at the
AGM after nine years of service. We have
benefited greatly from his input and advice
over the years and wish him well.
At the end of 2008, Tony Redman, our
technical director, retired after 38 years of
Group service. Although not a director of the
Company, Tony was a regular attendee at the
Board and his advice on technical matters which
are so vital to the success of the Company has
been invaluable and the Board wishes him well
for the future.
Sir Mark Moody-Stuart
Chairman
Anglo American plc Annual Report 2008
Expanding enterprise
development initiative
3,012
number of businesses currently
supported (2007: 1,312)
13,431
number of jobs sustained
(2007: 5,850)
Anglo American’s unique Socio-Economic
Assessment Toolbox (SEAT) process.
SEAT enhances our ability to interact with
stakeholders and to develop projects which
maximise opportunities for local people.
We have also adopted a new framework
for improving the social and environmental
impacts of our suppliers.
We are pleased with the increasing traction
of our enterprise development and micro-
finance programmes which, in South Africa
and Chile, are now generating jobs for more
than 13,000 people.
Water availability has emerged as a major
constraint. It is a strategic issue which must
be addressed through technical innovation,
improved stewardship, applying a proper value
to our water usage and dialogue about water
management with other users. Our commitment
to innovate is illustrated by the solution that
we have proposed at our Quellaveco copper
project in Peru. The project proposes a local
saline water source which currently flows into
the headwaters of the river system, thereby
improving the quality of river water for
downstream agriculture opportunities,
04
About Anglo American
Chief executive’s statement
we have taken decisive
action to position Anglo
American through the
downturn and we expect
to emerge in robust shape,
ready to capitalise on
the next phase of
economic growth
financial performance
2008 was a year that saw the end of a
lengthy period of highly supportive commodity
prices as the trajectory of the global economy
turned sharply downwards during the second
half. Overall, Anglo American delivered a
solid performance, with operating profit of
$10.1 billion and underlying earnings of
$5.2 billion, with strong performances from
our coal, iron ore and manganese businesses.
positioning Anglo American
through the cycle
The breadth and severity of the global economic
downturn and its impact on growth rates in
key sectors and economies are difficult to
overstate. From global automotive production
to construction activity in emerging markets,
there was a marked contrast between the first
and second halves of 2008, when commodity
prices fell sharply.
As we begin 2009, the economic outlook
remains weak with limited visibility, and we
are continuing to experience volatility and
downward pressure on commodity prices.
Against this backdrop, we have acted decisively
to position the Group through the downturn,
including pulling back planned production
growth, reducing the size of our workforce
by 19,000 by the end of 2009 in line with
our revised production and growth plans and
further cost cutting throughout the Group.
These actions are necessary to ensure that
Anglo American is well positioned through
the cycle, both operationally and financially,
to continue to deliver long term value to our
shareholders.
In December, we announced that capital
expenditure plans for 2009 would be scaled
back by more than 50% to $4.5 billion in
response to the changed economic outlook.
We will achieve this substantial reduction
principally by rescheduling capital spend on
many of the Group’s major development
projects. The $3.2 billion of capex that we
will spend on the Group’s projects in 2009 will
enable their continuing development without
incurring undue delays or penalties that may
impact their investment cases. These measures
balance necessary short term action in the
context of the long term nature of the mining
industry. We remain committed to our long term
Anglo American plc Annual Report 2008
Lost time injury frequency
rate (LTIFR) and fatal injury
frequency rate (FIFR)*
LTIFR
2.5
2.0
1.5
1.0
0.5
0
00 01 02
03
04
05
06
07 08
FIFR
0.04
0.03
0.02
0.01
0
* See KPI table on page 15 for definitions
of LTIFR and FIFR. Excludes Mondi from
June 2007 and Highveld from April 2007
strategy and will continue to allocate capital
towards our existing businesses and the
advancement of our portfolio of high quality
development projects. These projects are a key
driver of future value creation for our
shareholders, with several projects well timed
to enter production from 2011 onwards.
The Group’s pipeline of projects is focused
on the most attractive commodity segments
of iron ore, metallurgical coal and copper, in
addition to further expansion options in
platinum and diamonds. While much reduced
capital investment is planned for our projects
during 2009, their realisation will form an
important part of Anglo American’s strong
growth in the medium to long term. We are
retaining a high degree of flexibility of project
timing in order to enable appropriate reactions
to changing market conditions, thereby ensuring
that Anglo American is positioned optimally
for the next period of upward momentum in
the cycle.
The three key cost saving and efficiency
initiatives that we have put in place over the
past 18 months are well advanced and are
already beginning to make an important
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recognising that the sale of a business of its
scale is unlikely in the near term.
In August, following a series of transactions
in 2007 and 2008, we acquired control of the
Minas-Rio iron ore project and the Amapá iron
ore system. The Minas-Rio project has
considerable expansion potential and is a key
element in the Group’s long term iron ore
growth ambitions.
In October, the sale of the Namakwa Sands
mineral sands business was completed and, in
November, we sold 26% interests in both the
Black Mountain zinc, lead and copper operation
and the Gamsberg zinc project to Exxaro
Resources for a total consideration of
approximately $353 million.
After the year end, Anglo American reduced
its shareholding in AngloGold Ashanti to
11.8%, realising total proceeds of $434 million.
Early in the year, mining production in
South Africa was severely disrupted for a
short time owing to national electricity supply
problems. While the crisis was averted through
collaboration and consensus across the mining
industry, resulting in ongoing reduced power
usage, we are continuing to play an important
role, working in partnership with the South
African government and Eskom to develop and
implement long term solutions to guarantee
electricity supply.
As we strive to deliver superior operating
performance, we also made several senior
management changes during 2008, marking
a significant strengthening of the leadership
team, involving a combination of internal and
external appointments. These have included
new CEOs for Anglo Platinum, Anglo Coal
and Kumba Iron Ore.
Our executive team has been further
strengthened through the appointment of
Russell King as chief strategy officer, with
Mervyn Walker taking over the human
resources portfolio and joining the Executive
Committee (ExCo). We also welcomed Kuseni
Dlamini back to the Group in his new position
as head of Anglo American South Africa; he
is also a member of ExCo.
During the year, John Wallington, who
had served the Group for 27 years, was
succeeded as chief executive of Anglo Coal by
Ian Cockerill, who returned to the Group after
having been CEO of Gold Fields for six years.
Anglo American plc Annual Report 2008
contribution to our financial and operating
performance. Such disciplines are particularly
valuable during these times. The Asset
Optimisation programme has been rolled out
across the Group and is expected to contribute
a significant uplift to operating profit of some
$1 billion over the next three years. This is in
addition to the $1 billion in savings by 2011
we have announced from our procurement and
shared services initiatives, which have already
delivered value of over $200 million in savings
in 2008.
While the global economy continues to face
unprecedented challenges and, with severely
constrained financing markets, it is critical for
us to safeguard balance sheet flexibility as far
as possible. Notwithstanding the other measures
we have taken, the Board has decided to
suspend dividend payments in order to preserve
the Group’s strategic growth options. The Board
will continue to review the Group’s financial
position and is committed to the resumption
of dividend payments as soon as market
conditions allow.
delivering strategic objectives
In pursuit of our ambition of becoming the
leading global mining company, we have made
further strategic progress to focus the business
on its core mining portfolio, by making further
disposals of non-core assets, securing new
order mining rights and positioning the Group
for profitable growth.
In April, Anglo American was granted its
new order mining rights conversions by the
South African Department of Minerals and
Energy. The conversions relate to the mineral
rights across our businesses in South Africa.
This significant achievement provides an ever
stronger platform for the Group’s long term
development projects in South Africa, our
employees and contractors, as well as for
the many black empowered businesses with
which we are partnered.
In May, we disposed of the Group’s interest
in China Shenhua Energy, realising cash
proceeds of $704 million and, in June, we sold
Tarmac Iberia to Holcim for a consideration of
$186 million. The Tarmac group continues to be
managed to maximise shareholder value while
options for its sale continue to be explored,
06
About Anglo American
Chief executive’s statement continued
The Board wishes John well for the future.
Neville Nicolau moved from AngloGold Ashanti
to head up Anglo Platinum in succession to
Norman Mbazima and Duncan Wanblad, who
have assumed the respective roles of CEO of
Scaw Metals and head of copper at Anglo
Base Metals.
safety
The changes that we made to our safety
practices in 2007 and a renewed commitment
to a new level of safety performance delivered
results, and we are helping to lead the way,
particularly in South Africa, to achieve a safer,
more productive mining industry. In April, we
held the Anglo Tripartite Safety Summit in
Johannesburg, bringing together government,
unions and the industry to unlock and leverage
potential in working together to tackle some
of the critical issues around mining safety in
South Africa.
We have achieved a year on year reduction
of 17% in the lost time injury frequency rate
(LTIFR) at our operations, with extended
periods of incident-free, safe production.
2008 also saw an improvement in terms of
a 33% reduction in the number of fatalities
at our operations. During the year 27 people
died while on company business, compared
with 40 fatalities during 2007; this is a
significant step in the right direction, but we
still have a long way to go. Of particular note
is Anglo Platinum’s Union mine in South Africa,
which has achieved more than 6 million fatality
free shifts, and the Barro Alto nickel project
and Anglo Ferrous Brazil which achieved 966
days and 3.5 million hours respectively without
a lost time injury. The implementation of our
global Fatal Risk Standards and the successful
roll out of the global safety risk management
programme are helping to ensure a systematic
approach to managing safety and preventing
accidents as we continue on our journey
towards ‘zero harm’.
sustainable development
Energy security and climate change represented
significant challenges for our business in 2008.
The economic downturn may reduce short term
electricity supply pressures, but in a number
of countries there is a substantial backlog in
investment in generating assets. In relation to
climate change, we continued to drive forward
a wide array of energy efficiency projects,
invested further in methane generation projects
in Australia and we supported the launch of the
Australian government’s Global Carbon Capture
and Storage Institute.
Water too has emerged as a major factor,
both in relation to the impact in various regions
of climate change and to the need to manage it
in such a way as to meet the needs of a range
of local users. Water has been an increasing
area of focus for innovation and is a vital issue
for the future of our industry.
Delivering a sustainable uplift in the living
standards of the communities where we work
remains a core goal for our operations. The
training of more than 400 managers in the
Socio-Economic Assessment Toolbox (SEAT)
methodology demonstrates our seriousness.
We have also developed global partnerships
with leading NGOs CARE International on
development issues, and Fauna & Flora
International on biodiversity, learning a great
deal from our partners in the process. In South
Africa, we undertook a review of the social
performance of our operations in light of the
increasing expectations of our stakeholders
that mining should be a catalyst for wider
development. Although we are industry leaders
in areas like enterprise development, HIV/AIDS
and community development, we have
recognised that we do not always have the
necessary level of professionalism at site level.
So, despite the economic climate, in 2009 we
are investing in a major programme of internal
capacity building with internationally recognised
academic partners.
outlook
As a result of the global economic slowdown,
the second half of 2008 saw markedly lower
commodity prices, following several years of
highly supportive prices. Across the industry,
there has been curtailment of some high cost
operations in markets where prices and
demand have declined significantly, for
example in nickel, platinum, iron ore and coking
coal. We expect the difficult credit environment
to continue to impact the funding of many
potential new mines and expansions, thereby
further constraining supply when economic
growth returns.
The world economy faces an unprecedented
level of uncertainty and the outlook remains
poor in the near term, with expectations for
continuing volatility and weakness in
commodity prices. It is against this backdrop
that Anglo American has taken a series of
measures to ensure that the Group’s operating
and cost profiles are appropriate and that
its balance sheet and capital structure have
sufficient flexibility through the current
downturn. However, over the medium to
long term, Anglo American believes that the
fundamentals of its core commodities remain
attractive, with significant value to be created
by the Group’s long life, low cost growth
projects, several of which are timed to enter
production from 2011. The economic recovery
of the OECD member countries and the ongoing
industrialisation of the world’s major developing
markets are expected to drive long term
Anglo American plc Annual Report 2008
“ in 2008, we achieved
a year on year reduction
of 17% in the lost time
injury frequency rate at
our operations. we also
saw an improvement
in terms of a 33%
reduction in the
number of fatalities
at our operations.
this is a significant
step in the right
direction, but we still
have a long way to go”
demand for commodities, stimulated further
by government spending programmes in many
major economies, including the US and China.
In summary, Anglo American has a world
class asset base with long life, low cost mines
and a strong and geographically diverse project
pipeline across the most attractive commodity
segments. We have taken decisive action to
position Anglo American through the downturn
and we expect to emerge in robust shape,
ready to capitalise on the next phase of
economic growth.
Cynthia Carroll
Chief executive
07
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employees in Johannesburg,
south Africa, take part in ‘one’,
the global safety campaign
Kumba iron ore’s new jig plant at sishen in south Africa’s
northern cape is ramping up towards its design capacity
of 13 million tonnes per annum
peruvian president Alan
garcia and cynthia carroll
meet in the presidential
palace, lima in June 2008
Anglo American plc Annual Report 2008
08
About Anglo American
tyre contracts
strategic partnerships and global
contracts with suppliers meant
that spot market purchases were
largely avoided, resulting in savings
of $15 million
$15 m
savings
Pumps
increased fuel pump flow rates
at Anglo coal Australia’s dawson
mine are yielding benefits of around
$4 million per annum. by doubling
the flow rate, haul truck refuelling
time has been halved, with a
consequent reduction in the
haul truck fleet’s downtime
$4 m
savings
Introduction to Asset Optimisation
best
in class
Anglo American plc Annual Report 2008
Following the ‘One Anglo’ approach
of moving towards a common
framework of values and
standards, Anglo American has
been rolling out a value based
management (VBM) methodology
across the Group.
Within the VBM framework,
Asset Optimisation (AO) is the single
most important programme in a range of
value creating initiatives that are under way.
The AO programme is designed to improve the
performance of the Company’s existing long
life asset base through cost and productivity
improvements in order to unlock maximum
value from its existing assets.
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1. employees carrying out a safety check at
Anglo platinum’s rustenburg mine, south Africa
2. truck loading in the open pit at base metals’
mantos blancos copper mine, chile
3. inspecting an underground ventilation fan
at Anglo coal’s Kriel colliery, south Africa
4. dawson central, gangulu and palm tree
wutaru cultural heritage monitors carrying
out artefact surveys prior to exploration drilling
at dawson, Australia
3.
4.
in 2008, major progress was
made in improving the company’s
cost and productivity performance
and a substantial cost reduction
programme, targeting $1 billion
of cost savings from procurement
and shared services by 2011, was
announced. in addition, the Asset
optimisation programme will add
a further $1 billion over the next
three years.
$2 bn
uplift to operating profit
from Asset optimisation
and procurement initiatives
Tyres
in 2008, global tyre contracts were finalised
with michelin and bridgestone that secure
pricing and a major part of supply in large
off-the-road (otr) tyres for the foreseeable
future. the benefits of building these strategic
partnerships were clear when there was a
shortfall in otr tyres in 2008. michelin was able
to make volumes available to Anglo American,
easing the pressure on some mines which
would otherwise have had to buy more
expensive tyres on the spot market.
in addition, each of the business units and
mine sites collaborated on tyre allocations
through 2008. one example was at platinum’s
mogalakwena mine in south Africa, which
needed to buy spot market tyres at prices
higher than the contract price. through a
cooperative effort across the group, the
global supply and procurement team
managed to source tyres for mogalakwena
from el soldado mine in chile, which needed
fewer of these tyres than anticipated owing to
improvements in tyre lifetime. this collaboration
led to a direct saving of $2 million.
substantial improvements in tyre life, which
reduces the need to buy tyres, can be attributed
to a programme set up by Anglo technical in
2007. this programme was rolled out globally
and is undergoing constant improvement.
increasing tyre lifetime enables the organisation
to close supply gaps caused by a market
shortage of large otr tyres, as well as to
deliver overall savings to the group.
copper ore ready to be transported out of
the open pit at los bronces mine in chile,
where mining takes place at an elevation
of 3,000-3,500 metres above sea level
Introduction to Asset Optimisation
Group approach to Asset Optimisation (AO)
A programme to transform Anglo
American’s supply chain operations globally
also has been mobilised. The new Supply Chain
function will consolidate spend to manage it in
a more strategic, holistic manner and deliver an
overall spend reduction of 10% and benefits
of $1 billion by 2011, further details of which
can be found on pages 16 to 17. In addition,
three shared service centres, in Asia Pacific,
Latin America and South Africa, have been
established to provide common accounting
and employee services.
The AO programme involves a thorough
review of all mining activities and includes
benchmarking the performance of all assets
and processes, internally and externally.
The business units have established
Three elements form the Group’s approach to AO
dedicated teams to coordinate the
implementation and embed the AO process
with support from central technical resources.
Formal benchmarking procedures are being
developed with a common and searchable
AO database to maximise best practice
opportunities.
All business units have now completed the
initial phase of their AO programme and targets
have been calculated. The Group target is
$1 billion over the next three years in addition
to $1 billion savings from procurement.
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Anglo American plc Annual Report 2008
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Operating and financial review
Our locations
Group
overview
Anglo American is a global leader in mining, focused
on adding value for shareholders, customers, employees
and the communities in which it operates.
The Group’s unique portfolio of high quality mining assets
includes precious, base and bulk commodities.
The five core mining businesses are Platinum, Diamonds,
Base Metals, Iron Ore (Ferrous Metals) and Coal.
The Group is geographically diverse with an operating
footprint spanning 45 countries.
Precious
Platinum
Anglo Platinum mines, processes and refines
the entire range of platinum group metals
(platinum, palladium, rhodium, ruthenium,
iridium and osmium) and is the world’s largest
primary producer of platinum, accounting for
around 39% of global newly mined output.
Anglo Platinum has the largest platinum
reserves in the world, as well as extensive
resource capabilities and the ability to grow
production in line with projected demand for
the foreseeable future. All of Anglo Platinum’s
current operations are located in South Africa.
Diamonds
Anglo American’s diamond interests
are represented by its 45% shareholding
in De Beers.
De Beers is the world’s leading diamond
business. Its expertise extends to all
aspects of the diamond pipeline, including
prospecting, mining and recovery and,
through its distribution arm, The Diamond
Trading Company, the sorting, valuing and
sale of rough gem diamonds.
De Beers produces around 40% of the
world’s rough diamonds by value from its
mines in Botswana, Canada, Namibia and
South Africa.
Base
Base Metals
Anglo Base Metals has interests in 13
operations in six countries, producing copper,
nickel, zinc, niobium and phosphate fertilisers,
together with associated by-products, including
lead, molybdenum and silver.
In Chile, its six copper operations comprise
the wholly owned Los Bronces, El Soldado,
Mantos Blancos and Mantoverde mines, the
Chagres smelter and a 44% interest in the
Collahuasi mine.
Other South American operations are the
Loma de Níquel nickel mine in Venezuela, and
the Codemin nickel and Catalão niobium mines
in Brazil. Anglo Base Metals also has a controlling
interest in Copebrás, a leading Brazilian producer
of phosphate fertilisers and phosphoric acid.
In southern Africa, the Skorpion mine produces
zinc and the Black Mountain mine produces zinc
and associated by-products such as lead. Anglo
Base Metals’ sole European operation is the
Lisheen zinc and lead mine in Ireland.
Financial highlights(1)
Financial highlights(1)(2)
Financial highlights(1)
$ million
Operating profit
EBITDA
Net operating assets
Share of Group
operating profit
Share of Group
net operating assets
12 months
31 Dec 2008
12 months
31 Dec 2007
$ million
12 months
31 Dec 2008
12 months
31 Dec 2007
$ million
12 months
31 Dec 2008
12 months
31 Dec 2007
2,226
2,732
9,045
22%
27%
2,697
3,155
9,234
28%
35%
Share of associate’s
operating profit
EBITDA
Group’s aggregate
investment in De Beers
Share of Group
operating profit
508
665
484
587
1,623
1,802
5%
5%
Operating profit
EBITDA
Net operating assets
Share of Group
operating profit
Share of Group
net operating assets
2,505
2,845
5,474
25%
17%
4,338
4,683
4,989
45%
19%
(1) Share of Group operating profit and share of Group net operating assets for both 2008 and 2007 are based on continuing operations and therefore, in 2007, exclude the contribution of Mondi and AngloGold Ashanti.
(2) De Beers is an independently managed associate of the Group.
Anglo American plc Annual Report 2008
Our locations
11
Key
Corporate and representative offices
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Platinum
Diamonds
Base Metals
Ferrous Metals
Coal
Industrial Minerals
In addition to its operations as one of the major
diversified mining groups, Anglo American’s
exploration activities and projects cover many
parts of the globe.
Bulk
Ferrous Metals
coal
industrial Minerals
Anglo Ferrous Metals’ primary business
is iron ore. In South Africa, it holds a 63%
shareholding in Kumba Iron Ore and in
Brazil, it holds an effective 99.4% interest
in the Minas-Rio iron ore project, an effective
69.2% interest in the Amapá iron ore system
and a 49% interest in LLX Minas-Rio, the
owner of the port of Açu. Other interests
principally comprise Samancor Manganese
(manganese ore and alloy mining) and
Scaw Metals (carbon steel products).
Through Kumba Iron Ore, Anglo American is
the world’s fourth largest iron ore producer
in the global seaborne iron ore market.
The Group’s coal interests are held through
its wholly owned Anglo Coal business, one
of the world’s largest private sector coal
producers and exporters.
Anglo Coal currently produces around 100 million
tonnes of thermal and metallurgical coal from
four geographic regions: South Africa, Australia,
South America (Venezuela and Colombia) and
North America (Canada).
Anglo Coal’s excellent growth prospects in
thermal and metallurgical coal will ensure the
Group is firmly placed to help meet increased
global energy needs and will continue to play
an important part in Anglo American’s growth.
In 2007, Anglo American announced plans
to sell Tarmac, the aggregate and building
products business.
Anglo Industrial Minerals’ sole business is
Tarmac. Tarmac has a leading position in the
UK construction materials industry and is well
positioned in certain key markets in continental
Europe and the Middle East. The sale process
has been delayed until current credit market
conditions improve. However, the Tarmac
group continues to be managed to maximise
shareholder value while options for its sale
are being explored.
Financial highlights(1)
Financial highlights(1)
Financial highlights(1)
$ million
Operating profit
EBITDA
Net operating assets
Share of Group
operating profit
Share of Group
net operating assets
12 months
31 Dec 2008
12 months
31 Dec 2007
$ million
12 months
31 Dec 2008
12 months
31 Dec 2007
$ million
12 months
31 Dec 2008
12 months
31 Dec 2007
2,935
3,064
11,167
29%
34%
1,432
1,561
Operating profit
EBITDA
3,987
Net operating assets
15%
15%
Share of Group
operating profit
Share of Group
net operating assets
2,240
2,585
3,962
22%
12%
614
882
Operating profit
EBITDA
228
487
474
732
3,984
Net operating assets
3,335
4,509
6%
15%
Share of Group
operating profit
Share of Group
net operating assets
2%
10%
5%
17%
Anglo American plc Annual Report 2008
12
Operating and financial review
A global business fit for the future
anglo american’s strategy is to become the leading
global mining company. to realise that ambition, the
Group is striving to become the investment, partner
and employer of choice
investment of choice
Anglo American seeks to outperform its
competitors in delivering value to shareholders.
Everything that the Group hopes to achieve
for all other stakeholders – particularly host
governments, communities and employees –
must be built on a platform of sector leading
financial performance.
To achieve this, Anglo American is:
• uplifting the performance of its long life
asset base through cost and productivity
improvements;
• integrating a stronger performance culture
across the organisation and streamlining
its management model; and
process, there have been significant changes
to the executive teams, including new chief
executives for the base metals, coal and
platinum businesses since April 2007.
Growth
Anglo American’s portfolio is strategically
positioned for growth in the near, medium
and long term, through both organic growth
and targeted acquisitions across a number
of geographies. The Group’s approved project
pipeline is of the order of $17 billion. The
pipeline is focused on the most attractive
commodity markets, such as copper, iron
ore and export coal and capitalises on Anglo
American’s unique position in platinum.
• prioritising capital expenditure towards
The projects offer scale and are positioned
those businesses and development projects
that are expected to perform most strongly
in the near term.
Uplifting the performance
of the asset base
In 2007, a major drive was initiated to improve
cost and productivity performance along with a
substantial cost reduction programme, targeting
$1 billion of cost savings from procurement and
shared services by 2011.
The Asset Optimisation programme
involves a thorough review of all key mining
operations and includes benchmarking the
Group’s assets and processes relative to best
in class performance along key performance
drivers. The benefits of this programme will
have a particular impact on the coal and
platinum businesses, where some of the
best value enhancing potential lies.
Integrating a stronger
performance culture
To meet its strategic goals, the Group’s
organisational culture is being changed to
‘One Anglo’. This includes capitalising on the
Group’s global scale, with increased integration
in areas such as shared services and supply
chain management, knowledge sharing
between sites and across business units and
adherence to common standards and policies.
Furthermore, the Group is embedding
a performance culture throughout the
organisation, and building a management team
driven by value maximisation. As part of this
in the lower half of the industry cost curves.
The pipeline has the potential to deliver strong
production growth and market share gains in
all core market segments. The rapid and steep
decline in the prices of, and demand for, the
majority of the commodities produced by the
Group in the second half of 2008 as a
consequence of global economic uncertainty
has presented a significantly changed near
term outlook for Anglo American. As a result,
the Company has recently completed a wide
ranging review of its capital expenditure
programmes. The review focused particularly
on prioritising projects that are expected to
perform most strongly in the near term, with
little detrimental effect on projects that are
already at an advanced stage of development.
Planned capital expenditure for 2009
was reduced by more than 50% to $4.5 billion.
This substantial reduction will be achieved
principally by rescheduling capital spend on
many of the Group’s major development
projects. The $3.2 billion of capital expenditure
that will be spent on the Group’s projects in
2009 will enable their continuing development
without causing undue delays or penalties that
may impact their investment case, balancing
essential short term action in the context of the
long term nature of the mining industry. These
projects are a key driver of Anglo American’s
long term growth and several are well timed
to enter production from 2011 onwards.
Stay-in-business capital expenditure for
2009 was reduced to $1.3 billion, equal
to 64% of depreciation.
In addition to organic growth plans, the
Group continues to pursue targeted, value
enhancing acquisitions. In assessing acquisitive
growth opportunities, it takes a rigorous and
value based approach, looking for assets that:
• are in the most attractive market segments;
• have scale, long lives and future
growth options;
• are cost competitive; and
• offer significant value creation potential.
Partner of choice
Engaging with stakeholders
Anglo American has a long history of
successful collaboration with its stakeholders,
including governments, communities, and
non-governmental organisations (NGOs).
Only through the fostering of such relationships
can the Group thrive and be respected in the
countries and communities where it operates.
Building partnerships with governments
at all levels is critical to earning and retaining
the Group’s licence to operate, which is why
it seeks to engage with host governments to
understand and complement their objectives.
An example of this approach can be seen in
the collaborative work with the South African
government to improve safety performance
in the mining sector, find solutions to the
challenges around electricity supply, and to
improve the teaching of maths and science in
South African schools, to promote enterprise
development and to make progress towards
the country’s transformation goals.
Anglo American seeks to earn the consent
and support of the communities who live
around its operations and potential projects.
Such communities rightly expect to share in
the benefits of mining. It is the Group’s aim
to work with them to deliver meaningful and
long lasting benefits, such as:
• groundbreaking work to fight the HIV/AIDS
epidemic in southern Africa;
• offering pre-employment training to local
people to enable them to acquire the skills
needed to work at Group operations;
• working with communities to improve their
access to health services and education;
• supporting farmers to help to improve their
practices and income levels; and
• promoting sustainable enterprise development
in South Africa, Chile and Brazil.
Anglo American plc Annual Report 2008
inspecting a load haul truck in the vehicle workshop
at Kumba iron Ore’s Sishen mine in South africa’s
northern cape province. an improved maintenance
planning process is creating additional production
capacity for the truck fleet
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Anglo American cannot do this alone and it
welcomes the knowledge, skills and expertise
to be gained by working in partnership with
NGOs, and with aid and development
agencies. To help understand better the
concerns, priorities and needs of local people
the Group has also pioneered a unique process
called the Socio-Economic Assessment Toolbox
(SEAT), which is based on comprehensive
local stakeholder engagement, assessment
of the Group’s direct and indirect impacts
and on seeking ways in which the core
business can help to support improved local
development outcomes.
employer of choice
Becoming the employer of choice for Anglo
American begins with a guarantee to provide
a safe and supportive working environment
for everyone who works for the organisation.
The commitment to zero harm remains the
primary focus.
The Group offers a range of career paths
for both technical and professional people.
With its global footprint and growth aspirations,
Anglo American can offer both an exciting
and a fulfilling employment proposition.
Anglo American aims to attract the best
people in the industry, and to facilitate and
encourage professional and personal
development for all Anglo employees.
The Group is focused on developing talent
and is actively interested in developing a
diverse workforce where different experiences
and points of view are supported and valued.
Notably, women are being encouraged into the
organisation in greater numbers and the Group
endeavours to facilitate entry for individuals at all
levels from graduate to senior management and
from local recruitment to global appointments.
Anglo American plc Annual Report 2008
14
Operating and financial review
Key performance indicators (KPIs)
anglo american uses KPis to
help measure its performance.
the KPis are aligned to the three
key strategic aims of the Group
Anglo American’s strategy is to become
the leading global mining company. In 2007,
Anglo American identified four key areas
that required focus in order to achieve this:
integration, performance, growth and
engagement. During 2008, as understanding
evolved, three key strategic aims that should
underpin this ambition were identified:
• investment of choice;
• partner of choice; and
• employer of choice.
These aims are discussed in ‘A global business
fit for the future’ on pages 12 and 13 of the
Operating and financial review (OFR).
In implementing its strategy, Anglo
American measures performance with reference
to the KPIs set out in the adjacent table. These
KPIs are aligned to its key strategic aims and
are employed across the Group. The KPIs
encompass both financial and non-financial
indicators as well as quantitative and
qualitative measures. While these KPIs are
helpful in measuring the Group’s performance,
it is recognised that they are not exhaustive
and many additional performance measures
are also used to monitor progress.
A new indicator, enterprise development, has
been introduced to better reflect the impact of
the Group’s sustainable development initiatives.
Anglo American plc Annual Report 2008
Total shareholder
return (TSR)
Return on capital
employed (ROCE)
Year on year cost
savings ($m)*
Underlying earnings
per share*
Capital projects
and investment
TSR is defined as share price growth plus dividends
reinvested over the performance period. The Group
uses a performance period of three years and
calculates TSR annually
Please refer to the Remuneration report on
pages 69 to 78
Calculated as total operating profit before impairments
2007: 37.8% (total Group basis)
for the year divided by the average total capital less
other investments and adjusted for impairments
2008: 36.8%
Cost savings for the Group relating to operating efficiencies,
2007: $280 million ($380 million on a total
procurement and restructuring and synergies
Group basis)
2008: $348 million
Underlying earnings are net profit attributable to
equity shareholders, adjusted for the effect of special
items and remeasurements and any related tax and
minority interests
2007: $4.18 ($4.40 on a total Group basis)
2008: $4.36
Optimise the pipeline of projects and ensure that new capital
A summary of the Group’s capital projects
and investments is on pages 18 to 19
is only committed to projects that deliver the best value to
the business on a risk adjusted net present value basis
Energy efficiency†
Improvements in energy efficiency are measured
2007: 196 million‡ (107 million§) GJ total energy used
from a 2004 baseline
2008: 105 million GJ total energy used
Target: A 15% improvement in energy
efficiency by 2014
Total water use†
Water is a critical resource and is managed at catchment
2007: 251 million‡ (131 million§) m3
level. Baselines and targets are being revised
2008: 125 million m3
Target: To be set in 2009
CO2e emission intensity†
Reduction in carbon dioxide equivalent (CO2e) emissions
per unit of production is measured from a 2004 baseline
2007: 24.4 Mt‡ (19.4 Mt§) CO2e equivalent
2008: 19.8 mt CO2e equivalent
Target: A 10% reduction in CO2e emissions
per unit of production by 2014
Corporate social investment
Social investment as defined by the London Benchmarking
2007: Spend – $60.5 million, 0.70% of profit
Group includes donations, gifts in kind and staff time for
administering community programmes and volunteering
in company time
before tax
before tax
2008: Spend – $76.2 million, 1.11% of profit
Enterprise development
Number of companies supported and number of jobs
2007: Number of businesses supported 1,312;
sustained by companies supported by Anglo enterprise
development initiatives
Strategic aims
Strategic focus
KPI
Description
Results and target (if applicable)
Asset Optimisation
and financial
performance
New capital
investments
Sustainable
development
investment of choice
Anglo American seeks to outperform
its competitors in delivering value
to shareholders. Everything that the
Group hopes to achieve for all other
stakeholders – particularly host
governments, communities and
employees – must be built on a
platform of sector leading financial
performance.
Partner of choice
Anglo American has a history of
successful collaboration with its
stakeholders, including governments,
communities, and non-governmental
organisations (NGOs). The Company
understands that it can only thrive
if it is welcomed and respected
in the countries and communities
in which it operates.
employer of choice
For Anglo American, becoming the
employer of choice begins with
an aim to provide a safe and
supportive working environment
for everyone who works for the
organisation. The Company’s
commitment to zero harm remains
its primary focus. The organisation
offers a range of career paths for
both technical and professional people.
With its global footprint and growth
aspirations, Anglo American can offer
both an exciting and a fulfilling
employment proposition.
* Excludes discontinued operations unless otherwise stated.
† Reflects managed operations.
‡ Includes Mondi until 3 July 2007 and Highveld until April 2007.
§ Excludes Mondi and Highveld for all of 2007.
Safety
Work related fatal injuries and
FIFR is calculated as the number of fatal injuries to
2007: 40 fatalities, 0.018‡ (0.021§) FIFR
fatal injury frequency rate (FIFR)
employees or contractors per 200,000 hours worked
Lost time injury frequency
The number of lost time injuries (LTIs) per 200,000
rate (LTIFR)
hours worked. An LTI is an occupational injury which
renders the person unable to perform his/her duties
for one full shift or more the day after the injury was
incurred, whether a scheduled work day or not
People
Voluntary labour
turnover*
Number of permanent employee resignations as
a percentage of total permanent employees
2007: 4.3%
2008: 3.9%
number of jobs sustained 5,850
2008: Number of businesses supported 3,012;
number of jobs sustained 13,431
Target: Number of businesses supported 3,500;
number of jobs sustained 18,000
2008: 27 fatalities, 0.014 FIFR
2009 target: zero incidents
2007: 1.15‡ (1.26§)
2008: 1.04
2009 target: zero incidents
The ultimate goal of zero harm remains
Gender diversity*
Percentage of women and female managers employed
2007: 11% females, 15% female managers
2008: 12% females, 17% female managers
by the Group
Voluntary counselling
and testing (VCT) for
HIV/AIDS
Percentage of employees undertaking voluntary
annual HIV tests with compulsory counselling support
2007: 71%‡
2008: 77%
2009 target: 100% VCT in high disease burden
countries (100% is the long term goal)
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investment of choice
Anglo American seeks to outperform
its competitors in delivering value
to shareholders. Everything that the
Group hopes to achieve for all other
stakeholders – particularly host
governments, communities and
employees – must be built on a
platform of sector leading financial
performance.
Partner of choice
Anglo American has a history of
successful collaboration with its
stakeholders, including governments,
communities, and non-governmental
organisations (NGOs). The Company
understands that it can only thrive
if it is welcomed and respected
in the countries and communities
in which it operates.
employer of choice
For Anglo American, becoming the
employer of choice begins with
an aim to provide a safe and
supportive working environment
for everyone who works for the
organisation. The Company’s
commitment to zero harm remains
its primary focus. The organisation
offers a range of career paths for
both technical and professional people.
With its global footprint and growth
aspirations, Anglo American can offer
both an exciting and a fulfilling
employment proposition.
New capital
investments
Sustainable
development
Safety
People
Strategic aims
Strategic focus
KPI
Description
Results and target (if applicable)
Asset Optimisation
and financial
performance
Total shareholder
return (TSR)
Return on capital
employed (ROCE)
TSR is defined as share price growth plus dividends
reinvested over the performance period. The Group
uses a performance period of three years and
calculates TSR annually
Please refer to the Remuneration report on
pages 69 to 78
Calculated as total operating profit before impairments
for the year divided by the average total capital less
other investments and adjusted for impairments
2007: 37.8% (total Group basis)
2008: 36.8%
Year on year cost
savings ($m)*
Cost savings for the Group relating to operating efficiencies,
procurement and restructuring and synergies
Underlying earnings
per share*
Capital projects
and investment
Energy efficiency†
Total water use†
2007: $280 million ($380 million on a total
Group basis)
2008: $348 million
2007: $4.18 ($4.40 on a total Group basis)
2008: $4.36
Underlying earnings are net profit attributable to
equity shareholders, adjusted for the effect of special
items and remeasurements and any related tax and
minority interests
Optimise the pipeline of projects and ensure that new capital
is only committed to projects that deliver the best value to
the business on a risk adjusted net present value basis
A summary of the Group’s capital projects
and investments is on pages 18 to 19
Improvements in energy efficiency are measured
from a 2004 baseline
2007: 196 million‡ (107 million§) GJ total energy used
2008: 105 million GJ total energy used
Target: A 15% improvement in energy
efficiency by 2014
Water is a critical resource and is managed at catchment
level. Baselines and targets are being revised
2007: 251 million‡ (131 million§) m3
2008: 125 million m3
Target: To be set in 2009
CO2e emission intensity†
Reduction in carbon dioxide equivalent (CO2e) emissions
per unit of production is measured from a 2004 baseline
Corporate social investment
Enterprise development
Social investment as defined by the London Benchmarking
Group includes donations, gifts in kind and staff time for
administering community programmes and volunteering
in company time
Number of companies supported and number of jobs
sustained by companies supported by Anglo enterprise
development initiatives
Work related fatal injuries and
fatal injury frequency rate (FIFR)
FIFR is calculated as the number of fatal injuries to
employees or contractors per 200,000 hours worked
Lost time injury frequency
rate (LTIFR)
The number of lost time injuries (LTIs) per 200,000
hours worked. An LTI is an occupational injury which
renders the person unable to perform his/her duties
for one full shift or more the day after the injury was
incurred, whether a scheduled work day or not
2007: 24.4 Mt‡ (19.4 Mt§) CO2e equivalent
2008: 19.8 mt CO2e equivalent
Target: A 10% reduction in CO2e emissions
per unit of production by 2014
2007: Spend – $60.5 million, 0.70% of profit
before tax
2008: Spend – $76.2 million, 1.11% of profit
before tax
2007: Number of businesses supported 1,312;
number of jobs sustained 5,850
2008: Number of businesses supported 3,012;
number of jobs sustained 13,431
Target: Number of businesses supported 3,500;
number of jobs sustained 18,000
2007: 40 fatalities, 0.018‡ (0.021§) FIFR
2008: 27 fatalities, 0.014 FIFR
2009 target: zero incidents
2007: 1.15‡ (1.26§)
2008: 1.04
2009 target: zero incidents
The ultimate goal of zero harm remains
Voluntary labour
turnover*
Gender diversity*
Voluntary counselling
and testing (VCT) for
HIV/AIDS
Number of permanent employee resignations as
a percentage of total permanent employees
2007: 4.3%
2008: 3.9%
Percentage of women and female managers employed
by the Group
2007: 11% females, 15% female managers
2008: 12% females, 17% female managers
Percentage of employees undertaking voluntary
annual HIV tests with compulsory counselling support
2007: 71%‡
2008: 77%
2009 target: 100% VCT in high disease burden
countries (100% is the long term goal)
Anglo American plc Annual Report 2008
16
Operating and financial review
Performance against KPIs
investment of choice
Financial performance
The Group’s financial performance in the year
and the KPIs used to measure it are discussed
on pages 28 to 31.
Successes to date and future targets are
discussed in the ‘Best in class’ section of
this report on pages 8 and 9.
There are three elements which form the
Group’s approach to AO.
Asset Optimisation
Asset Optimisation (AO) is a structured approach
to optimise business operations by identifying,
defining, planning and implementing initiatives
that will unleash significant value improvement
potential from current assets.
This value improvement could come from,
for example, increased productivity, enhanced
efficiency and capital spend optimisation.
AO considers all aspects of the mining value
chain from ore resources and reserves to the
marketplace in pursuit of value adding
opportunities.
The AO strategy aims to improve the
value performance of assets and drive Anglo
American towards best in class by adopting a
systematic internal and external benchmarking
approach, enabling an understanding and
quantification of the ‘value-at-stake gap’
between current assets and processes relative
to best practice.
The AO programme will be supported
by a fully integrated and auditable project
management and value tracking system.
Fabricated
structural steel
the fabricated structural steel category
represents approximately 5% of the total
invested capital of anglo american’s expansion
projects. recent reductions in raw steel
commodity prices and indirect fabrication and
transport costs are being realised for current
projects where the negotiation of prices has
led to a reduction of between 15% and 20%.
aggregating demand across anglo american’s
businesses and regions has significant
potential to positively impact the project
value far beyond the purchase price of
the fabricated steel.
an additional benefit realised is the application
of a consistent review of the material standards
to enable lower cost country sourcing supply.
low cost country sourcing represents a
potential purchase saving of up to 35%.
the strategy is to provide selected suppliers
better assurance of demand to support the
future security of supply in each key region
of operation and to drive savings from
consolidated demand and global competition.
1. Structured asset optimisation
Structured asset optimisation (SAO) identifies
the key value levers of the business by
analysing the whole value chain of a process,
from ore in the ground to the markets for
products. Supported by the benchmarking
process, such levers allow for the assessment
of the value at stake which can be unlocked
through deliberate intervention. An integral
aspect of the SAO programme, aligned with
the ‘One Anglo’ philosophy, is the development
of systems and structures which will allow for
the rapid cross-divisional sharing of identified
opportunities and best practices.
A number of significant value adding
opportunities in this top-down process have
been identified and are at various stages of
deployment, from project definition to value
delivery. Across the Group, improvements are
being made in several areas, notably longwall
and continuous miner productivity in Coal’s
operations; mineral recovery projects at the
Platinum and Base Metal operations; and in
outbound logistics at Ferrous Metals.
2. Continuous improvement
Continuous improvement (CI) focuses on the
generation of value adding ideas from all levels
within the organisation, as well as finding new
ways to do things quicker and more efficiently.
CI applies to everything from processes to
projects and is typically an enabler for the
SAO programme.
The Group’s employees have identified
many CI opportunities. Those already adding
value to operations are in the fields of conveyor
availability, fuel management, tyre life and
reagent addition initiatives in all business units.
All ideas, big and small, are evaluated for
their value adding potential, and where
value exists, are implemented.
3. ‘One Anglo’ Supply Chain
The ‘One Anglo’ Supply Chain is a procurement
project which focuses on working more closely
as a single, integrated ‘One Anglo’ organisation
and is tasked with managing the organisation’s
spend in a more coordinated manner.
Work being undertaken under each of the
AO categories is illustrated below by reference
to specific projects.
KPis are employed
across the Group
to assess how well
the strategic aims
are being met
Anglo American plc Annual Report 2008
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‘One Anglo’ Supply Chain: Cost savings
from the Company’s procurement project
In February 2008, the Group set out a
programme aimed at transforming Anglo
American’s Procurement and Supply Chain
operations globally, with the ambitious, but
achievable, target to become the industry
leader and global benchmark for supply chain
value creation. At the heart of this strategy
is working more closely together as a single,
integrated organisation.
The new ‘One Anglo’ Supply Chain function
will consolidate expenditure to manage it in
a more strategic, holistic manner in order to
deliver an overall expenditure reduction of 10%
and benefits of $1 billion by 2011. A team of
global, cross-functional specialists were
mobilised into Strategic Sourcing teams early in
2008 and are on track to deliver the $1 billion
in committed value by 2011.
There are three elements to the
transformation plan within the ‘One Anglo’
Supply Chain:
• deliver additional value through more
effective management of spend;
• develop the processes, governance and a
performance management framework that
can be consistently applied across the
Group; and
• improve internal capability through better
teamwork as well as individual competencies.
The Strategic Sourcing teams are making good
progress and have started a series of initiatives
in 2008 relating to specific categories of spend
or commodity. Significant benefits have already
been achieved, with Anglo American’s Supply
Chain organisations realising over $200 million
of benefits in 2008.
Under the AO umbrella, value is being
achieved as the collective skills and strengths
of the Anglo American Group are brought
together. The Company’s suppliers also play
a vital role in this process. Accordingly, teams
are encouraged to tap into the capabilities of
the supplier base, recognising expertise and
collaborating with suppliers to identify value
and assist with initiative implementation.
Initially the teams focused on nine
categories including heavy mining equipment,
tyres, fuels and lubricants, explosives and
temporary labour. Category strategies have
been completed and over 90 value initiatives
identified, of which the top 20 represent
80% of the expected value. These initiatives
are both commercial and technical in nature,
including operational improvements as well as
contracting benefits that will be realised over
the short, medium and long term.
A further ten categories are now being
reviewed for various short to medium term
opportunities. These include continuous
mining equipment, draglines, transport and
logistics and structural steel. Teams are
progressing well on category analysis and
shaping value creation strategies.
Supply chain in action
a global strategic plan for the temporary
labour services category was completed
in 2008. its first benefit initiatives, regional
tenders in australia and South africa, were
recently concluded and will deliver significant
value across the Group. Suppliers were initially
selected based on best practice qualitative
criteria with a focus on their capability to
improve business processes and maintain
professional service levels. this approach
aimed to facilitate sustainable and strategic
supplier partnering in an effort to improve
demand forecasting and efficient resourcing
within the category. Once the desired
qualitative criteria were satisfied, commercial
considerations were negotiated. teamwork
between Hr management at mine sites,
business unit supply chain and the strategic
sourcing team was integral in achieving these
significant benefits. in addition to achieving
cost savings, on-site employment conditions
have been standardised and improved, while
suppliers have potential for increased
business.
Closer engagement with suppliers will
continue as a priority through 2009. In
November 2008, the Group’s first annual
global conference for its high performing
supplier partners took place and this will
become an annual event.
2008 was a strong year in terms of value
delivery. Results to date have been encouraging
and further categories are due to be reviewed
for value delivery potential in the second
quarter of 2009, covering a further 25% of
total expenditure.
The implementation of these initiatives
will address more than 40% of total spend
and those started during 2008 and through
2009 are expected to realise value in line
with the Group’s targets.
Although the present economic environment
has created challenges for all of the Group’s
operations, additional sourcing opportunities
are arising as a result of changing conditions
and price declines for many commodities.
Anglo American continues to work with its
suppliers to ensure that reductions in many
input costs are quickly reflected in its purchasing
price structures. Furthermore, global demand
has reduced for some strategic categories
such as heavy mining equipment, tyres and
construction services, alleviating the recent
security of supply concerns. This provides
a potential opportunity to enter into longer
term agreements with key suppliers.
Anglo American plc Annual Report 2008
18
Operating and financial review
Performance against KPIs continued
New capital investments
The Group’s review at the end of 2008 for
future planned capital expenditure resulted in
a decision to reduce it for 2009 to $4.5 billion,
including $1.3 billion stay-in-business capital
expenditure. These substantial changes to
planned capital expenditure will be achieved
principally by rescheduling many of the
Group’s development projects. The Group’s
capital expenditure programmes for 2010
will continue to be monitored against
prevailing and forecast market conditions.
During 2008, the Group continued with
the development of several major projects
in its pipeline of approved projects. The total
capital cost of these projects, across the
Group’s Platinum, Diamond, Coal, Base Metals
and Ferrous Metals businesses, amounts to
$17 billion on an attributable basis. This was
an increase of $5 billion relative to 2007.
The increase was principally due to the approval
in 2008 of three projects in South Africa,
the Amandelbult No. 4 Shaft and the Styldrift
Merensky phase 1 platinum replacement
projects and the Sishen South iron ore project,
increases in the forecast expenditure on the
Los Bronces and Barro Alto projects and the
consolidation of 100% of capital expenditure
for phase 1 of the Minas-Rio iron ore project
in Brazil.
For the longer term, the Group has an array
of projects under active consideration at the
pre-feasibility or feasibility stages. This pipeline
of projects stretches well into the future,
ensuring the Group maintains a high degree of
flexibility with regards to its formidable organic
growth potential.
During 2008, work continued on
Anglo Platinum’s major capital projects. The
$692 million Mogalakwena North expansion
project is expected to reach completion in
Q2 2010. The $224 million Amandelbult
East Upper UG2 expansion project is on track
to raise the mine’s platinum output by 100,000
ounces a year by 2012. Accessing Merenksy
Reef, the $316 million Paardekraal 2 Shaft
replacement project aims to replace 120,000
ounces of platinum annually by 2015. Smaller
projects include the Base metals refinery
expansion project and the Waterval Merensky
Plant retrofit, both of which remain on time and
on budget. Anglo Platinum has reduced its total
capital expenditure for 2009 to $600 million on
projects, through deferral of expenditure across
several major projects, including Amandelbult
No. 4 Shaft, Twickenham, Styldrift and the
second slag cleaning furnace at Waterval.
During the year, Base Metals continued
to develop its pipeline of projects across
South America, southern Africa and the US.
The major approved projects in copper and
nickel provide scope for significant organic
growth in the future. Completion of the approved
projects in the Base Metals pipeline also
improves the business unit’s cost positioning
across its suite of metals.
Anglo American plc Annual Report 2008
The decision to reduce capital expenditure
on Base Metals’ projects to $1.4 billion in
2009 has affected the commissioning dates
of the business unit’s two major approved
projects. Commissioning of the Los Bronces
copper expansion project in Chile, which aims
to take production to an average initial level
exceeding 400,000 tonnes per annum (tpa),
has been delayed by eight months and first
copper production is now expected in the fourth
quarter of 2011. For the Barro Alto nickel project
in Brazil there is a 12 month commissioning
delay, with first production expected in the
first quarter of 2011.
Base Metals has an extensive pipeline of
projects under consideration or development
for the longer term. In Chile, the potential
phased expansion of the Collahuasi copper
mine continues to be investigated. In Alaska,
the pre-feasibility study for the Pebble copper
project, in which the Group has a 50% stake,
is ongoing. It is anticipated that exploration
drilling will start at the 300,000 tpa
Michiquillay copper project in Peru in 2009.
Kumba Iron Ore continues to ramp-up
its production at the Sishen Expansion Project
in South Africa. The project is expected to
reach full production capacity of 13 million
tonnes per annum (Mtpa) of iron ore in 2009.
The Sishen South project, which involves the
development of an opencast mine 80 kilometres
south of Sishen mine, was approved in July
2008. Earthworks have commenced and bulk
construction is scheduled to begin with the
establishment of the major civil contracts during
the first quarter of 2009. The mine is scheduled
to start production in the first half of 2012,
ramping up to full capacity of 9 Mtpa in 2013.
The pace of construction at Minas-Rio is
driven by the timing of the Environmental
Licence and other permits and, therefore,
there is expected to be a 12 to 15 month
commissioning delay to the first phase of the
Minas-Rio iron ore project, with first production
now expected in the second quarter of 2012.
Planned annual capacity will be 26.5 Mtpa of
iron ore pellet feed at an anticipated cost of
$3.6 billion which is currently being updated
following the announced delay.
In manganese, the $183 million GEMCO
expansion project in Australia’s Northern
Territory is expected to be completed during
the first half of 2009. The project is on
target to increase GEMCO’s manganese ore
production capacity from 3.0 million dry metric
tonnes per annum (Mdmt pa) to 4.0 Mdmt pa
by the first half of 2009.
In Coal, the $473 million Zondagsfontein
project is under construction and includes a
50:50 joint venture plant with BHP Billiton
Energy Coal South Africa. The project is on
track to deliver 6.6 Mtpa of export and domestic
thermal coal from 2010, with first production
expected in the second quarter of 2009. The
Mafube project achieved full production rates
of 5.4 Mtpa in 2008. Work continues on the
housing project and the conveyor system and
completion is expected in early 2009. MacWest
is also nearly complete, with first production
achieved in July 2008 and full production of
2.7 Mtpa expected in March 2009.
In Australia, the $726 million Lake Lindsay
coking coal project is progressing well. The
coal handling and preparation plant has been
commissioned, having achieved milestones
on or ahead of plan, while the dragline started
operations in January 2009. The $839 million
Dawson expansion project was completed
in 2008. The Foxleigh mine was acquired in
February 2008, delivering additional volumes
and synergies with Anglo American’s adjacent
operations.
In Canada, Peace River Coal is making
good progress on a $95 million capitalisation
programme to acquire and operate its own
mining equipment fleet. In Colombia, the
expansion at Cerrejón to 32 Mtpa is complete
and full production is expected to be achieved
early in 2009. Feasibility studies are under
review to expand the operation to around
40 Mtpa. Total project capital expenditure
for 2009 for Anglo Coal has been reduced
to $400 million.
For the first time in its history, De Beers
opened three new mines in one year. In Canada,
Victor mine in northern Ontario was completed
and commissioned eight months ahead of
schedule, while Snap Lake mine in the Northwest
Territories commenced commercial production
in early 2008, with both mines reaching full
production in the second half of the year.
De Beers’ Voorspoed mine in South Africa
was officially opened in November and is
expected to produce 8.3 million carats at an
average value of $120 per carat for the next
12 to 16 years.
Ferrous Metals projects, shown in the table on page 19 on a nominal basis, were expressed in real terms in the
half year financial report. Had they been expressed in nominal terms the capex forecasts would have been:
Approved
Project
Sishen Expansion
Minas-Rio phase 1
Sishen South
Future unapproved
Project
Sishen Expansion Project 2
Sishen Pellet
At 30 June 2008
Capex (real) $m
Capex (nominal) $m
754
3,456
782
797
3,543
1,017
At 30 June 2008
Capex (real) $m
Capex (nominal) $m
775
338
819
359
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Selected major projects
completed in 2008
Sector
Base Metals
Diamonds
Coal
approved
Sector
Platinum(4)
Project
Collahuasi debottlenecking
Victor
Snap Lake
Voorspoed
Dawson
Project
Marikana JV
Mototolo JV
Amandelbult East Upper UG2
Mogalakwena North expansion(5)
Mogalakwena North replacement(5)
Townlands ore replacement
Lebowa Brakfontein Merensky
Base metals refinery expansion
MC plant capacity expansion – phase 1
Mainstream inert grind projects
Slag cleaning furnace 2
Paardekraal
Twickenham
Amandelbult No 4 Shaft project
Styldrift Merensky phase 1
Base Metals
Ferrous Metals
Coal
Barro Alto
Los Bronces expansion
Sishen expansion
Minas-Rio phase 1
Sishen South
Cerrejón
Lake Lindsay
Mafube
MacWest
Zondagsfontein
Future unapproved
Sector
Base Metals
Ferrous Metals
Coal
Project
Collahuasi expansion phase 1
Goias II
Quellaveco
Jacaré phase 1
Morro Sem Bone
Gamsberg
Michiquillay
Pebble
Sishen Expansion Project phase 1B
Sishen Expansion Project 2
Sishen C Grade
Sishen Pellet
Minas-Rio phase 2
Heidelberg opencast
Elders opencast
Elders underground
Cerrejón P40
New Largo
Heidelberg underground
Country
Chile
Canada
Canada
South Africa
Australia
Country
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Brazil
Chile
South Africa
Brazil
South Africa
Colombia
Australia
South Africa
South Africa
South Africa
Country
Chile
Brazil
Peru
Brazil
Brazil
South Africa
Peru
United States
South Africa
South Africa
South Africa
South Africa
Brazil
South Africa
South Africa
South Africa
Colombia
South Africa
South Africa
Completion date
Q4 2008
Q3 2008
Q4 2008
Q4 2008
Q4 2008
Capex
$m(1)
66
834
796
185
839
Production volume(2)
31 ktpa copper(3)
0.6 million carats pa
1.6 million carats pa
0.7 million carats pa
5.7 Mtpa coking, semi-soft and thermal
First
production
date
Full
production
date
Capex
$m(1)
Production volume(2)
Q1 2006
Q4 2006
Q3 2007
Q4 2007
Q4 2007
Q4 2007
Q2 2008
Q3 2009
Q3 2009
Q4 2009
Q4 2009
Q2 2010
Q4 2011
Q1 2012
Q2 2017
Q1 2011
Q4 2011
Q4 2007
Q2 2012
H1 2012
Q1 2007
Q4 2007
Q4 2007
Q3 2008
Q2 2009
Q1 2009
Q2 2009
Q4 2012
Q2 2010
Q2 2010
Q4 2015
Q1 2011
Q3 2010
Q3 2009
Q3 2010
Q4 2010
Q2 2015
Q4 2016
Q1 2019
Q2 2018
Q3 2012
Q4 2012
Q4 2009
Q3 2013
Q1 2013
Q1 2009
Q1 2009
Q2 2008
Q1 2009
Q4 2010
First
production
date
Full
production
date
2010
2013
2014
2015
2016
2016
TBD
TBD
2010
2013
2013
2014
TBD
2010
2011
2011
2012
2012
2013
2011
2014
2016
2017
2018
2018
TBD
TBD
2010
2014
2014
2015
TBD
2010
2011
2012
2014
2015
2014
36
200
224
692
230
139
179
279
80
188
134
316
800
1,602
1,621
145 kozpa refined platinum
130 kozpa refined platinum
100 kozpa refined platinum
230 kozpa refined platinum
Replace 200 kozpa refined platinum
Replace 70 kozpa refined platinum
Replace 108 kozpa refined platinum
11 ktpa nickel
11 ktpa waterval converter matte
Improve process recoveries
650 tpd increased slag cleaning capacity
Replace 120 kozpa refined platinum
180 kozpa refined platinum
Replace 271 kozpa refined platinum
245 kozpa refined platinum
1,600-1,800
2,200-2,500
36 ktpa nickel
173 ktpa copper(3) (6)
588
3,627
924
134
726
214
49
473
13.0 Mtpa iron ore
26.5 Mtpa iron ore pellet feed (wet basis)
9.0 Mtpa iron ore
3.0 Mtpa (2nd stage) thermal
4.0 Mtpa coking and semi-soft
5.4 Mtpa thermal
2.7 Mtpa thermal
6.6 Mtpa thermal
Capex
$m
450
1,915
2,500-3,000
2,200
1,670
1,930
TBD
TBD
Production volume(2)
485 ktpa copper(3) (8)
Fertiliser(7)
225 ktpa copper(3)
40 ktpa nickel
32 ktpa nickel
400 ktpa zinc
300 ktpa copper(3)
350 ktpa copper(3)
60
1,180
TBD
590
TBD
30
475
225
1,065
660
290
0.4 Mtpa iron ore
10.0 Mtpa iron ore
10.0 Mtpa iron ore
2.0 Mtpa iron ore pellets
26.5 Mtpa pellet feed (wet basis)
0.9 Mtpa thermal
6.4 Mtpa thermal
3.2 Mtpa thermal
8.0 Mtpa thermal
14.7 Mtpa thermal
4.2 Mtpa thermal
The Group has a number of other projects under evaluation, including Der Brochen, Waterval phase 5, Frank ore replacement UG2, Turffontein ore replacement UG2,
Union deep shaft project, BRPM phase 3 UG2 and MR north shaft, Pandora JV and Ga-Phasha JV in Platinum, Cerrejón P50 in Coal and Gahcho Kué in Diamonds.
(1) Capital expenditure shown on 100% basis in nominal terms.
Platinum projects reflect approved capex.
(2) Represents 100% of average incremental or replacement
production, at full production, unless otherwise stated.
(3) Pebble will produce molybdenum and gold by-products, Michiquillay
will produce molybdenum, gold and silver by-products and other
projects will produced molybdenum and silver by-products.
(4) Anglo Platinum has rescheduled the timing of projects to match
the 2009 production volume of 2.4 million ounces and project
expenditure level of $600 million. The impact of this rescheduling
beyond 2009 is currently under review.
(5) Mogalakwena was formerly known as PPRust.
(6) Production represents average over the first ten years of the project.
(7) Incremental production of 70 ktpa DCP, 88 ktpa low analysis
fertiliser and 414 ktpa high analysis fertiliser. The project will
also produce sulphuric acid, phosphoric acid and niobium.
(8) Total production of mine when project has ramped up to full
production. Further phase expansions have the potential to
increase production to 1 Mtpa.
Anglo American plc Annual Report 2008
20
Operating and financial review
Performance against KPIs continued
Total energy used*
GJ (million)
Paper and Packaging
Industrial Minerals
Coal
Ferrous Metals
Base Metals
Platinum
300
250
200
150
100
50
0
05
06 07
08
* Results of Paper and Packaging included
up to point of demerger in July 2007
and results of Highveld until April 2007.
Excludes independently managed operations
Anglo American plc Annual Report 2008
Partner of choice
Sustainable development
Anglo American formally embarked on a
sustainable development journey at the
beginning of this decade, which includes
a commitment to sustainable development
in its Good Citizenship: Our Business Principles
business principles. The Company’s goal is
to maximise the positive contributions it can
make, alongside governments and society, to
build a more sustainable future and to reduce
the negative impacts of its operations.
Sustainable development principles are
part of the Company’s key benchmarks.
They challenge the organisation to:
• be an efficient, ethical and value creating
business;
• create meaningful employment in safe,
healthy environments;
• reduce its environmental footprint and
contribute to biodiversity management;
• innovate and drive technology and process
improvement; and
• contribute to building more adaptable and
sustainable societies.
In 2008, the Group articulated a set of guiding
values, which were founded on those developed
within its business units. They are safety, care
and respect, integrity, accountability, collaboration
and innovation.
A number of important Anglo American
documents, policies and guidelines were
updated during 2008. These include the Anglo
Fatal Risk Standards, the Anglo Environmental
Performance Standards and the Sustainable
Development and the Supply Chain policy and
related guidelines.
Energy
Total energy consumption for the Group (on a
like for like basis) fell by 2% from 107 million
GJ in 2007 to 105 million GJ in 2008.
Energy efficiency
The Company has set a target of improving
energy efficiency by 15% over the ten years
to 2014 – measured as energy intensity per
unit of saleable product. In accordance with
this target, each business unit has set its
own goals and implemented appropriate
programmes to reduce energy consumption
or improve energy efficiency.
Energy management
The Group’s energy managers are constantly
being challenged by change in virtually all areas
of the Company’s business. This is illustrated,
for example, by the energy managers’ need
to measure efficiency gains, which are being
masked by changes in mining conditions,
acquisitions and disposals. In 2008, Group
wide roll-out began of Project REDUCE, which
aims to improve and, where possible, automate
energy data collection.
Energy security
In 2008, critical shortages of energy in a number
of countries of operation compounded the
challenges of the Company’s ongoing efficiency
programme. In some cases, this meant that less
efficient and more polluting sources of energy
needed to be found in the interim. Energy
shortages had a considerable effect in South
Africa and Chile, where power supply constraints
were a major inhibitor of the mining industry’s
ability to expand to meet demand levels. In
both countries, the Company has engaged
with power utilities and relevant authorities to
find solutions, implement efficiency measures,
and make contingency plans for unplanned
power outages.
Water
Several Anglo American operations are located
in some of the most water-stressed regions of
the world. The efficient use of water is essential
for these operations, both in terms of their
dependency on the resource, as well as for
their social licence to operate. Water quality
is an important factor for all our operations,
regardless of scarcity.
During 2008, the Group used 125 million m3
of water, compared with 131 million m3 in 2007
(on a like for like basis).
Since the Company’s first ‘WaterWays
Summit’ in 2007, Anglo American’s business
units have been working hard to develop water
strategies and action plans, mapping water
footprints and measuring water balances
and flows. The ultimate goal is an effective
‘One Anglo’ approach to water management.
There has been good progress on these
three items. Although all business units have
been measuring their water flows and water
balances for some time, they have improved
the integrity of their data.
Using the ‘footprint’ model, business units
now have a much better understanding of their
water consumption and have greater confidence
in their data. Through the coming year, a set
of water efficiency targets for the Group will
be developed, based on this information.
Each business unit has articulated its
own operational strategic approach to water
management, and has begun to implement
water action plans in parallel to their strategies.
The first draft of the Group Water Strategy,
designed to provide broad direction and
inspiration for operational water plans, was
presented towards the end of 2008. In addition,
an environmental steering group developed the
Environment Way Water Standard, which
supports the overall water management
framework and which is due for roll-out in
early 2009.
A major ambition for 2009 is implementing
the new Group Water Strategy, as well as the
water efficiency monitoring and reporting
model. Along with this, each operation will be
expected to set a water reduction target, and
develop a water reduction plan.
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Australian carbon pollution
reduction scheme
In 2008, the Australian government progressed
a number of policies related to climate change –
the key one being the Carbon Pollution Reduction
Scheme. As a major energy producer and user,
Anglo Coal Australia is working to inform policy,
understand its implications for the business and
explore GHG mitigation options.
Adaptation
Anglo American has formed a partnership with
Imperial College in London on a climate change
impact assessment project, which will enable
the Company, as a first step, to establish a
hazard inventory of its current and future
operations around the world. The Company will
then be in a position to implement appropriate
adaptation strategies for high risk operations.
CO2 equivalent emissions*
Tonnes (million)
Paper and Packaging
Industrial Minerals
Coal
Ferrous Metals
Base Metals
Platinum
36
30
24
18
12
6
0
05 06 07
08
* Results of Paper and Packaging included
up to point of demerger in July 2007
and results of Highveld until April 2007.
Excludes independently managed operations
Climate change and greenhouse
gas emissions
Anglo American recognises that climate
change is a serious international and community
concern, as well as a risk to its business, and is
committed to a 10% reduction in greenhouse
gas (GHG) emissions per unit of production
against a 2004 baseline.
One of the Company’s immediate
responses has been its work on energy
efficiency and energy management. Other
commitments include collaboration in research
and development programmes, incorporating
climate change considerations into business
planning and exploring market-based
emissions-reduction mechanisms.
During 2008, the managed businesses
emitted 19.8 million tonnes of carbon dioxide
equivalents (CO2e) compared with 19.4 million
tonnes on a like for like basis in 2007.
Methane
Anglo Coal’s efforts in Australia to generate
electricity from waste mine methane has
resulted in the establishment of two power
stations. The 32 megawatt (MW) German
Creek power station came on stream in
early 2007 and a 45 MW power station was
commissioned at Moranbah North in 2008.
These power stations will reduce our
greenhouse gas emissions by 2.5 million
tonnes of CO2e each year.
As part of the Company’s collaboration with
chemicals company Johnson Matthey (JM) to
identify potential joint research opportunities in
low-carbon technologies, and then develop and
commercialise them, Anglo American signed an
agreement with JM to develop technology that
will mitigate the effects of methane from mine
ventilation air.
Carbon capture and storage
In 2008, the difficult decision was taken to
place the Australian Monash Energy brown
coal-to-liquid and carbon capture and storage
(CCS) project under review owing to unfavourable
economic conditions and an uncertain regulatory
environment for carbon sequestration. Anglo
American was, however, pleased to announce
its support as a founding member of the Global
Carbon Capture and Storage Institute, based in
Australia. The institute aims to accelerate the
development and deployment of CCS projects.
Alternative energy
Anglo Base Metals has facilitated the
establishment of a wind farm at its Lisheen
zinc and lead mine, which will benefit the
operation, its employees, and the community,
and will leave a positive legacy after mine
closure. Other initiatives within Anglo Base
Metals include energy recovery, wind, solar
alternatives and co-generation.
Anglo American plc Annual Report 2008
22
Operating and financial review
Performance against KPIs continued
2008 Global social
investment expenditure
$ (million)
1
2
7
3
6
5
4
1 Health/HIV 4.1
2 Education and youth 10.5
3 Environment 1.6
4 Community development 30.2
5 Arts, culture and heritage 7.2
6 Housing 0.1
7 Other 22.5
2008 Global social investment
expenditure by region
$ (million)
6
7
1
5
4
3
2
1 South Africa 50.4
2 Rest of Africa 2.4
3 United Kingdom 4.7
4 Rest of Europe 0.5
5 The Americas 17.0
6 Australia/Asia 0.6
7 Other 0.6
Anglo American plc Annual Report 2008
Social and community development
The Company took a number of steps in 2008
to further its objective of becoming the partner
of choice for local communities and host
governments. At the heart of the approach
is a focus on maximising the beneficial
development outcomes of the Group’s
operations at a national and local level.
Anglo American has continued to expand
its award winning enterprise development
programmes. Highlights include the
establishment of 11 Anglo Zimele small
business hubs in South African mining
communities. These offer loans and mentoring
to local entrepreneurs. They join the existing
supply chain investment fund and a fund for
junior mining companies. Together, the Zimele
funds now encompass 239 businesses which
are supporting more than 10,400 jobs in South
Africa. Similar growth was seen in Chile, where
more than 2,700 entrepreneurs, generating in
excess of 3,000 jobs, are now being supported
though the Anglo Emerge programme.
Anglo American’s unique and highly
acclaimed Socio-Economic Assessment Toolbox
(SEAT) programme continued to be a major
focus of efforts to enhance social performance.
More than 400 managers and people from
partner organisations have now been trained
in the implementation of the toolbox and
assessments commenced at over 20 operations
in 2008. A particular feature of the training
has been participation from a wider range
of professional disciplines. In addition to
community development and relations staff,
numerous exploration, project management,
human resources and procurement staff have
also participated, as have about 20 NGO
partners. New tools were also added during
the year on managing the social issues
associated with on-site contractor
workforces and on respectful engagement
with indigenous people.
A major milestone was reached in
South Africa in November with the signing
of a memorandum of understanding between
Anglo Platinum and the Department of
Housing, which will ultimately enable the
development of approximately 20,000 houses
for employees. It is hoped that this will play
a major role in promoting home ownership
and reducing the proliferation of informal
settlements, particularly around Rustenburg
in the North West province.
In March 2008, the campaigning NGO,
ActionAid, published a report which included
allegations arising from a resettlement being
undertaken by Anglo Platinum at Mogalakwena.
The most serious allegation was that the mine
was polluting water supplies to nearby schools.
Independent scientific analysis has since proven
that this allegation was unfounded. However,
in response to the ActionAid allegations, the
South African Human Rights Commission (HRC)
launched an investigation. Although the
commission found that there had been no
violations of human rights on the part of the
Company, Anglo Platinum nevertheless used
the process to re-examine and enhance aspects
of its policies and practices for community
engagement. Anglo Platinum is committed
to applying international best practice in the
execution of resettlement.
Corporate social investment
Anglo American and its managed subsidiaries
and joint ventures contributed $76.2 million
(1.11% of pre-tax profit) to charitable causes
and community development initiatives in 2008
compared with $60.5 million (0.70% of pre-tax
profit) in 2007. These figures include cash
donations, gifts in kind and staff time spent
delivering community benefit programmes.
In 2008, the geographical distribution of
social investment was 69% in Africa, 22% in
the Americas, 1% in Australia and Asia, 7%
in the UK and Europe and 1% in other countries.
In addition, two independent trusts,
Optima and Epoch, have been endowed by
Anglo American to raise standards of maths
and science teaching in South African schools.
These contributed an additional $10 million
in 2008.
The majority of the Company’s social
investment is undertaken at site level and
is informed by stakeholder inputs through
the implementation of the SEAT process.
At a national level, the Anglo American
Chairman’s Fund, the Group’s main social
investment vehicle in South Africa, was rated
for the eighth year in succession as the top
corporate giver by NGOs and peer group
companies. In 2008, it supported more than
250 projects. Among the activities backed
by the Fund were the Leratong Hospice in the
communities of Atteridgeville and Saulsville,
west of Pretoria; the world class work of the
Aurum Institute for Health to support its
work on the treatment and prevention of HIV
and TB infection; and the expansion of the
African Institute of Mathematical Sciences
in Cape Town.
The Anglo American Group Foundation,
based in the UK, has a global remit to support
innovative projects which support development,
combat poverty, promote education and health
provision and environmental objectives. The
various causes supported by the Foundation
during 2008 included projects with CARE
International in Lesotho, Brazil and Zimbabwe;
Children of the Andes for its work in Colombia;
Sightsavers International for an eye-care
clinic in Guinea; Caring for Congolese Children;
Pro Mujer working with women in Peru on a
micro-loan programme; and the MicroLoan
Foundation in Namibia on a micro-enterprise
programme.
Within the UK, the Foundation continued to
support the homeless and other disadvantaged
groups in central London through working with
the Connection at St Martin’s, Centrepoint,
Fairbridge, Skillforce and other similar charities.
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Particular focus has also been placed on
education in engineering through the Foundation’s
ongoing work with Engineers Without Borders
and a newly formed relationship with the Royal
Academy of Engineering.
micro, small and medium sized enterprises
(SMEs) supported at any one time by the
Company’s enterprise development initiatives
and how many jobs these businesses are
supporting.
Enterprise development
A cornerstone of Anglo American’s approach
to delivering sustainable development is to
build the capacities and life chances of the
communities where the Company operates.
Two major elements of this are the
implementation of the SEAT process, which
provides operations with a template for regular
assessment of their positive and negative
impacts, for improving their understanding of
local people’s concerns, needs and priorities
and for developing targeted interventions to
improve the Group’s development impacts and
the Company’s enterprise development
programmes. In 2007, the Company stated that
it was developing a new KPI to reflect the value
and impact of sustainable development
initiatives. As a result, a new indicator has been
instituted, which describes both the number of
Enterprise development can involve both
free-standing businesses and those which are
successful in securing a place in the Group’s
supply chain. This has been chosen as a
proxy for the Company’s overall community
development work because, in Anglo American’s
experience, involvement in such businesses
is an effective means of empowering people
and building their capacities. Experience
also suggests that such programmes can be
particularly successful in addressing gender
inequality issues.
Anglo American’s long involvement in
enterprise development in South Africa was set
on a more formal footing in 1989, with various
initiatives aimed at widening black participation
in the economy. This subsequently developed
into the unit known as Anglo Zimele (meaning
‘to be independent’ in Xhosa). Zimele’s
methodology involves a combination of equity
stakes, loans, opportunities to compete for
supply chain opportunities and mentoring and
is highly rated by groups like the World Bank.
It has three elements: supply-chain related
businesses; a junior mining fund; and a new
small business fund (launched at the end
of 2007, it now has 11 small business hubs
in South African mining communities). The
number of jobs supported by Zimele-sponsored
companies broadly doubled during 2008 to
more than 10,000.
A micro-enterprise loan and SME
management capacity building scheme
launched in Chile in 2007 had, by the end of
2008, extended support to 2,710 businesses
employing over 3,000 people. A new small
business scheme was also launched in Brazil
around the Barro Alto project in 2008 in
partnership with CARE. Despite the current
difficult economic circumstances, it is hoped
that enterprise development schemes
supported or implemented by Anglo American
can be expanded to provide livelihoods to
more than 18,000 people by the end of 2009.
community
development
anglo american has been working with
care international UK since 2003. the scope
and ambition of the relationship increased in
December 2007 when cynthia carroll signed
a Memorandum of Understanding (MoU) with
care UK’s chief executive, Geoffrey Dennis.
the objective of the MoU is to alleviate poverty
and to promote improved development
outcomes. in 2008, a programme of activities
was launched to work towards these goals.
this included care participation in anglo
american social management training sessions
in Brazil, chile and South africa; study visits to
see anglo american’s workplace and community
Hiv/aiDS programmes; investment in enterprise
development initiatives; and community
development projects. the MoU has also
catalysed a number of initiatives in-country,
notably the development of a broad-based
community development partnership around
the Barro alto project in Brazil. the anglo
american Group Foundation also initiated funding
for care projects in lesotho, Zimbabwe and
Brazil, as well as for a team member in care’s
emergency shelter team.
livelihood projects are one of the areas where
anglo american and care work together. above,
women are participating in a ceramics livelihood
programme in São Paulo, Brazil, a project supported
by the anglo american Group Foundation
Anglo American plc Annual Report 2008
24
Operating and financial review
Performance against KPIs continued
Lost time injury frequency
rate (LTIFR) and fatal injury
frequency rate (FIFR)*
LTIFR
2.5
2.0
1.5
1.0
0.5
0
00 01 02
03
04
05
06
07 08
FIFR
0.04
0.03
0.02
0.01
0
* See KPI table on page 15 for definitions
of LTIFR and FIFR. Excludes Mondi from
June 2007 and Highveld from April 2007
Anglo American voluntary
labour turnover
%
4
.
5
0
.
5
9
.
4
3
.
4
9
.
3
6
5
4
3
2
1
0
04 05 06 07 08
Anglo American diversity
% Female
% Females
% Female managers
18
16
14
12
10
8
6
4
2
0
0
.
3
1
5
.
2
1
5
.
3
1
0
.
1
1
2
.
5
1
2
.
4
1
3
.
5
1
6
.
0
1
0
.
7
1
0
.
2
1
04
05
06
07
08
Anglo American plc Annual Report 2008
employer of choice
Safety
Anglo American’s vision is one of zero harm
at all its operations. Zero harm means a work
environment where no one gets hurt and is
underpinned by the three principles of:
zero mindset; no repeats; and simple,
non-negotiable standards. Preventing repeat
incidents is a particular focus of attention.
The Company’s efforts on safety are
delivering some improvement, but much
remains to be done. During 2008, the number
of people who lost their lives while on the
Group’s business was 27. This compares with
40 fatalities the previous year. Though still
an unacceptable figure, it represents a 33%
improvement. Twelve fatalities occurred in the
first half of the year and 15 in the second six
months; 17 took place underground and 10 on
the surface; 15 individuals who lost their lives
were contractors and 12 were employees.
Progress continues to be made in
redesigning mining processes and technology
to reduce falls of ground and their potential
for loss of life. This is reflected in a reduction
in fall of ground incidents during 2008, which,
for the first time, were not the most frequent
type of fatal incident. Vehicle transport was
responsible for 26% of deaths, followed by
falls of ground at 22% and moving machinery
and falling at 15% each. Anglo Coal completed
a transport review during 2008 to gain a better
understanding of the nature and circumstances
of transport incidents. Implementing the
recommendations of the review has been
given high priority.
In 2008, the Group’s lost time injuries,
which are measured according to the industry
standard of lost time injury frequency rate
(LTIFR) per 200,000 hours worked, was 1.04.
This represents a 17% improvement on the
2007 performance of 1.26.
A ‘One Safe Anglo’ safety strategy
has been developed, which outlines the
approach needed to be taken to improve
safety performance, close performance
gaps and achieve zero harm. This strategy
will be implemented through a combination
of globally developed programmes and
activities and business unit safety improvement
plans (SIPs), which set out to address specific
operational priorities and challenges. Each
business unit has developed a SIP in response
to the two internal Anglo American safety
summits held in 2007.
At the end of 2007, Anglo American
launched its Fatal Risk Standards to prevent loss
of life arising from incidents that, historically,
have had a high frequency. For 2008, the
managed operations achieved an average of
67% implementation of the standards, slightly
below the target of 70%, while full compliance
is required by 2010.
More than 1,300 people were trained
throughout 2008 on a groundbreaking
programme to establish and embed an
operational safety risk management process.
The programme is intended to contribute to
a critical step-change in the Group’s safety
performance, and aims for everyone
working at Anglo American to make the
right safety decisions.
Education programmes for around 8,000
supervisors, managers and executives across
the Group will be delivered from 2008 to 2010
by a network of university partners around the
world. Up to 20% of the places on all courses
will also be opened up to external delegates,
primarily from unions and regulators.
Trends in safety incident rates are neither
fully indicative nor predictive of the level of
safety risk control within the organisation.
As a result, a series of leading indicators and
practical measures is being put in place to test
the integrity of these controls.
People
During the year, the Group’s employees worked
together more closely in order to realise Anglo
American’s strategy to become the investment,
partner and employer of choice. Following the
launch of the Group strategy and values at a
global leadership conference in May, there has
been a vigorous roll-out programme across all
business units and operations designed to
embed new ways of thinking and working
among our 105,000 permanent staff based
on five continents.
Anglo American’s people strategies are a
key pillar in building and maintaining the Group
as the employer of choice, and in ensuring that
employees at all levels have the knowledge
and capability to drive the investment of
choice and partner of choice strategies.
Talent management
During 2008, the talent audit process
was embedded further across the Group
in a standardised way. Executive Committee
attention to succession planning took place
alongside regular comprehensive reviews
of the executive pipeline in order to assess
succession for top positions as well as any
potential business risk.
External hiring to strengthen the quality of
leadership continued throughout the year, with
20 senior appointments across most businesses
and functions. Internally, increased objectivity
was brought to the identification of executive
pipeline potential through the introduction
of independent assessment by business
psychologists. About 70 senior managers were
assessed throughout 2008, which facilitated a
sharper focus on individual development planning
for current and future roles. The results were also
reviewed at an aggregate level to identify trends,
strengths and gaps in the overall leadership profile
and to inform future development strategies.
A new talent tracking system, ‘AngloTrack’,
launched at the beginning of 2008, houses
key data on the Group’s executive and senior
managers and is designed to support the
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decision making process regarding appointments
and succession planning.
A key theme throughout the year was
to encourage greater cooperation across
the Group to increase effectiveness in talent
management and resourcing, particularly in
the area of cross-fertilisation of talent. Regular
networking forums with representatives from
all business units were introduced to share
issues and best practice and to provide a
platform for sharing vacancies and transferring
talent across the organisation. In a similar vein,
an employee referral system was introduced
to incentivise staff to introduce talented
potential employees to the Company. General
communication on talent management matters
was also stepped up, with key information
for employees on the Group’s policies and
processes brought together electronically in
a user-friendly portal. In addition, building the
talent management capabilities of HR people
is being addressed in a systematic way, with
specific training provided to 190 first-line
professionals throughout the organisation
to help enable effective performance to a
common Group standard.
Reward, retention and performance
The Group’s reward strategies assisted in
attracting and retaining talented and skilled
employees in a labour market that remained
tight throughout most of the year. Voluntary
labour turnover fell marginally during the year
to 3.9%, indicating that reward and longer
term retention arrangements are being
successful in retaining employees.
The Company continued to strengthen its
regional and international compensation and
benefits standards and capability. Internal and
external market survey and benchmarking
activities were conducted on a more rigorous
scale using a Global Banding Framework to
more accurately map and compare roles across
business units, functions and industries. These
activities not only facilitated cross-business unit
mobility during 2008 and laid the foundations
for future career moves in 2009, but have also
been an important element in demonstrating
to the Remuneration Committee that the
Group’s remuneration packages remain
competitive and appropriate.
Significant progress, too, has been made
on the design of a common performance
measurement and management system to
be rolled out across the Group in 2010. This
will link business scorecard-based performance
contracts, robust performance measurement
and employee development planning and
review and will be integrated with the Group’s
remuneration and talent management systems.
The year saw further development and wider
deployment of the Group’s payroll, benefit and
employee life cycle information management
system. This coincided with detailed analysis of
the various processes involved in the delivery
of a global shared service and the design of
standard processes as part of an employee
services model. Further implementation of
common technology, processes and shared
service centres is scheduled for 2009 and
2010 across three main hubs.
There has also been a focus on the Group’s
mobility framework, with the appointment
of, and transition to, one global expatriate
tax services provider and the development of
a Group-wide international assignment policy.
Ongoing work on employee mobility will
assist the organisation’s ability to attract
and retain employees.
Transformation
During 2008, the business units increasingly
worked more closely together to achieve
common Group standards and goals while
simultaneously taking major strides towards
changing the Group’s diversity profile.
In a further change to the composition of
management ranks within South Africa, there
was a 3% growth in the representation of
‘historically disadvantaged South Africans’
(HDSAs) at management level; HDSAs now
comprise 45% of management against a target
of 40% (2007: 42%). There was also growth
in the number of women in senior management
roles, the proportion increasing to 18.3%
(2007: 17.0%). These trends are expected
to continue in 2009.
Within the Group as a whole, initiatives
like ‘Women in Mining‘, designed to boost the
attraction of females into the industry, have
started to have an impact. The overall proportion
of females increased to 12% (2007: 11%),
while the percentage of female managers rose
to 17% (2007: 15%).
HIV and AIDS
HIV/AIDS workplace programmes are in place
at all operations, though the focus of activity
is in southern Africa. The percentage of
employees who are tested annually as part of
the Group’s HIV/AIDS counselling and voluntary
testing programme continues to grow and by
year end had reached 77%.
During 2008, the Company extended this
programme to the dependants of employees.
Reaching these dependants, however, will be
a considerable challenge, particularly where
families live in remote areas, far from Anglo
American treatment centres.
The programme is now being extended to
the contractor workforce, with the aim that
every HIV-positive contractor can access
care, support, and treatment. During the year,
an HIV/AIDS policy requirement for suppliers
was also integrated into the Company’s new
supply chain code. Anglo American estimates
HIV prevalence across its southern African
operations to be 18%, or about 14,500
employees. Of this total, just over half of
those in need of care are participating in HIV
disease management programmes and more
attention needs to be devoted to enrolling
HIV-positive employees into care and support
programmes. This strategy should also help
reduce the incidence of tuberculosis (TB), the
most common feature of immune deficiency.
More than 3000 employees, 21% of
those who are HIV-positive, are receiving
anti-retroviral treatment (ART). The Company
estimates that at least 30%, potentially 1,400
employees, of those who are HIV-positive and in
need of treatment, are not yet receiving it.
A continuing concern is the number of
employees who discontinue ART. The Company
has a 62% retention rate after 5.5 years, which
although consistent with other experience in
sub-Saharan Africa, leaves much room for
improvement. Most of the losses are in the
first year of treatment.
Women and girls are both physiologically
and psychologically far more vulnerable to
HIV infection than men. Gender equality
and women’s rights, therefore, have become
central themes globally in the battle against
HIV infection and they form an important
component in the Group’s response. All work
on socio-economic development around the
Group’s operations, equality in the workplace,
social investment, education and skills
development features special consideration
of women.
Anglo American plc Annual Report 2008
26
Operating and financial review
Resources
the resources anglo
american considers critical
to achieving its strategic
aims include:
• Knowledge and expertise
• Proved and probable
reserves
Full details of the Group’s
Ore reserves and Mineral
resources estimates are
found on pages 136 to 161
Anglo American plc Annual Report 2008
Knowledge and expertise
Technology capability
Anglo American has long been distinguished
by its strong in-house technology capability.
The Anglo Technical division (Anglo Technical)
is the custodian of specialised engineering skills
employed throughout the Group, while Anglo
Research identifies emerging technologies and
develops them to pilot-plant scale and also
assists in the rapid transfer of technologies
across the Group. During 2008, a value based
management exercise was conducted across
Anglo Technical and Anglo Research to improve
focus and the degree of prioritisation. The
technology strategy has accordingly been
upgraded, with clear technology development
priorities established in the following areas:
safety, sustainable development, research and
development, asset optimisation and nurturing
of technical talent.
Anglo Technical continues to assist operations
at Group sites worldwide, particularly in such
fields as safety improvement, asset optimisation
and energy efficiency. In addition to bedding
down energy and emission reduction reporting,
an IT network has been established to collect
data on electricity usage from all Group
operations in South Africa. This will assist in
establishing baseline parameters for energy
efficiency improvements to meet Group targets,
and also in managing the impact of electricity
rationing schemes that have been proposed for
introduction during 2009. Technical studies into
the construction and operation of very large
electric motors have led to the successful
commissioning of gearless mill drives at Anglo
Platinum’s Mogalakwena concentrator in South
Africa and on the new dragline at Anglo Coal’s
Lake Lindsay operation in Australia, the first
application of alternating current (AC) drive
technology in the Group. Mining automation
remains a key focus area, offering the potential
for improved safety and reduced cost, while
the ongoing development of industrial wireless
networking offers major new cost effective
opportunities to extend the capabilities of control
systems at Group operations. Anglo Technical
has also formulated a new Group Fatal Risk
Standard to cover procedures for energy
isolation before undertaking, inspection,
maintenance or construction work.
In the exploration field, benchmarking
exercises in Canada and production surveys in
South Africa have demonstrated that the Ground
Electromagnetic, Superconducting Quantum
Interference Device (EM SQUID) provides Anglo
American with a technical advantage over
its competitors. Geophysical tools are also
increasingly being deployed in risk management,
with tools such as 3D seismic surveys, downhole
geophysical logging and borehole radar being
applied in mine planning and development.
Predictive hazard mapping and modelling ahead
of the mining face, using integrated geoscience
and engineering inputs, is an important area
of research at Anglo Technical.
At Anglo Research, an innovative process
has been piloted successfully for the production
of titanium metal, with further research and
development now being conducted to optimise
the technology. The development of an
innovative production technology to extract
nickel from laterite ores has progressed to the
stage where detailed design of an integrated
pilot plant is almost complete. Research
initiatives are being conducted to significantly
improve water and energy efficiency in the
future through development of new technologies
in the areas of ore upgrading, comminution and
dry processing. Concentrator surveys continue
to be conducted across the Group to improve
operational and water usage efficiencies. A
new-generation Scanning Electro Microscope –
Mineral Liberation Analyser (SEM MLA) is
currently being commissioned. State of the art
operating software is being developed to allow
automated online mineralogy data capture at
remote operational sites, with high level data
evaluation being conducted in the Mineralogical
Research department.
A number of factors, including technical
advances, constraints on the availability of
resources such as water and energy, the
need to reduce our impact on the climate
and evolving stakeholder expectations, have
prompted a re-assessment of the way in which
major projects are designed, assessed and
implemented. A suite of tools and procedures,
developed internally and in conjunction with
international partners, is being rolled out
across the Group to assist project managers
in ensuring that due consideration is given to
all relevant factors over the lifetime of each
project. Anglo Technical is leading a number
of capital efficiency initiatives derived from an
international benchmarking study completed in
2008. These focus on optimising organisational
project structures, the development of essential
project skills and rolling out a Group best practice
project standard. Governance and assurance
are also provided through the technical review
of major projects at various stages of their
development.
Exploration
Anglo American continued its exploration
activities in 2008. Exploration is undertaken
in a range of frontier areas to more mature
greenfield locations globally as well as in
brownfield environments in close proximity
to Anglo’s existing operations. Anglo’s
exploration geoscientists are also involved
in the identification and evaluation of
properties for potential acquisition or
alliance opportunities.
Anglo teams continued to advance
exploration on recent discoveries, sole funded
projects and alliances with other companies.
Through 2008, excluding De Beers, the Group
spent $212 million (2007: $157 million)
on exploration in 21 countries. De Beers spent
$96 million on exploration (2007: $126 million).
27
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with significant investment in both early and
advanced stage programmes, concentrated
primarily on accelerating high interest
discoveries in Angola, Democratic Republic
of Congo and Canada. Early-stage exploration
also continued in India, Namibia, Russia and
South Africa with the emphasis on desktop
targeting work and prospecting activities in
focused ground holdings.
Anglo Base Metals spent $123 million
during 2008 and continued focused exploration
around its Chilean copper and Brazilian nickel
and phosphate mines, in addition to zinc
exploration adjacent to operations in Namibia,
South Africa and Ireland. Its project pipeline
was strengthened by early-stage discoveries
of nickel-copper in Finland and zinc in Namibia.
Advanced project work further evaluated the
West Wall and Michiquillay copper projects in
Chile and Peru respectively, the Jacaré nickel
project in Brazil and the Gamsberg East zinc
project in South Africa. Near-mine exploration
efforts centred on resource evaluation of
the San Enrique-Monolito project and other
near-mine opportunities.
Anglo Platinum spent $36 million on
an ongoing programme of exploration around
existing operations in the Bushveld Complex of
South Africa and the Great Dyke of Zimbabwe.
International exploration was again focused
on Canada (though reduced in scale), China,
Brazil and Russia.
assessing and extending resources for export
thermal and coking coal, domestic thermal coal
and coal bed methane (CBM). In South Africa,
further exploration was undertaken on the
South Rand and Kriel East projects, and resources
were successfully converted to reserves at
Mafube and Zondagsfontein. A CBM gas-yield
test was also evaluated in the Waterberg
project area of the country, while exploration
for CBM was initiated in Botswana following
the granting of licences there. In Australia,
exploration targeted the Saddlers Creek,
Moranbah South and Grosvenor Projects,
while in Canada the focus remained on the
Roman Mountain project adjacent to the
existing Trend Mine.
Anglo Ferrous Metals incurred $18 million
on exploration for iron ore. In South Africa, this
comprised both greenfield prospecting in the
Northern Cape and brownfield activity at Sishen,
Thabazimbi and Zandrivierspoort. In Brazil,
activities continued at the Amapá system and
Minas-Rio project.
Anglo Coal’s exploration expenditure
During the year, De Beers spent $96 million
of $35 million was concentrated on evaluating,
on a focused global exploration programme
anglo technical
anglo Platinum launched a Borehole radar
(BHr) programme in 2007. the principal
objective was to map geological disruptions
to the PGM-bearing Merensky and UG2 reefs,
especially so called ‘potholes’, which can
vary in length from a few metres to hundreds
of metres. Mining into potholes results
in wasted development costs, dilution
of ore and inefficient deployment of people
and equipment and can also be a safety
hazard because of unstable ground.
the BHr technique, implemented by anglo
technical’s Geosciences resource Group,
uses a special sensing probe, deployed in
boreholes drilled ahead of mining development
in order to show any reef disruptions up to
200 metres in advance of where mining is
planned to take place. at one shaft, a BHr
survey was able to identify mineable areas
in generally poor ground that had not been
exploited previously owing to the inability
to predict where potholes would be found.
Here, a BHr survey costing $150,000 was able
to add more than $14.2 million in value to the
mine’s resource base. BHr is also being used
in pilot holes, adjacent to the sites of proposed
new shafts, to identify any vertical or
near-vertical geological features that might
pose a danger during shaft sinking, such as
faults and water-filled fissures.
Anglo American plc Annual Report 2008
Drillers prepare to acquire borehole radar data at De Beers’
Snap lake mine in canada. Borehole radar implementation
strategies have been developed by anglo technical through
collaboration between anglo american and De Beers
geophysicists. where applicable these strategies are now
being rolled out at various Group mines
28
Operating and financial review
Group financial performance
the 2008 results
were achieved against
the background of the
crisis that enveloped
the world’s financial
markets in the second
half of the year, which
resulted in a sharp decrease
in commodity prices
Anglo American plc Annual Report 2008
Financial review of Group results*
Group operating profit was $10,085 million,
with operating profit from core operations
of $9,765 million, 10% higher than 2007.
Operating profit was driven by higher prices
realised in the year, particularly for coal,
iron ore, manganese ore and alloy, platinum,
rhodium and diamonds. Higher sales volumes
of coal and iron ore also contributed, as did
the favourable exchange rate of the South
African rand against the US dollar. Coal and
Ferrous Metals saw very significant increases
in operating profit, to record levels, on the
back of stronger prices, increased volumes
and operational efficiencies. Operating profit
from Platinum and Base Metals was lower than
2007. At Platinum, this was due to a decrease
in metal sales and higher key input costs, which
were only partly offset by the higher realised
platinum and rhodium prices. The Base Metals
results were impacted by sharply lower base
metals prices, particularly in the fourth quarter
as the London Metal Exchange (LME) copper
price fell to 132 c/lb at the end of December.
The impact of prices, as well as lower overall
production and sales volumes and increased
input costs, resulted in lower operating profit
from the Base Metals division.
Group underlying earnings were $5,237 million,
4% lower than the prior year on a continuing
basis. Underlying earnings from core operations
were in line with 2007. Underlying earnings
reflect the operational results discussed above,
an increase in net finance costs due to higher
interest as a result of the increased debt levels,
as well as an increase in the effective tax rate.
on a continuing basis, reflecting the lower
weighted average number of shares as
a result of the share buyback programme.
Profit for the year after special items
and remeasurements decreased by 1% to
$5,215 million compared with $5,294 million in
the prior year. The decrease reflects the results
discussed above and in the business unit
overviews on pages 32 to 53, in particular a
reduction in the operational results of non-core
businesses, as well as a charge of $880 million
for operating remeasurements including a
$760 million loss on non-hedge derivatives.
This is partly offset by an increase in net profit on
disposals, lower operating special item charges,
particularly in the Group’s associates, and a net
tax credit on special items and remeasurements
compared with a charge in 2007.
The Group’s results are influenced by a
variety of currencies owing to the geographic
diversity of the Group. In 2008, there was
a positive exchange variance in underlying
earnings of $725 million. Results benefited
from the weaker South African rand against
the US dollar with an average exchange rate
of R8.27 compared with R7.05 in 2007 as well
as from the slightly weaker Australian dollar and
Chilean peso, although these were partly offset
by the overall strengthening of the Brazilian
real over the year. There was a positive impact
on underlying earnings from increased prices
amounting to $1,311 million, reflecting better
prices for coal, iron ore, manganese ore
and alloys, platinum, rhodium and a range
of Tarmac’s products, partly offset by
significantly lower base metals prices.
Group underlying earnings per share
were $4.36 compared with $4.18 in 2007
Operating special items and remeasurements,
including associates, amounted to a charge of
Underlying earnings
$ million
Profit for the financial year attributable to equity shareholders
of the Company – continuing operations
Operating special items including associates
Operating remeasurements including associates
Net profit on disposals including associates
Financing remeasurements including associates:
Exchange (gain)/loss on De Beers preference shares
Unrealised net gains on non-hedge derivatives related to net debt
Tax remeasurements
Tax on special items and remeasurements including associates
Minority interests on special items and remeasurements
including associates
Underlying earnings – continuing operations
Underlying earnings – discontinued operations
Underlying earnings – total Group
Underlying earnings per share ($) – continuing operations
Underlying earnings per share ($) – discontinued operations
Underlying earnings per share ($) – total Group
Year ended
Year ended
31 Dec 2008 31 Dec 2007
5,215
477
880
(1,027)
5,294
713
(2)
(484)
(28) 3
(8)
153 –
(264)
(28)
15
(161)
(34)
5,237
–
5,237
4.36
–
4.36
5,477
284
5,761
4.18
0.22
4.40
* Throughout the financial review, Group results are presented on a continuing basis unless otherwise stated and therefore exclude the
results of Mondi and AngloGold Ashanti in 2007.
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$1,357 million. Included in operating special
items of $477 million was $393 million in
respect of impairments and restructurings,
including a $140 million impairment relating
to Base Metals assets, $91 million impairment
and restructuring relating to Tarmac assets
and $79 million relating to the Group’s share
of the De Beers impairment. Also included
in special items and remeasurements were
one-off costs associated with ‘One Anglo’
initiatives of $72 million. Operating
remeasurements of $880 million principally
related to net losses on non-hedge capital
expenditure derivatives held by Anglo Ferrous
Brazil and Los Bronces and an unrealised loss
on an embedded derivative at Minera Loma
de Níquel.
Net profit on disposals of $1,027 million
which, including associates, was $543 million
higher than 2007, includes the net profit of
$551 million relating to the sale of the Group’s
interest in China Shenhua Energy, $142 million
relating to the disposal of the interest in Minera
Santa Rosa SCM and $101 million relating to
the disposal of Northam Platinum Limited.
Financing remeasurements, including
associates, are made up of an unrealised net
gain of $8 million on non-hedge derivatives
and a $28 million foreign exchange gain on
retranslating De Beers US dollar preference
shares held by a rand denominated entity.
Tax remeasurements, which amounted to a
charge of $153 million, and related to foreign
currency translation of deferred tax balances.
Net finance costs
Net finance costs from continuing operations,
excluding net remeasurement gain of $51 million
(2007: $29 million), increased to $452 million
(2007: $137 million). The increase reflects
higher interest costs due to the increase in
debt and higher net foreign exchange losses
on net debt monetary items, principally at
Anglo Ferrous Brazil and Base Metals, partly
offset by higher interest capitalised.
Summary income statement
$ million
Operating profit before special items and remeasurements –
continuing operations
Operating special items
Operating remeasurements
Operating profit from subsidiaries and joint ventures
Net profit on disposals
Share of net income from associates – continuing operations(1)
Total profit from operations and associates
Net finance costs before remeasurements
Financing remeasurements
Profit before tax
Income tax expense
Profit for the financial year – continuing operations
Minority interests
Profit for the financial year attributable to equity shareholders –
continuing operations
Profit for the financial year attributable to equity shareholders –
discontinued operations
Profit for the financial year attributable to equity shareholders –
total Group
Basic earnings per share ($) – continuing operations
Basic earnings per share ($) – discontinued operations
Basic earnings per share ($) – total Group
Group operating profit including associates before special items
and remeasurements – continuing operations
Group operating profit including associates before special items
and remeasurements – discontinued operations
Group operating profit including associates before special items
and remeasurements – total Group
(1) Operating profit from associates before special items and remeasurements – continuing operations
Operating special items and remeasurements(2)
Net profit on disposals(2)
Net finance costs (before remeasurements)
Financing remeasurements(2)
Income tax expense (after special items and remeasurements)
Minority interests (after special items and remeasurements)
Share of net income from associates – continuing operations
(2) See note 7 to the Financial statements.
Year ended
Year ended
31 Dec 2008 31 Dec 2007
7,981
(352)
(779) 5
6,850
1,009
1,113
8,972
(452)
51
8,571
(2,451)
6,120
(905)
8,518
(251)
8,272
460
197
8,929
(137)
29
8,821
(2,693)
6,128
(834)
5,215
5,294
–
2,010
5,215
7,304
4.34
–
4.34
4.04
1.54
5.58
10,085
9,590
–
526
10,085
10,116
2,104
(226)
18
(147)
(15)
(606)
(15)
1,113
1,072
(465)
24
(85)
(4)
(303)
(42)
197
Special items and remeasurements
$ million
Operating
special items
Operating
remeasurements
Operating
special items
and remeasurements
Year ended 31 Dec 2008
Year ended 31 Dec 2007
Excluding
associates
Associates
Total
Excluding
associates
Associates
Total
(352)
(125)
(477)
(251)
(462)
(713)
(779)
(101)
(880)
5
(3)
2
(1,131)
(226)
(1,357)
(246)
(465)
(711)
Anglo American plc Annual Report 2008
30
Operating and financial review
Group financial performance continued
Taxation
$ million (unless
otherwise stated)
Profit before tax
Tax
Profit for the
financial year
Effective tax
rate including
associates (%)
Year ended 31 Dec 2008
Year ended 31 Dec 2007
Before special
items and
remeasure-
ments
Associates’
tax and
minority
interests
Before special
items and
remeasure-
ments
Including
associates
Associates’
tax and
minority
interests
Including
associates
8,832
(2,545)
654
9,486
9,021
347
9,368
(623)
(3,168)
(2,676)
(305)
(2,981)
6,287
31
6,318
6,345
42
6,387
33.4
31.8
Taxation
IAS 1 Presentation of Financial Statements
requires income from associates to be
presented net of tax on the face of the income
statement. Associates’ tax is therefore not
included within the Group’s total tax charge on
the face of the income statement. Associates’
tax before special items and remeasurements
included within ‘Share of net income from
associates’ for the year ended 31 December
2008 was $623 million (2007: $305 million).
The effective rate of tax before special
items and remeasurements, including share of
associates’ tax, on a continuing basis was 33.4%.
This was an increase from the equivalent effective
rate of 31.8% in the year ended 31 December
2007. The main reasons for this net increase
are tax losses not recognised for deferred tax
purposes and changes in the geographic mix
of profits around the Group, partially offset by
changes in statutory tax rates and the impact
of prior year adjustments. In addition, the 2007
rate benefited from the availability of enhanced
tax depreciation on certain assets.
Discontinued operations
On 2 July 2007, the Paper and Packaging
business, ‘Mondi’, was demerged from the
Group by way of a dividend in specie paid
to shareholders.
On 2 October 2007, the Group sold
67.1 million shares in AngloGold Ashanti Limited
which reduced the Group’s shareholding from
41.6% to 17.3%. The Group’s representation
on the company’s board was also withdrawn
at this time. The remaining investment is
accounted for as a financial asset investment.
Both of these operations are presented
as discontinued.
Refer to note 35 to the Financial
statements for financial information
on discontinued operations.
Balance sheet
Equity attributable to equity shareholders of
the Company was $20,221 million compared
with $22,461 million at 31 December 2007.
This decrease resulted primarily from the
balance sheet impact of weakening exchange
rates relative to the US dollar (in particular
the rand), partly offset by the consolidation
of the Amapá iron ore system and additional
effective interest in the Minas-Rio iron ore
project, the proportionate consolidation of
the Foxleigh joint venture and the additional
interest acquired in Anglo Platinum.
The $4 billion share buyback programme
announced in August 2007 was suspended,
with around $1.7 billion of shares having
been repurchased.
Cash flow
Net cash inflows from operating activities were
$8,065 million compared with $6,800 million
in 2007. EBITDA was $11,847 million, an
increase of 6% from $11,171 million in 2007.
Acquisition expenditure accounted for an
outflow (net of cash acquired) of $7,907 million
(including settlement of related derivative
instruments) compared with $1,934 million
in 2007. This included $5,282 million in respect
of the Group’s acquisition of the controlling
interest and subsequent acquisition of 97%
of the remaining minorities in Anglo Ferrous
Brazil SA and $1,113 million in respect of
the Group’s investment in ordinary shares
in Anglo Platinum Limited.
Proceeds from disposals totalled
$1,524 million, including net cash inflows on the
sale of Namakwa Sands mineral sands operation
to Exxaro of $311 million, $704 million from
the sale of the Group’s holding in China Shenhua
Energy, $155 million from the sale of Tarmac
Iberia and $205 million on the sale of Northam
Platinum Limited by Anglo Platinum.
Anglo American plc Annual Report 2008
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The Group's forecasts and projections,
taking account of reasonably possible changes
in trading performance and the refinancing of
the facilities above, show that the Group will
be able to operate within the level of its
current facilities.
The Group’s approach to liquidity and
counterparty risk is discussed on page 54.
Weighted average number of shares
The weighted average number of shares
used to determine earnings per share in 2008
was 1,202 million compared with 1,309 million
in 2007. This reduction reflects the effect of
the share buyback programme and the share
consolidation following the demerger of the
Paper and Packaging business in July 2007.
Dividends
The Board has decided to suspend dividend
payments.
Return on capital employed (ROCE)
ROCE in 2008 was 36.8% compared with
37.8% (on a total Group basis) in 2007.
The decrease was mainly due to the
operating results discussed in this Financial
review of Group results and in the business
unit overviews on pages 32 to 53.
(1) Net debt to total capital is calculated as net debt divided by
total capital less investments in associates. Total capital is
net assets excluding net debt.
Analysis of depreciation and
amortisation by business segment
(subsidiaries and joint ventures)
$ million
Platinum
Base Metals
Ferrous Metals
Coal
Industrial Minerals
Other
Year ended
Year ended
31 Dec 2008 31 Dec 2007
507
340
87
293
259
23
455
344
100
221
258
20
1,509
1,398
Analysis of capital expenditure on a
cash flow basis by business segment
(subsidiaries and joint ventures)
$ million
Platinum
Base Metals
Ferrous Metals
Coal
Industrial Minerals
Other
Purchase of tangible
assets
Investment in
biological assets
Year ended
Year ended
31 Dec 2008 31 Dec 2007
1,563
1,494
831
933
301
24
1,479
610
470
1,052
274
46
5,146
3,931
1 1
5,147
3,932
Analysis of dividends
US cents per share
Interim dividend
Recommended final
dividend
Total dividends
2008
44
–
44
2007
38
86
124
Purchases of tangible assets amounted to
$5,146 million, an increase of $1,215 million.
Planned increases in capital expenditure
by Platinum, Base Metals, Ferrous Metals
and Industrial Minerals were partly offset
by lower expenditure by Coal.
Net cash received from financing activities
was $3,542 million compared with net cash
used in 2007 of $5,661 million. This primarily
arose from the receipt of $6,616 million of
additional borrowings (an increase in the year
of $3,495 million) together with a $5,507 million
reduction in cash outflow in respect of share
purchases.
Liquidity and funding
Net debt, excluding hedges but including
net debt of disposal groups (net cash of
$8 million), was $11,043 million, an increase
of $5,804 million from 31 December 2007.
The increase reflects planned capital
expenditure on projects in Platinum, Base
Metals, Ferrous Metals and Industrial Minerals
and debt taken on to fund the acquisition
of the controlling interest and subsequent
acquisition of 97% of the remaining minorities
in Anglo Ferrous Brazil SA and to increase the
stake in Anglo Platinum Limited. This was partly
offset by operating cash inflows and $1.5 billion
proceeds from disposals.
Net debt at 31 December 2008 comprised
$13,960 million of debt, partly offset by
$2,744 million of cash and cash equivalents
(net of bank overdrafts) and $173 million current
financial asset investments. Net debt to total
capital(1) at 31 December 2008 was 37.8%,
compared with 20.0% at 31 December 2007.
Over the last 12 months, Anglo American
has issued medium and long term debt in the
euro and sterling bond markets, in addition to
arranging new bank financing in both Europe
and South Africa.
At 31 December 2008, Anglo American
had undrawn bank facilities of $6.1 billion, cash
deposits of $2.7 billion and commercial paper
maturing throughout 2009 of $1.1 billion.
Anglo American’s only significant debt
repayment in the next year is a $3 billion
revolving bank facility (of which $1.1 billion
was drawn at 31 December 2008) which
matures in December 2009. In addition,
a £300 million (approximately $500 million)
euro bond matures in December 2010.
With respect to the $3 billion facility,
the intention is to refinance part or all of the
facility, subject to requirements, taking into
consideration proceeds from disposal of assets
and cash flow from operations, using a variety
of sources which may include the issue of
public bonds in the European and US markets
and new bank facilities.
Anglo American plc Annual Report 2008
32
Operating and financial review
Business unit
overview
in each business unit overview on the following pages, operating
profit includes associates’ operating profit and is before special
items and remeasurements unless otherwise stated
capital expenditure relates to cash expenditure on tangible
and biological assets. Share of Group operating profit and share
of Group net operating assets for both 2008 and 2007 are based
on continuing operations and, therefore, in 2007, exclude the
contribution from Mondi and angloGold ashanti
Precious
Platinum
See page 33
Diamonds
See page 37
Base
Base Metals
See page 40
Bulk
Ferrous Metals
See page 45
coal
See page 48
industrial Minerals
See page 52
Anglo American plc Annual Report 2008
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Platinum
BUSineSS Unit Overview
Operating profit
2008
$2,226 m
2007: $2,697 m
EBITDA
2008
$2,732 m
2007: $3,155 m
• World’s leading primary producer of platinum
• Seven greenfield developments under way
South Africa
anglo Platinum mines in
the Bushveld complex
in South africa with five
mining operations, three
smelters and two refineries
at the Polokwane smelter,
wet concentrate made up
of UG2 and Merensky reef
is smelted to produce a
PGM-rich nickel-copper
furnace matte which is
then sent to rustenburg’s
acP converter for refining
Business overview
Anglo Platinum Limited, based in South Africa,
is the world’s leading primary producer of
platinum, accounting for around 39% of global
output. It mines, processes and refines the
entire range of platinum group metals (PGMs):
platinum, palladium, rhodium, ruthenium,
iridium and osmium. Although PGMs are the
primary products of its operations, base metals
such as nickel, copper and cobalt sulphate are
important secondary products and are
significant contributors to earnings.
Anglo Platinum’s operations exploit the
world’s richest reserve of PGMs, known as the
Bushveld Complex, which contains PGM-
bearing Merensky, UG2 and Platreef ores. The
company has access to an excellent portfolio of
ore reserves to ensure that it is well placed to
be the world’s leading platinum producer for
many years to come.
Anglo Platinum currently wholly owns
five mining operations, a tailings re-treatment
facility, three smelters, a base metals refinery
and a precious metals refinery, all in the Limpopo
and North West provinces of South Africa.
Each of its mines operates its own concentrator
facilities, with smelting and refining of the
output being undertaken at Rustenburg
Platinum Mines’ metallurgical facilities.
The company’s 100% owned mining
operations comprise Rustenburg Platinum
Mines’ Rustenburg, Amandelbult, Mogalakwena
and Twickenham sections as well as Lebowa
Platinum Mines, 51% of which is held for sale.
Rustenburg Platinum Mines’ Union Section is
85% held, with a black economic empowerment
(BEE) partner, the Bakgatla-Ba-Kgafela
traditional community, holding the remainder.
Anglo Platinum also has a 50:50 joint
venture with a BEE consortium, led by African
Rainbow Minerals, over the Modikwa platinum
mine, a joint venture with Royal Bafokeng
Resources, a BEE partner, over the combined
Bafokeng-Rasimone platinum mine and
Styldrift properties and a joint venture with
Xstrata over the Mototolo mine. In addition,
Anglo Platinum has joint ventures with
Aquarius Platinum covering the shallow
reserves of the Kroondal and Marikana
mines and portions of the reserves at
Anglo Platinum’s Rustenburg Section.
In September 2007, Anglo Platinum agreed,
in principle, to sell assets for a total upfront
cash consideration of R7.6 billion (about
$1.1 billion) to ‘historically disadvantaged
South African’ (HDSA) companies, Anooraq
Resources and Mvelaphanda Resources. The
transactions envisaged the sale of an effective
51% of the Lebowa platinum mine and a further
1% of the Ga-Phasha, Boikgantsho and Kwanda
50:50 JV projects to Anooraq, as well as the
sale of Anglo Platinum’s 50% interest in the
Booysendal project and 22.4% shareholding
in Northam Platinum Limited to Mvelaphanda.
In March and April 2008, the suite of
definitive legal agreements for the transactions
was entered into, which remained subject to
various suspensive conditions. The sale of
Anglo Platinum’s investment in Northam was
finalised in December 2008 and the only
remaining condition for the Booysendal sale
is consent to transfer control from South
Africa’s Department of Minerals and Energy,
which is expected in the first quarter of 2009.
In respect of the transaction with Anooraq,
owing to the significant deterioration in global
market conditions, material decline in PGM
prices and constrained debt and equity capital
markets, the Lebowa mine plan and project
pipeline, including the Middelpunt Hill UG2
expansion project, are under review. Anglo
Platinum and Anooraq intend to conclude the
transaction as soon as is practically possible
and have thus extended the date for fulfilment
of the conditions until 30 April 2009.
Anglo American plc Annual Report 2008
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Operating and financial review
BUSineSS Unit Overview cOntinUeD
Anglo Platinum production*
Ounces (thousand)
Palladium, rhodium and gold
Platinum
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
03
04
05
06
07
08
* Excludes share of Northam Platinum Limited.
Excludes production of nickel and copper.
industry overview
PGMs have a wide range of industrial and
high-technology applications. Demand for
platinum is driven by its use in autocatalysts
to control emissions from both petrol and diesel
engine vehicles, and in jewellery. These uses
are responsible for 67% of net total platinum
consumption. Platinum, however, also has an
enormous range of lesser-known applications,
predominantly in the chemical, electrical,
medical, glass and petroleum industries.
The platinum jewellery market requires
constant promotion and development and Anglo
Platinum is the major supporter of the Platinum
Guild International, which since its inception in
1975 has played a key role in encouraging demand
for platinum and establishing new platinum
jewellery markets. China has been the leading
platinum jewellery market since 2000,
followed by Europe, Japan and North America.
Industrial applications for platinum
are driven by technology and, especially
in the case of autocatalysts, by legislation.
Technological development continues to
drive industrial demand and ongoing research
into new applications will create further
growth in this sector. With the rapid spread
of exhaust emissions legislation, more than
94% of new vehicles sold in the world now
have autocatalysts fitted. The intensifying
stringency of emissions legislation will drive
growth in PGM demand for autocatalysts as
new legislation is applied to trucks and
offroad vehicles.
Interest in fuel cell technology has
accelerated dramatically over the past decade,
largely on the back of rising concerns about
environmental degradation and energy costs.
At present, demand is small, but gradual
medium to long term growth, first in small
battery replacement applications and stationary
fuel cells, and later with the commercialisation
of fuel cell vehicles, is envisaged.
Palladium’s principal application is in
autocatalysts (around 50% of net demand).
Palladium is also used in electronic components,
in dental alloys and, more recently, as an
emerging jewellery metal in markets such as
China. Palladium demand growth is expected to
slow, while supply is expected to increase from
South African expansions and recycling from
spent autocatalysts.
Rhodium is an important metal in
autocatalytic activity, which accounts for nearly
80% of net demand. The metal is also used in
industrial applications such as glass-making for
flat-panel display units. In the short to medium
term, the market supply and demand balance
is expected to remain tight, supported by
autocatalyst growth and glass demand for
flat-screen televisions. Thrifting (using less
metal, typically in thinner coatings, to achieve
the same catalytic effect) and increased supply
from UG2 Reef expansions may ease the
market balance in the longer term.
The other three PGMs produced are
ruthenium, iridium and osmium. In recent times,
ruthenium has enjoyed strong uptake on the
back of heavy demand from the electronics
sector, where the metal is used to increase
magnetic data-recording memory in hard disks
and in plasma display panels of flat-screen
televisions. Ruthenium, along with iridium, is
also used in chemical and electronic applications.
Osmium is employed as a catalyst in the
pharmaceutical industrial sector and to stain
specimens for microscopic analysis.
Platinum supply and demand
Ounces (thousand)
Total platinum supply
Total platinum demand
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Anglo American plc Annual Report 2008
Source: Johnson Matthey
99
00
01
02
03
04
05
06
07
08
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$ million
(unless otherwise stated)
Operating profit
EBITDA
Net operating assets
Capital expenditure
Share of Group
operating profit
Share of Group net
operating assets
2008
2007
2,226
2,732
9,045
1,563
2,697
3,155
9,234
1,479
22%
28%
27%
35%
Platinum grain
formed during
refining at anglo
Platinum’s precious
metals refinery
Strategy and growth
Anglo Platinum’s strategy is to develop the
market for PGMs, expand production into that
growth opportunity and conduct its businesses
safely, cost-effectively and competitively.
Growing demand is stimulated by
substantial investment in research and
development into new uses for PGMs; through
partners and customers, including Johnson
Matthey (Anglo Platinum has a 17.5% stake
in Johnson Matthey Fuel Cells), and global
development campaigns for jewellery through
the Platinum Guild International.
In the second half of 2008, Anglo Platinum
reviewed its capital expenditure programme
in response to the unprecedented rapid decline
in PGM prices caused in the main by rapidly
slowing vehicle sales in North America, Europe
and Japan having a negative effect on the
outlook for PGMs in autocatalysis. The
company’s annual planning process included
the evaluation of a number of initiatives to
reduce costs and improve operational
productivity as well as a critical examination
of short term supply and demand trends.
Capital expenditure is being curtailed by
delaying expenditure across several major
projects, including Amandelbult No.4 Shaft,
Twickenham, Styldrift, the second slag
cleaning furnace at Waterval and numerous
smaller projects.
Anglo Platinum’s announced expansion
programme and ore replacement projects
underpin a sustained high level of exploration
activities. Exploration is mainly directed at
accumulating geological data in areas where
PGM ore bodies are known to occur and is thus
primarily focused on quantifying ore reserves
and mineral resources in the Bushveld Complex.
Anglo Platinum is involved in developing
mining activity for PGMs on the Great Dyke
of Zimbabwe. The Great Dyke is the second
largest known repository of platinum in
the world after the Bushveld Complex.
Development and exploration work is focused
on new projects in the area, including the Unki
mine, as well as establishing extensions to the
resource base for future projects. In addition,
Anglo Platinum is involved in exploration
activities in Canada, Russia, Brazil and China.
Financial overview
Anglo Platinum’s operating profit declined
by 17% to $2,226 million. This was as a
result of lower metal sales and significant
increases in key input costs, partly offset
by a higher price achieved for the basket
of metals sold and a weaker average rand
against the dollar.
The average dollar price realised for the
basket of metals sold equated to $2,764 per
platinum ounce, a 7% rise over 2007, with
higher prices achieved for platinum and rhodium
making the largest contribution to the increase.
The average realised price for platinum of
$1,570 per ounce was $268 or 21% above
the 2007 figure, while the achieved nickel
price was sharply lower at $9.79 per pound
(2007: $17.04). Anglo Platinum successfully
renegotiated the contract sales terms for
rhodium, resulting in the realised sales price of
rhodium moving closer to market prices during
2008. The average price achieved on rhodium
sales for the year was $5,174 per ounce.
Platinum demand by region
Ounces (thousand)
Europe
Japan
North America
China
Rest of the world
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Anglo Platinum cash operating costs
– total operations
US$/ounce
$/oz Pt refined
$/oz PGM refined
4
8
3
,
1
3
5
1
,
1
0
3
7
0
0
6
1,400
1,200
1,000
800
600
400
200
0
0
9
8
9
4
8
4
8
7
6
3
4
1
7
4
9
5
4
6
2
6
9
4
3
3
7
3
3
1
2
99
00
01
02
03
04
05
06
07
08
02
03
04
05
06
07
08
Source: Johnson Matthey
Anglo American plc Annual Report 2008
Outlook
Notwithstanding the current uncertainty in
the global resources and platinum sectors,
Anglo Platinum’s long term strategy to
develop the market for PGMs, expand its
production into that opportunity and to conduct
its business cost effectively and competitively
remains sound.
The long term prosperity of the business
is considered when taking short term action
and Anglo Platinum will continue to respond to
the challenges that face the platinum industry.
While the planned level of refined platinum
production of 2.4 million ounces is currently
expected to be appropriate for 2009, the
company will take appropriate action should
economic conditions affecting net platinum
demand deteriorate further. Production levels
will be continually monitored against global
economic developments and revised production
guidance will be provided when appropriate.
In order to maintain positive operating
margins at the planned 2009 production level
of 2.4 million ounces of refined platinum the
current cost of production will be reduced. This
will be achieved through active management of
the supply chain to realise, without delay, the
benefits of the significant reduction of input
commodity prices; safely reducing units of
consumption where possible; managing labour
more effectively to improve efficiencies through
re-skilling and redeployment where required;
avoiding recruitment of non-critical positions;
and reducing the number of contract employees
at operations.
Every effort will be made to avoid the
retrenchment of permanent employees. However,
should economic conditions deteriorate further,
this may become unavoidable.
36
Operating and financial review
These reductions were largely offset by
an increase in purchased ounces from the
new Eland Platinum mine, which commenced
delivery to Anglo Platinum in December 2007,
together with increased output from the new
Mogalakwena North pit and the Modikwa and
Kroondal Platinum mines.
The cash operating cost per equivalent
refined platinum ounce (in respect of Anglo
Platinum’s own mines plus its share of joint
ventures) increased by 36% to R11,093
per ounce. The increase in unit costs was
attributable primarily to above inflation
pressures experienced in key input costs
including labour, diesel, chemicals, steel
grinding media, explosives and cement,
compounded by reduced production from
Anglo Platinum’s attributable share of
mining operations.
Anglo Platinum’s focus on safety, based
on zero harm and a change in safety culture,
has resulted in an improvement in the safety
performance across the operations, with the
lost time injury frequency rate improving by
14% to 1.74 from 2.03 in 2007. Despite the
improvement, 17 employees lost their lives at
Anglo Platinum’s managed operations during
the year, compared with 25 in 2007. Safety
continues to be a focus area in the Company’s
aspiration towards zero harm through the
elimination of all unsafe incidents and conditions.
Projects
The rapid decrease in revenue in the second
half of 2008 led to declining margins, increased
debt levels and confirmation that global economic
events would negatively influence short term
demand. In line with the Anglo American
Group, a review of the company’s capital
expenditure programme was completed,
resulting in the reduction of total expected
capital expenditure for 2009 to $900 million
through the deferral of expenditure across
several major and numerous smaller projects.
The criteria used to determine project
expenditure deferral were to maximise
short term reductions in expenditure and
minimise the delay in reaching full production.
The expected reduction in short term production
arising from the deferral of capital projects is
largely expected to match the reduced demand.
The commissioning of the Mogalakwena
North expansion project concentrator is complete.
Capital expenditure planned for the accelerated
removal of overburden at the new North pit
has been deferred. As a result, less ore will be
exposed, thereby reducing the level of mining
output originally planned for 2009.
BUSineSS Unit Overview cOntinUeD
Markets
Average market prices ($/oz)
2008
2007
Platinum
Palladium
Rhodium
Source: Johnson Matthey
1,585
1,304
355
355
6,564
6,200
2008 was a year of unprecedented price
volatility in the platinum market with platinum
reaching a record of $2,276 per ounce in March
before falling sharply as economic conditions
deteriorated. In the second half of the year,
the global economic downturn reduced credit
availability for vehicle purchases. Anglo Platinum
estimates that demand from the autocatalyst
segment decreased by more than 8% or
330,000 ounces, owing to the smaller number
of vehicles produced and a rundown of stock
levels by major auto companies. Although not
immune to the global economic downturn,
industrial demand held up reasonably well in
2008, with demand increasing in some areas
such as the chemical sector as investment
in new capacity reached a peak. High prices
in the first half of the year discouraged
consumer purchases of jewellery and increased
the recycling of old jewellery, thereby reducing
demand for new metal. In the second half
of the year, the declining price of platinum
encouraged purchases of metal by jewellers
and investors alike.
The global supply of platinum has decreased
by 11%, or 740,000 ounces, over the past two
years and is not expected to increase in the
current global economic environment.
Anglo Platinum expects a balanced
platinum market in 2009. It also anticipates
that the platinum price, which suffered
downside overcorrection on negative news
flow in the second half of 2008, is likely to
trade above $1,000 per ounce on average
during 2009.
Operating performance
Refined platinum production for the year of
2,386,600 ounces was 4% lower than 2007
but in line with the mid 2008 forecast.
Several factors impacted production at
operations, including safety related stoppages;
the suspension of operations to rehabilitate
shaft steelwork at the Turffontein shaft of
Rustenburg mine; the disruption of operations
at the Amandelbult mine as a result of a major
flood event; electricity supply constraints in
January and the associated ramp-up period
when supply resumed; commissioning delays
at Mogalakwena North concentrator and lower
throughput at the Mogalakwena South
concentrator; the overall expected reduction
in built-up head grade; and furnace run-outs
at the Polokwane and Waterval smelters.
Anglo American plc Annual Report 2008
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Diamonds
Share of associate’s operating profit
2008
$508 m
2007: $484 m
EBITDA
2008
$665 m
2007: $587 m
• De Beers is the world leader in diamonds
• Diamond production exceeded
48 million carats
• Opened three mines in the year (two
in Canada and one in South Africa)
De Beers ownership structure
Canada
Snap lake and victor
mines in canada, both
opened in 2008
Southern Africa
Main mining,
beneficiation and
operational activities
in Botswana, South
africa and namibia.
element Six also
produces synthetic
diamonds in South
africa as well as
europe and china
Anglo American
Group
Central Holdings
Ltd
Government of
Botswana
45%
40%
15%
DB Investments (Lux)
100%
De Beers sa (Lux)
50%
50%
60%
74%
100%
100%
Debswana
(Botswana)
Namdeb
(Namibia)
Element Six
DTCB
NDTC
De Beers
Consolidated
Mines
(South Africa)
De Beers
(Canada)
The
Diamond
Trading
Company
Business overview
Anglo American’s diamond interests are
represented by its 45% shareholding in
De Beers. The other shareholders in De Beers
are Central Holdings Ltd (an Oppenheimer
family owned company), which owns 40%,
and the Government of Botswana with 15%.
De Beers is the world’s leading diamond
business and with its joint venture partners
operates in more than 20 countries across five
continents, employing around 20,000 people.
De Beers produces around 40% of the world’s
rough diamonds by value from its mines in
Botswana, Canada, Namibia and South Africa.
De Beers holds a 50% interest in Debswana
Diamond Company and in Namdeb Diamond
Corporation, owned jointly with the
Government of Botswana and the Government
of Namibia, respectively, and a 70%
shareholding in De Beers Marine Namibia.
In addition, De Beers has a 74%
shareholding in South African based De Beers
Consolidated Mines Limited, with a broad-based
black economic empowerment consortium (the
Ponahalo group) holding the balance.
De Beers owns 100% of The Diamond
Trading Company (DTC), the sales and rough
diamonds distribution arm of De Beers. It also
has a 50% interest with the Government of
Botswana in Diamond Trading Company
Botswana (DTCB) and a 50% ownership, along
with the Government of Namibia’s matching
shareholding, in Namibia Diamond Trading
Company (NDTC).
De Beers and LVMH Moët Hennessy Louis
Vuitton have established a high-end retail
jewellery joint venture, through De Beers
Diamond Jewellers (DBDJ), with stores in the
most fashionable areas of some of the world’s
great cities, including New York, Los Angeles,
London, Paris, Tokyo and Dubai.
De Beers, through Element Six, is a major
producer of synthetic industrial diamond
material; applications include cutting, grinding,
polishing, wire making and other technical and
scientific uses. Element Six has a significant
market share in the oil and gas drilling business
and has expanded in recent years by building
a manufacturing facility in China, through
acquiring a majority stake in a facility in
Ukraine, and by enhancing its hard-material
portfolio with the acquisition of Barat Carbide
in Germany. The Barat acquisition has given
Element Six materials competence in carbide,
and marketing channels as well as application
knowhow in mining, road construction and
for wear parts. With sales of well above
$100 million, Barat Carbide is a large addition
to Element Six, resulting in total annual sales
of over $500 million for the combined entities.
Anglo American plc Annual Report 2008
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BUSineSS Unit Overview cOntinUeD
De Beers production*
Carats recovered (million)
60
50
40
30
20
10
0
03
04
05
06
07
08
*DBCM, Debswana, Namdeb, Williamson
and Canada
Sorting rough diamonds at
the Diamond trading company
in london. in 2008, the De Beers
group produced 48.1 million
carats of diamonds
Anglo American plc Annual Report 2008
industry overview
Up to two-thirds of the world’s diamonds by
value originate from southern and central
Africa, while significant sources have been
discovered in Russia, Australia and Canada.
Most diamonds come from the mining of
kimberlite deposits. Another important source
of gem diamonds, however, has been
secondary alluvial deposits formed by the
weathering of primary kimberlites and the
subsequent deposition of released diamonds
in rivers and beach gravels.
Rough or uncut diamonds are broadly
classified either as gem diamonds or industrial
quality diamonds, with gem representing by
far the larger of the two markets by value.
The primary world market for gem diamonds is
in retail jewellery where aspects such as size,
colour, shape and clarity have a large impact
on valuation. De Beers, through the DTC, and
its partners in Botswana, South Africa and
Namibia, supplies its clients – known as
‘Sightholders’ – with parcels of rough diamonds
that are specifically aligned to their respective
cutting and polishing needs.
Strategy and growth
During 2008, De Beers continued to focus both
investment and divestment activity to position
the company for future growth. The strategy
centres on exploration in central and southern
Africa; driving profitable production growth
across operations and seeking enhanced levels
of organisational effectiveness. De Beers has
been divesting from those mines that, under
the company’s current cost structures, are
deemed marginal or loss making. In 2008,
De Beers completed the sale of the Kimberley
underground mines and Cullinan Diamond Mine
to Petra Diamonds Limited and the disposal of
Williamson Diamond Mine in Tanzania.
During the reporting period, De Beers
officially opened its first mines in Canada at
Victor mine in northern Ontario and Snap Lake
mine in the Northwest Territories. Victor was
completed and commissioned eight months
ahead of schedule and Snap Lake commenced
commercial production in early 2008 with
both mines reaching full production in the
second half of the year. In South Africa, the
long-dormant Voorspoed mine was officially
re-opened with its first diamonds being
recovered in June. As a result of the coming
on stream of these projects during the year,
De Beers’ capital expenditure has declined
significantly.
In April, De Beers commissioned a new
$83 million diamond facility in Gaborone,
the largest and most sophisticated of its
kind in the world, which is now home to the
DTCB. This boost to beneficiation – adding
downstream value to mining operations – in the
producer country includes the process of sorting
and valuing rough diamonds, their subsequent
cutting and polishing, and the manufacture of
diamond jewellery. The focus on beneficiation
extends to Namibia through the NDTC, to
South Africa through the State Diamond Trader
and to Canada through local supply agreements
reached with the governments of Ontario and
the Northwest Territories respectively. All these
initiatives seek to create an enabling
environment through which each country’s
valuable diamond resources can be further
transformed into a source of national wealth,
pride and development.
In May, Judge Chesler entered an order in
the US Federal District Court in New Jersey
approving in all respects the Settlement in
the Diamond Class Actions, which addressed
De Beers’ outstanding historical civil legal issues
in the US. Certain appeals have been noted
against the order, which will be addressed in
accordance with ordinary legal processes.
The DTC completed its Sightholder selection
process in 2008, appointing 78 clients for the
new three-year contract period. Clients will be
receiving ‘Sights’ through wholly owned and
joint venture DTC operations around the world,
with many of the Sightholders receiving Sights
in several different countries. The selection
criteria for Sightholders were designed to
identify those applicants that demonstrated
excellence in their technical ability, their
distribution and marketing effectiveness
and the core strengths of their diamond
business. Financial transparency and ethical
accountability were mandatory.
DBDJ continued to expand its global
network of operations in 2008.
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Financial overview
The Group’s share of operating profit from
De Beers rose by 5% to $508 million.
De Beers’ sales for 2008 at $6,888 million
(attributable $3,096 million) were marginally
above the previous year (2007: $6,836 million
(attributable $3,076 million)), though below
expectation owing to the impact of the global
economic downturn. Over the first nine months,
the DTC, which represented 86% of De Beers’
total sales, achieved record sales as buoyant
demand for diamonds translated into increased
prices. Fourth quarter sales slowed as a result
of the downturn and the consequent liquidity
squeeze in the key global cutting centres.
Net interest bearing debt fell to $3.55 billion
(2007: $4.06 billion) as a result of the benefits
of a stronger dollar, the repayment of debt and
shareholder support.
In light of the weak outlook for diamond
sales, the shareholders of De Beers have agreed
to provide loans to De Beers, proportionate to
their shareholdings, totalling $500 million in
2009. Anglo American holds a 45% interest
in De Beers and will therefore provide a loan
of up to $225 million. De Beers is an associate
company of Anglo American and its debt is
therefore not consolidated on to Anglo American’s
balance sheet.
Markets
Global retail sales showed steady growth during
the first half of 2008 driven principally by the
emerging markets of China, India and the Middle
East. However, in 2008, the all important holiday
period took place amidst significant weakness
in US economic sentiment, with American
consumers, the world’s major diamond
purchasers, cutting back sharply on spending.
The luxury goods sector appears to have been
particularly impacted, with jewellery retailers
in the US reporting double digit year on year
declines over the traditional key buying season
between Thanksgiving and Christmas. As a
result, it is estimated that global diamond retail
sales were down, in the low single digits, for
the year as a whole.
Operating performance
During the year, De Beers produced 48.1 million
carats (2007: 51.1 million carats). Production
from Debswana was 32.3 million carats (2007:
33.6 million carats), Namdeb yielded 2.1 million
carats (2007: 2.2 million carats), while the
output from South African operations fell to
12.0 million carats (2007: 15.0 million carats).
The new Canadian operations at Snap Lake and
Victor produced 1.6 million carats (2007:
81,000 carats).
Element Six recorded total annual sales of
almost $500 million for the year and growth
of 25% as a result of the inclusion of a full
year’s trading in respect of E6 Hard Materials
(Barat Carbide), acquired in 2007, as well as
organic growth.
De Beers is prospecting for
diamonds close to its Snap lake
mine, which opened in 2008 in
the forbidding terrain of canada’s
northwest territories
De Beers has made an impairment to goodwill
of $176 million ($79 million attributable) as well
as having an $82 million charge ($37 million
attributable) in relation to restructuring and
retrenchment as a result of current trading
conditions.
Projects
For the first time in its history, De Beers opened
three new mines in one year. In Canada, Victor
mine in northern Ontario was completed and
commissioned eight months ahead of schedule,
while Snap Lake mine in the Northwest Territories
commenced commercial production in early
2008 with both mines achieving full production
in the second half of the year. De Beers’
Voorspoed mine in South Africa was officially
opened in November and is expected to
produce 8.3 million carats at an average value
of $120 per carat over the next 12 to 16 years.
Outlook
The global economic crisis is having a
significant impact on sales of retail diamond
jewellery, liquidity and demand for rough
diamonds in the cutting centres. This, in turn,
has resulted in a reduction in sales of rough
diamonds by the DTC. Trading conditions are
expected to remain challenging throughout
2009. De Beers has taken steps to significantly
reduce production levels, costs and capital
expenditure across all operations. These actions,
together with the business restructuring
initiatives already completed, including the
disposal of the marginal Cullinan and
Williamson mines, have positioned De Beers
to weather this tough economic environment.
Recent market research from the US
and China confirms that consumers’ desire
for diamonds remains strong. As economic
conditions improve, emerging demand, coupled
with the decline in long term diamond supply,
is expected to form a positive foundation for
future increases in diamond prices.
$ million
(unless otherwise stated)
Share of associate’s
operating profit
EBITDA
Group’s aggregate
investment in
De Beers
Share of Group
operating profit
2008
2007
508
665
484
587
1,623
1,802
5%
5%
Anglo American plc Annual Report 2008
40
Operating and financial review
Base Metals
BUSineSS Unit Overview cOntinUeD
Operating profit
2008
$2,505 m
2007: $4,338 m
EBITDA
2008
$2,845 m
2007: $4,683 m
• Record copper production at Los Bronces
and Mantoverde
• Los Bronces expansion and Barro Alto
projects significantly progressed
• Agreement reached with local community
at Michiquillay in Peru
$ million
(unless otherwise stated)
Operating profit
Copper
Nickel, niobium,
mineral sands and
phosphates
Zinc
Other
EBITDA
Net operating assets
Capital expenditure
Share of Group
operating profit
Share of Group net
operating assets
2008
2007
2,505
2,017
4,338
2,983
507
136
(155)
2,845
5,474
1,494
786
654
(85)
4,683
4,989
610
25%
45%
17%
19%
Anglo American plc Annual Report 2008
South America
Six copper operations in
chile, loma de níquel
nickel mine in venezuela,
and nickel, niobium and
phosphate fertiliser
operations in Brazil
Europe and southern Africa
Zinc operations in southern africa
(Black Mountain and Skorpion)
and ireland (lisheen)
Business overview
Anglo Base Metals has interests in 13
operations in six countries, producing copper,
nickel, zinc, niobium and phosphate fertilisers,
together with associated by-products including
lead, molybdenum and silver.
In Chile, its six copper operations comprise
the wholly owned Los Bronces, El Soldado,
Mantos Blancos and Mantoverde mines, the
Chagres smelter and a 44% interest in the
Collahuasi mine. The mines also produce
associated by-products such as molybdenum
and silver.
Other South American operations are
the Loma de Níquel nickel mine in Venezuela,
as well as Codemin (nickel) and the Catalão
niobium mine in Brazil. Anglo Base Metals also
has a controlling interest in Copebrás, a leading
Brazilian producer of phosphate fertilisers and
phosphoric acid. Phosphate fertilisers are used
to supplement natural soil nutrients in order to
achieve high agricultural yields.
In southern Africa, the Skorpion mine
produces zinc and the Black Mountain mine
produces zinc and associated by-products such
as lead, copper and silver. Anglo Base Metals’
sole European operation is the Lisheen zinc and
lead mine in Ireland.
The transaction whereby black economic
empowerment company Exxaro Resources
acquired Anglo Base Metals’ Namakwa Sands
mineral sands operation in South Africa,
together with 26% of each of Black Mountain
and the Gamsberg zinc project, was completed
in the second half of 2008. Black Mountain
and Gamsberg will continue to be managed
and operated by Anglo Base Metals.
industry overview
The majority of copper produced is used by the
wire and cable markets and takes advantage
of the metal’s electrical conductivity, corrosion
resistance and thermal conductivity. Applications
that make use of copper’s electrical conductivity,
such as wires (including wiring used in
buildings), cables and electrical connectors,
account for around 60% of total demand, while
about 20% of demand comes principally from
the construction industry which uses copper
to produce plumbing pipe and roof sheeting,
owing to the metal’s corrosion resistance
qualities. Copper’s thermal conductivity also
makes it suitable for use in heat transfer
applications such as air conditioning and
refrigeration, which make up some 10% of total
demand. Other applications include structural
and aesthetic uses.
Around 60% of all refined nickel is used
in stainless steel. Other uses include high
corrosion resistant alloys for use in chemical
plants, superalloys that can withstand extreme
temperatures and are predominantly used in
aviation, high technology electronic uses and
as a substrate for chromium plating.
Zinc is used predominantly in galvanising
and alloys. Steel coated with zinc (galvanised
steel) exhibits high levels of corrosion
resistance. This application is responsible for
around 50% of total demand. Zinc based alloys
in die casting, ranging from automotive
components to toys and models, account for
around 10-12% of demand, with copper based
zinc alloys (brass) accounting for 15-17%. Zinc
semis are used as roofing products and in dry
cell batteries (8-10%). Chemical and other
applications make up the remainder of refined
demand (approximately 13-15%), where zinc
is used in a diverse range of products and
applications, including tyres, paints,
pharmaceuticals and chemical processing.
With the exception of nickel, base metals
industry ownership is presently relatively
fragmented. Currently, the approximate global
market shares of the four largest copper, nickel
and zinc mine producers are: 35%, 46% and
25%, respectively. Producers are price-takers
and there are relatively few opportunities for
product differentiation.
The industry is capital intensive and is
likely to become more so as high grade surface
deposits are exhausted and deeper and/or
lower grade deposits are developed, requiring
greater economies of scale in order to be
commercially viable. Real prices of copper,
nickel and zinc are cyclical but have tended to
decline over the long term. The decline in real
prices reflects the long term trend in cost
reduction as a result of advances in technology
41
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and lower input costs. Average margins have,
therefore, tended to be maintained.
For much of this decade, the ongoing
industrialisation and urbanisation of China have
driven demand for a range of commodities. This
contributed substantially to a base metal price
up-cycle that was unprecedented both in its
extent and its longevity, with the country now
accounting for an estimated 28%, 22% and
33% of global first-use demand for refined
copper, nickel and zinc, respectively. The global
credit crisis and significant slowing of economic
growth in the second half of the year, however,
have caused a very sudden and extensive fall
in base metals demand and prices. This has
already resulted in mine and smelter closures
(particularly zinc and nickel) and the delaying of
new projects and additions to existing capacity.
Strategy and growth
Anglo Base Metals’ strategy is to find or acquire,
develop and operate long life, low cost mines
in a socially and environmentally responsible
manner, with a strong focus on efficient
resource allocation, continuous improvement
and capital and operating excellence.
The business is constantly developing and
evaluating growth options from a combination
of sources, including greenfield and brownfield
projects, acquisitions, exploration, technology
development and asset optimisation programmes.
Significant future growth will come from
approved expansions at Los Bronces in Chile
and Barro Alto in Brazil (although the rate of
development of these projects has been slowed
in light of prevailing economic conditions),
and studies are under way into further growth
potential at Collahuasi in Chile and Quellaveco
in Peru. In addition, work continues on evaluating
the potential and development options for
two major new resources acquired in 2007:
Michiquillay in Peru and Pebble in Alaska.
Financial overview
Operating profit at Base Metals of $2,505 million
was some 42% lower than the previous year.
This followed sharply lower copper, nickel,
zinc and lead prices, including a significant
$591 million adverse mark to market and final
liquidation adjustment due to lower realised
copper prices on revenue initially recognised
on provisionally priced sales, as well as lower
copper prices at the end of 2008. Of the
negative mark to market and final liquidation
adjustment, there was a positive impact
of $265 million in the first half, offset by a
negative impact of $856 million in the second
half. Lower overall sales volumes and continued
rises in input costs also contributed to the
reduction in operating profit. The sale of
Namakwa Sands was completed on 1 October
2008, with that operation therefore
contributing for only nine months of the year.
Markets
Average market prices (c/lb)
Copper
Nickel
Zinc
Lead
2008
315
953
85
95
2007
323
1,686
147
118
During the first nine months of 2008, the copper
market continued to be tight, with prices rising
to an all time record level of 407 c/lb in July.
However, concerns about future global economic
growth in the latter half of the year led to a
sharp drop in prices, with copper ending the
year at 132 c/lb. Weakness in the nickel market
continued into 2008, with rising inventories
(London Metal Exchange (LME) stocks closing
the year at a 13-year high) and declining
economic sentiment, leading to a material drop
in prices. Zinc prices continued to weaken
materially for similar reasons.
Operating performance
Copper division
Operating profit
($ million)
Attributable
production (tonnes)
2008
2007
2,017
2,983
641,300 655,000
Los Bronces, Collahuasi and Mantoverde all
increased production in 2008, partially offsetting
lower production at both El Soldado and, less
so, at Mantos Blancos. Record production was
achieved at Los Bronces and Mantoverde.
Los Bronces increased output by 2%
principally due to higher ore grades. The Group’s
share of Collahuasi’s production was 3% higher
than for 2007 as a result of significantly
improved grades, somewhat offset by pipeline
and pumping constraints, and a SAG mill motor
stator failure in September. Production at
El Soldado was 32% lower as a consequence
of lower ore grades, largely owing to challenging
rock stability conditions impacting sequencing
in the underground and open pit mines.
Output from Mantoverde was 2% higher
following recoveries from the heap leach
operations achieving a record level. At Mantos
Blancos, production fell by 3%; while improved
throughput and grades lifted concentrate
production, this was offset by lower cathode
production resulting from lower volumes of
ore and enriched solution purchased from
third parties. Chagres’ output fell by 11%,
mainly due to the lower average grade of
concentrate treated.
Leading copper mining countries
by mine production in 2007
Tonnes (thousand)
Leading nickel mining countries
by mine production in 2007
Tonnes (thousand)
Leading zinc mining countries
by mine production in 2007
Tonnes (thousand)
Chile
Peru
US
Australia
China
Indonesia
Russia
Canada
Zambia
1,190
1,190
871
831
789
770
589
550
Poland
452
5,557
Russia
Canada
Indonesia
Australia
294
255
229
185
New Caledonia
125
Philippines
Cuba
China
78
75
70
Colombia
South Africa
49
38
3,013
1,518
1,444
China
Australia
Peru
US
Canada
India
Mexico
Ireland
Kazakhstan
803
623
539
452
401
386
Bolivia
212
2007 world total: 15,520 kt
2007 world total: 1,559 kt
2007 world total: 11,108 kt
Source: World Bureau of Metal Statistics
Source: World Bureau of Metal Statistics
Source: World Bureau of Metal Statistics
Anglo American plc Annual Report 2008
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Operating and financial review
BUSineSS Unit Overview cOntinUeD
Nickel, niobium, mineral
sands and phosphates
Operating profit
($ million)
Attributable nickel
production (tonnes)
2008
2007
507
786
20,000 25,600
At Codemin, output fell 8% owing to a scheduled
stoppage to reline one of the furnaces. Sales
fell 15%, reflecting the lower production and
also a slowdown in stainless steel producer
offtake. At Catalão, niobium production reduced
by 2% as a result of lower recoveries on ore
from the Boa Vista mine. Performance at
Copebrás during 2008 can be divided into
two distinct phases: from January to August,
demand for all products was extremely strong
and the company sold its entire production at
rising prices; from September onwards, sales
volumes and prices reduced sharply as farmers
were forced to reduce or even curb fertiliser
usage completely owing to the reduced
availability of credit arising from the global
economic downturn.
Loma de Níquel’s production declined by
31% following strike action and a consequential
series of operational difficulties on restarting
the plant, as well as two nationwide power
outages. Sales fell 33%, partly reflecting lower
production, but also because of congestion and
delays at the port compounded by the bankruptcy
of the main shipper and a number of cancellations
from customers towards the year end.
In January 2008, Minera Loma de Níquel
(MLdN) was notified of the intention of the
Venezuelan Ministry of Basic Industries and
Mining (MIBAM) to cancel 13 of its exploration
and exploitation concessions due to MLdN’s
alleged failure to fulfil certain conditions of the
concessions. These concessions do not include
the concessions where the current mining
operations and metallurgical facilities are
located. MLdN believes that it has complied
with the conditions of these concessions and
has lodged administrative appeals against the
notices of termination and is waiting for a
response from MIBAM. MLdN may in the future
undertake further appeals, including with
Venezuela’s Supreme Court, if MIBAM’s ruling
does not adequately protect its interests.
Anglo American and MLdN continue to strive
to resolve the matter by way of constructive
dialogue; however, Anglo American and MLdN
believe that there is a valid legal basis to
reverse the notices of termination and will
pursue all appropriate legal and other remedies
and actions to protect their respective interests
both under Venezuelan and international law.
As such, Anglo American anticipates
restoration of these 13 concessions and
renewal of those that expire in 2012. As a
result, the Group continues to consolidate
at los Bronces copper mine in chile,
a load haul truck, laden with ore, prepares
to take its load out on to the long climb
out of the open pit
Anglo American plc Annual Report 2008
BUSineSS Unit Overview cOntinUeD
MLdN and no impairment has been recorded for
the year ended 31 December 2008.
In a separate development, the
environmental permit for slag deposition
expired on 23 November 2008. Pending
reissuance of the permit, MLdN implemented a
short term contingency plan to allow operations
to continue by storing the slag in various
locations in the plant area. On 23 December,
MLdN suspended operations but a satisfactory
temporary alternative operating and deposition
approach was developed which enabled
operations to restart on 28 January 2009.
At 31 December 2008, Anglo American’s
interest in the book value of MLdN, including
its mineral rights, was $443 million (as included
in the Group’s balance sheet). In the 12 months
to December 2008, MLdN’s production and
contribution to Group operating profits were
respectively 10,900 tonnes of nickel in ferronickel
and $30 million. The average price of nickel in
2008 was 953 c/lb. As of 19 February 2009,
the price of nickel was 447 c/lb.
Anglo American is proud of its record in
Venezuela, where it has invested substantial
amounts in exploration and subsequently the
construction of the country’s only primary
nickel producer. It is a major contributor to and
employer in the Venezuelan economy as well as
a significant taxpayer. The operation continues,
as it has always done, to work constructively
with all stakeholders, employees, local
communities and government and to the
highest sustainable development, social
and environmental standards.
Zinc division
Operating profit
($ million)
Attributable zinc
production (tonnes)
Attributable lead
production (tonnes)
2008
2007
136
654
340,500 343,100
62,900 62,100
43
Anglo Base Metals operating profit by commodity*
$ (million)
Copper
Nickel, niobium, mineral sands and phosphates
Zinc
9
1
0
,
3
3
8
9
,
2
2
1
8
3
,
1
6
4
0
,
1
4
2
2
1
9
4
2
2
0
1
6
8
7
4
5
6
6
1
5
6
2
4
7
1
0
,
2
7
0
5
6
3
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2,800
2,400
2,000
1,600
1,200
800
400
0
2004
2005
2006
2007
2008
*Excludes operating profit from Hudson Bay and corporate/other costs. Copebrás is included from 2006
2008 LME daily closing copper/nickel/zinc price
Cents/lb
Nickel
2,000
1,750
1,500
1,250
1,000
750
500
250
0
Copper
Zinc
400
300
200
100
0
Jan
Feb Mar Apr May
Jun
Jul
Aug
Sep
Oct Nov
Dec
At Skorpion, production was 3% lower owing
to electricity supply constraints in southern
Africa in the first quarter, mechanical failure of
a cathode crane in the electrowinning cellhouse
and industrial action. Despite tight cost control,
mine operating unit costs rose following lower
production volumes and rising input costs.
At Lisheen, zinc production increased by 2%
primarily as a result of higher feed grades and
improved metallurgical recoveries, but lead
output was down 21% due to lower grades
and recoveries. Improvements in stope
availability and underground infrastructure
at Black Mountain resulted in a 13% increase
in tonnage mined, despite a week-long
unplanned stoppage of the mine and plant
in January following a power shortage in
South Africa. Lower zinc grades and recoveries
resulted in zinc production decreasing by 1%
to 27,900 tonnes, although lead production
increased by 12% to 47,000 tonnes. The sale
of 26% of Black Mountain and Gamsberg to
Exxaro Resources was completed on 3 November
2008, following the successful conversion of
old order to new order mining rights.
Impairments of $78 million and $62 million
were provided at Lisheen and Black Mountain
respectively.
Projects
Base Metals has a strong project pipeline which
provides significant scope for organic growth in
the medium and long term. Anglo American’s
review of its capital expenditure programme
in late 2008 resulted in the decision to slow the
rate of development of the two major projects
under construction, Barro Alto and the Los
Bronces expansion project.
The Barro Alto nickel project in Brazil has
been delayed by a year and first production is
now planned for early 2011. Owing to pressure
on project costs and exchange rate fluctuations,
Anglo American plc Annual Report 2008
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BUSineSS Unit Overview cOntinUeD
Anglo Base Metals production*
Tonnes (thousand)
Copper
Zinc
Nickel
1,200
1,000
800
600
400
200
0
03
04
05
06
07
08
* Excludes copper and zinc production from
Hudson Bay
total capital expenditure for the project is
now estimated at between $1.6 billion and
$1.8 billion, of which $1.2 billion has been
spent and committed.
Construction progress on the $2.2 billion
to $2.5 billion Los Bronces expansion project
in Chile was in line with plan. Targeted
commissioning has, however, now been
pushed out by eight months to late 2011.
Cost pressures remain and will be managed
closely under the revised project schedule
and in the context of the changing global
economic environment.
At Collahuasi, further progress was made
on the 140,000 tonne per day concentrator
throughput debottlenecking project, which
has now been commissioned.
The revised feasibility study for the
Quellaveco project in Peru reached an advanced
stage of completion during the year. Resource
development, community projects, a technical
review and project optimisation work are
continuing. Also in Peru, the Michiquillay project,
acquired through a privatisation auction in
2007, received the social licences from both the
Michiquillay and La Encañada communities, and
will now proceed into the exploration phase.
Chagres, Mantoverde, Collahuasi and
Gamsberg all have early-stage studies under
way, examining options for projects that will
either increase production and/or extend
mine lives.
Outlook
In January 2009, Codelco, the Chilean mining
company, did not exercise its option to purchase
up to a 49% minority interest in Anglo American
Sur, the wholly owned Group company that
owns the Los Bronces and El Soldado copper
mines and the Chagres smelter. The window
for exercising the option is limited to once
every three years in the month of January
until January 2027. The next such window
is in January 2012.
Production of nickel, subject to operating
difficulties in Venezuela, and copper are
forecast to increase in 2009, with zinc and
phosphate production remaining at similar
levels to 2008. Operating margins are expected
to start to benefit from declining costs of
certain key inputs, such as fuel, energy, sulphur,
sulphuric acid, ammonia and explosives.
For all base metals, a period of price
weakness is anticipated due to the weak
outlook for global growth. Across the industry,
persistent supply side constraints in the case
of copper and, for nickel and zinc, the closure
of operations or deferral of projects, should
support a price recovery once signs of a
sustained improvement in demand start
to emerge.
copper cathodes in the solvent
extraction/electrowinning plant
at Mantos Blancos, chile
Anglo American plc Annual Report 2008
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Ferrous Metals
Operating profit
2008
$2,935 m
2007: $1,432 m
EBITDA
2008
$3,064 m
2007: $1,561 m
• Highest ever iron ore production
in 2008 of 37.4 Mtpa
• Anglo Ferrous Brazil and Kumba
expansions to lift Group iron ore
production to 150 Mtpa by 2017
North and
South America
amapá iron ore system and Minas-rio
iron ore project in Brazil and Scaw
Metals manufacturing in chile, Peru,
Mexico and canada
South Africa
Kumba iron Ore mines at
Sishen and thabazimbi.
Scaw Metals has various
manufacturing operations.
Samancor Manganese has
ore mines and alloy plants
Australia
Scaw Metals has
operations in australia
and Samancor
Manganese operates
an ore mine and an
alloy plant in tasmania
Business overview
Anglo Ferrous Metals’ primary business is
iron ore. It holds a 63% shareholding in
Kumba Iron Ore in South Africa, and in Brazil
an effective 99.4% interest in the Minas-Rio
iron ore project, a 49% interest in LLX
Minas-Rio, which owns the port of Açu
(currently under construction) from which iron
ore from the Minas-Rio project will be exported,
and an effective 69.2% interest in the Amapá
iron ore system. Other interests principally
comprise Samancor Manganese (manganese
ore and alloy mining) and Scaw Metals
(carbon steel iron ore products).
Johannesburg stock exchange (JSE)
listed Kumba currently operates two mines
in South Africa – Sishen in the Northern Cape,
which achieved output in 2008 of 34 million
tonnes per annum (Mtpa) inclusive of
4.7 Mtpa from the Sishen jig plant (Sishen
expansion), and Thabazimbi, in Limpopo,
which produced 2.7 Mtpa. In 2008, Kumba
exported more than 75% of its total iron ore
sales volumes, mostly to customers in Asia
and Europe.
Planned annual capacity of the Minas-Rio
iron ore project will be 26.5 Mtpa of iron ore
pellet feed, with start-up expected in the
second quarter of 2012 at an anticipated cost
of $3.6 billion. Amapá, located in Amapá state
in northern Brazil, produces both pellet feed
and sinter feed, with an annual capacity of
6.5 Mtpa. During the year it produced 1.2 Mt
as it continues to ramp up production to its
design capacity.
Anglo Ferrous Metals also holds a 40%
shareholding in Samancor Manganese, the
world’s largest integrated producer, by sales,
of manganese ore and alloys. BHP Billiton holds
60% and has management control. Samancor
has operations in South Africa and Australia
and is a vertically integrated manganese ore
and alloys producer.
Scaw Metals is a global group that
manufactures a diverse range of steel products.
With principal operations in southern Africa,
Chile, Peru, Canada and Mexico, it produces
rolled steel products, steel and iron castings,
cast alloy iron, forged steel grinding media
as well as steel chain, wire rope and strand
products. Scaw’s products serve the
construction, railway, power generation,
mining, cement, marine and offshore oil
industries worldwide. In June, Scaw Metals
acquired Ozz Industries (Proprietary) Limited
in South Africa. The acquisition will expand
Scaw’s product range and increase
manufacturing capacity of certain of Scaw’s
existing product lines.
Anglo Ferrous Metals has a 37.1%
voting interest in JSE-listed Tongaat-Hulett,
an agri-processing business which includes
integrated components of land management,
agriculture and property development.
Through its sugar and starch operations in
southern Africa, Tongaat-Hulett produces a
range of refined carbohydrate products from
sugar cane and maize. The company balances
the operational requirement for cane supplies
to its sugar operations with the transition to
property development.
Hulamin, in which Anglo Ferrous Metals
has a 38.4% voting interest, is Africa’s largest
producer of aluminium rolled, extruded and
other semi-fabricated and finished products,
with its main operations situated in
Pietermaritzburg, South Africa. As an
independent niche producer of technically
demanding and higher value products, Hulamin
supplies customers spread among all the major
aluminium consuming regions of the world.
industry overview
Steel is the most widely used of all metals.
In 2008, world crude steel production decreased
by 1.2% to reach a total of 1.33 billion tonnes.
Until mid-September, when global economic
conditions suddenly worsened, steel consumption
for the year had been set to grow materially.
However, for the first time since 2001, month
on month output declined in September and
carried on declining through the remainder of
the year and into 2009.
In response to declining demand, major
steel producers across the industry, led by
ArcelorMittal, announced and implemented
deep production cuts (>30% of capacity).
For the first time in a decade, the decline in
production has been synchronised across
the world, including Europe, Japan, North
America and China.
The seaborne iron ore market, which
is driven by the global steel industry, grew
from 454 Mtpa in 2000 to 768 Mtpa by the
end of 2008. This increase arose mainly from
Chinese demand growth. In the final quarter
of the year, however, demand declined by
13% year on year.
The global market for iron ore has seen
a change from supply shortage to demand
destruction in the period of a few months. This
is expected to result in softer contract iron ore
prices in 2009. In the medium term, however,
supply shortages could return, as juniors are
currently finding it hard to raise finance for
new capacity and majors scale back capital
Anglo American plc Annual Report 2008
46
Operating and financial review
BUSineSS Unit Overview cOntinUeD
World crude steel production
Tonnes (million)
5
4
3
,
1
0
3
3
,
1
1
5
2
,
1
7
4
1
,
1
9
6
0
,
0 1
7
9
1,400
1,200
1,000
800
600
400
200
0
03 04 05 06 07 08
Source: World Steel Association
Operating profit
$ (million)
5
3
9
,
2
6
5
4
,
1
2
3
4
,
1
0
6
3
,
1
3,000
2,000
1,000
0
05 06 07 08
Anglo Ferrous Metals
iron ore production*
Tonnes (million)
Thabazimbi
Sishen
36
30
24
18
12
6
0
03
04
05
06
07
08
* Excludes production from the Amapá iron
ore system which was acquired in 2008
Anglo American plc Annual Report 2008
expenditure on long dated expansion projects.
Logistical constraints associated with rail and
port capacity and shortages in dry bulk vessel
capacity at times, could compound the impact on
the supply side of the seaborne iron ore market.
In the longer term, Anglo American expects
that steel demand will revert back to trend
growth rates of around 4% globally; requiring
seaborne iron ore supply to grow by 5-6%.
As 96% of manganese ore is smelted
to produce manganese ferro-alloys (such as
ferromanganese and silicomanganese), the
performance of the manganese alloy industry is
the key determinant of ore demand. Manganese
alloy is used in steel alloying applications. As
with iron ore, 2008 was a mixed year, with
strong growth in the months up to August
and rapid demand decline for the remainder
of the year. Samancor’s response was to
curtail production in line with market demand.
Should steel production decline further
in 2009, manganese ore and alloy prices are
likely to remain under pressure. Lending support
to prices is the expectation of reducing exports
from China, as the government there continues
its efforts to curtail alloy production through
such measures as increased export tariffs.
Strategy and growth
The core strategy of the business is to grow
Anglo American’s position in iron ore and make
it the cornerstone of the Anglo Ferrous Metals
portfolio.
During the year, Anglo American increased
its effective interest in the Minas-Rio iron ore
project from 49% to 99.4% and also acquired
an effective interest of 69.2% in the Amapá
iron ore system. These additional shareholdings
were achieved through the acquisition of a
98.9% shareholding in Anglo Ferrous Brazil SA,
a company which holds a 51% interest in the
Minas-Rio iron ore project and a 70% in the
Amapá iron ore system. Anglo American also
owns a 49% interest in LLX Minas-Rio, the
owner of the port of Açu, which it acquired
during 2007.
Anglo Ferrous Brazil SA, in which Anglo
American acquired a 98.9% shareholding in
2008, holds a 51% interest in the Minas-Rio
iron ore project and a 70% in the Amapá iron
ore system.
Sishen’s jig plant made a 4.7 Mt contribution
to production during the period, having been
commissioned at the end of 2007. Ramp up
continues and full design capacity of 13 Mtpa
is expected to be achieved in the fourth quarter
of 2009.
The Sishen South project, which involves the
development of an opencast mine 80 kilometres
south of Sishen mine, was approved in July and
is expected to produce 9 Mtpa of iron ore. First
production is forecast for 2012.
Financial overview
Operating profit at Anglo Ferrous Metals
reached a record $2,935 million, with operating
profit from its core businesses increasing by
135% to $2,843 million, mainly due to higher
iron ore sales volumes and higher iron ore,
manganese ore and alloy prices.
Markets
World crude steel production decreased by
1.2% in 2008 to 1.33 billion tonnes. China’s
steel production grew by 2.6%, with its share
of global production rising to 37.8%. However,
as a result of the decline in steel demand in the
final quarter of 2008, demand for iron ore has
decreased significantly, resulting in reduced
production and delays to project capital spend
from major iron ore producers.
Similarly, the manganese ore and alloy
market was characterised by increasing
stocks and falling prices towards the end of
the year, as steel mills delayed or cancelled
their purchases. As a result, major suppliers
announced plans to reduce production in
the fourth quarter of 2008. A return to
production at full capacity will depend
on improved global economic conditions.
Operating performance
Kumba Iron Ore achieved a strong financial
and operational performance for the year,
with operating profit increasing by 94% to
$1,618 million, principally as a result of higher
export prices, higher export sales volumes and
increased revenue from shipping operations.
These improvements were offset marginally
by a 20% increase in net operating expenses,
mainly due to the shipping operations, rising
costs of fuels and lubricants and broad
inflationary pressures. Production increased
by 13% to 36.7 Mt, principally as a result of
the Sishen jig plant (Sishen expansion), which
achieved production of 4.7 Mt for the year.
Scaw Metals delivered a record operating
profit of $274 million, with strong demand for
most of its products. Margins remained under
pressure owing to significant price increases
in key raw materials and import competition
but were able to successfully pass this on to
its customers.
Anglo Ferrous Brazil comprises the Group’s
effective 99.4% interest in the Minas-Rio iron
ore project, effective 69.2% interest in the
Amapá iron ore system and the 49% interest
in LLX Minas-Rio.
The Amapá system in Brazil is at a
pre-operational phase while ramping up to
design capacity of 6.5 Mtpa. In 2008, the
ramp-up of operations was significantly
slower than previously envisaged, with annual
production totalling 1.2 Mt. Anglo American,
together with its partner at Amapá, Cliffs
Natural Resources Inc., is studying all aspects
of the mine and taking proactive steps to
ensure that production is ramped up to
design capacity.
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Samancor Manganese delivered record results
with operating profit of $980 million, more than
four times its $225 million contribution in 2007,
following a sharp increase in manganese ore
and alloy prices for most of 2008.
The Tongaat-Hulett and Hulamin contribution
to operating profit declined by 19% to $92 million.
Following the unbundling of Hulamin from
Tongaat-Hulett and related empowerment
transactions in June 2007, these businesses,
which were consolidated for the first six months
of 2007, were equity accounted in the second
half of 2007 and for the full 12 months of 2008.
Projects
Minas-Rio’s capital expenditure programme
fell behind schedule during 2008, mainly due
to the delay in obtaining several environmental
licences and permits that prevented the
initiation of works, particularly at the mine
and beneficiation plant. The project also
experienced delays in negotiations with groups
of landowners, thereby slowing the progress
on the pipeline, transmission line and the
access roads to the port. However, a number
of other key environmental licences were
granted during the year, including the
Installation Licences for the port and pipeline
and the Preliminary Licences for the
beneficiation plant and the mine.
The pace of construction at Minas-Rio is
driven by the timing of the Environmental Licence
and other permits, and therefore, there is
expected to be a 12 to 15 month commissioning
delay to the first phase of the Minas-Rio iron
ore project, with first production now expected
in the second quarter of 2012. Planned annual
capacity will be 26.5 Mtpa of iron ore pellet feed
at an anticipated cost of $3.6 billion, which is
currently being updated following the
announced delay.
Anglo American will continue to develop
the Minas-Rio iron ore project during 2009,
with planned capital expenditure for the
year focusing on the port and pipeline units.
The timing of the capital expenditure will
be further adjusted in accordance with the
granting of the Environmental Licence and
other permits. The pre-feasibility study for
the second phase of the Minas-Rio iron ore
project was initiated during 2008, a phase
which will further increase Anglo American’s
long term iron ore production capacity.
Sishen’s jig plant commenced commercial
production during the year, having been
commissioned at the end of 2007. Ramp-up
continues and full design capacity of 13 Mtpa
is expected to be achieved in the fourth quarter
of 2009.
The Sishen South project, which involves
the development of an opencast mine some
80 kilometres south of Sishen mine, was
approved in July 2008. Earthworks have
commenced and bulk construction is scheduled
to begin with the establishment of the major
civil contracts during the first quarter of 2009.
the new jig plant at Kumba iron Ore’s Sishen
mine in South africa’s northern cape. the
plant attained output of 4.7 million tonnes
of iron ore in 2008
The mine is scheduled to start production in the
first half of 2012, ramping up to full capacity
of 9 Mtpa in 2013.
The $183 million GEMCO expansion project
in Australia’s Northern Territory is expected
to be completed in the first half of 2009.
The project is on target to increase GEMCO’s
manganese ore production capacity from
3.0 million dry metric tonnes per annum
(mdmt pa) to 4.0 mdmt pa.
Outlook
The first half of 2009 is expected to be a
challenging period for sales volumes of iron
ore and manganese ore and alloys.
Kumba Iron Ore plans to increase iron
ore production by approximately 10% during
2009 as the ramp-up of the jig plant continues.
Kumba will continue to target customers in
China in order to redirect any lower contract
sales volumes in Europe or Japan. In the short
term, minor production cutbacks may be
appropriate to produce a higher quality product.
More substantial production cutbacks are
dependent on the scale of demand reductions
from Europe and Japan and the extent to which
these can be offset by demand from China.
Iron ore price negotiations are a key area of
uncertainty in the volatile economic conditions,
though Kumba’s high quality product range
and the strength of its longstanding customer
relationships are expected to enable the company
to continue its successful performance. Iron ore
market fundamentals remain robust in the
medium to long term.
The market for manganese ore and alloys
is dependent on the carbon steel industry
and is, therefore, directly impacted by the
current weak steel markets. Should global
steel production decline further during 2009,
manganese ore and alloy prices are expected
to remain under pressure.
Demand for Scaw Metals’ products is
expected to remain strong, driven by demand
from the mining and infrastructure sectors.
However, profitability is likely to remain under
pressure from increasing input costs.
$ million
(unless otherwise stated)
Operating profit
Kumba Iron Ore
Scaw Metals
Samancor Manganese
Anglo Ferrous Brazil
Other
2008
2007
2,935
1,432
1,618
274
980
(8)
(21)
834
172
225
(9)
(12)
Core businesses
2,843
1,210
Tongaat-Hulett/Hulamin
Highveld Steel
Other businesses
EBITDA
Net operating assets
Capital expenditure
(including biological assets)
Share of Group
operating profit
Share of Group
net operating assets
92
–
92
114
108
222
3,064
11,167
1,561
3,987
832
471
29%
15%
34%
15%
Anglo American plc Annual Report 2008
48
Operating and financial review
Coal
BUSineSS Unit Overview cOntinUeD
Operating profit
2008
$2,240 m
2007: $614 m
EBITDA
2008
$2,585 m
2007: $882 m
• Anglo Coal is one of the world’s
largest private sector coal producers
and exporters
• Anglo Coal is focused on expanding
from its existing strong position
• Coal is likely to remain an essential
part of the energy mix well into
the future
North and South America
South american presence through 33%
holding in cerrejón coal in colombia and
a 25% interest in carbones del Guasare
in venezuela. Peace river coal in canada
South Africa
Four mines in the
witbank coalfield
supply thermal
coal to export and
local markets. Five
additional mines
supply domestic
coal, of which four
supply eskom and
one supplies Sasol
Australia
Six mines, five supplying
export metallurgical
and thermal markets,
one supplying a local
power provider
Anglo American plc Annual Report 2008
Business overview
Anglo Coal is the world’s sixth largest private
sector coal producer and exporter, with
operations in South Africa, Australia, South
America and Canada.
In South Africa, Anglo Coal owns and
operates eight operations and has a 50%
interest in the Mafube colliery. Four operations
are in the Witbank coalfield and supply some
22 million tonnes per annum (Mtpa) of
thermal coals to the export and local markets.
In addition the New Vaal, New Denmark and
Kriel mines are dedicated to supplying some
35 Mtpa of thermal coal to Eskom. Anglo Coal’s
Isibonelo operation produces some 5 Mtpa
for Sasol Synthetic Fuels under a 20 year
supply contract.
The bulk of exports consist of thermal coal,
though a small volume of metallurgical coal is
also exported. Anglo Coal routes nearly all of
its export coal through the Richards Bay Coal
Terminal, in which it holds a 27% interest.
Anglo Coal is the fourth largest producer of
coal in Australia, with one wholly owned mine
and a controlling interest in another five, as
well as significant undeveloped coal reserves.
Its mines are located in Queensland and New
South Wales and produce some 28 Mtpa
attributable of metallurgical (13 Mtpa) and
thermal (15 Mtpa) coal, largely for the export
market. It also owns an effective 23% interest
in the Jellinbah mine in Queensland which
produces 1 Mtpa of metallurgical coal.
In South America, the company has a
33% shareholding in Cerrejón Coal, a 32 Mtpa
(10.4 Mtpa attributable) opencast operation in
Colombia which serves the export thermal coal
market, as well as a 25% interest in Carbones
del Guasare (CdG), which owns and operates
the Paso Diablo mine in northern Venezuela,
which produced about 5 Mtpa of thermal and
metallurgical (PCI) coal for the year.
Anglo Coal has a 74% interest in Peace
River Coal in Canada, which produced 0.8 Mtpa
of primarily metallurgical coal in 2008 from the
Trend Mine in British Columbia. New metallurgical
coal development projects are currently under
investigation at the adjacent Roman and Horizon
properties and further resource evaluation is
under way at several other properties held by
Peace River Coal.
Anglo Coal also has a 60% interest in the
Xiwan coal mine lease area in China, where
the feasibility of developing the mine is under
evaluation in conjunction with Anglo Coal’s
joint venture partner, the Shaanxi Coal
Geological Bureau.
In February 2007, Anglo Coal announced
the creation of Anglo Inyosi Coal, a newly
formed broad-based economic empowerment
(BEE) company valued at approximately
$1 billion. Anglo American own 73% of Anglo
Inyosi Coal, with the remaining 27% held by
Inyosi. The new company incorporates several
key Anglo Coal assets, namely the existing
Kriel colliery and the greenfield projects of
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World coal consumption*
Tonnes oil equivalent (million)
N America
S/C America
Europe/Eurasia
Middle East
Africa
China
Asia Pacific
(excl. China)
6
7
1
,
3
0
9
0
,
3
7
5
9
,
2
5
0
8
,
2
3
3
6
,
2
6
8
2
,
2
7
7
2
,
2
4
6
3
,
2
5
8
3
,
2
7
3
4
,
2
98 99 00 01 02 03 04 05 06 07
*Commercial solid fuels only
Source: BP Statistical Review of World Energy 2007
conveyor belt at
Dawson mine in
Queensland, australia.
the Dawson expansion
project, which was
completed in 2008,
was one of the largest
coal mining ventures
ever undertaken in
australia, with the
Dawson complex having
an annual capacity of
12.7 Mt of export coal
Elders, Zondagsfontein, New Largo and
Heidelberg. The transaction represents a major
milestone in meeting the BEE objectives set out
in South African legislation. The outstanding
conditions precedent to the transaction are
expected to be fulfilled in the first half of 2009,
following which the transaction will complete.
industry overview
Coal is the most abundant source of fossil fuel
energy in the world, considerably exceeding
known reserves of oil and gas. The bulk of coal
produced worldwide is thermal coal used for
power generation. Thermal coal is also supplied
as a fuel to other industries such as the cement
sector. Metallurgical coal is a key raw material
for 70% of the world’s steel industry.
Approximately 5.3 billion tonnes of hard
coal is produced globally each year, with the
majority used in the country of production.
A small volume is traded across land borders
such as those between the US and Canada or
between the former Soviet Union countries.
The international seaborne coal market
comprises some 0.7 billion tonnes, of which
some 0.5 billion tonnes are thermal coal and
0.2 billion tonnes are metallurgical coal.
Produced in a relatively limited number
of countries, metallurgical coal is primarily
used in the steelmaking industry and
includes hard coking coal, semi-soft coking
coal and pulverised coal injection (PCI) coal.
The chemical composition of the coal is
fundamental to the steel producers’ raw
material mix and product quality. The market
for this coal has a larger proportion of longer
term, annually priced contracts, though
increasingly, some steel companies are using
short term contracts to meet the balance of
their requirements. Demand in this sector is
fundamentally driven by economic, industrial
and steel demand growth. Price negotiations
between Australian suppliers and Japanese
steel producers generally, but not always, set
the trend that influences settlements throughout
the market. Anglo Coal is a significant supplier
to virtually all the major steel producing groups
in the world.
The thermal coal market is supplied by
a larger number of countries and producers
than the metallurgical coal market. Thermal
coal producers vary greatly in size and operate
in a highly competitive market.
Demand for thermal coal is driven by
demand for electricity and is also affected by
the availability and price of competing fuels
such as oil and gas, as well as nuclear power.
Driven by varying degrees of deregulation in
electricity markets, customers focus increasingly
on securing the lowest cost fuel supply at a
particular date. This has resulted in a move
away from longer term contracts towards a
mix of short term contracts, spot pricing, the
development of various price indices, hedging
and derivative instruments. The extent to
which the full range of pricing instruments is
used, however, varies from region to region.
Anglo Coal exports thermal coal from South
Africa, Australia, Canada and South America
to customers throughout the Med-Atlantic
and Indo-Pacific. The balance of Anglo Coal’s
production is sold domestically in Australia
and South Africa. In South Africa, a large
portion of domestic sales is made to the state-
owned power utility, Eskom, on long term (i.e.
life of mine) cost-plus contracts. Sales also take
place to domestic industrial sector consumers.
In Australia, domestic sales are predominantly
to power utilities under long and shorter term
contractual arrangements.
Anglo Coal production
Tonnes (million)
Thermal
Coking
100
80
60
40
20
0
03
04
05
06
07
08
Anglo American plc Annual Report 2008
50
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BUSineSS Unit Overview cOntinUeD
$ million
(unless otherwise stated)
Operating profit
South Africa
Australia
South America
Canada 8
Projects and corporate
EBITDA
Net operating assets
Capital expenditure
Share of Group
operating profit
Share of Group
net operating assets
2008
2,240
736
1,144 9
396
–
(44)
2,585
3,962
933
2007
614
414
227
(36)
882
3,984
1,052
22%
6%
12%
15%
Anglo American plc Annual Report 2008
Strategy and growth
Anglo Coal’s strategy is focused on serving
the power generation and steel making sectors
from large, low cost, and predominantly export
oriented coal basins. Anglo Coal delivers this
strategy through its diverse, high quality asset
portfolio in South Africa, Australia and the
Americas, and also aims to be a long term,
reliable supplier to its customers. It also aims
to be a leader in the industry in the pursuit of
cleaner coal solutions to the world’s energy
needs. Anglo Coal’s strategy is based on the
three pillars of operational excellence, growth
and securing the future.
Anglo Coal is focused on expanding
from its existing strong position in the export
metallurgical and export thermal coal markets,
while maintaining its leading position in the
South African domestic thermal market (where
it is a key supplier to Eskom). This strategy will
be delivered through its extensive portfolio of
greenfield and brownfield expansion projects,
supported by targeted acquisitions.
An example of this strategy in action
was the acquisition in December 2007 of
70% of the Foxleigh coal mine joint venture
in Queensland, Australia. This adds to Anglo
Coal’s existing coal mining operations in the
Bowen Basin, one of the world’s premier coking
coal supply regions. Foxleigh currently produces
in total 2.5 Mtpa of PCI coal for the steelmaking
industry (with production capacity for 3.3 Mtpa),
and adjoins Anglo Coal’s Capcoal (German Creek)
operations and the associated Lake Lindsay
mine development. The mine and surrounding
tenements will be the subject of ongoing
exploration and feasibility studies. In addition,
Anglo Coal has substantially completed a major
programme of investment which includes
the expansions at Cerrejón, Lake Lindsay
and Dawson and ongoing projects at Mafube
and Zondagsfontein.
Anglo Coal continues to pursue business
development opportunities in several major coal
producing regions. This includes interests in a
range of projects that offer potential exposure
to the broader energy markets, while building
on the business’ core capability in coal, namely
coal bed methane (CBM) exploration in South
Africa and Botswana, stranded coal reserves
at the Monash project in Australia, the Xiwan
coal-to-chemicals project in China, and the
FutureGen Industrial Alliance in the US. While
these projects remain at an early stage with
demanding economics, they do ensure that
Anglo Coal is equipped with a diverse resource
base to meet changing market demands over
the long term.
The impact of climate change is an area of
focus for the sector and Anglo Coal’s strategy
is to participate to help address the issue as
demand for energy continues to grow. Anglo
Coal is a leading member of numerous industry
bodies, such as the World Coal Institute (WCI)
and the Coal Industry Advisory Board (CIAB),
and is a founding member of the Global Carbon
Capture and Storage Institute (GCCSI), launched
in November 2008. Anglo Coal continues to
take steps at its own operations to reduce its
carbon footprint, including the capture of
methane from underground mining operations
that is converted into electricity at on-site or
neighbouring power stations.
While Anglo Coal continues to grow and
expand its operations in its existing geographies,
it is also continually evaluating potential
opportunities in new regions. In 2008, the
company spent $35 million on exploration
and new business development activities,
investigating thermal and coking coal and
CBM reserves and resources, mainly in southern
Africa, China, Australia and Canada. It has
conducted an advanced resource evaluation
of the Xiwan project in China and is examining
additional projects in South Africa, Canada
and Australia. Anglo Coal commenced
a CBM exploration programme in Botswana
in late 2008.
Financial overview
Anglo Coal delivered a record operating profit
of $2,240 million, a 265% increase over 2007,
with coal production totalling 99.5 Mt. This
resulted from higher metallurgical and thermal
coal prices, combined with increased coal
production for the year, weaker exchange rates
and the early benefits of tighter operational
discipline across the businesses, partially offset
by further rises in the cost of royalties, fuel,
rail, labour and most key consumables.
Markets
2008 began with a very tight international
metallurgical coal market, with supply falling
into deficit as a result of bad weather in
Queensland which had the effect of reducing
coal production and shipping volumes during
the first quarter. These events resulted in 2008
coal prices being settled at historically high
levels. By the end of the year, however, market
conditions had deteriorated significantly, with a
collapse in global steel production leaving the
metallurgical coal market oversupplied.
Demand for thermal coal remained strong in
2008, with increased consumption, particularly
in the north Asia region. Prices continued to
increase during the first half of the year, reaching
a peak in early July, driven by the cold winter in
China, together with numerous coal production
and logistics difficulties, including electricity
shortages in South Africa. The increase in crude
oil and natural gas prices during the same period
allowed thermal coal to maintain its price
competitiveness against these fuels despite
the significant coal price increases. In the last
quarter of the year, the global economic
downturn caused a sharp drop in oil prices
and thermal coal prices declined in line.
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Operating performance
South Africa
Operating profit from South African sourced
coal was 78% higher at $736 million, mainly
due to the increase in export thermal prices and
a weaker exchange rate. During January 2008,
South African operations were affected by
Eskom load shedding, which evolved into a
national electricity crisis. Despite this, annual
production remained constant at 59.4 Mt,
driven mainly by operational efficiency and
equipment improvements, higher output
at Kleinkopje, where additional coal for Eskom
was produced in order to alleviate the power
crisis, as well as at Mafube, which ramped
up production.
Australia
Operating profit from Australia was a record
$1,144 million, largely resulting from the
significant increase in metallurgical coal prices
and production, partly offset by cost and royalty
increases. Production reached record levels of
27.8 Mt despite the delays caused by abnormal
levels of rainfall in the first quarter. Such
production was achieved through implementing
higher cost volume initiatives to take advantage
of market conditions and the successful
negotiation of alternative port and rail corridors
in order to alleviate expansion constraints.
South America
Operating profit from South America was
74% higher than 2007 at $396 million, driven
primarily by 33.3% held Cerrejón in Colombia.
Cerrejón’s significantly increased operating
profit was offset by higher fuel prices, the
appreciation of the Colombian peso and an
increase in royalties arising from higher realised
sales prices. The mine’s total sales were 6%
higher at 31.5 Mt as growth continued as planned
towards the 32 Mtpa profile. In Venezuela, total
sales at Carbones del Guasare were sharply
lower at 4.6 Mt following a lack of availability
of equipment, spares and ongoing political,
logistical and labour disruptions.
Canada
Peace River Coal commenced commercial
production of high quality coking coal in
January 2008 at its Trend mine in British
Columbia, delivering $8 million of operating
profit in 2008. Total coal production for the
year was 0.8 Mt.
Projects
In South Africa, the $473 million Zondagsfontein
project is under construction and includes a
50:50 joint venture plant with BHP Billiton
Energy Coal South Africa. The project is on
track to deliver 6.6 Mtpa of export and Eskom
coal from 2010, with first production expected
in the second quarter of 2009. The Mafube
project achieved the production rate of 5.4 Mtpa
in 2008. Work continues on the housing project
and the conveyor system with completion
coal stockpile at
Mafube colliery, which
anglo coal South africa
holds 50:50 with a black
economic empowerment
consortium. During
2008, Mafube produced
5.4 million tonnes of
coal for the domestic and
export market
expected in early 2009. MacWest is nearly
complete, with first production achieved in July
2008 and full production of 2.7 Mtpa expected
in March 2009.
In Australia, the $726 million Lake Lindsay
coking coal project is progressing well; the
coal handling and preparation plant has been
commissioned, having achieved milestones
on or ahead of plan, while the dragline started
operations in January 2009. The $839 million
Dawson expansion project was completed
in 2008. The Foxleigh mine was acquired in
February 2008, delivering additional volumes
and synergies with Anglo American’s
adjacent operations.
In Canada, Peace River Coal is making
good progress on a $95 million capitalisation
programme to acquire and operate its own
mining equipment fleet.
In Colombia, the $42 million (attributable)
expansion at Cerrejón to 32 Mtpa is complete and
full production is expected to be achieved early
in 2009. Feasibility studies are under review to
expand the operation to around 40 Mtpa.
Outlook
Global economic weakness has led to a rapid
decline in global steel production following
falling demand from the construction and
automotive sectors in particular. This continues
to have a significant impact on the metallurgical
coal market. In the thermal coal market,
underlying demand remains relatively strong,
although the decline in the oil price is having
a significant impact.
The outlook for 2009 for both metallurgical
and thermal coal remains uncertain in a testing
macro-economic environment where global
energy prices are expected to be highly volatile.
In response to weakening markets,
Anglo Coal’s plans to grow metallurgical coal
production by 10% during 2009 were curtailed
and output is expected to be marginally below
2008 levels. Should conditions change
materially, Anglo Coal will respond with further
adjustments to its metallurgical coal production.
Anglo American plc Annual Report 2008
Tarmac’s ready-mixed concrete is
manufactured at production units located
close to its market and is composed of sand,
gravel, crushed rock, water, cement, cement
replacements and other components dependent
upon the performance required from the
resultant mix. Ready-mixed concrete is
transported to site in specialist truck mixers
designed to mix the material during transit.
Mortar and screeds consist of sand, cement
and various admixtures dependent on their
application and performance requirements.
Mortar is predominantly used for masonry
applications such as bricklaying and will often
contain lime to improve working properties.
Asphalt, which is manufactured by coating
graded, crushed rock with bitumen, is the main
product used for surfacing roads. Applied hot
or cold to road foundations, asphalt is either
supplied to site or collected by contractors
from strategically located plants.
Tarmac’s concrete products sector provides
the construction industry with a variety of
pre-fabricated products, including blocks for
walling, pre-stressed structural flooring and
engineered pre-cast elements.
Tarmac’s lime and cement, which employ
similar production processes, are added value
materials used widely within construction.
Lime is also an important product in the
environmental and industrial sectors.
The aggregates, asphalt, cement and
ready-mix markets in which Tarmac participate
are consolidated in the UK, with a small number
of large companies accounting for a large
percentage of the market. The main aggregates
players also compete in the more fragmented
concrete products market.
As a result of the rapid decline in credit
market liquidity, the industry faces a challenging
and uncertain environment as demand thins
against the backdrop of global slowdown.
Europe and the Middle East
aggregate and building products
businesses in the UK. international
business in ten countries across
europe and the Middle east
industry overview
Tarmac’s sand and gravel products are used
mostly in the production of ready-mixed
concrete, but are also used for fills and
drainage. Extracted from pits and dredged
from coastal waters, materials are washed
and graded prior to use.
Crushed rock is predominantly used for
road construction (where it is used both as
a foundation and, when heated and mixed
with bitumen, as a surfacing material), other
foundations, drainage, railway ballast and
concrete products. Crushed rock may also
be used in ready-mixed concrete.
vegetation thrives on formerly mined land at tarmac’s tunstead quarry in Derbyshire, england.
the quarry, which has an output of 5.5 Mt of limestone annually, is the largest producer of
high-purity industrial limestone in europe and the UK’s biggest producer of lime
52
Operating and financial review
Industrial Minerals
BUSineSS Unit Overview cOntinUeD
Operating profit
2008
$228 m
2007: $474 m
EBITDA
2008
$487 m
2007: $732 m
• Successful divestment of Tarmac Iberia
• Strong delivery on cost saving initiatives
• Cash generative despite challenging market
Business overview
Anglo Industrial Minerals’ sole business
is Tarmac, an international heavy building
materials producer. In the UK, it is a market
leader in aggregates, asphalt, mortar and
ready-mixed concrete and it has significant
operations in concrete products, lime and
cement. It has operations in continental Europe
and the Middle East, where it is principally
involved in the production of crushed rock,
sand and gravel, asphalt, ready-mixed
concrete and concrete products.
Tarmac’s UK organisation consists of
two business units, Aggregate Products and
Building Products, which are supported by a
shared-service centre based in central England.
Aggregate Products comprises aggregates,
asphalt, contracting, recycling and ready-mixed
concrete and has a widespread geographic
presence, enabling strong local customer
focus. Building Products is made up of those
businesses that have essentially national
markets, including cement, lime, mortar
and concrete products.
Tarmac’s international businesses operate
in ten countries in continental Europe and the
Middle East. It is a leading producer of hard rock,
sand and gravel and concrete products in its
Central European countries of operation. In
2008, the company sold its Spanish operations.
Anglo American plc Annual Report 2008
BUSineSS Unit Overview cOntinUeD
Strategy
Tarmac’s strategy is to maximise shareholder
value by exploiting its core competitive
reserves, while maintaining its strong market
positions in established territories. In January
2008, Tarmac increased to 100% its ownership
of United Marine Aggregates (UMA), a
significant UK marine-dredged aggregates
business. In August 2008, Tarmac disposed
of its 100% ownership of Tarmac Iberia.
Tarmac continues to focus on its core
business activities, pursue further cost
reductions in light of the weak market in the
short term and reduce capital expenditure
without harming its strong leadership position.
Within Tarmac as a whole, there remains
significant upside potential from operational
and commercial business improvements and
focused growth, with initiatives planned to
deliver that upside by 2010. Tarmac aims
to be the supplier of choice across its full
product range.
Financial overview
Tarmac’s operating profit fell by 52% to
$228 million compared with 2007, mainly
due to the impact of significant cost increases
as well as a decline in UK volumes of around
20% in the second half of the year. Tarmac
accelerated cost reductions and generated
operating savings of $101 million, while
maintaining its market share. As a result,
Tarmac continued to make a positive cash
flow contribution with net cash inflow from
operating activities of $398 million.
In the UK, operating profits fell by 65%
on a like for like basis, with sales falling in line
with the overall market. At Tarmac International,
operating profits (excluding the positive impact
of exchange rates and on a like for like basis)
were broadly in line with 2007, benefiting from
previous expansionary investment and relative
resilience in certain markets such as Poland.
Markets
The construction industry in the UK experienced
challenging market conditions during 2008,
particularly in the second half of the year with
the rapid deterioration in UK house-building
activity. The volatility of energy prices and the
impact on cement and distribution costs also
continued to affect the industry. Overall in
continental Europe, the decline in construction
activity has been less severe to date than in
the UK.
Operating performance
Volumes in the UK aggregates and concrete
products were 15-20% lower than the prior
year, with significantly reduced demand from
the housing and commercial sectors, while
asphalt volumes showed more resilience,
with similar volumes to 2007. Tarmac showed
declines in line with the market as it maintained
its leadership positions in key areas.
The significant decline in volumes from
UK Aggregate Products in the second half
prompted a portfolio right-sizing exercise.
45 operating sites have been mothballed
and further cost savings of $63 million
were achieved through an increased focus
on capacity and cost reduction. Underlying
operating profit for this business fell by 42%
compared with 2007 (after adjusting for the
UMA acquisition and the impact of exchange
rates). During 2008, the remaining 50% of
the UMA business was acquired from Hanson.
Within Tarmac, the UK Building Products
business was affected by the economic downturn
to the greatest extent and saw underlying
operating profits fall by 69% (before the impact
of exchange rates). Mothballing six operating
sites and further cost savings of $21 million
reduced the effect of weakening demand on
the business’s operating profit.
Tarmac International’s underlying operating
profit (on a like for like basis) was in line with
2007, with favourable market conditions in
Poland and cost savings of $17 million offsetting
emerging weakness in France. Tarmac Iberia
was sold in August 2008 to Holcim for
$186 million.
Following a structural review of the
Industrial Minerals business by management, as
a result of trading conditions in the construction
sector, restructuring and impairment charges
totalling $91 million have been recorded.
Outlook
The outlook in the short to medium term
is for continued demand weakness in UK and
international markets. Tarmac will continue to
take steps to adapt to market changes through
capacity reductions. Additional cost saving and
a continued focus on cash generation, while
maintaining existing market leadership, will
ensure that the business remains both resilient
and well positioned for the future.
53
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rubber chips from tyres that
cannot be retreaded or reused
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cement kiln at tunstead
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$ million
(unless otherwise stated)
Operating profit
EBITDA
Net operating assets
Capital expenditure
Share of Group
operating profit
Share of Group
net operating assets
2008
2007
228
487
3,335
301
474
732
4,509
274
2%
5%
10%
17%
Anglo American plc Annual Report 2008
54
Operating and financial review
Principal risks and uncertainties
Liquidity and counterparty risk
The Group is exposed to liquidity risk arising
from the need to finance its ongoing operations
and growth. If the Group is unable to obtain
sufficient credit due to banking and capital
market conditions, the Group may not be able
to raise sufficient funds to develop new
projects, fund acquisitions or meet the Group’s
ongoing financing needs and as a result
operating results, revenues, cash flows
or financial condition may be adversely
affected.
The Group is also exposed to counterparty
risk from customers or holders of cash that
could result in financial losses should those
counterparties become unable to meet their
obligations to the Group. Cash deposits and
other financial instruments, including trade
receivables due from third parties, give rise
to counterparty credit risk.
The Group has an experienced Treasury
operations team who are responsible for
managing the funding requirements of the
Group and managing liquidity risk. The Treasury
department also has a role to play in managing
counterparty risk, particularly with banks
where Anglo American places cash deposits.
The Treasury operations of our joint ventures and
associates, including De Beers, are independently
managed and may expose the Group to liquidity
and other financial risks.
Currency risk
Because of the global nature of its business,
the Group is exposed to currency risk where
transactions are not conducted in US dollars
or where assets and liabilities are not US dollar
denominated. Fluctuations in the exchange rates
of the most important currencies influencing
operating costs and asset valuations (the
South African rand, Chilean peso, Brazilian real,
Australian dollar, euro and pound sterling) may
adversely affect financial results to a material
extent. The Group’s foreign exchange hedging
is limited to debt instruments and capital
expenditure on major projects.
Inflation
As the Group is unable to control the market
price at which the commodities it produces are
sold (except for any forward sales or derivative
contracts), it is possible that significantly higher
future inflation in the countries in which Anglo
American operates may result in an increase
in future operational costs without a concurrent
depreciation of the local currency against the
dollar or an increase in the dollar price of the
applicable commodities. Cost inflation in the
mining sector is more apparent during periods
of high commodity prices as demand can exceed
supply. In addition, any lag in the reduction of
input costs against falls in commodity prices
will have a negative impact on profit margins
and financial results.
Sensitivity analysis in respect of currency and commodity prices
Set out below is the impact on underlying earnings of a 10% fluctuation
in some of the Group’s commodity prices and exchange rates:
Commodity currency
Average price/rate(1)
10% sensitivity US$ million(2)
Platinum
Palladium
Coal
Copper
Nickel
Zinc
Iron ore
ZAR/USD
AUD/USD
CLP/USD
GBP/USD
$1,585/oz(3)
$355/oz(3)
$120/t(4)
315 c/lb(5)(6)
953 c/lb(5)
85 c/lb(5)
$88/t(7)
8.27
1.17
524
0.54
144
22
349
275
50
45
88
279
110
45
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(1) ‘oz’ denotes ounces, ‘t’ denotes tonnes, ‘c’ denotes US cents, ‘lb’ denotes pounds.
(2) Excludes the effect of any hedging activities. Stated after tax at marginal rate. Sensitivities are the average of the positive and negative
and reflect the impact of a 10% change in the average prices received and exchange rates during 2008. Increases in commodity prices
increase underlying earnings and vice versa. A strengthening of the rand, pound sterling, Australian dollar and Chilean peso relative to
the US dollar reduces underlying earnings and vice versa.
(3) Source: Johnson Matthey.
(4) Average price represents RSA-API 4 index. Sensitivity reflects the impact of a 10% change in the average price across the entire
Anglo Coal product portfolio.
(5) Being the average LME price. Sensitivity reflects the impact of a 10% change in the average price received.
(6) Copper sensitivity excludes the impact of provisionally priced copper from 2007. At 31 December 2008 there were 145,066 tonnes
of provisionally priced copper sales, marked at 139 c/lb (2007: 140,137 tonnes, marked at 302 c/lb).
(7) Average price represents average iron ore export price achieved. Sensitivity reflects the impact of a 10% change in the average price
across lump and fine.
Understanding our key risks
and developing appropriate
responses to those risks is
crucial to anglo american’s
success
The Group is exposed to a variety of risks
and uncertainties which can have a financial
or reputational impact on the Group and which
may also impact the achievement of social,
economic and environmental objectives. These
risks include strategic, commercial, operational,
compliance and financial risks. The principal
risks and uncertainties facing the Group have
been categorised into headline risk areas.
The Group’s approach to risk management
is set out in the corporate governance section
on pages 64 to 68.
The key headline risks identified for
2009, potential impacts on the Group and the
mitigation strategies are summarised below:
Key headline risks
Commodity prices
Commodity prices are determined primarily
by international markets and global supply and
demand. Fluctuations in commodity prices give
rise to commodity price risk across the Group.
Historically, such prices have been subject to
substantial variation and in 2008 there was a
very significant reduction in commodity prices,
particularly during the second half of the year.
The impact of such volatility can result in
material and adverse movement in the Group’s
operating results, asset values, revenues and
cash flows. If the global economic environment
remains weak for the medium to long term, the
ability of the Group to deliver growth in future
years may be adversely affected.
Other potential consequences of a
sustained reduction in commodity prices
include the inability to complete black
economic empowerment (BEE) transactions
in South Africa as BEE partners may not be
able to finance their investments or require
a restructuring of their investments.
Due to the diversified nature of the Group,
the general policy is not to engage in commodity
price hedging. The Group manages this risk
through constant monitoring of the markets in
which it operates and continuous review of
capital expenditure programmes to ensure they
reflect market conditions. A continuous focus
on operating expenditure is also an important
method of mitigating this risk.
Anglo American plc Annual Report 2008
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The Group monitors costs very closely
and the introduction of initiatives such as
Asset Optimisation and ‘One Anglo’ Supply
Chain are designed to minimise costs.
Safety, health and the environment
Mining is a hazardous industry and is highly
regulated by safety, health and environmental
laws. Failure to provide a safe working
environment may result in government authorities
forcing closure of mines on a temporary or
permanent basis or refusing mining right
applications. The failure to achieve the required
high levels of safety management can result
in harm to the Group’s employees and the
communities near the mines, harm to the
environment, fines and penalties, liability
to employees and third parties for injury,
impairment of the Group’s reputation, industrial
action or inability to recruit and retain skilled
employees. Changes in laws, regulations or
community expectations can result in increased
compliance and remediation costs.
The Group recognises that the HIV/AIDs
epidemic in sub-Saharan Africa is a significant
threat to economic growth and development in
that region. There is a risk that the recruitment
and retention of skilled people is not possible
as planned to meet growth aspirations. Anglo
American provides anti-retroviral therapy to
employees with HIV/AIDS and also undertakes
education and awareness programmes to help
prevent employees and their families becoming
infected or spreading infection.
Other health risks to employees include
noise induced hearing loss, occupational lung
diseases and tuberculosis. The Group provides
occupational health services to employees and
continues to implement measures to limit the
incidence and severity of such diseases.
Anglo American is a large user of energy
and one of the key commodities it produces
is coal. Various regulatory measures aimed
at reducing greenhouse gas emissions and
improving energy efficiency may affect
Anglo American’s operations and customer
demand for products over time. Assessments
of the potential future impact of climate
change regulation are uncertain, particularly
if inconsistent regulations are adopted in the
various geographies in which Anglo American
operates.
Anglo American sets a very high priority
on safety, health and the environment and
invests considerable resources in seeking
to improve the safety performance of the
Group’s operations, as well as in research
and development to minimise impact on the
environment and improve energy efficiency.
The Group is constantly reviewing practices
to improve safety performance and works
closely with unions and governments,
striving to produce a safer mining industry.
Political, legal and regulatory
The Group’s businesses may be affected by
political or regulatory developments in any
of the countries and jurisdictions in which
the Group operates, including changes to
fiscal regimes or other regulatory regimes
which may result in restrictions on the export
of currency, expropriation of assets, imposition
of royalties and requirements for local
ownership or beneficiation. Political instability
can also result in civil unrest, nullification of
existing agreements or mining leases and
permits. Any of these threats may adversely
affect the Group’s operations or the results
of those operations. The Group has no control
over changes in local market interest rates
or political acts which may deprive the Group
of the economic benefits of ownership of
its assets.
In January 2008, Minera Loma de Níquel
(MLdN) was notified of the intention of the
Venezuelan Ministry of Basic Industries and
Mining (MIBAM) to cancel 13 of its exploration
and exploitation concessions due to MLdN’s
alleged failure to fulfil certain conditions of
the concessions. Further details are provided
in the Base Metals overview section.
The Group actively monitors regulatory and
political developments on a continuous basis.
Supplier risk
The inability to obtain, in a timely manner,
strategic consumables, raw materials, mining
and processing equipment could have an
adverse impact on results of operations and
the Group’s financial condition. The strong
commodity cycle witnessed in recent years
increased demand for such supplies, resulting
in periods when supplies were not always
available to meet demand when required
or cost increases above normal inflation rates
materialised. Any interruption to the Group’s
supplies or increase in costs adversely affects
the Group’s financial position and future
performance. Anglo American has limited
influence over manufacturers and suppliers
but takes a proactive approach to developing
relationships with critical suppliers and
improving the effectiveness of the Group’s
purchasing leverage through the ‘One Anglo’
Supply Chain initiative.
Contractors
Mining contractors are used at a number of the
Group’s operations to mine and deliver ore to
processing plants, for example. In periods of
high commodity prices, demand for contractors
may exceed supply resulting in increased costs
or lack of availability of key contractors.
Disruption of operations or increased costs
can occur should there be disputes with
contractors or unavailability of certain skills.
Reserves and resources
The Group’s mineral resources and ore
reserves are subject to a number of assumptions,
including the price of commodities, production
costs and recovery rates. Fluctuations in these
variables may have an impact on the long term
financial condition and prospects of the Group.
The Group’s policy on reporting of ore
reserves and mineral resources is expanded
on pages 136 to 161.
Exploration
Exploration and development are speculative
activities with no guarantee of success, but
they are necessary for future growth. Failure to
discover new reserves of sufficient magnitude
could adversely affect future results and the
Group’s financial condition.
Anglo American invests considerable sums
each year through its Exploration division in
resource discovery and development to reserves.
Event risk
Damage to or breakdown of a physical asset,
including risk of fire, explosion or natural
catastrophe, can result in a loss of assets
and subsequent financial losses. The Group’s
operations are exposed to natural risks such
as earthquake, extreme weather conditions,
failure of mining pit slopes and tailing dam
walls, fires and explosion.
Specialist consultants are engaged to
analyse such event risks on a rotational basis
and provide recommendations for management
action to prevent or limit the effects of such a
loss. In addition, the Group seeks to purchase
insurance to protect against the financial
consequences of catastrophic event, subject
to the availability and cost of such insurance.
Employees
The ability to recruit, develop and retain
appropriate skills for the Group is made
difficult by global competition for skilled labour
particularly in periods of high commodity prices.
The failure to retain skilled employees or to
recruit new staff may lead to increased costs,
interruptions to existing operations and delay
in new projects.
A number of strategies are implemented
to mitigate this risk including attention to an
appropriate suite of reward and benefit structures
and ongoing refinement of Anglo American
as an attractive employee proposition.
Employees in the key countries where
Anglo American operates are unionised and
the risk of strike or other industrial relations
disputes may have an adverse affect on the
results of operations. Anglo American mitigates
this risk through a process of constructive
dialogue with trade unions and the maintenance
of effective working relationships.
Anglo American plc Annual Report 2008
56
Operating and financial review
Principal risks and uncertainties continued
Operational performance and project
delivery
Failure to meet production targets can result
in increased unit costs, which are pronounced
at operations with higher levels of fixed costs.
Unit costs may exceed forecasts, adversely
affecting performance and the results of
operations.
Failure to meet project delivery times
and costs could have a negative effect on
operational performance and lead to increased
costs or reductions in revenue and profitability.
Increasing regulatory, environmental and
social approvals can result in significant increases
in construction costs and/or significant delays
in construction. These increases could materially
and adversely affect the economics of a project,
the Group’s asset values, costs, revenues,
earnings and cash flows.
A number of strategies have been
implemented to mitigate these risks including
management oversight of operating performance
and project delivery through regular executive
management briefings, increased effectiveness
of procurement activities and business
improvement initiatives to reduce unit costs
and improve delivery of capital projects.
Acquisitions
The Group has undertaken a number of
acquisitions in the recent past, including the
Minas-Rio project in Brazil. With any such
transaction there is the risk that any benefits
or synergies identified at the time of acquisition
may not be achieved as a result of changing
or incorrect assumptions or materially different
market conditions, resulting in adverse affects
on financial performance, production volumes
or product quality. Furthermore, the Group
could find itself liable for past acts or omissions
of the acquired business without any adequate
right of redress.
Rigorous guidelines are applied to the
evaluation and execution of all acquisitions
that require the approval of the Investment
Committee and, subject to size, the Board.
Infrastructure
Inadequate supporting facilities, services and
installations (water, power, transportation,
etc.) may affect the sustainability and growth
of the business, leading to a loss of
competitiveness, market share and reputation
of the Group. The ongoing power generation
situation in South Africa, which escalated during
the early part of 2008, is a good example of
this risk but this is not the only country where
reliable supply of power is a key issue. Anglo
American’s approach to addressing this risk is to
work jointly on developing sustainable solutions
to these problems with suppliers of
infrastructure services and facilities.
Anglo American plc Annual Report 2008
Community relations
The Group operates in several countries
where ownership of rights in respect of land
and resources is uncertain and where disputes
in relation to ownership or other community
matters may arise. These disputes are not
always predictable and may cause disruption
to projects or operations. The Group’s
operations can have an impact on local
communities, including the need, from time to
time, to relocate communities or infrastructure
networks such as railways and utility services.
Failure to manage relationships with local
communities, government and non-government
organisations may adversely affect the Group’s
reputation as well as its ability to bring projects
into production.
The Group has developed a process to
enable its business units to effectively manage
relationships with communities and actively
seeks engagement with all affected communities
impacted by the Group’s operations.
Joint venture relationships
Some of the Group’s operations are controlled
and managed by joint venture partners,
associates or by other companies. Management
of non-controlled assets may not comply with
the Group’s standards, for example, on safety,
health and environment. This may lead to higher
costs, lower production and have a negative
bearing on operational results, asset values
or the Group’s reputation.
Anglo American seeks to mitigate this
risk by way of a thorough evaluation process
before committing to any joint venture and
implementation of ongoing governance
processes in existing joint ventures.
Critical accounting judgements and key
sources of estimation and uncertainty
In the course of preparing financial statements,
management necessarily makes judgements
and estimates that can have a significant
impact on the financial statements. The most
critical of these relate to estimation of the
useful economic life of assets and ore reserves,
impairment of assets, restoration, rehabilitation
and environmental costs and retirement
benefits. These are detailed below. The use of
inaccurate assumptions in calculations for any
of these estimates could result in a significant
impact on financial results.
Useful economic lives of assets and ore
reserves estimates
The Group’s mining properties, classified
within tangible assets, are depreciated over
the respective life of the mine using the unit
of production (UOP) method based on proven
and probable reserves. When determining ore
reserves, assumptions that were valid at the
time of estimation may change when new
information becomes available. Any changes
could affect prospective depreciation rates
and asset carrying values.
The calculation of the UOP rate of
amortisation could be impacted to the extent
that actual production in the future is different
from current forecast production based on
proven and probable mineral reserves.
Factors which could impact useful economic
lives of assets and ore reserve estimates
include:
• changes to proven and probable mineral
reserves;
• the grade of mineral reserves varying
significantly from time to time;
• differences between actual commodity
prices and commodity price assumptions
used in the estimation of mineral reserves;
• renewal of mining licences;
• unforeseen operational issues at mine
sites; and
• adverse changes in capital, operating,
mining, processing and reclamation costs,
discount rates and foreign exchange rates
used to determine mineral reserves.
The majority of other tangible assets are
depreciated on a straight line basis over their
useful economic lives. Management reviews
the appropriateness of assets’ useful economic
lives at least annually and any changes could
affect prospective depreciation rates and asset
carrying values.
Impairment of assets
The Group reviews the carrying amounts of
its tangible and intangible assets to determine
whether there is any indication that those
assets are impaired. In making the assessment
for impairment, assets that do not generate
independent cash flows are allocated to an
appropriate cash generating unit (CGU).
The recoverable amount of an asset, or
CGU, is measured as the higher of fair
value less costs to sell and value in use.
Management necessarily applies its
judgement in allocating assets that do not
generate independent cash flows to appropriate
CGUs, and also in estimating the timing and
value of underlying cash flows within the
value in use calculation. Subsequent changes
to the CGU allocation or to the timing of or
assumptions used to determine cash flows
could impact the carrying value of the
respective assets.
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Restoration, rehabilitation
and environmental costs
Provision is made, based on net present
values, for restoration, rehabilitation and
environmental costs as soon as the obligation
arises. Costs incurred at the start of each
project are capitalised and charged to the
income statement over the life of the project
through depreciation of the asset and the
unwinding of the discount on the provision.
Costs for restoration of subsequent site
damage are provided at net present value
and charged against profits as extraction
progresses. Environmental costs are estimated
using either the work of external consultants
or internal experts. Management uses its
judgement and experience to provide for and
amortise these estimated costs over the life
of the mine.
Retirement benefits
The expected costs of providing pensions and
post retirement benefits under defined benefit
arrangements relating to employee service
during the period are charged to the income
statement. Any actuarial gains and losses,
which can arise from differences between
expected and actual outcomes or changes
in actuarial assumptions, are recognised
immediately in the Consolidated Statement
of Recognised Income and Expense.
Assumptions in respect of the expected
costs are set after consultation with qualified
actuaries. While management believes the
assumptions used are appropriate, a change
in the assumptions used would impact the
earnings of the Group going forward.
Special items
Operating special items are those that
management considers, by virtue of their
size or incidence, should be disclosed
separately to ensure that the financial
information also allows an understanding of
the underlying performance of the business.
The determination as to which items should
be disclosed separately requires a degree
of judgement.
Basis of disclosure
This operating and financial review (OFR)
describes the main trends and factors underlying
the development, performance and position of
Anglo American plc (the Group) during the year
ended 31 December 2008, as well as those likely
to affect the future development, performance
and position. It has been prepared in line with the
guidance provided in the reporting statement on
the operating and financial review issued by the
UK Accounting Standards Board in January 2006.
Forward looking statements
This OFR contains certain forward looking
statements with respect to the financial condition,
results, operations and businesses of the Group.
These statements and forecasts involve risk and
uncertainty because they relate to events and
depend on circumstances that occur in the future.
There are a number of factors that could cause
actual results or developments to differ materially
from those expressed or implied by these forward
looking statements.
Anglo American plc Annual Report 2008
58
Governance
The Board
Left to right:
Sir Mark Moody-Stuart, Cynthia Carroll, René Médori,
Sir C K Chow, David Challen, Sir Rob Margetts
1. Sir Mark Moody-Stuart KCMG N
PhD, MA, FGS
68, was appointed a non-executive director
on 16 July 2002 and non-executive chairman
on 1 December 2002. He also sits on the
Remuneration, Safety and Sustainable
Development (S&SD) and Nomination
Committees. Sir Mark is a director of HSBC
Holdings plc, Accenture Ltd and Saudi Aramco.
Sir Mark was chairman of The Shell Transport
and Trading Company plc from 1997 to 2001
and chairman of the Committee of Managing
Directors of the Royal Dutch/Shell Group from
1998-2001. He is a member of the board of the
UN Global Compact and chairman of the Global
Compact Foundation. Sir Mark is being proposed
for re-election at the AGM on 15 April 2009.
2. Cynthia Carroll E
MSc, MBA
52, was appointed chief executive on 1 March
2007, having joined the Board on 15 January
2007. Cynthia Carroll chairs the Executive
Committee (ExCo) and sits on the S&SD
Committee. She is the former president and
chief executive officer of Alcan’s Primary
Metals Group and a former director of
AngloGold Ashanti Limited and the Sara Lee
Corporation. She is a non-executive director
of BP plc, Anglo Platinum Limited and De Beers.
E – Executive director
N – Non-executive director
Anglo American plc Annual Report 2008
3. René Médori E
Doctorate in Economics
51, was appointed to the Board on 1 June 2005,
becoming finance director on 1 September 2005.
René Médori is a member of ExCo and chairman
of the Investment Committee. He is a former
finance director of The BOC Group plc and is a
non-executive director of Scottish and Southern
Energy plc, De Beers, DB Investments and
Anglo Platinum Limited.
4. Sir C K Chow N
DEng (Hon), CEng, FREng, HonFHKIE,
FIChemE
58, was appointed to the Board on 15 April
2008. He is currently chief executive officer
of the MTR Corporation, a position he has held
since December 2003. He was formerly chief
executive of Brambles Industries and GKN.
Prior to joining GKN he worked for the BOC
Group for 20 years, becoming chief executive
of its Gases Division and joining its board in
1993. He is the non-executive chairman of
Standard Chartered Bank (Hong Kong) Limited.
5. David Challen CBE N
MA, MBA
65, joined the Board on 9 September 2002
and was appointed as the senior independent
non-executive director in April 2008. He is
chairman of the Audit Committee and a
member of the Remuneration Committee. David
Challen is currently vice chairman of Citigroup
European Investment Bank and a non-executive
director of Smiths Group plc and the Classical
Opera Company. Previously he was chairman
of J. Henry Schroder & Co. Limited, where he
spent most of his professional career. He is
currently deputy chairman of the UK’s Takeover
Panel. Mr Challen is being proposed for
re-election at the AGM on 15 April 2009.
6. Sir Rob Margetts CBE N
BA, FREng
62, joined the Board on 18 March 1999.
He is chairman of the Remuneration Committee
and a member of the Nomination Committee.
He is chairman of Legal & General Group Plc,
Ensus Limited, Ordnance Survey and the Energy
Technologies Institute. He is also a director of
Falck Renewables and Neochimiki SA. He was
formerly chairman of The BOC Group plc and
vice chairman of ICI PLC. Sir Rob was also
chairman of the UK Natural Environment
Research Council and a member of the UK
Council for Science and Technology. In
accordance with the provisions of the Combined
Code, directors who have served longer than
nine years are subject to annual re-election
and, accordingly, Sir Rob is being proposed for
re-election at the AGM on 15 April 2009.
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Left to right:
Professor Karel Van Miert, Nicky Oppenheimer, Fred Phaswana,
Dr Chris Fay, Dr Mamphela Ramphele, Peter Woicke
7. Professor Karel Van Miert N
Graduate in Diplomatic Sciences
67, joined the Board on 19 March 2002.
He is a member of the Audit and Nomination
Committees. He is currently a member of the
supervisory boards of German utility RWE,
Philips NV, Munich Re and Vivendi Universal.
He is also a member of the advisory boards of
Goldman Sachs and Eli Lilly and a member of
the boards of Solvay s.a. and Agfa-Gevaert.
He was previously President of Nyenrode
University, Netherlands Business School,
a member of the European Parliament from
1979 to 1985 and a member of the European
Commission from 1989 to 1999.
8. Nicky Oppenheimer N
MA
63, joined the Board on 18 March 1999.
He is a member of the Nomination Committee.
Nicky Oppenheimer joined the Group in 1968
and subsequently became an executive director
and a deputy chairman of Anglo American
South Africa Limited. He became deputy
chairman of De Beers Consolidated in 1985
and has been chairman of De Beers since 1998.
9. Fred Phaswana N
MA, BCom
64, joined the Board on 12 June 2002. He is
chairman of the Nomination Committee and
a member of the Audit Committee. Fred
Phaswana is currently chairman of Anglo
Platinum and Transnet Limited and a director
of Naspers and was previously BP regional
president: Africa, a director of BP Oil (Benelux),
an associate president of BP Netherlands and
chairman and chief executive of BP Southern
Africa. He is also a member of the South
African Institute of International Affairs.
Mr Phaswana is being proposed for re-election
at the AGM on 15 April 2009.
10. Dr Chris Fay CBE N
BSc, PhD, FREng, FRSE, FICE, FEI
63, joined the Board on 19 April 1999.
He is chairman of the S&SD Committee and
a member of the Remuneration and Audit
Committees. He is a non-executive chairman
of Brightside Group plc, Iofina plc and Stena
International S.àr.l. He is a former non-
executive director of BAA plc and a former
chairman of Shell UK and of the British
government’s Advisory Committee on Business
and the Environment. In accordance with the
provisions of the Combined Code, directors who
have served longer than nine years are subject
to annual re-election and, accordingly, Dr Fay
is being proposed for re-election at the AGM
on 15 April 2009.
11. Dr Mamphela Ramphele N
PhD, BComm
61, joined the Board on 25 April 2006.
She is a member of the Nomination and S&SD
Committees. Dr Ramphele is the chair of Circle
Capital Ventures, a black empowerment
company, a non-executive director of the
Mediclinic and Business Partners S.A. and a
trustee of the Nelson Mandela and Rockefeller
Foundations, and an adviser to the Veolia
Institute. She was formerly co-chair of the
Global Commission on International Migration,
a World Bank managing director and vice-
chancellor at the University of Cape Town.
Dr Ramphele is being proposed for re-election
at the AGM on 15 April 2009.
12. Peter Woicke N
MBA
66, joined the Board on 1 January 2006
and is a member of the Audit, Nomination
and S&SD Committees. From 1999 to January
2005 he was chief executive officer of the
International Finance Corporation. He was also
a managing director of the World Bank. Prior to
joining the International Finance Corporation,
Peter Woicke held numerous positions over
nearly 30 years with J.P. Morgan. He is
currently chairman of the International Save
the Children Alliance, a member of the Saudi
Aramco board and was previously a member
of the Plugpower Inc, Raiffeisen International
Holding and MTN Group boards. Mr Woicke is
being proposed for re-election at the AGM on
15 April 2009.
Anglo American plc Annual Report 2008
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Governance
Executive Committee
The executive committee is responsible for implementing
the strategies and policies determined by the Board,
managing the business and affairs of the company,
prioritising the allocation of capital and reviewing
operational and safety procedures throughout the Group.
1
8
2
4
9
3
5
10
6
7
1. cynthia carroll
See page 58 for biographical
details.
2. rené Médori
See page 58 for biographical
details.
3. Russell King
BA Hons
51, has held a variety of business
and functional responsibilities in
the UK and Australia with ICI PLC.
From 1997 to 2000 he was
managing director of Orica
Consumer Products. He joined
Anglo American in July 2001 as
executive vice president, Group
human resources and business
development, and became chief
strategy officer in April 2008. He
is also a non-executive director of
Aggreko plc.
4. Philip Baum
BCom, LLB, Higher Dip Tax Law
54, is chief executive of Anglo
Ferrous Metals. He joined the
Group in 1979 and has held a
variety of positions including CEO
Anglo American Zimbabwe from
1996 to 2001, acting CEO of
Anglo American South Africa from
2006 to 2008 and first head of
what is now Anglo Zimele. He is
a director of Kumba Iron Ore,
Anglo Ferrous Brazil, Samancor
Manganese, Exxaro,
Tongaat-Hulett and Hulamin.
5. Ian Cockerill
BSc (Geology) MSc (Mining)
54, is chief executive of Anglo
Coal. From 1996 to 1999 Ian
was executive officer, business
development for AngloGold. In
1999, he was appointed managing
director of Gold Fields Limited and
in 2002, CEO of that company,
until April 2008 when he joined
Anglo Coal as chief executive.
6. Kuseni D Dlamini
Bachelor of Social Science
(Honours), MPhil
41, is head of Anglo American
South Africa. From December
2005 to June 2008 he was
executive chairman of Richards
Bay Coal Terminal Company
Limited. Kuseni previously held
a number of senior management
positions at the operations in
South Africa and the London
offices of De Beers Consolidated
Mines Limited, and at AngloGold
Ashanti’s corporate office in
Johannesburg.
7. Brian Beamish
BSc (Mechanical Engineering)
52, is chief executive of
Anglo Base Metals. From 1995 to
1999 he was executive director,
operations at Anglo Platinum. He
transferred to Anglo Base Metals
in January 2000 and was chief
operating officer from April 2005
until April 2007 when he became
chief executive.
8. Mervyn Walker
MA
49, is Group head of human
resources. A solicitor by
profession, he joined Anglo
American in September 2008
from the Mondi Group, where
he was Group human resources
and legal director. He had
previously spent 19 years with
British Airways, holding a variety
of senior positions, including
director for people. He is
non-executive chairman of
AMEC plc’s pension schemes.
Anglo American plc Annual Report 2008
9. David Weston
MBA, BSc (Eng)
50, is chief executive of Anglo
Industrial Minerals. He spent
25 years with Shell and was
president, Shell Canada Products,
before joining the Anglo American
Group in 2006.
10. Neville Nicolau
BTech (Mining Engineering), MBA
49, appointed chief executive of
Anglo Platinum in June 2008. He
joined the Group in January 1979,
working in the Gold and Uranium
Division at different managerial
levels in all the major operating
areas in South Africa. In 2000
and 2001 he was the technical
director of AngloGold’s South
American operations, based in
Brazil. He became chief operating
officer (Africa) of AngloGold
Ashanti in May 2004.
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Directors’ report
The directors have pleasure in submitting the
statutory financial statements of the Group for
the year ended 31 December 2008.
Principal activities
and business review
Anglo American plc is one of the world’s largest
mining and natural resource groups. With its
subsidiaries, joint ventures and associates, it
is a global leader in platinum group metals and
diamonds, with significant interests in coal,
base and ferrous metals, as well as an
industrial minerals business and a stake in
AngloGold Ashanti. The Group is geographically
diverse with operations in Africa, Europe,
South and North America, Australia and Asia.
More detailed information about the Group’s
businesses, activities and financial performance
is incorporated into this report by reference and
can be found in the Chairman’s and Chief
executive’s statements on pages 2 to 6 and the
Operating and financial review on pages 10
to 57.
Going concern
The financial position of the Group, its
cash flows, liquidity position and borrowing
facilities are set out in the Group financial
performance review of Group results on pages
28 to 31. In addition, detail is given on the
Group’s policy on managing credit and liquidity
risk in the Principal risks and uncertainties
section on pages 54 to 57, with details of our
policy on capital risk management being set
out in note 24 to the financial statements.
The Group’s gross debt at the 2008 year end
was $14.0 billion. The gearing level was
37.8%. Details of borrowings and facilities
are set out in notes 23 and 24 and net debt
is set out in note 30.
Over the last 12 months, Anglo American
has issued medium and long term debt in the
euro and sterling bond markets, in addition to
arranging new bank financing in both Europe
and South Africa. At 31 December 2008,
Anglo American had undrawn bank facilities of
$6.1 billion, cash deposits of $2.7 billion and
commercial paper maturing throughout 2009
of $1.1 billion. Anglo American’s only significant
debt facility maturing in the next year is a
$3 billion revolving bank facility (of which
$1.1 billion was drawn at 31 December 2008)
which matures in December 2009. In addition,
a £300 million (approximately $500 million)
euro bond matures in December 2010. With
respect to the $3 billion facility, the intention
is to refinance part or all of the facility, subject
to requirements, taking into consideration
proceeds from disposal of assets and cash flow
from operations, using a variety of sources
which may include the issue of public bonds
in the European and US markets and new
bank facilities.
The directors have considered the Group’s
cash flow forecasts for the period to the end
of March 2010. The Board is satisfied that
the Group’s forecasts and projections, taking
account of reasonably possible changes
in trading performance and the intended
refinancing of the facility above, show that the
Group will be able to operate within the level of
its current facilities for the foreseeable future.
For this reason the Group continues to adopt
the going concern basis (as interpreted by the
Guidance on Going Concern and Financial
Reporting for directors of listed companies
registered in the UK, published in November
1994) in preparing its financial statements.
Dividends
An interim dividend of 44 US cents per
ordinary share was paid on 18 September
2008. With no final dividend for the year,
the total dividend for the year will therefore
be 44 US cents per ordinary share.
Two shareholders have waived their rights
to receive dividends. In both cases, these
shareholders act as trustees/nominees
holding shares for use solely in relation to
the Group’s employee share plans. These
shareholders and the value of dividends waived
during the year were:
Greenwood Nominees Limited: $9,443,818.26
Security Nominees Limited: $35,357.26
Share capital
The Company’s authorised and issued share
capital as at 31 December 2008, together with
details of share allotments and purchases of
own shares during the year, is set out in
note 28 on pages 115 to 121.
The Company was authorised by
shareholders at the AGM held on 15 April 2008
to purchase its own shares in the market up
to a maximum of 14.99% of the issued share
capital. This authority will expire at the 2009
AGM and in accordance with usual practice
a resolution to renew it for another year will
be proposed.
Material shareholdings
Details of interests of 3% or more in the
ordinary share capital of the Company are
shown within the Shareholder information
section of the Notice of Meeting booklet.
Directors
Biographical details of the directors currently
serving on the Board are given on pages 58 and
59. Details of directors’ interests in shares and
share options of the Company can be found
in the Remuneration report on pages 69 to 78.
Sir CK Chow was appointed to the Board
at the AGM on 15 April 2008. Bobby Godsell
retired from the Board at the conclusion of the
AGM on 15 April 2008.
Sustainable development
The Report to Society 2008 will be available
from the Company in April. This report focuses
on the safety, sustainable development, health
and environmental performance of the Group’s
managed operations, their performance with
regard to the Company’s Good Citizenship:
Our Business Principles, and the operational
dimensions of their social programmes.
Payment of suppliers
Anglo American plc is a holding company and,
as such, has no material trade creditors.
Businesses across the Group are responsible
for agreeing the terms under which transactions
with their suppliers are conducted, reflecting
local and industry norms and group purchasing
arrangements which may have been made with
a supplier. The Group values its suppliers and
recognises the benefits to be derived from
maintaining good relationships with them.
Anglo American acknowledges the importance
of paying invoices, especially those of small
businesses, promptly.
value of land
Land is mainly carried in the financial
statements at cost. It is not practicable to
estimate the market value of land and mineral
rights, since these depend on product prices
over the next 20 years or more, which will vary
with market conditions.
Post-balance sheet events
Post-balance sheet events are set out in note
41 to the financial statements on page 132.
audit information
The directors confirm that, so far as they are
aware, there is no relevant audit information
of which the auditors are unaware and that all
directors have taken all reasonable steps to
make themselves aware of any relevant audit
information and to establish that the auditors
are aware of that information.
employment and other policies
The Group’s key operating businesses are
empowered to manage, within the context of
their own industry and the different legislative
and social demands of the diverse countries in
which those businesses operate, subject to the
standards embodied in Anglo American’s Good
Citizenship: Our Business Principles.
Within all the Group’s businesses, the safe
and effective performance of employees and
the maintenance of positive employee relations
are of fundamental importance. Managers are
charged with ensuring that the following key
principles are upheld:
• adherence to national legal standards
on employment and workplace rights
at all times;
• adoption of fair labour practices;
• prohibition of child labour;
• prohibition of inhumane treatment of
employees and any form of forced labour,
physical punishment or other abuse;
• continual promotion of safe and healthy
working practices;
• promotion of workplace equality and
elimination of all forms of unfair
discrimination;
Anglo American plc Annual Report 2008
62
Governance
Directors’ report continued
• provision of opportunities for employees
to enhance their work-related skills
and capabilities;
• recognition of the right of our employees
to freedom of association; and
• adoption of fair and appropriate
procedures for determining terms and
conditions of employment.
Further, the Group is committed to treating
employees at all levels with respect and
consideration, to investing in their
development and to ensuring that their
careers are not constrained by discrimination
or arbitrary barriers.
Copies of the Good Citizenship: Our Business
Principles booklet are available from the Company
and may be accessed on the Company’s
website www.angloamerican.co.uk
As in previous years, numerous employee
communication presentations and workshops
took place at Group level, including a series
of 70 workshops worldwide to embed the
Group’s six core values, the training of more
than 400 managers on the implementation of
the Socio-Economic Assessment Toolbox and
three management development programmes.
The Group has a well-used enterprise
information portal, theSource, which seeks to
ensure that employees are regularly updated on
developments within the Group, and feedback
is encouraged.
In addition, the Company regularly publishes
Optima (available on the Company’s website)
and AngloWorld, which contain items of news,
current affairs and information relevant to
Group employees.
charitable donations
During the year, Anglo American and its
subsidiaries made donations for charitable
purposes or wider social investments
amounting to $76.2 million (1.11% of pre-tax
profit of subsidiaries and joint ventures).
Charitable donations of $4.7 million were made
in the UK, consisting of payments in respect
of education, sport and youth $0.9 million
(19.1%); community development $1.9 million
(40.4%); health and HIV/AIDS $0.4 million
(8.5%); environment $0.1 million (2.1%); arts,
culture and heritage $0.3 million (6.4%), and
other charitable causes $1.1 million (23.5%).
These figures were compiled with reference
to the London Benchmarking Group model for
defining and measuring social investment
spending. A fuller analysis of the Group’s social
investment activities can be found in the
Report to Society 2008.
Political donations
No political donations were made during 2008.
Anglo American has an established policy of
not making donations to, or incurring expenses
for the benefit of, any political party in any part
of the world, including any political party or
political organisation as defined in the Political
Parties, Elections and Referendums Act 2000.
Anglo American plc Annual Report 2008
annual General Meeting
The AGM will be held on 15 April 2009.
A separate booklet enclosed with this report
contains the notice convening the meeting
together with a description of the business to
be conducted.
additional information
for shareholders
Set out below is a summary of certain
provisions of the Company’s current Articles
of Association (the Articles) and applicable
English law concerning companies (the
Companies Act 1985 and the Companies Act
2006, together the Companies Acts) required
as a result of the implementation of the
Takeovers Directive in English law. This is a
summary only and the relevant provisions of
the Articles or the Companies Acts should be
consulted if further information is required.
Dividends and distributions
Subject to the provisions of the Companies
Acts, the Company may by ordinary resolution
from time to time declare dividends not
exceeding the amount recommended by the
Board. The Board may pay interim dividends
whenever the financial position of the
Company, in the opinion of the Board, justifies
such payment.
The Board may withhold payment of all
or any part of any dividends or other monies
payable in respect of the Company’s shares
from a person with a 0.25% interest or more
(as defined in the Articles) if such a person
has been served with a notice after failing
to provide the Company with information
concerning interests in those shares required
to be provided under the Companies Acts.
Rights and obligations attaching
to shares
The rights and obligations attaching to the
ordinary and preference shares are set out in
the Articles. The Articles may only be changed
by the shareholders by special resolution.
Voting
Subject to the Articles generally and to any
special rights or restrictions as to voting
attached by or in accordance with the Articles
to any class of shares, on a show of hands
every member who is present in person at a
general meeting shall have one vote and, on a
poll, every member who is present in person or
by proxy shall have one vote for every share of
which he/she is the holder. It is, and has been
for some years, the Company’s practice to hold
a poll on every resolution at Annual and
Extraordinary shareholder meetings.
Where shares are held by trustees/
nominees in respect of the Group’s employee
share plans and the voting rights attached to
such shares are not directly exercisable by the
employees, it is the Company’s practice that
such rights are not exercised by the relevant
trustee/nominee.
Under the Companies Acts, members are
entitled to appoint a proxy, who need not be a
member of the Company, to exercise all or any
of their rights to attend and to speak and vote
on their behalf at a general meeting or class
meeting. A member may appoint more than
one proxy in relation to a general meeting or
class meeting provided that each proxy is
appointed to exercise the rights attached to a
different share or shares held by that member.
A member that is a corporation may appoint
one or more individuals to act on its behalf
at a general meeting or class meetings as
a corporate representative.
The Company is aware of the debate
concerning section 323 of the Companies Act
2006, related to the voting rights of corporate
representatives. Anglo American is committed
to ensuring all investors have the opportunity
to exercise their voting rights and, to this end,
has adopted the guidance issued by the
Institute of Chartered Secretaries and
Administrators (available at www.icsa.org.uk).
Restrictions on voting
No member shall, unless the directors
otherwise determine, be entitled in respect
of any share held by him/her to vote either
personally or by proxy at a shareholders’
meeting or to exercise any other right conferred
by membership in relation to shareholders’
meetings if any call or other sum presently
payable by him/her to the Company in respect
of that share remains unpaid. In addition,
no member shall be entitled to vote if he/she
has been served with a notice after failing
to provide the Company with information
concerning interests in those shares required
to be provided under the Companies Acts.
Issue of shares
Subject to the provisions of the Companies
Acts relating to authority and pre-emption
rights and of any resolution of the Company
in a general meeting, all unissued shares of
the Company shall be at the disposal of the
directors and they may allot (with or without
conferring a right of renunciation), grant
options over or otherwise dispose of them
to such persons, at such times and on such
terms as they think proper.
Shares in uncertificated form
Directors may determine that any class of
shares may be held in uncertificated form and
title to such shares may be transferred by means
of a relevant system or that shares of any class
should cease to be held and transferred. Subject
to the provisions of the Companies Acts, the
CREST Regulations and every other statute,
statutory instrument, regulation or order for the
time being in force concerning companies and
affecting the Company (together, the Statutes),
the directors may determine that any class of
shares held on the branch register of members
of the Company resident in South Africa or any
other overseas branch register of the members
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of the Company may be held in uncertificated
form in accordance with any system outside
the UK which enables title to such shares to be
evidenced and transferred without a written
instrument and which is a relevant system.
The provisions of the Articles shall not apply to
shares of any class which are in uncertificated
form to the extent that the Articles are
inconsistent with the holding of shares of that
class in uncertificated form, the transfer of title
to shares of that class by means of a relevant
system or any provision of the CREST
Regulations.
Deadlines for exercising voting rights
Votes are exercisable at a General Meeting of
the Company in respect of which the business
being voted upon is being heard. Votes may be
exercised in person, by proxy, or in relation to
corporate members, by corporate representative.
The Articles provide a deadline for submission
of proxy forms of not than less than 48 hours
before the time appointed for the holding of the
meeting or adjourned meeting.
Variation of rights
Subject to statute, the Articles specify that
rights attached to any class of shares may be
varied with the written consent of the holders
of not less than three-quarters in nominal value
of the issued shares of that class, or with the
sanction of an extraordinary resolution passed
at a separate General Meeting of the holders of
those shares. At every such separate General
Meeting the quorum shall be two persons
holding or representing by proxy at least
one-third in nominal value of the issued shares
of the class (calculated excluding any shares
held as treasury shares). The rights conferred
upon the holders of any shares shall not, unless
otherwise expressly provided in the rights
attaching to those shares, be deemed to be
varied by the creation or issue of further shares
ranking pari passu with them.
Transfer of shares
All transfers of shares which are in certificated
form may be effected by transfer in writing in
any usual or common form or in any other form
acceptable to the directors and may be under
hand only. The instrument of transfer shall be
signed by or on behalf of the transferor and
(except in the case of fully-paid shares) by or
on behalf of the transferee. The transferor shall
remain the holder of the shares concerned until
the name of the transferee is entered in the
register. All transfers of shares which are in
uncertificated form may be effected by means
of the CREST system.
The directors may decline to recognise any
instrument of transfer relating to shares in
certificated form unless it:
(a) is in respect of only one class of share;
and
(b) is lodged at the transfer office (duly
stamped if required) accompanied by the
relevant share certificate(s) and such other
evidence as the directors may reasonably
require to show the right of the transferor to
make the transfer (and, if the instrument of
transfer is executed by some other person
on his/her behalf, the authority of that
person so to do).
The directors may, in the case of shares in
certificated form, in their absolute discretion and
without assigning any reason therefor, refuse
to register any transfer of shares (not being
fully-paid shares) provided that, where any such
shares are admitted to the Official List of the
London Stock Exchange, such discretion may
not be exercised in such a way as to prevent
dealings in the shares of that class from taking
place on an open and proper basis. The
directors may also refuse to register an
allotment or transfer of shares (whether fully
paid or not) in favour of more than four
persons jointly.
If the directors refuse to register an
allotment or transfer, they shall send within
two months after the date on which the letter
of allotment or transfer was lodged with the
Company, to the allottee or transferee, notice
of the refusal.
A shareholder does not need to obtain
the approval of the Company, or of other
shareholders of shares in the Company, for
a transfer of shares to take place.
Directors
Directors shall not be less than ten nor more
than 18 in number. A director is not required
to hold any shares of the Company by way of
qualification. The Company may by ordinary
resolution increase or reduce the maximum
or minimum number of directors.
Powers of directors
Subject to the Articles, the Companies Acts and
any directions given by special resolution, the
business of the Company will be managed by
the Board who may exercise all the powers of
the Company.
The Board may exercise all the powers of
the Company to borrow money and to mortgage
or charge any of its undertaking, property and
uncalled capital and to issue debentures and
other securities, whether outright or as
collateral security for any debt, liability or
obligation of the Company or of any third party.
The Company may by ordinary resolution
declare dividends but no dividend shall be
payable in excess of the amount recommended
by the directors. Subject to the provisions of
the Articles and to the rights attaching to any
shares, any dividends or other monies payable
on or in respect of a share may be paid in such
currency as the directors may determine. The
directors may deduct from any dividend payable
to any member all sums of money (if any)
presently payable by him/her to the Company
on account of calls or otherwise in relation to
shares of the Company. The directors may
retain any dividends payable on shares on
which the Company has a lien, and may apply
the same in or towards satisfaction of the
debts, liabilities or engagements in respect of
which the lien exists.
Appointment of directors
The directors may from time to time appoint
one or more directors.
The Board may appoint any person to be a
director (so long as the total number of directors
does not exceed the limit prescribed in the
Articles). Any such director shall hold office only
until the next AGM and shall then be eligible for
election.
Retirement of directors
At each AGM all those directors who have
been in office for three years or more since
their election or last re-election shall retire
from office. In addition, a director may at
any AGM retire from office and stand for
re-election. In accordance with the Combined
Code, any director who has served more
than three three-year terms is subject to
annual re-election.
Significant agreements: Change of
control
At 31 December 2008, Anglo American had
committed bilateral and syndicated borrowing
facilities totalling $15.7 billion with a number of
relationship banks and a rand 20 billion South
African Medium Term Note Programme which
contain change of control clauses. In aggregate,
these facilities are considered significant to the
Group and in the event of a takeover (change of
control) of the Company, these contracts may
be cancelled, become immediately payable or
be subject to acceleration.
In the event of a change of control,
employee share plans would be affected.
No other agreements that take effect, alter
or terminate on a change of control of the
Company are considered significant in terms of
the potential impact on the Group as a whole.
Purchases of own shares
At the AGM held on 15 April 2008, authority
was given for the Company to purchase, in the
market, up to 198 million Ordinary Shares of
5486/91 US cents each. Details of purchases
made during the year are set out in note 28 on
pages 115 to 121.
Indemnities
To the extent permitted by law and the Articles
the Company has made qualifying third party
indemnity provisions for the benefit of its
directors during the year and which remain in
force at the date of this report.
By order of the Board
Nicholas Jordan
Company Secretary
19 February 2009
Anglo American plc Annual Report 2008
64
Governance
Corporate governance
combined code compliance
Anglo American is committed to the highest
standards of corporate governance – the way in
which the Company is directed and controlled –
and complied fully with the Combined Code on
Corporate Governance June 2006 (the Code)
throughout the year under review.
role of the Board
The Board of directors is responsible to
shareholders for the performance of the
Company. Its role includes the establishment,
review and monitoring of strategic objectives,
approval of major acquisitions, disposals and
capital expenditure and overseeing the Group’s
systems of internal control, governance and risk
management. A schedule of matters reserved
for the Board’s decision details key aspects
of the Company’s affairs that the Board does
not delegate (including, among other things,
approval of business plans and budgets,
material expenditure and alterations to
share capital).
Board composition and
directors’ independence
The Board is chaired by Sir Mark Moody-Stuart.
The chairman is responsible for leading the
Board and for its effectiveness. Cynthia Carroll
is the chief executive and is responsible for
the execution of strategy and the day-to-day
management of the Group, supported by the
Executive Committee (ExCo), which she chairs.
The Company has adopted the Statement of
Division of Responsibilities between the
Chairman and the Chief Executive promulgated
by the Institute of Chartered Secretaries and
Administrators. On 1 September 2008, the
Chief Executive’s Committee and ExCo were
merged. The functions and membership of ExCo
are set out on page 67. David Challen succeeded
Sir Rob Margetts as the senior independent
non-executive director on 15 April 2008.
The Board has a strong independent
element and currently comprises, in addition
to the chairman, two executive and nine
non-executive directors, eight of whom are
independent according to the definition
contained in the Code. The independent
directors are indicated within the table
opposite, and full biographical details for each
director are given on pages 58 and 59. The
letters of appointment of the non-executive
directors are available for inspection at the
registered office of the Company.
The Company is conscious of the need
to maintain an appropriate mix of skills and
experience on the Board, and to progressively
refresh its composition over time, and, in this
connection, Sir CK Chow was appointed and
Bobby Godsell retired from the Board at the
conclusion of the 2008 AGM.
David Challen, Chris Fay, Sir Rob Margetts,
Sir Mark Moody-Stuart, Fred Phaswana,
Mamphela Ramphele and Peter Woicke will
Anglo American plc Annual Report 2008
be proposed for re-election at the AGM.
Sir Mark is the chairman of Anglo American plc,
and serves as a member of the Nomination,
Remuneration and Safety and Sustainable
Development (S&SD) Committees.
David Challen is the senior independent
non-executive director and is chairman of the
Audit Committee and a member of the
Remuneration Committee. Fred Phaswana is
chairman of the Nomination Committee and a
member of the Audit Committee. Peter Woicke
is a member of the Audit, S&SD and
Nomination Committees and Mamphela
Ramphele is a member of the S&SD and
Nomination Committees. Chris Fay and
Sir Rob Margetts will again be proposed for
re-election at the AGM. Each has served three
three-year terms as an independent non-
executive director, having been first appointed
during 1999, and hence their nomination for
re-election has been subject to particularly
rigorous review. Chris Fay chairs the S&SD
Committee and serves as a member of the
Audit and Remuneration Committees.
Sir Rob Margetts chairs the Remuneration
Committee and is a member of the Nomination
Committee. The Board values their wide
experience and contributions to its proceedings,
and is satisfied that they both remain robustly
independent. The re-election of Sir Rob Margetts
and Chris Fay is in accordance with provision
A.7.2 of the Code. None of the non-executive
directors has served concurrently with an
executive director for more than four years.
Since January 2008, one independent
non-executive director has been appointed and
one non-independent non-executive director
has retired. The Company considers that its
programme of progressively refreshing the
composition of the Board remains effective.
conflicts of interest
During the year a full survey of the Board
members’ interests and appointments was
carried out, the Board was fully briefed on the
Companies Act 2006 provisions in relation to
conflicts of interest which came in to effect
on 1 October 2008 and conflict management
procedures were agreed. Anglo American policy
dictates that if a director becomes aware that
he/she has a direct or indirect interest in an
existing or proposed transaction with Anglo
American, he/she should notify the board
at the next board meeting or by a written
declaration. Interests in proposed transactions
should be notified before the transaction is
entered into and directors have a continuing
duty to update any changes in these interests.
There were no such notifications of interests
in proposed transactions during the year. In
accordance with the Company’s Articles and
relevant legislation, an unconflicted quorum of
the board can authorise potential conflicts and
such authorisations can be limited in scope and
are reviewed on an annual basis.
Directors’ training
Anglo American’s directors have a wide range
of expertise as well as significant experience
in strategic, financial, commercial and mining
activities. Training and briefings are also
available to all directors on appointment and
subsequently, as necessary, taking into account
existing qualifications and experience. Directors
also have access to management, and to the
advice of the company secretary. Furthermore,
all directors are entitled to seek independent
professional advice concerning the affairs
of Anglo American at its expense, although
no such advice was sought during 2008.
Board and Committee meetings – frequency and attendance
Independent
Board
(nine
meetings)
Audit
(three
meetings)
S&SD Remuneration Nomination
(three
(six
(four
meetings)
meetings)
meetings)
Sir Mark Moody-Stuart
Cynthia Carroll
René Médori
Sir C K Chow(1)
David Challen
Chris Fay
Bobby Godsell(1)
Sir Rob Margetts
Karel Van Miert
Nicky Oppenheimer
Fred Phaswana
Mamphela Ramphele
Peter Woicke
n/a
No
No
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
Yes
All
All
All
All
All
All
All
8
All
7
8
8
All
n/a
n/a
n/a
n/a
All
All
n/a
n/a
All
n/a
All
n/a
2
All
All
n/a
n/a
n/a
All
All
n/a
n/a
n/a
n/a
3
All
All
n/a
n/a
n/a
All
All
n/a
All
n/a
n/a
n/a
n/a
n/a
All
n/a
n/a
n/a
n/a
n/a
n/a
All
2
2
All
2
All
(1) Meetings attended prior to retirement or since appointment.
65
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Presentations are made to the Board by
business management on the activities of
operations. Directors undertake regular visits
to operations and projects and, in 2008,
operations in Australia, Botswana, Brazil,
Chile, China, Germany, Peru, Philippines,
South Africa, Venezuela and the US were
visited. In addition, during the year, directors
attended courses/seminars on corporate
governance, the credit crunch/recession,
remuneration, and pensions management.
Board effectiveness
A formal evaluation of the performance of the
Board, its committees and individual directors
is carried out annually by means of detailed
questionnaires and/or interviews. The most
recent evaluation was carried out by Dr Long of
Boardroom Review and presented to the Board.
For the first time the scope of the evaluation
was widened to include the views of senior
executives below board level and the Deloitte
partner responsible for the audit. The aim is to
ensure continuous improvement in the
functioning of the Board. Arising from the
review carried out in 2008, the Board has
agreed to certain changes and ongoing
development in the following areas:
• Strategy planning
• Communications with major shareholders
• Talent management and succession planning
• Committee composition
• Submission of information to the Board and
scheduling of meetings
As in past years, the evaluation process also
included a review, chaired by the senior
independent non-executive director (without
the chairman present), of the performance of
the chairman. It is the Board’s current intention
to continue to engage an external reviewer for
the Board effectiveness evaluation process
from time to time.
committees of the Board
Subject to those matters reserved for its
decision, the Board delegates certain
responsibilities to a number of standing
committees – the Audit, Remuneration,
Nomination and S&SD Committees. The terms
of reference for each of these committees
and a schedule of matters reserved for
the Board’s decision are published on the
Company’s website.
Remuneration Committee
The Remuneration Committee is responsible for
establishing and developing the Group’s general
policy on executive and senior management
remuneration and determining specific
remuneration packages for executive directors.
The directors’ Remuneration report, setting
out Anglo American’s policy on executive
remuneration, is set out on pages 69 to 78 of
this Annual Report. A resolution to approve the
Remuneration report will be proposed at the
forthcoming AGM. The Committee met six
times during 2008.
The Remuneration Committee presently
comprises: Sir Rob Margetts (chairman),
David Challen and Chris Fay, all of whom are
independent non-executive directors, and
Sir Mark Moody-Stuart. Sir CK Chow and Peter
Woicke will join the Committee with effect from
the conclusion of the AGM.
Safety and Sustainable Development
(S&SD) Committee
The S&SD Committee is responsible for
developing framework policies and guidelines
for the management of sustainable development
issues, including safety, health and environment
matters, and ensuring their progressive
implementation throughout the Group.
The S&SD Committee normally meets three
or four times each year, including a visit to an
operation, and business unit heads are invited
to attend committee meetings. Each business
unit head makes a safety and sustainable
development presentation to the Committee.
The Report to Society 2008, to be published
in April, will focus on the safety, sustainable
development, health and environmental
performance of the Group’s managed
operations, their performance with regard to
the Company’s Good Citizenship principles
and the operational dimensions of their social
programmes. The Committee met four times
during 2008.
The S&SD Committee presently comprises:
Chris Fay (chairman), Cynthia Carroll,
Sir Mark Moody-Stuart, Mamphela Ramphele
and Peter Woicke.
Nomination Committee
The Nomination Committee makes
recommendations to the Board on the
appointment of new executive and non-
executive directors, including making
recommendations as to the composition of
the Board and its committees and the balance
between executive and non-executive
directors. The Nomination Committee meets
as and when required and engages external
consultants to identify appropriate candidates.
During 2008, the services of Spencer Stuart
were used by the Committee.
The Board, via the Nomination Committee,
has taken steps to ensure that the Human
Resources function of the Group regularly
reviews and updates the succession plans
of directors and senior managers. The
Committee met three times during 2008.
The Nomination Committee presently
comprises: Fred Phaswana (chairman),
Sir Rob Margetts, Sir Mark Moody-Stuart,
Nicky Oppenheimer, Mamphela Ramphele,
Karel Van Miert and Peter Woicke. In
accordance with the provisions of the
Code, the majority of members and the
chairman of the Committee are independent
non-executive directors.
With effect from the conclusion of the
AGM, the Committee will consist of Sir Mark
Moody-Stuart (chairman), Fred Phaswana,
Mamphela Ramphele, Karel Van Miert,
Peter Woicke and Sir CK Chow.
Audit Committee
The primary role of the Audit Committee is
to ensure the integrity of financial reporting
and the audit process, and that a sound risk
management and internal control system is
maintained. In pursuing these objectives,
the Audit Committee oversees relations
with the external auditors and reviews the
effectiveness of the internal audit function.
The Committee also monitors developments
in corporate governance to ensure the
Group continues to apply high and
appropriate standards.
In fulfilling its responsibility of monitoring
the integrity of financial reports to
shareholders, the Audit Committee has
reviewed accounting principles, policies and
practices adopted in the preparation of public
financial information and has examined
documentation relating to the Annual Report,
Interim Report, preliminary announcements and
related public reports. The clarity of disclosures
included in the financial statements was
reviewed by the Audit Committee, as was the
basis for significant estimates and judgements.
In assessing the accounting treatment of major
transactions open to different approaches,
the Committee considered written reports by
management and the external auditors. The
Committee’s recommendations are submitted
to the Board for approval.
The chief financial officers of all operations
have provided confirmation, on a six-monthly
basis, that financial and accounting control
frameworks operate satisfactorily. The
Committee considered summaries of the
significant risk and control issues arising from
these reports. The Committee also received
regular internal and external audit reports on
the results of audits at various operations.
Further information on risk management
processes is provided in the internal control
disclosure statement on page 66.
External audit
Anglo American’s policy on auditors’
independence, which came into effect on
1 January 2003, is consistent with the ethical
standards published by the Auditing Practices
Board in December 2004.
A key factor that may impair auditors’
independence is a lack of control over non-audit
services provided by the external auditors. In
essence, the external auditors’ independence
is deemed to be impaired if the auditors provide
a service which:
• results in auditing of own work by the
auditors;
• results in the auditors acting as a manager
or employee of the Group;
Anglo American plc Annual Report 2008
66
Governance
Corporate governance continued
• puts the auditors in the role of advocate for
the Group; or
• creates a mutuality of interest between the
auditors and the Group.
Anglo American addresses this issue through
three primary measures, namely:
• disclosure of the extent and nature of
non-audit services;
• the prohibition of selected services; and
• prior approval by the Audit Committee
chairman of non-audit services where the
cost of the proposed assignment is likely
to exceed $50,000.
Disclosure entails reporting non-audit services
to the Group’s audit committees and inclusion
of prescribed detail, i.e. the breakdown of
fees paid to external auditors for audit and
non-audit work in the Annual Reports of listed
entities. The policy’s definition of prohibited
non-audit services corresponds with the
European Commission’s recommendations
on auditors’ independence.
Other safeguards encapsulated in the
policy include:
• the external auditors are required to adhere
to a rotation policy based on best practice
and professional standards in the United
Kingdom. The standard period for rotation
of the audit engagement partner is five
years and, for any key audit principal,
seven years.
• any partner designated as a key audit
principal of Anglo American shall not be
employed by Anglo American in a key
management position unless a period of
at least two years has elapsed since the
conclusion of the last relevant audit.
• the external auditors are required to
periodically assess, in their professional
judgement, whether they are independent
of the Group.
• the Audit Committee ensures that the scope
of the auditors’ work is sufficient and that
the auditors are fairly remunerated.
• the Audit Committee has primary
responsibility for making recommendations
to the Board on the appointment,
re-appointment and removal of the
external auditors.
• the Audit Committee has the authority
to engage independent counsel and
other advisers as they determine
necessary in order to resolve issues
on auditor independence.
The Audit Committee has satisfied itself that
the United Kingdom professional and regulatory
requirements for audit partner rotation and
employment of former employees of the
external auditors have been complied with.
The Audit Committee considered
extent of non-audit fees do not present a threat
to the external auditors’ independence.
Furthermore, after reviewing a report from
the external auditors on all their relationships
with Anglo American that might reasonably
have a bearing on the external auditors’
independence and the audit engagement
partner and staff’s objectivity, and the related
safeguards and procedures, the Committee
has concluded that the external auditors’
independence was not impaired.
The Audit Committee approved the external
auditors’ terms of engagement, scope of work,
the process for the 2008 interim review, the
annual audit and the applicable levels of
materiality. Based on written reports submitted,
the Committee reviewed, with the external
auditors, the findings of their work and
confirmed that all significant matters had been
satisfactorily resolved.
The Committee’s assessment of the
external auditors’ performance and
independence underpins its recommendation
to the Board to propose to shareholders the
re-appointment of Deloitte as auditors until the
conclusion of the AGM in 2010. Resolutions to
authorise the Board to re-appoint and determine
their remuneration will be proposed at the AGM
on 15 April 2009.
Internal audit
The Group has an internal audit department
that reports centrally with responsibility for
reviewing and providing assurance on the
adequacy of the internal control environment
across all of Anglo American’s operations.
The head of internal audit is responsible for
reporting the findings of this internal audit work
to the Audit Committee on a regular basis.
Internal audit teams operated in all of the
Group’s principal divisions in the period under
review, reporting findings to local senior
management. Internal audit function’s
mandates and annual audit coverage plans
were approved by the Audit Committee.
The internal audit activities are performed
either by teams of appropriate, qualified and
experienced employees, or through the
engagement of external practitioners upon
specified and agreed terms. A summary of audit
results and risk-management information was
presented to the Committee and Group senior
management at regular intervals throughout
the year. The Group’s head of internal audit
reports to the Audit Committee on the internal
audit function’s performance against the agreed
internal audit plan.
Assurance regarding the accuracy and
reliability of mineral resources and ore reserves
disclosures is provided through a combination
of internal technically proficient staff and
independent third parties.
information pertaining to the balance between
fees for audit and non-audit work for the Group
in 2008 and concluded that the nature and
Composition
The Audit Committee presently comprises:
David Challen (chairman), Chris Fay,
Fred Phaswana, Karel Van Miert and Peter
Woicke, all of whom are independent non-
executive directors. In view of his appointment
to other committees, Peter Woicke will step
down as a member at the conclusion of the
AGM. The Board, in consultation with the Audit
Committee chairman, makes appointments to
the Committee. The Board has determined that
the Committee members have the skills and
experience necessary to contribute meaningfully
to the Committee’s deliberations. In addition,
the chairman has requisite experience
in accounting and financial management.
The Committee met three times during
2008, and on one of those occasions the
members held discussions with the external
audit partners and the head of internal audit
in the absence of management.
effectiveness of internal control
and risk management
The Executive Committee, (ExCo) (previously
known as the Chief Executive’s Committee until
1 September 2008) as mandated by the Board,
has established a Group-wide system of
internal control to manage significant Group
risks. This system, which has been operating
throughout the year and to the date of this
report, supports the Board in discharging its
responsibility for ensuring that the wide range
of risks associated with the Group’s diverse
international operations is effectively managed
in support of the creation and preservation
of shareholder wealth. Where appropriate,
necessary action has been or is being taken to
remedy any failings or weaknesses identified
from review of the effectiveness of the internal
control system.
Internal control
The system of internal control, which is
embedded in all key operations, provides
reasonable rather than absolute assurance
that the Group’s business objectives will be
achieved within the risk tolerance levels defined
by the Board. Regular management reporting,
which provides a balanced assessment of key
risks and controls, is an important component
of Board assurance. In addition, certain Board
committees focus on specific risks such as
safety and capital investment and provide
assurance to the Board on those matters. The
chief financial officers provide confirmation,
on a six-monthly basis, that financial and
accounting control frameworks have operated
satisfactorily. The Board also receives
assurance from the Audit Committee, which
derives its information, in part, from regular
internal and external audit reports on risk and
internal control throughout the Group. The
Group’s internal audit function has a formal
collaboration process in place with the external
auditors to ensure efficient coverage of internal
controls. The Anglo American internal audit
function is responsible for providing
independent assurance to ExCo and the Board
Anglo American plc Annual Report 2008
on the effectiveness of the risk management
process throughout the Group.
supports the Board in achieving its risk
management objectives.
Anglo American seeks to have a sound
During the course of the year the Board
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facilities are operated by independent service
providers who remove all indications from
information received as to the identity of the
callers before submission to designated persons
in the Group
During 2008, 208 reports were received via
the global ‘Speakup’ facility, covering a broad
spectrum of concerns, including ethical,
criminal, supplier relationships, health and
safety, and human resource-type issues.
Reports received were kept strictly confidential
and were referred to appropriate line managers
within the Group for resolution. Where
appropriate, action was taken to address the
issues raised.
executive management
Executive Committee (ExCo)
Until 1 September 2008 the Chief Executive’s
Committee (CeCom) was responsible for
implementing the strategies and policies
determined by the Board, managing the
business and affairs of the Company,
prioritising the allocation of capital, technical
and human resources and establishing best
management practices. CeCom was also (until
1 September 2008) responsible for senior
management appointments and monitoring
their performance and acted as the risk
committee for the purpose of reviewing and
monitoring Anglo American’s systems of
internal control.
CeCom comprised: Cynthia Carroll (chair),
René Médori, Russell King and Tony Redman.
With effect from 1 September 2008, ExCo
assumed all the responsibilities of CeCom in
addition to its own responsibilities of
developing corporate and business unit
strategy, monitoring strategic process in terms
of key milestones and reviewing operational
and safety procedures of the Group’s business
units. ExCo meets at least every two months
on a formal basis for a two day session and
when required in the intervening periods.
considered the Group’s responsiveness to
changes within its business environment.
The Board is satisfied that there is an ongoing
process, which has been operational during
the year, and up to the date of approval of the
Annual Report, for identifying, evaluating and
managing the significant risks faced by the
Group. This includes social, environmental and
ethical risks as highlighted in the Disclosure
Guidelines on Socially Responsible Investment
issued by the Association of British Insurers.
A detailed report on social, environmental and
ethical issues is included in the Company’s
Report to Society 2008.
Accountability and audit
The Board is required to present a balanced
and understandable assessment of Anglo
American’s financial position and prospects.
Such assessment is provided in the Chairman’s
and Chief executive’s statements and the
Operating and financial review of this Annual
Report. The respective responsibilities of the
directors and external auditors are set out on
pages 80 and 83. As referred to in the
Directors’ report, the directors have expressed
their view that Anglo American’s business is
a going concern.
Whistleblowing programme
Following adoption in December 2003 of a
whistleblowing policy that is aligned with the
Public Interest Disclosure Act 1998, the Group
implemented a whistleblowing programme in all
of the managed operations. The programme,
which is monitored by the Audit Committee,
is aimed at enabling employees, customers,
suppliers, managers or other stakeholders, on
a confidential basis, to raise concerns in cases
where conduct is deemed to be contrary to our
values. It may include:
• actions that may result in danger to the
The current members of ExCo are; Cynthia
health and / or safety of people or damage
to the environment;
• unethical practice in accounting, internal
accounting controls, financial reporting and
auditing matters;
• criminal offences, including money
laundering, fraud, bribery and corruption;
• failure to comply with any legal obligation;
• miscarriage of justice;
• any conduct contrary to the ethical
principles embraced in our Good Citizenship:
Our Business Principles or any similar policy;
• any other legal or ethical concern; and
• concealment of any of the above.
The programme makes available a selection of
telephonic, e-mail, web-based and surface mail
communication channels to any person in the
world who has information about unethical
practice in Anglo American and its managed
operations. The multilingual communication
Carroll (chair), René Médori, Russell King,
Philip Baum, Brian Beamish, Ian Cockerill,
Kuseni Dlamini, Neville Nicolau, David Weston
and Mervyn Walker.
Investment Committee
The role of the Investment Committee, which
is a sub-committee of ExCo, is to manage
the process of capital allocation by ensuring
that investments and divestments increase
shareholder value and meet Anglo American’s
financial criteria. The Committee makes
recommendations to ExCo and/or the Board
on these matters. The Committee meets
as required.
The Investment Committee presently
comprises: René Médori (chairman), Dorian
Emmett and Gareth Mostyn.
Anglo American plc Annual Report 2008
system of internal control, based on the
Group’s policies and guidelines, in all
material associates and joint ventures. In
those companies that are independently
managed, as well as joint ventures, the
directors who are represented on these
organisations’ boards seek assurance that
significant risks are being managed.
Risk management
The Board’s policy on risk management
encompasses all significant business risks to
the Group, including, financial, operational and
compliance risk, which could undermine the
achievement of business objectives. This
system of risk management is designed so
that the different businesses are able to tailor
and adapt their risk management processes to
suit their specific circumstances. This flexible
approach has the commitment of the
Group’s senior management. There is clear
accountability for risk management, which
is a key performance area of line managers
throughout the Group. The requisite risk and
control capability is assured through Board
challenge and appropriate management
selection and skills development. Managers
are supported in giving effect to their risk
responsibilities through policies and guidelines
on risk and control management. Continuous
monitoring of risk and control processes, across
headline risk areas and other business-specific
risk areas, provides the basis for regular and
exception reporting to business management
and boards, ExCo, the Audit Committee and
the Board.
Some of the headline risk areas, which have
been elaborated upon in the financial review,
set out on pages 54 to 56 are:
• commodity price risk;
• political risk;
• legal and regulatory risk;
• counterparty risk; and
• infrastructure and operational
performance risks.
The risk assessment and reporting criteria
are designed to provide the Board with a
consistent, Group-wide perspective of the key
risks. The reports to the Board, which are
submitted at least every six months, include
an assessment of the likelihood and impact of
risks materialising, as well as risk mitigation
initiatives and their effectiveness.
In conducting its annual review of the
effectiveness of risk management, the Board
considers the key findings from the ongoing
monitoring and reporting processes,
management assertions and independent
assurance reports. The Board also takes
account of material changes and trends in the
risk profile and considers whether the control
system, including reporting, adequately
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Governance
Corporate governance continued
Shareholders will have the opportunity
at the forthcoming AGM, notice of which is
contained in the booklet enclosed herewith,
to put questions to the Board, including the
chairmen of the various committees. Facilities
have been put in place to enable shareholders
on the UK register to receive Company
communications electronically rather than
by mail and, for those unable to attend the
meeting, to cast their votes by electronic
means, including those shareholders whose
shares are held in the CREST system.
As a result of the implementation in 2008
of the electronic communications provisions
in the Companies Act 2006, the Company
reduced the cost of the annual report
production and distribution. Shareholders
may elect to receive notification by email of
the availability of the annual report on the
Company’s website instead of receiving paper
copies. The Company is working towards
implementing this approach to incorporate
South African investors holding shares in
dematerialised form.
Voting on each resolution to be proposed
at the AGM will be conducted on a poll rather
than by a show of hands. The results of the
poll will be announced to the press and on the
Company’s website.
relations with shareholders
The Company maintains an active dialogue
with its key financial audiences, including
institutional shareholders, sell-side analysts
and potential shareholders. The Investor and
Corporate Affairs Department manages the
ongoing dialogue with these audiences and
regular presentations take place at the time of
interim and final results as well as during the
rest of the year. An active programme with
potential shareholders is also maintained.
Any concerns raised by a shareholder in
relation to the Company and its affairs are
communicated to the Board as a whole. The
Board is briefed on a regular basis by the
Investor and Corporate Affairs Department
and analysts’ reports are circulated to the
directors. Feedback from meetings held
between executive management, or the
Investor and Corporate Affairs Department,
and institutional shareholders is also
communicated to the Board.
During the year there were regular
presentations and meetings with institutional
investors in the UK, South Africa, continental
Europe and the US to communicate the strategy
and performance of Anglo American. Executive
directors as well as key corporate officers
including business unit heads, host such
presentations including seminars for investors
and analysts, and ‘one-on-one’ meetings.
Executive management also presents at
industry conferences on a regular basis
throughout the year, which are mainly
organised by investment banks for their
institutional investor base. The chairman,
senior independent non-executive director and
other non-executive directors are also available
to shareholders to discuss any matter they
wish to raise. The Company’s website
www.angloamerican.co.uk provides the
latest news and historical financial information,
details about forthcoming events for
shareholders and analysts, and other
information on Anglo American.
Anglo American plc Annual Report 2008
Remuneration report
1. remuneration committee
This report sets out the Company’s
remuneration policy and practice for executive
and non-executive directors and provides details
of their remuneration and share interests for
the year ended 31 December 2008.
1.1 Role of the Remuneration Committee
and Terms of Reference
The Remuneration Committee (the Committee)
is responsible for considering and making
recommendations to the Board on:
• the Company’s general policy on executive
and senior management remuneration;
• the specific remuneration packages for
executive directors of the Company,
including basic salary, performance-based
short-term and long-term incentives,
pensions and other benefits; and
• the design and operation of the Company’s
share incentive schemes.
The full Terms of Reference of the Committee
can be found on the Anglo American website
(www.angloamerican.co.uk) and copies are
available on request.
The Committee met six times during 2008.
1.2 Membership of the Committee
The Committee comprised the following
non-executive directors during the year ended
31 December 2008:
• Sir Rob Margetts (chairman);
• David Challen;
• Chris Fay; and
• Sir Mark Moody-Stuart.
The Company’s chief executive attends the
Committee meetings by invitation and assists
the Committee in its considerations, except
when issues relating to her own compensation
are discussed. No directors are involved in
deciding their own remuneration. In 2008, the
Committee was advised by the Company’s
Human Resources and Finance functions and,
specifically, Russell King, Mervyn Walker and
Chris Corrin. It also took external advice as
shown in Figure 1.
Certain overseas operations within the
Group are also provided with audit and
non-audit related services from PwC’s, Mercer’s
and Deloitte’s worldwide member firms.
A summary of the letter from Mercer
containing the conclusions of their review
of the Committee’s executive remuneration
processes for 2008 can be found on page 79,
while the full letter can be found on the
Company’s website.
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2. remuneration policy on
executive director remuneration
The Company’s remuneration policy is formulated
to attract and retain high-calibre executives and
to motivate them to develop and implement the
Company’s business strategy in order to optimise
long-term shareholder value creation. It is the
intention that this policy will continue to apply for
2009 and subsequent years, subject to ongoing
review as appropriate. The policy is framed
around the following key principles:
• total rewards will be set at levels that are
sufficiently competitive to enable the
recruitment and retention of high-calibre
executives;
• total incentive-based rewards will be earned
through the achievement of demanding
performance conditions consistent with
shareholder interests;
• incentive plans, performance measures and
targets will be structured to operate soundly
throughout the business cycle;
• the design of long-term incentives will be
prudent and will not expose shareholders
to unreasonable financial risk;
• in considering the market positioning of
reward elements, account will be taken of
the performance of the Company and of the
individual executive director; and
• reward practice will conform to best practice
standards as far as reasonably practicable.
Representatives of the Company’s principal
investors are consulted on changes to
remuneration policy.
Figure 1: External advice provided to the Remuneration Committee
Advisers
Services provided to the Committee
Other services provided to the Company
PricewaterhouseCoopers LLP
(PwC)
Appointed by the Company, with the agreement of the
Committee, to provide specialist valuation services
Monks Partnership
(a subsidiary of PwC)
Appointed by the Company, with the agreement of the
Committee, to provide market remuneration data
Linklaters LLP
(Linklaters)
Mercer Limited (Mercer)
Deloitte LLP
(Deloitte)
Appointed by the Company, with the agreement of the
Committee, to provide legal advice on long-term
incentives and directors’ service contracts
Engaged by the Committee to review the Committee’s
processes on an annual basis, in order to provide
shareholders with assurance that the remuneration
processes the Committee has followed are in line with
stated policy and that the Committee has operated
within its Terms of Reference
Investment advisers, actuaries and auditors for
various pension schemes; advisers on internal audit
projects and the adoption of International Financial
Reporting Standards; taxation, payroll and
executive compensation advice
Legal advice on certain corporate matters
Investment advisers and actuaries for various
pension schemes
In their capacity as Group auditors, Deloitte
undertakes an audit of sections 10 and 11 of the
remuneration report annually. However, they
provide no advice to the Committee
Anglo American plc Annual Report 2008
70
Governance
Remuneration report continued
CEO – Expected values
3
1
2
1 Fixed 29%
2 Performance-related annual bonus 35%
3 Performance-related long-term incentives 36%
FD – Expected values
3
1
2
1 Fixed 29%
2 Performance-related annual bonus 35%
3 Performance-related long-term incentives 36%
Vesting of Enhancement Shares
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75%
1
33%
2
0%
RPI
+0%
RPI
+3%
RPI
+6%
RPI
+9%
RPI
+12%
RPI
+15%
RPI
+18%
Real EPS growth over three years
Anglo American plc Annual Report 2008
3. elements of executive director
remuneration
3.1 Remuneration mix
Each executive director’s total remuneration
consists of salary, annual bonus, long-term
incentives and benefits. An appropriate balance
is maintained between fixed and performance-
related remuneration and between elements
linked to short-term financial performance
and those linked to longer-term shareholder
value creation.
Assuming on-target performance, the
Committee’s policy is that at least 50%
(60% for Cynthia Carroll) of each executive
director’s remuneration is performance-related.
In 2008, 71% of both the chief executive’s
and the finance director’s remuneration on an
expected-value basis was performance-related
(see illustrative charts).
The Bonus Share Plan (BSP) and the Long
Term Incentive Plan (LTIP) are designed to align
the longer-term interests of shareholders and
executives and to underpin the Company’s
performance culture. The Committee monitors
the relevance and appropriateness of the
performance measures and targets applicable
to both plans. Further details of the BSP and the
LTIP are set out below and on pages 71 and 72.
3.2 Basic salary
The basic salary of the executive directors is
reviewed annually and is targeted at the market
median of companies of comparable size, market
sector, business complexity and international
scope. This is adjusted either way based on
experience and other relevant factors. The
market for executives of main-board calibre,
in large international resource companies
in particular, has in recent years been very
competitive and it is therefore deemed sensible
to position basic salary for executive directors
at no lower than the median point. Company
performance, individual performance and
changes in responsibilities are also taken into
consideration in setting salary levels each year.
3.3 Bonus Share Plan (BSP)
The BSP was first operated in 2004 and all
executive directors are normally eligible to
participate in it.
The BSP requires executive directors to
invest a significant proportion of their
remuneration in shares, thereby more closely
aligning their interests with those of shareholders,
and encourages management at all levels to
build up a meaningful personal stake in the
Company. Awards under the BSP are not
pensionable, are made annually and consist
of three elements:
• a performance-related cash element;
• Bonus Shares as a conditional award,
normally to a value equal to the cash
element; and
• an additional performance-related element
in the form of Enhancement Shares.
The BSP operates as follows:
• the value of the bonus is calculated by
reference to achievement against annual
performance targets which include
measures of corporate (and, where
applicable, business unit) performance
as well as the achievement of specific
individual objectives. For executive
directors, the corporate element is based on
stretching earnings per share (EPS) targets
which are calculated using underlying
earnings (reconciled in note 12 of the
financial statements). The key individual
objectives are designed to support the
Company’s strategic priorities and in 2008
included value-enhancing cost savings,
strategic initiatives, safety improvements,
productivity growth, talent management
and operational efficiencies;
• the Committee reviews these measures
annually to ensure they remain appropriate
and sufficiently stretching in the context
of the economic and performance
expectations for the Company and its
operating businesses;
• in 2008, 50% of each annual bonus was
based on the corporate financial measure
and the remaining 50% on key personal
performance measures. This split was
decided upon to reflect the importance of
the ongoing strategic repositioning of the
Group and because of the volatile nature
of commodity prices in recent years, with
the implications of this on setting earnings
targets. The level of bonus payable is
reduced if certain overall safety
improvement targets are not met. Bonus
parameters are set on an individual basis;
• in the case of the directors and executive
committee, half the bonus has in previous
years been paid in cash, and the maximum
cash element has been 75% of basic salary
in the case of both Cynthia Carroll and René
Médori. The maximum bonus is payable only
for meeting targets which, in the opinion of
the Committee, represent an exceptional
performance for the Group. The other part
of the bonus has been in the form of a
conditional award of Bonus Shares hitherto
equal in value to the cash element. Despite
another strong financial performance in
2008, conditions in the mining industry over
the past six months have deteriorated
rapidly and, in order to further strengthen
the longer-term alignment with shareholders,
the Committee has determined that, for the
2008 performance year, the portion of the
bonus payable in cash should be reduced
from 50% to 25%, with the balance being
awarded in the form of Bonus Shares. These
Bonus Shares vest only if the participant
remains in employment with the Group until
the end of a three-year holding period (or is
regarded by the Committee as a ‘good
leaver’); and
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• executive directors also receive a
Figure 2: LTIP – Sector Index
conditional award of Enhancement Shares
at the same time as the award of Bonus
Shares. The maximum potential, at face
value, of the Enhancement Shares is 75%
of the face value of the Bonus Shares
(i.e. for the award made in 2008 a
maximum of 56% of basic salary). Awards
of Enhancement Shares made in 2008 will
vest after three years only to the extent
that a challenging performance condition
(based on earnings per share growth against
growth in the UK Retail Price Index (RPI) –
Real EPS growth) is met (see illustrative
chart opposite). There is no retesting of this
performance condition.
Real EPS growth is viewed as the most
appropriate performance measure for
this element of the BSP because it is a
fundamental financial performance indicator,
both internally and externally, and links directly
to the Company’s long-term objective of
improving earnings. The targets have been
approved by the Committee after reviewing
performance over a number of years and have
been set at a level which provides stretching
performance levels for management. At the
end of each performance period, the level of
performance achieved and the proportion
of awards vesting will be published in the
subsequent remuneration report.
3.4 Share options and all-employee
share schemes
No share options were granted in 2008 to
executive directors under the Company’s
Executive Share Option Scheme (ESOS) and
there is no intention to make future grants
under the ESOS to executive directors.
However, the ESOS is retained for use
in special circumstances relating to the
recruitment or retention of key executives.
Accordingly, as the current ESOS will expire
in early 2009, the ESOS will be replaced in
2009 by the Anglo American Discretionary
Option Plan which was approved by
shareholders at the Annual General Meeting
(AGM) in April 2008.
Executive directors are eligible to participate
in the Company’s Save As You Earn scheme
(SAYE) and Share Incentive Plan (SIP).
Performance conditions do not apply to these
schemes because they are offered to all
UK-based employees. As the current SAYE
scheme will expire in early 2009, it will be
replaced in 2009 by the new SAYE scheme
which was approved by shareholders at the
AGM in April 2008.
3.5 Long Term Incentive Plan (LTIP)
Grant levels
Conditional LTIP awards are made annually to
executive directors. The maximum grant level
under the LTIP is currently 200% of basic salary
and it is anticipated that, in 2009, conditional
Category weighting
Comparator companies
Mining
94%
BHP Billiton plc
Rio Tinto plc
Teck Cominco
Vale
Vedanta Resources plc
Xstrata plc
Industrial Minerals
6%
CRH plc
Holcim Limited
Lafarge
Figure 3: LTIP – Sector Index comparison
The Company’s relative TSR compared with the Sector Index
% proportion of total TSR element vesting
Below Target
Target (matching the weighted median of the Sector Index)
Target plus 5% per annum
Target plus 7.5% per annum (or above)
0
20
50
75
grants under the LTIP will be made at 200% of
basic salary for executive directors, including
the chief executive. The Committee is content
that the performance conditions that need to
be satisfied for these awards to vest in full are
sufficiently stretching in the context of the
award levels. In determining annual award
levels, the Committee also gives consideration
to market competitiveness and has set the
levels taking account of median expected
value of long-term incentives relative to other
companies of a similar size. These awards
are discretionary and are considered on a
case-by-case basis.
Performance measures
As in previous years, vesting of the LTIP
awards made during 2008 is subject to the
achievement, over a fixed three-year period,
of stretching Group performance targets.
Half of each award is subject to a Group
Total Shareholder Return (TSR) measure, while
the other half is subject to a Group operating
measure, currently return on capital employed
(ROCE). These performance measures were
selected on the basis that they foster the
creation of shareholder value and their
appropriateness is kept under review by
the Committee. Taken as a whole, vesting
depends on meeting a very challenging set
of performance hurdles.
At the end of each performance period, the
levels of TSR and ROCE performance achieved
and the level of award earned is published in
the subsequent remuneration report. There is
no retesting of performance.
Total shareholder return (TSR)
The Committee considers comparative TSR to be
a suitable long-term performance measure for
the Company’s LTIP awards. Executives would
benefit under this measure only if shareholders
have enjoyed returns on their investment which
are superior to those that could have been
obtained in other comparable companies.
The portion of each award that is based on
TSR is measured 50% against the Sector Index
and 50% against the constituents of the FTSE
100. Maximum vesting of the TSR element
of an award will be possible only if Anglo
American outperforms by a substantial margin
both the sector benchmark (as described below)
and the largest UK companies across all sectors.
Sector Index comparison
One half of the TSR element of an LTIP award
vests according to the Company’s TSR over the
performance period, relative to a weighted
basket of international natural resource
companies (the Sector Index). The Committee
may amend the list of comparator companies
in the Sector Index, and relative weightings, if
circumstances make this necessary (for example,
as a result of takeovers or mergers of comparator
companies or significant changes in the
composition of the Group). In calculating TSR
it is assumed that all dividends are reinvested.
For awards made in 2008, the companies
constituting the Sector Index were as shown
in Figure 2. Should the Tarmac group be sold or
demerged during the performance period relating
to this award, the percentage attributable to
Industrial Minerals will fall to zero.
The LTIP closely aligns the interests of
Target performance for the Sector Index
shareholders and executive directors by
rewarding superior shareholder returns and
financial performance and by encouraging
executives to build up a shareholding in
the Company.
is assessed by calculating the median TSR
performance within each sub-sector category,
and then weighting these medians by the
category weightings shown above. That part
of any award that is contingent upon the Sector
Index element of the TSR performance will vest
as shown in Figure 3. Shares will vest on a
straight-line basis for performance between
the levels shown in Figure 3.
Anglo American plc Annual Report 2008
72
Governance
Remuneration report continued
Figure 4: LTIP – FTSE 100 comparison
The Company’s relative TSR compared with the FTSE 100
% proportion of total TSR element vesting
Below the median TSR of the FTSE 100
Equal to the median TSR of the FTSE 100
Equal to the 90th percentile TSR of the FTSE 100
Above the 90th percentile TSR of the FTSE 100
0
20
50
75
Figure 5: LTIP – ROCE targets
Minimum ROCE Target
Maximum ROCE Target
Existing capital employed
45.54%
47.54%
Incremental capital employed
10%
10%
Figure 6: LTIP – ROCE vesting
Below or equal to the Minimum ROCE Target
Equal to or greater than the Maximum ROCE Target
% proportion of ROCE element vesting
0
100
FTSE 100 comparison
The vesting of the other half of the TSR element
of an LTIP award will depend on the Company’s
TSR performance over the performance period
compared with the constituents of the FTSE
100 Index, as outlined in Figure 4. Shares will
vest on a straight-line basis for performance
between the levels shown in Figure 4.
These targets were calibrated such that for
the TSR element of the award there is
approximately a 10% chance of achieving
full vesting and a 25% chance of two-thirds
vesting. These probabilities were assessed by
PwC using the same Monte Carlo model used
for calculating fair values of the LTIP under
IFRS 2 (Share-based Payments). The estimated
average fair value of an award under the
TSR element is 50% of the value of
shares awarded.
Graphs showing the Company’s TSR
performance against the weighted average
of the Sector Index and against the FTSE 100
for the five years from 1 January 2004 to
31 December 2008 can be found in Figure 9
on page 74.
Return on capital employed
Group ROCE is the second performance measure
for LTIP awards. The Committee considers this
to be among the most important factors which
drive sustainable improvements in shareholder
value in a natural resource business, as well
as one of the most important measures of
differentiation in performance in this sector.
The proportion of shares vesting based on
Group ROCE will vary according to the degree
of improvement in the Group’s average
annualised ROCE over the performance period.
Unless certain minimum targets for improvement
in returns (on both capital employed for the
financial year preceding the start of the
performance period (existing capital employed)
and on the additional capital employed during
the performance period (incremental capital
employed)) are met, no shares will vest under
this performance measure. The maximum ROCE
targets are based on stretching levels of return
on the existing capital employed.
The targets for the ROCE element of the
2008 conditional award are shown in Figure 5.
To ensure that the targets do act as an effective
incentive, they are adjusted for factors outside
management’s control, such as movements in
commodity prices, certain foreign exchange
rate effects and capital in progress, as well as
for relevant changes in the composition of
the Group.
The ROCE element of the award vests as
shown in Figure 6.
Shares will vest on a straight-line basis for
performance between the Minimum ROCE
Target and the Maximum ROCE Target.
3.6 Vesting of share incentives in the
event of change of control or
termination of employment
In the event of a change of control of the
Company, the following provisions apply under
the Company’s incentive plans:
• share options granted under the former
ESOS may be exercised irrespective of
whether the applicable performance
conditions have been met;
• the number of shares that vest under the
LTIP will be calculated by reference to the
extent to which the applicable performance
conditions have been met at the time of the
change of control;
• the Bonus Shares awarded under the BSP
will be released, and, to the extent that
the performance condition has been met
Anglo American plc Annual Report 2008
at the time of the change of control,
Enhancement Shares awarded under the
BSP will vest;
• SAYE options may be exercised (to the
extent of savings at the date of exercise);
and
• participants may direct the SIP trustee as to
how to deal with their SIP shares (although
Matching Shares may be forfeited in some
circumstances).
In the event that a director’s employment is
terminated, vesting of any outstanding share
options under the former ESOS is dependent
upon the reasons the contract is terminated.
Performance conditions fall away in the event
of redundancy. However, if the director resigns
voluntarily, then all such options lapse unless
the Committee determines otherwise.
In the case of LTIP interests, if a director
resigns voluntarily, then his/her interests lapse.
If he/she retires with the consent of the
Committee, is made redundant or is considered
by the Committee to be a ‘good leaver’, vesting
at the end of the performance period
is based on the normal performance criteria
and then pro rated for the proportion of the
performance period for which the director served.
In the case of the BSP, if a director ceases
to be employed before the end of the year in
respect of which the annual performance
targets apply, then no award will be made unless
the Committee determines otherwise (taking
into account the proportion of the year for
which the director was an employee of the
Group and of performance to date against the
annual performance targets at the date of
cessation). If a director resigns voluntarily
before the end of the three-year vesting
period, the Bonus Share awards lapse and
awards of Enhancement Shares are forgone.
If a director retires with the consent of the
Committee, is made redundant or is considered
by the Committee to be a ‘good leaver’, Bonus
Shares already awarded will be transferred as
soon as practicable after the date of leaving
and Enhancement Shares will vest at the end
of the performance period (to the extent that
the performance condition has been met).
3.7 Employee Share Ownership Trust
and policy on provision of shares for
incentive schemes
The Group uses an Employee Share Ownership
Trust (the Trust) to acquire and hold shares to
facilitate the operation of its share schemes.
As at 31 December 2008, the Trust held
4,445,244 ordinary shares in the Company,
registered in the name of Greenwood Nominees
Limited. Shares held by the Trust are not voted
at the Company’s general meetings. The Board
also has the necessary authorities to utilise
newly issued or Treasury Shares in connection
with the operation of its share schemes.
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3.8 Pensions
Details of individual pension arrangements are
set out on page 76. Since the inception of the
new UK pensions regime applicable from 6 April
2006, the Committee has been prepared to
consider requests from executive directors that
their contracts be altered for future service, so
that future pension benefits are reduced or
cease to accrue and that a pension allowance
be paid having the same cost to the employer
as the defined contribution benefits forgone.
Similarly, the Committee is prepared to
consider requests from executive directors (as
is the case for employees more generally) that
their contracts be altered for future service, so
that supplementary pension contributions are
made into their defined contribution pension
arrangements, in return for equivalent-cost
reductions in their future basic salaries and/or
in the cash element of any future BSP awards.
3.9 Other benefits
Executive directors are entitled to the provision
of a car allowance, medical insurance, death
and disability insurance, social club membership
and limited personal taxation/financial advice,
in addition to reimbursement of reasonable
business expenses. The provision of these
benefits is considered to be market-competitive.
4. executive shareholding targets
Within five years of their appointment,
executive directors are expected to acquire and
maintain a holding of shares with a value of
two times basic salary in the case of the chief
executive and one times basic salary in the
case of any other executive director.
The Committee takes into consideration
achievement against these targets when
making grants under the Company’s various
long-term incentive plans.
5. external appointments
Executive directors are not permitted to hold
external directorships or offices without the
prior approval of the Board; if approved, they
may each retain the fees payable from one
such appointment. During the year ended
31 December 2008, Cynthia Carroll and
René Médori each retained fees amounting
to £93,000 and £61,000 respectively.
6. Policy on non-executive director
remuneration
Non-executive director remuneration is
approved by the Board as a whole on the
recommendation of the chairman and executive
directors.
The Company’s policy on non-executive
director remuneration is based on the following
key principles:
• Remuneration should be:
– sufficient to attract and retain world-class
non-executive talent;
Figure 7: Executive directors(1)
Cynthia Carroll (chief executive)
René Médori (finance director)
Date of
appointment
15 January 2007
01 June 2005
Next AGM re-election
or election
April 2010
April 2011
(1) At each AGM all those directors who have been in office for three years or more since their election or last re-election shall retire from
office. Details of those retiring by rotation this year are contained in the Notice of AGM.
All non-executive directors have letters
of appointment with the Company for an
initial period of three years from their date
of appointment, subject to reappointment
at the AGM (Figure 8).
9. Historical comparative TSr
performance graphs
The graphs shown in Figure 9 represent the
comparative TSR performance of the Company
from 1 January 2004 to 31 December 2008. In
drawing up these graphs it has been assumed
that all dividends paid have been reinvested.
The first graph shows the Company’s
performance against the performance of the
FTSE 100 Index, chosen as being a broad equity
market index comprising companies of a
comparable size and complexity to Anglo
American. This graph has been produced in
accordance with the requirements of Schedule
7A to the Companies Act 1985.
The second graph shows the Company’s
performance against the weighted Sector Index
comparator group used to measure company
performance for the purposes of the vesting of
LTIP interests conditionally awarded in 2006.
This graph gives an indication of how the
Company is performing against the targets
in place for LTIP interests already granted,
although the specifics of the comparator
companies for each year’s interests may
vary to reflect changes such as mergers and
acquisitions among the Company’s competitors
or changes to the Company’s business mix. TSR
is calculated in US dollars, and the TSR level
shown as at 31 December each year is the
average of the closing daily TSR levels for the
five-day period up to and including that date.
– consistent with recognised best practice
standards for non-executive director
remuneration;
– in the form of cash fees, but with the
flexibility to forgo all or part of such fees
(after deduction of applicable income tax
and social security contributions) to
acquire shares in the Company should the
non-executive director so wish; and
– set by reference to the responsibilities
taken on by the non-executives in chairing
the Board and its committees.
• Non-executive directors may not participate
in the Company’s share incentive schemes
or pension arrangements.
It is the intention that this policy will continue
to apply for 2009 and subsequent years,
subject to ongoing review as appropriate.
The Board reviews non-executive directors’
fees periodically to ensure that they remain
market-competitive. The most recent review,
in February 2009, concluded that no change
should be made to these fees for 2009.
Additional fees are paid to the chairmen of
Board committees and to the senior
independent director (SID). Should non-
executive directors acquire executive board roles
within subsidiaries of the Company, then they
might also receive additional remuneration
from the relevant subsidiaries on account of
these increased responsibilities.
7. chairman’s fees
The chairman’s fees are reviewed
periodically (on a different cycle from the
review of non-executive directors’ fees).
A recommendation is then made to the Board
(in the absence of the chairman) by the
Committee and chief executive, who take
external advice on market comparators.
8. Directors’ service contracts
Cynthia Carroll and René Médori are employed
by Anglo American Services (UK) Ltd (AAS).
It is the Company’s policy that the period
of notice for executive directors will not exceed
12 months and accordingly the employment
contracts of the executive directors are
terminable at 12 months’ notice by either party.
The contracts of executive directors do not
provide for any enhanced payments in the
event of a change of control of the Company,
nor for liquidated damages.
Anglo American plc Annual Report 2008
74
Governance
Remuneration report continued
Figure 8: Non-executive directors(1)(2)
Sir Mark Moody-Stuart (chairman)
Date of
appointment
16 July 2002
Next AGM re-election
or election
April 2009
David Challen (SID and chairman, Audit Committee) 09 September 2002
April 2009
Sir CK Chow
Chris Fay (chairman, S&SD Committee)(3)
Bobby Godsell (retired 15 April 2008)
Sir Rob Margetts
(chairman, Remuneration Committee)(3)
Nicky Oppenheimer
15 April 2008
19 April 1999
18 March 1999
18 March 1999
18 March 1999
Fred Phaswana (chairman, Nomination Committee) 12 June 2002
Mamphela Ramphele
Karel Van Miert
Peter Woicke
25 April 2006
19 March 2002
01 January 2006
April 2011
April 2009
n/a
April 2009
April 2010
April 2009
April 2009
April 2011
April 2009
(1) At each AGM all those directors who have been in office for three years or more since their election or last re-election shall retire from
office. Details of those retiring by rotation this year are contained in the Notice of AGM.
(2) There is no fixed notice period; however, the Company may in accordance with, and subject to, the provisions of the Companies Act
2006, by Ordinary Resolution of which special notice has been given, remove any director from office. The Company’s Articles of
Association also permit the directors, under certain circumstances, to remove a director from office.
Figure 9:
Historical comparative
TSR performance graphs
Anglo American
FTSE 100 Index
400
300
200
100
0
04
05
06
07
08
Anglo American
Sector Index
1,000
800
600
400
200
0
04
05
06
07
08
(3) In accordance with the provisions of the Combined Code, independent non-executive directors who have served longer than nine years are
subject to annual re-election and, accordingly, Chris Fay and Sir Rob Margetts are being proposed for re-election at the AGM in April 2009.
Source: Thomson Datastream
Figure 10: Executive directors’ emoluments(1)
Basic salary
as paid
2007
£000
2008
£000
1,050
660
900
565
Cynthia Carroll(5)
René Médori
Plus: Basic
salary sacrificed
into pension
scheme(2)
2007
£000
Total
basic salary
2007
£000
2008
£000
–
45
1,050
660
900
610
2008
£000
–
–
Annual
performance
bonus
– cash element(2) (3)
2008
£000
319
208
2007
£000
641
407
Benefits
in kind(4)
2007
£000
2008
£000
2008
£000
198
1,126
1,567
55
28
923
Total
2007
£000
2,667
1,045
(1) Subsequent to his retirement from the Board in 2004, Bill Nairn provided consultancy services to Anglo American, receiving £3,000 (2007: £38,000) for the provision of these services during the year.
He resigned his non-executive directorships with listed subsidiaries of the Group in September 2007 and therefore received £nil fees (2007: £15,000) during 2008.
(2) In 2008, René Médori contractually agreed with his employing company that supplementary pension contributions be made into his pension arrangements in return for an equivalent-cost reduction in the cash
element of his BSP award for the 2007 performance period.
(3) The split between the cash and share elements of the Bonus Share Plan is set out on page 70.
(4) Each executive director receives a car allowance and a limited amount of personal taxation/financial advice; they also receive death and disability benefits and medical insurance.
(5) Cynthia Carroll was, in accordance with the terms of her appointment, entitled to be compensated for the tax due on her relocation expenses; this compensation is included in Benefits in kind above.
10. remuneration outcomes
Figure 11: Non-executive directors’ emoluments(1)(2)
during 2008
The information set out in this section and
section 11 has been subject to audit.
10.1 Directors’ emoluments
Executive directors
Figure 10 sets out an analysis of the pre-tax
remuneration during the years ended
31 December 2008 and 2007, including
bonuses but excluding pensions, for individual
directors who held office in the Company
during the year ended 31 December 2008.
Non-executive directors
Figure 11 sets out the fees and other
emoluments paid to non-executive directors
during the year ended 31 December 2008 which
amounted to £1,177,000 (2007: £1,237,000).
10.2 Bonus Share Plan
Details of shares awarded under the BSP to
executive directors during 2008 and their
current holdings are shown in Figure 12.
Anglo American plc Annual Report 2008
Sir Mark Moody-Stuart
David Challen
Sir CK Chow (appointed 15 April 2008)
Chris Fay
Bobby Godsell (retired 15 April 2008)(3)
Sir Rob Margetts
Nicky Oppenheimer(3)
Fred Phaswana(3)
Mamphela Ramphele
Karel Van Miert
Peter Woicke
2008
£000
450
89
46
80
20
84
71
142
65
65
65
Total fees
2007
£000
450
80
–
80
71
93
71
143
65
65
65
(1) Each non-executive director, with the exception of Sir Mark Moody-Stuart, was paid a fee of £65,000 (2007: £65,000) per annum,
and those non-executive directors who act as chairmen of the Audit Committee, Safety and Sustainable Development Committee and
Remuneration Committee were paid an additional sum of £15,000 (2007: £15,000) per annum. The chairman of the Nomination
Committee was paid an additional sum of £7,500 (2007: £7,500) per annum. The senior independent director (SID) received fees of
£13,000 per annum. David Challen replaced Sir Rob Margetts as SID on 15 April 2008 and their additional fees in 2008 for this role
were £9,000 (2007: £nil) and £4,000 (2007: £13,000) respectively.
(2) In addition to the fees reported above for 2007, Ralph Alexander, who resigned on 26 October 2007, received fees of £54,000.
(3) Bobby Godsell and Nicky Oppenheimer received fees for their services as non-executive directors of Anglo American South Africa
Limited amounting to £1,000 (2007: £6,000) and £6,000 (2007: £6,000) respectively, which are included in the above table.
Fred Phaswana is the non-executive chairman of Anglo American South Africa Limited and of Anglo Platinum and received fees for
these services amounting to £69,000 (2007: £71,000), which are included in the above table.
75
Figure 12: Bonus Share Plan
Number
of Bonus
Shares
conditionally
awarded
during
2008(2)
22,731
14,434
Number of
Enhancement
Shares
conditionally
awarded
during
2008
17,048
10,826
Number of
Enhance-
ment
Shares
vested
during
2008
–
–
Number of
Bonus
Shares
vested
during 2008
–
–
Number of
Enhance-
ment
Shares
lapsed
during
2008
–
–
Total
interest at
1 January
2008
–
43,009
BSP interests(1)
Cynthia Carroll(3)
René Médori
Market
price at
date of
2008
award
£
End date of
performance
period for
Enhancement
Shares
awarded
during 2008
28.21 01/ 01/2011 31/12/2010
28.21 01/ 01/2011 31/12/2010
Date of
vesting of
Bonus Shares
awarded
during 2008
Total
interest at
31
December
2008
39,779
68,269
(1) The performance period applicable to each award is three years. Neither Cynthia Carroll nor René Médori received BSP awards in 2005 (in respect of the 2004 financial year) and consequently no shares vested
in 2008.
(2) Where permitted by finance legislation, awards of Bonus Shares under the BSP are granted as forfeitable shares, which would be forfeited in the event that an executive director leaves service, other than as
a ‘good leaver’, before the shares are released.
(3) In accordance with her terms upon joining, Cynthia Carroll was granted 132,718 forfeitable shares, in compensation for long-term incentives forgone at her previous employer. The market price of the shares
at the date of this award was £24.91. These shares are forfeitable in the event that she leaves service before they are released to her. As a result of the share consolidation following the demerger of Mondi,
11,945 shares lapsed and the resultant forfeitable award was 120,773 forfeitable shares, of which 72,464 were released to her in February 2008, 24,155 will be released to her in February 2009 and 24,154
will be released to her in February 2010, subject to her continued employment. These awards are as follows:
Interests
Cynthia Carroll
Shares vested
Cynthia Carroll
Beneficial interest in
forfeitable shares at
31 December 2007
120,773
Number of forfeitable shares Number of forfeitable shares
lapsed during the year
–
vested during the year
72,464
Beneficial interest in
forfeitable shares at
31 December 2008
48,309
Latest
performance
period end date
–
Number of
shares
vested
Date of
conditional
award
Market
price at
date of Market price at
date of vesting
award
£
£
Market value at
date of vesting
£
72,464
21/02/2007
24.91
33.29
2,412,327
3
G
o
v
e
r
n
a
n
c
e
Figure 13: Long Term Incentive Plan
LTIP interests(1)(2)
Cynthia Carroll
René Médori
Total beneficial
interest in LTIP at
1 January 2008
73,538
165,256
Number of shares
conditionally
awarded during
2008
66,985
45,980
Number
of shares
vested
during 2008
–
(65,868)
Number
of shares lapsed
Total beneficial
interest in LTIP at
during 2008 31 December 2008
140,523
145,368
–
–
Latest
performance
period end date
31/12/2010
31/12/2010
(1) The LTIP awards made in 2008 are conditional on two performance conditions as outlined on pages 71 and 72: the first is based on the Company’s TSR relative to a weighted group of international natural
resource companies and to the constituents of the FTSE 100; the second is based on an underlying operating measure which focuses on raising the Company’s ROCE in the medium term. Further details on
the structure of the LTIP, the required level of performance for the 2008 award and how performance against targets is measured can be found on pages 71 and 72. The market price of the shares at the date
of award was £31.35.
(2) The performance period applicable to each award is three years. The performance period relating to the LTIP awards in 2005 (which were granted on 5 April) ended on 31 December 2007. Vesting was subject
to two performance conditions: the first based on the Company’s TSR relative to a weighted group of international natural resource companies and the FTSE 100; with the second based on an underlying
operating measure which focused on improvements in the Company’s ROCE in the medium term. Part of each award was based on the TSR measure and part on the operating measure. These awards are as
follows:
Shares vested
René Médori
Number of
shares vested
Dates of
conditional award
Market price at
date of award £
Market price at
date of vesting £
Money value
at date of vesting £
65,868
05/04/2005
12.54
34.39
2,265,201
In the case of the LTIP awards granted in 2005, the determinants for vesting were 50% on relative TSR and 50% on meeting specified Group ROCE targets. The ROCE targets are a function of targeted
improvement in returns on existing capital employed at the start of the performance period and targeted returns in excess of the cost of capital on new capital investment over that period. The entry-level target
for any LTIP has been the actual return achieved on the capital employed, excluding capital work in progress, in the year immediately preceding the commencement of the performance period. In order to
maintain the effectiveness of the plan in driving long-term performance, the actual returns in the final performance year are adjusted for movements in commodity prices, certain foreign exchange rate effects
(e.g. translation windfalls), capital in progress (to reflect the fact that mines under construction absorb large amounts of capital before producing a return), for relevant changes in the composition of the Group
(e.g. significant acquisitions and disposals) and other one-off factors which would otherwise result in a misleading outcome.
The threshold blended target (i.e. the target on existing and new capital) for the performance period for the 2005 LTIP was 17.80% and the upper blended target 19.80%. The ROCE achieved was 21.71% and
the outcome on this element of the LTIP was thus 100%. On the TSR measure, Anglo American achieved a TSR over the three-year performance period of 178 % which generated a 75% vesting in terms of the
2005 Sector Index Comparator Group and a 150% vesting against the FTSE 100 (being above the 90th percentile). The overall vesting level for the director with a 50% Group ROCE, 25% Sectoral TSR and
25% FTSE 100 TSR split was therefore 106.25 %.
Anglo American plc Annual Report 2008
76
Governance
Remuneration report continued
Figure 14: Directors’ share options
Beneficial
holding at
1 January
2008(1)
951
Granted
–
Exercised
–
Lapsed
–
Beneficial
holding at
31 December
2008
951
Weighted
average option
Earliest date from
price £ which exercisable
1/9/2013
17.97
Latest expiry date
28/2/2014
René Médori
(1) Beneficial holdings comprise SAYE options held in respect of shares by René Médori of 951 options with an option price of £17.97. The market price of the Company’s shares at the end of the year and the
highest and lowest mid-market prices during the period are disclosed in Section 10.4. There are no performance conditions attached to these options.
10.3 Long Term Incentive Plan
Conditional awards of shares were made in
2008 to executive directors under the LTIP as
shown in Figure 13.
10.4 Directors’ share options
No executive share options have been granted
to any director since 2003 (Figure 14).
The highest and lowest mid-market prices
of the Company’s shares during the period
1 January 2008 to 31 December 2008 were
£36.80 and £10.54 respectively. The
mid-market price of the Company’s shares
at 31 December 2008 was £15.46.
10.5 Share Incentive Plan (SIP)
During the year, Cynthia Carroll and René
Médori both purchased 65 shares under the
SIP, in addition to the shares held by them
at 1 January 2008. If these shares are held
for three years, they will be matched by the
Company on a one-for-one basis, conditional
upon the director’s continued employment. In
addition, Cynthia Carroll and René Médori were
each awarded 90 free shares under the SIP in
March 2008. Participants in the SIP are entitled
to receive dividends on their shares.
The information provided in sections 10.2
to 10.5 is a summary. However, full details
of directors’ shareholdings and options are
contained in the Register of Directors’ Interests
of the Company, which are open to inspection.
10.6 Pensions
10.6.1 Directors’ pension arrangements
Cynthia Carroll and René Médori participated in
defined contribution pension arrangements in
terms of their contracts with AAS. In 2008,
normal contributions were payable on their
behalf at the rate of 30% of their basic salaries
payable under these contracts.
Figure 15: Defined contribution pension schemes
Directors
Cynthia Carroll(1)
René Médori(2)
Normal contributions
2007
2008
£000
£000
270
315
198
183
(1) The contributions payable into pension arrangements for Cynthia Carroll amounted in 2008 to £225,000 (2007: £203,000), the
balance being payable in the form of a cash allowance to an equivalent-cost to the employer. This allowance is included in the pension
figure above. It does not form part of basic salary disclosed in the directors’ emoluments table on page 74 nor is it included in
determining awards under the BSP.
(2) René Médori contractually agreed with his employer that supplementary pension contributions should be made into his defined
contribution pension arrangements in return for a reduction in the cash element awarded under the BSP for performance in 2007.
These supplementary contributions of £15,000 (2007: £68,000) are included in his ‘2007 Annual performance bonus – cash element’
amount of £407,000 disclosed in the directors’ emoluments table on page 74.
10.6.2 Defined contribution pension
schemes
The amounts payable into defined contribution
pension schemes by the Group in respect of the
individual directors were as shown in Figure 15.
12. Directors’ share interests
The interests of directors who held office during
the period 1 January 2008 to 31 December
2008 in Ordinary Shares (Shares) of the
Company and its subsidiaries were as shown
in Figures 16 and 17.
10.6.3 Defined benefit pension schemes
No director was eligible in 2008 for membership
of any defined benefit pension scheme.
Figures 18 and 19 outline the changes in
the above interests which occurred between
1 January 2009 and the date of this report.
approval
This directors’ remuneration report has been
approved by the Board of directors of Anglo
American plc.
Signed on behalf of the Board of directors
Sir Rob Margetts
Chairman, Remuneration Committee
19 February 2009
10.6.4 Excess retirement benefits
No person who served as a director of the
Company during or before 2008 has been paid
or received retirement benefits in excess of
the retirement benefits to which he/she was
entitled on the date on which benefits first
became payable (or 31 March 1997,
whichever is later).
11. Sums paid to third parties in
respect of a director’s services
No consideration was paid to or became
receivable by third parties for making available
the services of any person as a director of the
Company, or while a director of the Company,
as a director of any of the Company’s
subsidiary undertakings, or as a director of any
other undertaking of which he/she was (while
a director of the Company) a director by virtue
of the Company’s nomination, or otherwise
in connection with the management of the
Company or any undertaking during the year
to 31 December 2008.
Anglo American plc Annual Report 2008
77
3
G
o
v
e
r
n
a
n
c
e
Figure 16: Shares in Anglo American plc
As at 31 December 2008 (or, if earlier, date of resignation)
Directors
Cynthia Carroll (1)
René Médori(2)
Sir Mark Moody-Stuart(3)
David Challen
Sir CK Chow(4)
Chris Fay
Bobby Godsell(5)
Sir Rob Margetts(6)
Nicky Oppenheimer(7)
Fred Phaswana
Mamphela Ramphele
Karel Van Miert
Peter Woicke
Figure 17: Shares in Anglo American plc
As at 1 January 2008 (or, if later, date of appointment)
Directors
Cynthia Carroll (1)
René Médori(2)
Sir Mark Moody-Stuart(3)
David Challen
Sir CK Chow(4)
Chris Fay
Bobby Godsell(5)
Sir Rob Margetts(6)
Nicky Oppenheimer(7)
Fred Phaswana
Mamphela Ramphele
Karel Van Miert
Peter Woicke
See following page for footnotes.
Beneficial
92
44,819
25,651
1,820
5,500
6,827
83
13,343
33,557,017
12,739
1,487
455
4,440
Beneficial
27
10,952
23,727*
1,820
1,500
6,827
83
12,334*
33,557,016
14,435*
771*
455
2,853*
LTIP
140,523
145,368
BSP
Bonus Shares
BSP Enhancement
Shares
22,731
38,012
17,048
30,257
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Conditional
Other
48,309
–
–
–
–
–
–
–
–
–
–
–
–
LTIP
BSP
Bonus Shares
BSP Enhancement
Shares
Conditional
Other
73,538
165,256
–
23,578
–
120,773
19,431
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
SIP
182
239
–
–
–
–
–
–
–
–
–
–
–
SIP
27
84
–
–
–
–
–
–
–
–
–
–
–
Anglo American plc Annual Report 2008
78
Governance
Remuneration report continued
Figure 18: Shares in Anglo American plc
As at 1 January 2009 (or, if later, date of appointment)
Directors
Cynthia Carroll (1)
René Médori(2)
Sir Mark Moody-Stuart(3)
David Challen
Sir CK Chow(4)
Chris Fay
Sir Rob Margetts(6)
Nicky Oppenheimer(7)
Fred Phaswana
Mamphela Ramphele
Karel Van Miert
Peter Woicke
Beneficial
92
44,819
25,651
1,820
5,500
6,827
13,343
33,557,017
12,739
1,487
455
4,440
Figure 19: Shares in Anglo American plc
As at 19 February 2009 (or, if earlier, date of resignation)
Directors
Cynthia Carroll (1)
René Médori(2)
Sir Mark Moody-Stuart(3)
David Challen
Sir CK Chow(4)
Chris Fay
Sir Rob Margetts(6)
Nicky Oppenheimer(7)
Fred Phaswana
Mamphela Ramphele
Karel Van Miert
Peter Woicke
Beneficial
109
44,836
26,535
1,820
5,500
6,827
13,777
33,557,017
13,610
1,816
455
5,177
LTIP
140,523
145,368
BSP
Bonus Shares
BSP Enhancement
Shares
22,731
38,012
17,048
30,257
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
LTIP
140,523
145,368
BSP
Bonus Shares
BSP Enhancement
Shares
22,731
38,012
17,048
30,257
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Conditional
Other
48,309
–
–
–
–
–
–
–
–
–
–
–
Conditional
Other
48,309
–
–
–
–
–
–
–
–
–
–
–
SIP
182
239
–
–
–
–
–
–
–
–
–
–
SIP
199
256
–
–
–
–
–
–
–
–
–
–
* Shareholdings restated to correct a clerical error in the Annual Report 2007.
(1) Following her appointment as an executive director on 15 January 2007, Cynthia Carroll was granted 132,718 forfeitable shares conditional on her continued employment with the Group and in partial
compensation for long-term incentives forgone at her previous employer. As a result of the share consolidation following the demerger of Mondi, 11,945 shares lapsed and the resultant forfeitable award
was 120,773 forfeitable shares, of which 72,464 were released to her in February 2008, 24,155 will be released to her in February 2009 and 24,154 will be released to her in February 2010, subject to her
continued employment.
(2) René Médori’s beneficial interest arises as a result of his wife’s interest in these Shares.
(3) Sir Mark Moody-Stuart’s beneficial interest includes 11,375 Shares arising as a result of his interest in a family trust.
(4) Sir CK Chow was appointed to the Board at the AGM on 15 April 2008.
(5) Bobby Godsell resigned from the Board at the conclusion of the AGM on 15 April 2008.
(6) Sir Rob Margetts’ beneficial interest arises as a result of his wife’s interest in these Shares.
(7) Nicky Oppenheimer’s beneficial interest in 33,556,927 of these Shares arises as a result of his interest in a discretionary trust which is treated as interested in 27,300,000 Shares in which E Oppenheimer &
Son Holdings Limited is treated as interested and 6,252,377 Shares in which Central Holdings Limited is treated as interested. The 6,252,377 Shares referred to above are Shares held by Debswana
Diamond Company (Pty) Limited, in which Nicky Oppenheimer and Central Holdings Limited have no economic interest. His interest in 4,550 of these Shares arises as a result of his wife’s interest in a trust
which has an indirect economic interest in those Shares.
Anglo American plc Annual Report 2008
79
3
G
o
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a
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c
e
Independent remuneration report review
This letter contains the findings and conclusions
from our review of the processes followed by
the Anglo American Remuneration Committee
(the Committee) during 2008. The review was
undertaken at your request as Chairman of the
Committee in order to provide shareholders
with assurance that the processes followed by
the Committee supported the policy stated in
Anglo American’s Remuneration Report.
It is our view that the processes followed
by the Committee during 2008 fully supported
the Company’s remuneration policy. Please
find below a description of the process that
we followed in coming to our conclusion,
along with our detailed observations and
recommendations.
review process
In order to reach our view we undertook
the following:
• A review of the Committee’s terms of
reference;
conclusions
On the basis of the document review referred
to above and the interviews with the Chairman
and Secretary of the Committee, we are
comfortable that the Committee has discharged
its duties in line with the Policy on Executive
Director Remuneration stated in the Anglo
American Annual Report.
As noted in previous years we consider that
the members of the Committee continue to be
an effective and cohesive team and that the
Committee is an exemplar of best practice.
We understand that consideration has
been given to refreshing the membership of
the Committee in line with the requirements of
the Combined Code and that the composition
of the Committee will continue to be
reviewed periodically.
Further detail regarding the Mercer Review is
included in a letter of this date addressed to the
Committee Chairman which we understand will
be made available on the Company’s website.
• A review of the minutes of the Committee
Yours sincerely,
covering the period from January to
December 2008;
• A review of any briefing materials prepared
for the Committee during the year;
• An interview with Chris Corrin in his
capacity as Secretary to the Committee; and
• An interview with the Chairman of
the Committee.
Mark Hoble
Principal
Mercer Limited
Tower Place
London EC3R 5BU
30 January 2009
Findings
The Committee consists entirely of independent
non-executive directors. It met formally on six
occasions in 2008.
We reviewed the minutes of each meeting
along with any supporting papers or
documentation that was tabled. We found that
the decisions taken by the Committee were in
line with Anglo American’s stated remuneration
policy, namely that levels of reward, whilst
competitive, require demanding performance
conditions to be met which are consistent with
shareholder interests. We are satisfied that the
Committee closely adheres to the stated policy
of setting base pay levels at the median of
comparable companies, that at least 50% of
remuneration for the executive directors is
performance-related and that variable pay is
consistent with business performance, market
conditions and retention of talent.
We are satisfied that the Committee
challenges the proposals put forward by
executive management and adopts a rigorous
and robust approach to decision-making.
We are also satisfied that the Committee
seeks the advice of external consultants on
technical issues where appropriate and gives
careful consideration to the information and
recommendations that it receives, before
reaching an informed decision.
Anglo American plc Annual Report 2008
80
Governance
Statement of directors’ responsibilities
The directors are responsible for preparing the
Annual Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare
financial statements for each financial year.
The directors are required by the IAS Regulation
to prepare the Group financial statements under
International Financial Reporting Standards
(IFRS) as adopted by the European Union. The
Group financial statements are also required by
law to be properly prepared in accordance with
the Companies Act 1985 and Article 4 of the
IAS Regulation.
The directors have elected to prepare the parent
company financial statements in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards and applicable law).
The parent company financial statements are
required by law to give a true and fair view
of the state of affairs of the Company. In
preparing these financial statements, the
directors are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgements and estimates that are
International Accounting Standard 1 requires
reasonable and prudent; and
that IFRS financial statements present fairly
for each financial year the Company’s financial
position, financial performance and cash flows.
This requires the faithful representation of the
effects of transactions, other events and
conditions in accordance with the definitions and
recognition criteria for assets, liabilities, income
and expenses set out in the International
Accounting Standards Board’s ‘Framework for
the preparation and presentation of financial
statements’. In virtually all circumstances, a fair
presentation will be achieved by compliance
with all applicable IFRS. However, directors are
also required to:
• properly select and apply accounting policies;
• present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information; and
• provide additional disclosures when
compliance with the specific requirements
in IFRS are insufficient to enable users to
understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performance.
• state whether applicable UK Accounting
Standards have been followed, subject
to any material departures disclosed and
explained in the financial statements.
The directors are responsible for keeping proper
accounting records that disclose with reasonable
accuracy at any time the financial position of the
Company and enable them to ensure that the
parent company financial statements comply
with the Companies Act 1985. They are also
responsible for safeguarding the assets of the
Company and hence for taking reasonable steps
for the prevention and detection of fraud and
other irregularities.
The directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Anglo American plc Annual Report 2008
Financial statements
contents
Responsibility statements
Independent auditors’ report to the members of Anglo American plc
Principal statements
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of recognised income and expense
Reconciliation from EBITDA to cash inflows from continuing operations
Notes to the financial statements
1 Accounting policies
2 Segmental information
3 Profit for the financial year
4 Operating profit from subsidiaries and joint ventures
5 Exploration expenditure
6 Employee numbers and costs
7 Special items and remeasurements
8 Net finance costs
9 Financial instrument gains and losses
10 Tax on profit on ordinary activities
11 Dividends
12 Earnings per share
13 Intangible assets
14 Tangible assets
15 Environmental rehabilitation trusts
16 Investments in associates
17 Joint ventures
18 Financial asset investments
19 Inventories
20 Trade and other receivables
21 Trade and other payables
22 Financial assets
23 Financial liabilities
24 Financial risk management and derivative financial assets/liabilities
25 Provisions for liabilities and charges
26 Deferred tax
27 Retirement benefits
28 Called-up share capital and share-based payments
29 Reconciliation of changes in equity
30 Consolidated cash flow analysis
31 EBITDA by business segment
3 2 Acquisitions
33 Disposals and demerger of subsidiaries and businesses
34 Disposal groups and non-current assets held for sale
35 Discontinued operations
36 Capital commitments
37 Contingent liabilities and contingent assets
38 Operating leases
39 Related party transactions
40 Group companies
41 Events occurring after end of year
42 Financial statements of the parent company
82
83
84
85
86
87
87
88
92
96
97
98
98
98
100
100
101
101
101
102
103
104
104
105
105
105
106
106
106
106
107
111
111
112
115
122
123
124
125
126
127
128
129
129
130
130
131
132
133
81
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Anglo American plc Annual Report 2008
82
Financial statements
Responsibility statements
for the year ended 31 December 2008
We confirm that to the best of our knowledge:
(a) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of Anglo American plc and the undertakings included in the consolidation taken as a whole; and
(b) the Operating and financial review includes a fair review of the development and performance of the business and the position of Anglo American
plc and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face.
By order of the Board
Cynthia Carroll
Chief executive
René Médori
Finance director
Anglo American plc Annual Report 2008
83
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Independent auditors’ report to the members of Anglo American plc
We have audited the Group and Company financial statements (the
‘Financial statements’) of Anglo American plc for the year ended
31 December 2008 which comprise the Consolidated income statement,
the Consolidated balance sheet, the Consolidated cash flow statement,
the Consolidated statement of recognised income and expense, the
Reconciliation from EBITDA to cash inflows from continuing operations,
the Accounting policies, the related notes 2 to 41 and the Company
balance sheet and related notes. These Financial statements have been
prepared under the accounting policies set out therein. We have also
audited the information in the Remuneration report that is described as
having been audited.
This report is made solely to the Company’s members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditors’ report and
for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the Annual Report and the
Group financial statements in accordance with applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the
European Union, and for preparing the Company financial statements
and the Remuneration report in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice) are set out in the Statement of
directors’ responsibilities.
Our responsibility is to audit the Financial statements and the part of the
Remuneration report to be audited in accordance with relevant legal and
regulatory requirements and International Standards on Auditing (UK
and Ireland).
We report to you our opinion as to whether the Financial statements
give a true and fair view and whether the Financial statements and
the part of the Remuneration report to be audited have been properly
prepared in accordance with the Companies Act 1985 and whether,
in addition, the Group financial statements have been properly prepared
in accordance with Article 4 of the IAS Regulation. We also report to
you whether, in our opinion, the information given in the directors’
report is consistent with the Financial statements. The information given
in the directors’ report includes that specific information presented in the
operating and financial review that is cross referred from the business
review section of the directors’ report.
•
•
•
•
We read the other information contained in the Annual Report as
described in the contents section and consider whether it is consistent
with the audited Financial statements. We consider the implications for
our report if we become aware of any apparent misstatements or material
inconsistencies with the Financial statements. Our responsibilities do not
extend to any further information outside of the Annual Report.
Basis of audit opinion
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant to
the amounts and disclosures in the Financial statements and the part
of the Remuneration report to be audited. It also includes an assessment
of the significant estimates and judgments made by the directors in the
preparation of the Financial statements, and of whether the accounting
policies are appropriate to the Group’s and Company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance that the Financial
statements and the part of the Remuneration report to be audited are
free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the Financial statements
and the part of the Remuneration report to be audited.
Opinion
In our opinion:
•
the Group financial statements give a true and fair view,
in accordance with IFRSs as adopted by the European Union,
of the state of the Group’s affairs as at 31 December 2008
and of its profit for the year then ended;
the Group financial statements have been properly prepared in
accordance with the Companies Act 1985 and Article 4 of the
IAS Regulation;
the Company financial statements give a true and fair view,
in accordance with United Kingdom Generally Accepted Accounting
Practice, of the state of the parent Company’s affairs as at
31 December 2008;
the Company financial statements and the part of the Remuneration
report to be audited have been properly prepared in accordance with
the Companies Act 1985; and
the information given in the directors’ report is consistent with
the Financial statements.
In addition we report to you if, in our opinion, the Company has not kept
proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law
regarding directors’ remuneration and other transactions is not disclosed.
Deloitte LLP
Chartered Accountants and Registered Auditors
London
19 February 2009
We review whether the corporate governance statement reflects the
Company’s compliance with the nine provisions of the 2006 Combined
Code specified for our review by the Listing Rules of the Financial Services
Authority, and we report if it does not. We are not required to consider
whether the board’s statements on internal control cover all risks and
controls, or form an opinion on the effectiveness of the Group’s corporate
governance procedures or its risk and control procedures.
Anglo American plc Annual Report 2008
84
Financial statements
Consolidated income statement
for the year ended 31 December 2008
Before
special items
and
remeasurements
2008
Note
Special
items and
remeasurements
(note 7)
2008
Before
special items
and
remeasurements
2007
Special
items and
remeasurements
(note 7)
2007
25,470
(16,952)
8,518
–
640
9,158
616
(797)
44
(137)
9,021
(2,676)
6,345
318
6,663
868
5,477
34
284
902
5,761
–
(246)
(246)
460
(443)
(229)
–
–
29
29
(200)
(17)
(217)
1,726
1,509
2007
25,470
(17,198)
8,272
460
197
8,929
616
(797)
73
(108)
8,821
(2,693)
6,128
2,044
8,172
(34)
(183)
834
5,294
–
1,726
34
2,010
(34)
1,543
868
7,304
4.04
1.54
5.58
3.99
1.51
5.50
86
1,031
113
1,527
3,718
US$ million
Group revenue
Total operating costs
2
26,311
(18,330)
Operating profit from subsidiaries and joint ventures
Net profit on disposals
Share of net income from associates
2,4
7
2,16
Total profit from operations and associates
2
Investment income
Interest expense
Other financing (losses)/gains
Net finance costs
Profit before tax
Income tax expense
8
10
Profit for the financial year – continuing operations
Profit for the financial year – discontinued operations
35 –
7,981
–
1,303
9,284
589 –
(850)
(191)
(452)
8,832
(2,545)
6,287
–
–
(1,131)
(1,131)
1,009
(190)
(312)
–
51
51
(261)
94
(167)
2008
26,311
(19,461)
6,850
1,009
1,113
8,972
589
(850)
(140)
(401)
8,571
(2,451)
6,120
–
6,287
(167)
6,120
1,050
5,237
–
–
1,050
5,237
(145)
(22)
905
5,215
–
–
–
–
(145)
(22)
905
5,215
4.34
–
4.34
4.29
–
4.29
–
–
130
1,538
–
Profit for the financial year – total Group
Attributable to (continuing operations):
Minority interests
Equity shareholders of the Company
Attributable to (discontinued operations):
Minority interests
Equity shareholders of the Company
Attributable to (total Group):
Minority interests
Equity shareholders of the Company
Earnings per share (US$)
Basic – continuing operations
Basic – discontinued operations
Basic – total Group
Diluted – continuing operations
Diluted – discontinued operations
Diluted – total Group
3
3
3
12
12
12
12
12
12
Dividends
Proposed ordinary dividend per share (US cents)
Proposed ordinary dividend (US$ million)
Ordinary dividends paid during the year per share
(US cents)
Ordinary dividends paid during the year (US$ million)
Dividend in specie (US$ million)
11
11
11
Underlying earnings and underlying earnings per share are set out in note 12.
Anglo American plc Annual Report 2008
Consolidated balance sheet
as at 31 December 2008
US$ million
Intangible assets
Tangible assets
Environmental rehabilitation trusts
Investments in associates
Financial asset investments
Trade and other receivables
Deferred tax assets
Other financial assets (derivatives)
Other non-current assets
Total non-current assets
Inventories
Trade and other receivables
Current tax assets
Other current financial assets (derivatives)
Current financial asset investments
Cash and cash equivalents
Total current assets
Assets classified as held for sale
Total assets
Trade and other payables
Short term borrowings
Short term provisions
Current tax liabilities
Other current financial liabilities (derivatives)
Total current liabilities
Medium and long term borrowings
Retirement benefit obligations
Other financial liabilities (derivatives)
Deferred tax liabilities
Provisions for liabilities and charges
Other non-current liabilities
Total non-current liabilities
Liabilities directly associated with assets classified as held for sale
Total liabilities
Net assets
Equity
Called-up share capital
Share premium account
Other reserves
Retained earnings
Equity attributable to equity shareholders of the Company
Minority interests
Total equity
The financial statements were approved by the Board of directors on 19 February 2009.
Cynthia Carroll
Chief executive
René Médori
Finance director
85
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l
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t
a
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m
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n
t
s
2008
2007
3,006
29,545
244
3,612
3,115
94
258
4 –
167
1,556
23,534
252
3,341
4,780
159
474
105
40,045
34,201
2,702
2,929
471
372
173 –
2,771
9,418
275
2,344
3,572
223
535
3,129
9,803
758
49,738
44,762
(4,770)
(6,784)
(168)
(804)
(1,436)
(3,950)
(5,895)
(142)
(992)
(501)
(13,962)
(11,480)
(7,211)
(401)
(61)
(4,555)
(1,317)
(395) –
(2,404)
(444)
(85)
(4,650)
(1,082)
(13,940)
(80)
(8,665)
(287)
(27,982)
(20,432)
21,756
24,330
738
2,713
(2,057)
18,827
20,221
1,535
21,756
738
2,713
3,155
15,855
22,461
1,869
24,330
Note
13
14
15
16
18
20
26
24
19
20
24
18
30b
34
21
23
25
24
23
27
24
26
25
34
28,29
29
29
29
29
Anglo American plc Annual Report 2008
86
Financial statements
Consolidated cash flow statement
for the year ended 31 December 2008
US$ million
Cash inflows from continuing operations
Dividends from associates
Dividends from financial asset investments
Income tax paid
Net cash inflows from operating activities – continuing operations
Net cash inflows from operating activities – discontinued operations
Net cash inflows from operating activities – total Group
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and cash equivalents acquired(1)
Investment in joint ventures
Investment in associates
Cash flows from derivatives related to acquisitions
Purchase of tangible assets
Purchase of financial asset investments
Investment of advance received in anticipation of disposal(2)
Loans granted
Interest received and other investment income
Disposal and demerger of subsidiaries, net of cash and cash equivalents disposed
Sale of interests in associates
Repayment of loans and capital by associates
Proceeds from disposal of tangible assets
Proceeds from sale of financial asset investments
Other cash flows from derivatives not related to net debt
Other investing activities
Net cash used in investing activities – continuing operations
Net cash inflows from investing activities – discontinued operations
Net cash used in investing activities – total Group
Cash flows from financing activities
Issue of shares by subsidiaries to minority interests
Sale of treasury shares to employees
Purchase of treasury shares
Interest paid
Dividends paid to minority interests
Dividends paid to Company shareholders
Receipt of short term borrowings
Receipt of medium and long term borrowings
Cash flows from derivatives related to net debt
Advance received in anticipation of disposal(2)
Other financing activities
Net cash inflows from/(used in) financing activities – continuing operations
Net cash inflows from financing activities – discontinued operations
Net cash inflows from/(used in) financing activities – total Group
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash movements in the year
Effects of changes in foreign exchange rates
Cash and cash equivalents at end of year
(1) Includes amounts paid to acquire minority interests in subsidiaries.
Note
30a
32
32
33
30c
30c
2008
2007
9,579
609
50
(2,173)
8,065
–
8,065
(5,887)
(609)
(9)
(661) –
(5,146)
(741)
(281) –
(108)
291
468
205 –
42
30
851
(166)
(29)
9,375
275
36
(2,886)
6,800
464
7,264
(772)
(1,114)
(1)
(3,931)
(47)
(108)
228
110
119
111
601
(2)
(30)
(11,750)
(4,836)
–
2,575
(11,750)
(2,261)
62
40
(710)
(741)
(796)
(1,550)
1,432
5,184
380 –
307 –
(66)
29
134
(6,217)
(483)
(728)
(1,538)
2,780
341
21
3,542
(5,661)
–
692
3,542
(4,969)
(143)
34
3,074
(143)
(187)
2,744
2,980
34
60
3,074
(2) Advance received in respect of anticipated disposal of the Group’s 50% interest in the Booysendal joint venture, invested in unlisted preference shares (guaranteed by Nedbank Limited and Nedbank Group Limited)
and an escrow account, pending completion of the transaction. Refer to note 21 for further details.
Anglo American plc Annual Report 2008
87
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Consolidated statement of recognised income and expense
for the year ended 31 December 2008
US$ million
Net (loss)/gain on revaluation of available for sale investments
Net gain on revaluation of available for sale investments – associates
Net loss on cash flow hedges
Net gain/(loss) on cash flow hedges – associates
Net exchange loss on translation of foreign operations
Actuarial net loss on post retirement benefit schemes
Actuarial net loss on post retirement benefit schemes – associates
Deferred tax
Net (expense)/income recognised directly in equity
Transferred to income statement: sale of available for sale investments
Transferred to income statement: cash flow hedges
Transferred to initial carrying amount of hedged items: cash flow hedges
Transferred to income statement: exchange differences on disposal of foreign operations
Tax on items transferred from equity
Total transferred from equity
Profit for the financial year
Total recognised income and expense for the financial year(1)
Attributable to:
Minority interests
Equity shareholders of the Company
(1) Total recognised income and expense for the financial year of nil (2007: $2,026 million) relates to discontinued operations.
2008
(888)
–
(874)
4
(4,514)
(129)
(7)
167
(6,241)
(476)
380
637 –
2
(94) 3
449
6,120
2007
2,326
10
(286)
(41)
(303)
(37)
(6)
(123)
1,540
(298)
315
337
357
8,172
328
10,069
487
(159)
844
9,225
Reconciliation from EBITDA(1) to cash inflows from continuing operations
for the year ended 31 December 2008
US$ million
2008
2007
EBITDA – continuing operations
Share of operating profit of associates before special items and remeasurements
Depreciation and amortisation in associates
Share-based payment charges
Operating fair value gains before special items and remeasurements
Provisions
Increase in inventories
Decrease/(increase) in operating receivables
Increase in operating payables
Other adjustments
Cash inflows from continuing operations
(1) EBITDA is operating profit before special items, remeasurements, depreciation and amortisation in subsidiaries and joint ventures and share of EBITDA of associates.
US$ million
Operating profit, including associates, before special items and remeasurements – continuing operations(2)
Depreciation and amortisation
Subsidiaries and joint ventures
Associates
EBITDA – continuing operations
11,847
(2,104)
(253)
155
(1)
46
(999)
80
896
(88)
9,579
2008
10,085
1,509
253
11,847
11,171
(1,072)
(183)
138
(12)
77
(352)
(389)
53
(56)
9,375
2007
9,590
1,398
183
11,171
(2) ‘Operating profit, including associates, before special items and remeasurements – continuing operations’ is reconciled to ‘Profit for the financial year – continuing operations’ in note 2.
Anglo American plc Annual Report 2008
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Financial statements
Notes to the financial statements
1. Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and International Financial Reporting
Interpretation Committee (IFRIC) interpretations adopted for use by the European
Union, with those parts of the Companies Act 1985 applicable to companies
reporting under IFRS and with the requirements of the UK Disclosure and
Transparency rules of the Financial Services Authority in the United Kingdom as
applicable to periodic financial reporting. The financial statements have been
prepared under the historical cost convention as modified by the recording of
pension assets and liabilities and certain financial instruments. A summary of the
principal Group accounting policies is set out below with an explanation of changes
to previous policies following adoption of new accounting standards and
interpretations in the year.
The details of the elections made on conversion to IFRS were set out in the
31 December 2005 Annual Report.
The preparation of financial statements in conformity with generally accepted
accounting principles, requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
Details of the Group’s significant accounting policies and critical accounting
estimates are set out in the ‘Operating and financial review’ and form part of these
financial statements; these are set out on pages 56 and 57.
Significant areas of estimation uncertainty include:
•
•
•
•
useful economic lives of assets and ore reserves estimates;
impairment of assets;
restoration, rehabilitation and environmental costs; and
retirement benefits.
Adoption of standards and changes in accounting policies
The Group has adopted with effect from 1 January 2008, IFRIC 14 IAS 19 –
The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction and IFRIC 11 IFRS 2 – Group and Treasury Share Transactions.
The Group has also adopted with effect from 1 July 2008, Reclassification of
Financial Assets (Amendments to IAS 39 Financial Instruments: Recognition and
Measurement and IFRS 7 Financial Instruments: Disclosures).
The adoption of these statements has not had a material impact from a Group
perspective.
Discontinued operations
On 2 July 2007 the Paper and Packaging business, Mondi, was demerged from the
Group by way of a dividend in specie paid to shareholders.
On 2 October 2007 the Group sold 67.1 million shares in AngloGold Ashanti
Limited which reduced the Group’s shareholding from 41.6% to 17.3%. The
Group’s representation on the company’s board was also withdrawn at this time.
The remaining investment is accounted for as a financial asset investment.
Both of these operations are presented as discontinued.
Basis of consolidation
The financial statements incorporate a consolidation of the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
31 December each year. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in
the Consolidated income statement from the effective date of acquisition or up to
the effective date of disposal, as appropriate.
Anglo American plc Annual Report 2008
Where necessary, adjustments are made to the results of subsidiaries, joint
ventures and associates to bring their accounting policies into line with those used
by the Group. Intra-group transactions, balances, income and expenses are
eliminated on consolidation, where appropriate.
For non-wholly owned subsidiaries, a share of the profit for the financial year and
net assets is attributed to the minority interests as shown in the Consolidated
income statement and Consolidated balance sheet. Any losses applicable to the
minority interests in excess of the total recognised minority interests are allocated
against the interests of the parent until such time as future profits have exceeded
the losses previously absorbed.
Associates
Associates are investments over which the Group is in a position to exercise
significant influence, but not control or joint control, through participation in the
financial and operating policy decisions of the investee. Typically the Group owns
between 20% and 50% of the voting equity of its associates. Investments in
associates are accounted for using the equity method of accounting except when
classified as held for sale.
The Group’s share of associates’ net income is based on their most recent audited
financial statements or unaudited interim statements drawn up to the Group’s
balance sheet date.
The total carrying values of investments in associates represent the cost of each
investment including the carrying value of goodwill, the share of post acquisition
retained earnings, any other movements in reserves and any long term debt interests
which in substance form part of the Group’s net investment. The carrying values
of associates are reviewed on a regular basis and if an impairment in value has
occurred, it is written off in the period in which those circumstances are identified.
The Group’s share of an associate’s losses in excess of its interest in that associate
is not recognised unless the Group has an obligation to fund such losses.
Joint venture entities
A joint venture entity is an entity in which the Group holds a long term interest and
shares joint control over the strategic, financial and operating decisions with one or
more other venturers under a contractual arrangement.
The Group’s share of the assets, liabilities, income, expenditure and cash flows of
such jointly controlled entities are accounted for using proportionate consolidation.
Proportionate consolidation combines the Group’s share of the results of the joint
venture entity on a line by line basis with similar items in the Group’s financial
statements.
Joint venture operations
The Group has contractual arrangements with other participants to engage in joint
activities other than through a separate entity. The Group includes its assets,
liabilities, expenditure and its share of revenue in such joint venture operations
with similar items in the Group’s financial statements.
Revenue recognition
Revenue is derived principally from the sale of goods and is measured at the fair
value of consideration received or receivable, after deducting discounts, volume
rebates, value added tax and other sales taxes. Sales of concentrate are stated
at their invoiced amount which is net of treatment and refining charges. A sale
is recognised when the significant risks and rewards of ownership have passed.
This is usually when title and insurance risk have passed to the customer and the
goods have been delivered to a contractually agreed location.
Revenue from metal mining activities is based on the payable metal sold.
Sales of certain commodities are ‘provisionally priced’ such that the price is not
settled until a predetermined future date based on the market price at that time.
Revenue on these sales is initially recognised (when the above criteria are met)
at the current market price. ‘Provisionally priced’ sales are marked to market at
each reporting date using the forward price for the period equivalent to that
outlined in the contract. This mark to market adjustment is recorded in revenue.
Revenues from the sale of material by-products are included within revenue.
Where a by-product is not regarded as significant, revenue may be credited against
the cost of sales.
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1. Accounting policies continued
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the shareholders’ rights
to receive payment have been established.
Business combinations and goodwill arising thereon
The identifiable assets, liabilities and contingent liabilities of a subsidiary, joint
venture entity or an associate, which can be measured reliably are recorded at their
provisional fair values at the date of acquisition. Any excess of the cost of acquisition
over the fair values of the identifiable net assets acquired is attributed to goodwill.
Provisional fair values are finalised within 12 months of the acquisition date.
Goodwill in respect of subsidiaries and joint ventures is included within intangible
assets. Goodwill relating to associates is included within the carrying value of
the associate.
Where the fair value of the identifiable net assets acquired exceeds the cost of the
acquisition, the surplus, which represents the discount on the acquisition, is
credited to the income statement in the period of acquisition.
For non-wholly owned subsidiaries, minority interests are initially recorded at the
minorities’ proportion of the fair values of the assets and liabilities recognised
at acquisition.
Tangible assets
Mining properties and leases include the cost of acquiring and developing mining
properties and mineral rights.
Mining properties are depreciated down to their residual values using the unit of
production method based on proven and probable reserves. Depreciation is
charged on new mining ventures from the date that the mining property is capable
of commercial production. When there is little likelihood of a mineral right being
exploited, or the value of the exploitable mineral right has diminished below cost,
a write down to the recoverable amount is charged to the income statement.
For open pit operations the removal of overburden or waste ore is required to
obtain access to the orebody. To the extent that the actual waste material removed
per tonne of ore mined (known as the stripping ratio) is higher than the average
stripping ratio in the early years of a mine’s production phase, the costs associated
with this process are deferred and charged to operating costs using the expected
average stripping ratio over the average life of the area being mined. This reflects
the fact that waste removal is necessary to gain access to the orebody and
therefore realise future economic benefit. The average stripping ratio is calculated
as the number of tonnes of waste material expected to be removed during the life
of mine, per tonne of ore mined. The average life of mine cost per tonne is
calculated as the total expected costs to be incurred to mine the orebody divided
by the number of tonnes expected to be mined. The cost of stripping in any period
will therefore be reflective of the average stripping rates for the orebody as a
whole. However, where the pit profile is such that the actual stripping ratio is
below the average in the early years no deferral takes place as this would result
in recognition of a liability for which there is no obligation. Instead this position
is monitored and when the cumulative calculation reflects a debit balance deferral
commences. The average life of mine stripping ratio and the average life of mine
cost per tonne are recalculated annually in light of additional knowledge and
changes in estimates. Changes in the life of mine stripping ratio are accounted
for prospectively as a change in estimate.
Land and properties in the course of construction are carried at cost, less any
recognised impairment. Depreciation commences when the assets are ready for
their intended use. Buildings and plant and equipment are depreciated down to
their residual values at varying rates, on a straight line basis over their estimated
useful lives or the life of mine, whichever is shorter. Estimated useful lives
normally vary from up to 20 years for items of plant and equipment to a maximum
of 50 years for buildings.
Residual values and estimated useful lives are reviewed at least annually.
Assets held under finance leases are depreciated over the shorter of the lease term
and the estimated useful lives of the assets.
Non-mining licences and other intangibles
Non-mining licences and other intangibles are measured initially at purchase cost
and are amortised on a straight line basis over their estimated useful lives.
Estimated useful lives vary between three and five years.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible
and intangible assets to determine whether there is any indication that those
assets are impaired. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment, if any.
Where the asset does not generate cash flows that are independent from other
assets, the Group estimates the recoverable amount of the cash generating unit
(CGU) to which the asset belongs. An intangible asset with an indefinite useful life
is tested for impairment annually and whenever there is an indication that the
asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated to be less than its
carrying amount, the carrying amount of the asset or CGU is reduced to its
recoverable amount. An impairment is recognised as an expense in the income
statement.
Where an impairment subsequently reverses, the carrying amount of the asset or
CGU is increased to the revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment been recognised for the asset or CGU in prior
years. A reversal of an impairment is recognised as a gain in the income statement.
Impairment of goodwill
Goodwill arising on business combinations is allocated to the group of CGUs that
is expected to benefit from the synergies of the combination and represents the
lowest level at which goodwill is monitored by the Group’s board of directors
for internal management purposes. Details of the CGUs to which goodwill is
allocated are provided in note 13. The recoverable amount of the CGU or group
of CGUs to which goodwill has been allocated is tested for impairment annually
on a consistent date during each financial year, or when events or changes in
circumstances indicate that it may be impaired.
Any impairment is recognised immediately in the income statement. Impairments
of goodwill are not subsequently reversed.
Research and exploration expenditure
Research and exploration expenditure is written off in the year in which it is
incurred. When a decision is taken that a mining property is economically feasible
and should be developed for commercial production, all further directly
attributable, pre-production expenditure is capitalised within tangible assets.
Capitalisation of pre-production expenditure ceases when the mining property is
capable of commercial production.
Capitalised pre-production expenditure prior to commercial production is assessed
for impairment in accordance with the Group accounting policy stated above.
Inventory
Inventory and work in progress are valued at the lower of cost and net realisable
value. The production cost of inventory includes an appropriate proportion of
depreciation and production overheads. Cost is determined on the following bases:
•
•
•
Raw materials and consumables are valued at cost on a first in, first out
(FIFO) basis.
Finished products are valued at raw material cost, labour cost and a proportion
of manufacturing overhead expenses.
Metal and coal stocks are included within finished products and are valued at
average cost.
At precious metals operations that produce ‘joint products’, cost is allocated
between products according to the ratio of contribution of these metals to gross
sales revenues.
Anglo American plc Annual Report 2008
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Financial statements
Notes to the financial statements continued
1. Accounting policies continued
Retirement benefits
The Group operates both defined benefit and defined contribution schemes for its
employees as well as post retirement medical plans. For defined contribution
schemes the amount charged to the income statement is the contributions paid
or payable during the year.
For defined benefit pension and post retirement medical plans, full actuarial
valuations are carried out every three years using the projected unit credit
method and updates are performed for each financial year end. The average
discount rate for the plans’ liabilities is based on AA rated corporate bonds of a
suitable duration and currency or, where there is no ‘deep market’ for such bonds,
based on government bonds. Pension plan assets are measured using year end
market values.
Actuarial gains and losses, which can arise from differences between expected and
actual outcomes or changes in actuarial assumptions, are recognised immediately
in the Consolidated statement of recognised income and expense. Any increase in
the present value of plan liabilities expected to arise from employee service during
the year is charged to operating profit. The expected return on plan assets and the
expected increase during the year in the present value of plan liabilities are
included in investment income and interest expense.
Past service cost is recognised immediately to the extent that the benefits are
already vested and otherwise is amortised on a straight line basis over the average
period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognised past
service costs and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus the present value
of available refunds and reductions in future contributions to the plan.
Tax
The tax expense represents the sum of the current tax charge and the movement
in deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit
differs from net profit as reported in the income statement because it excludes
items of income or expense that are taxable or deductible in other years and it
further excludes items that are not taxable or deductible. The Group’s liability for
current tax is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial statements
and the corresponding tax basis used in the computation of taxable profit and is
accounted for using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary differences arise from the initial
recognition of goodwill or an asset or liability in a transaction (other than in a
business combination) that affects neither the tax profit nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries, joint ventures, and associates, except where the
Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date
and is adjusted to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period
when the liability is settled or the asset is realised. Deferred tax is charged or
credited in the income statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also taken directly to equity.
Deferred tax assets and liabilities are offset when they relate to income taxes
levied by the same taxation authority and the Group intends to settle its current
tax assets and liabilities on a net basis.
Anglo American plc Annual Report 2008
Leases
In addition to lease contracts, other significant contracts are assessed to determine
whether, in substance, they are or contain a lease. This includes assessment of
whether the arrangement is dependent on use of a specific asset and right to use
that asset is conveyed through the contract.
Rental costs under operating leases are charged to the income statement in equal
annual amounts over the lease term.
Assets held under finance leases are recognised as assets of the Group on
inception of the lease at the lower of fair value or the present value of the
minimum lease payments derived by discounting at the interest rate implicit in the
lease. The interest element of the rental is charged against profit so as to produce
a constant periodic rate of interest on the remaining balance of the liability, unless
it is directly attributable to qualifying assets, in which case it is capitalised in
accordance with the Group’s general policy on borrowing costs set out on page 91.
Non-current assets held for sale and discontinued operations
Non-current assets (and disposal groups) are classified as held for sale if their
carrying amount will be recovered through a sale transaction rather than through
continuing use. This condition is regarded as met only when it is highly probable
and the asset (or disposal group) is available for immediate sale in its present
condition. Management must be committed to the sale which should be expected
to qualify for recognition as a completed sale within one year from the date of
classification.
Non-current assets (and disposal groups) are classified as held for sale from the
date these conditions are met and are measured at the lower of carrying amount
and fair value less costs to sell. Any resulting impairment is reported through the
income statement as a special item. On classification as held for sale the assets
are no longer depreciated. Comparative amounts are not adjusted.
Where an asset or business has been sold or is classified as held for sale and is
either a, or part of a, single co-ordinated plan to dispose of either a separate major
line of business or geographical area of operation, or is a subsidiary acquired
exclusively with a view to sale, it is considered to be a ‘discontinued operation’.
Once an operation has been identified as discontinued, its net profit and cash flows
are separately presented from continuing operations. Comparative information is
reclassified so that net profit and cash flows of prior periods are also separately
presented.
Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and environmental costs arises
when environmental disturbance is caused by the development or ongoing
production of a mining property. Such costs arising from the decommissioning of
plant and other site preparation work, discounted to their net present value, are
provided for and capitalised at the start of each project, as soon as the obligation
to incur such costs arises. These costs are charged against profits over the life of
the operation, through the depreciation of the asset and the unwinding of the
discount on the provision. Costs for restoration of subsequent site damage which
is created on an ongoing basis during production are provided for at their net
present values and charged against profits as extraction progresses.
Changes in the measurement of a liability relating to the decommissioning of plant
or other site preparation work that result from changes in the estimated timing or
amount of the cash flow, or a change in the discount rate, are added to, or
deducted from, the cost of the related asset in the current period. If a decrease in
the liability exceeds the carrying amount of the asset, the excess is recognised
immediately in the income statement. If the asset value is increased and there is
an indication that the revised carrying value is not recoverable, an impairment test
is performed in accordance with the accounting policy set out on page 89.
For some South African operations annual contributions are made to dedicated
environmental rehabilitation trusts to fund the estimated cost of rehabilitation
during and at the end of the life of the relevant mine. The Group exercises full
control of these trusts and therefore the trusts are consolidated. The trusts’ assets
are recognised separately on the balance sheet as non-current assets at fair value.
Interest earned on funds invested in the environmental rehabilitation trusts is
accrued on a time proportion basis and recognised as interest income.
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1. Accounting policies continued
Foreign currency transactions and translation
Foreign currency transactions by Group companies are booked in the functional
currencies of the companies at the exchange rate ruling on the date of transaction.
At each balance sheet date, monetary assets and liabilities that are denominated
in foreign currencies are retranslated at the rates prevailing on the balance sheet
date. Gains and losses arising on retranslation are included in profit or loss for the
period and are classified as either operating or financing depending on the nature
of the monetary item giving rise to them.
On consolidation, the assets and liabilities of the Group’s overseas operations are
translated into the presentation currency of the Group at exchange rates prevailing
on the balance sheet date. Income and expense items are translated at the average
exchange rates for the period where these approximate the rates at the dates of
transactions. Exchange differences arising, if any, are classified within equity and
transferred to the Group’s cumulative translation adjustment reserve. Exchange
differences on foreign currency balances with foreign operations for which
settlement is neither planned nor likely to occur and therefore form part of the
Group’s net investment in these foreign operations are offset in the cumulative
translation adjustment reserve.
Cumulative translation differences are recognised as income or expense in the
period in which the operation they relate to is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity
are treated as assets of the foreign entity and translated at the closing rate.
Presentation currency
As permitted by UK company law, the Group results are presented in US dollars,
the currency in which most of its business is conducted.
Borrowing costs
Interest on borrowings directly relating to the financing of qualifying capital
projects under construction is added to the capitalised cost of those projects during
the construction phase, until such time as the assets are substantially ready for
their intended use or sale which, in the case of mining properties, is when they are
capable of commercial production. Where funds have been borrowed specifically to
finance a project, the amount capitalised represents the actual borrowing costs
incurred. Where the funds used to finance a project form part of general
borrowings, the amount capitalised is calculated using a weighted average of rates
applicable to relevant general borrowings of the Group during the period.
All other borrowing costs are recognised in the income statement in the period in
which they are incurred.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based Payment.
In accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that had not vested as
at 1 January 2005.
The Group makes equity settled share-based payments to certain employees,
which are measured at fair value at the date of grant and expensed on a straight
line basis over the vesting period, based on the Group’s estimate of shares
that will eventually vest. For those share schemes with market related vesting
conditions, the fair value is determined using the Monte Carlo method at the grant
date. The fair value of share options issued with non-market vesting conditions
has been calculated using the Black Scholes model. For all other share awards, the
fair value is determined by reference to the market value of the share at the date
of grant. For all share schemes with non-market related vesting conditions, the
likelihood of vesting has been taken into account when determining the relevant
charge. Vesting assumptions are reviewed during each reporting period to ensure
they reflect current expectations.
Black economic empowerment (BEE) transactions
Where the Group disposes of a portion of a South African based subsidiary or
operation to a BEE company at a discount to fair value, the transaction is
considered to be a share-based payment (in line with the principle contained in
South Africa interpretation AC 503 Accounting for Black Economic Empowerment
(BEE) Transactions). The discount provided or value given is calculated in
accordance with IFRS 2 and included in the determination of the profit or loss
on disposal.
Employee benefit trust
The carrying value of shares held by the employee benefit trust are recorded
as treasury shares, shown as a reduction in retained earnings within
shareholders’ equity.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits,
together with short term, highly liquid investments that are readily convertible to
a known amount of cash and that are subject to an insignificant risk of changes
in value. Bank overdrafts are, however, shown within short term borrowings in
current liabilities on the balance sheet. Cash and cash equivalents in the
Consolidated cash flow statement are shown net of overdrafts.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal value
(with the exception of receivables relating to provisionally priced sales – as set
out in the revenue recognition accounting policy) net of appropriate allowance
for estimated irrecoverable amounts. Such allowances are raised based on an
assessment of debtor ageing, past experience or known customer circumstances.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value with
the exception of amounts relating to purchases of provisionally priced concentrate
which are marked to market (using the appropriate forward price) until settled.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Investments
Investments, other than investments in subsidiaries, joint ventures and associates,
are financial asset investments and are initially recorded at fair value. At subsequent
reporting dates, financial assets that the Group has the expressed intention and
ability to hold to maturity (‘held to maturity’) as well as loans and receivables are
measured at amortised cost, less any impairment. The amortisation of any discount
or premium on the acquisition of a held to maturity investment is recognised in the
income statement in each period using the effective interest method.
Investments other than those classified as held to maturity or loans and
receivables are classified as either at fair value through profit or loss (which
includes investments held for trading) or available for sale investments. Both
sub-categories are measured at each reporting date at fair value. Where
investments are held for trading purposes, unrealised gains and losses for the
period are included in the income statement within other gains and losses. For
available for sale investments, unrealised gains and losses are recognised in equity
until the investment is disposed or impaired, at which time the cumulative gain or
loss previously recognised in equity is included in the income statement.
Current financial asset investments consist mainly of bank term deposits and fixed
and floating rate debt securities. Debt securities that are intended to be held to
maturity are recorded on the amortised cost basis. Debt securities that are not
intended to be held to maturity are recorded at the lower of cost and market value.
Provision is raised against these assets when there is doubt over the future
realisation of value as a result of a known event or circumstance.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified and accounted for as debt
or equity according to the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual interest in the assets
of the Group after deducting all of its liabilities.
Bank borrowings
Interest bearing bank loans and overdrafts are recorded at the proceeds received,
net of direct transaction costs. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are accounted for on an accruals
basis and charged to the income statement using the effective interest method.
They are added to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
Anglo American plc Annual Report 2008
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Financial statements
Notes to the financial statements continued
1. Accounting policies continued
Derivative financial instruments and hedge accounting
In order to hedge its exposure to foreign exchange, interest rate and commodity
price risk, the Group enters into forward, option and swap contracts. The Group
does not use derivative financial instruments for speculative purposes. Commodity
based (normal purchase or normal sale) contracts that meet the scope exemption
in IAS 39 are recognised in earnings when they are settled by physical delivery.
All derivatives are held at fair value in the balance sheet within other financial
assets (derivatives) or other financial liabilities (derivatives) and, when designated
as hedges, are classified as current or non-current depending on the maturity of
the derivative. Derivatives that are not designated as hedges are classified as
current, in accordance with IAS 1, even when their actual maturity is expected to
be greater than one year.
Changes in the fair value of derivative financial instruments that are designated
and effective as hedges of future cash flows are recognised directly in equity.
The gain or loss relating to the ineffective portion is recognised immediately in
the income statement. If the cash flow hedge of a firm commitment or forecast
transaction results in the recognition of a non-financial asset or a liability, then,
at the time the asset or liability is recognised, the associated gains or losses on
the derivative that had previously been recognised in equity are included in the
initial measurement of the asset or liability. For hedges that do not result in the
recognition of a non-financial asset or a liability, amounts deferred in equity are
recognised in the income statement in the same period in which the hedged item
affects profit or loss.
For an effective hedge of an exposure to changes in fair value, the hedged item
is adjusted for changes in fair value attributable to the risk being hedged with
the corresponding entry in profit or loss. Gains or losses from remeasuring the
associated derivative are recognised in profit or loss.
The gain or loss on hedging instruments relating to the effective portion of a net
investment hedge is recognised in equity. The ineffective portion is recognised
immediately in the income statement. Gains or losses accumulated in equity are
included in the income statement when the foreign operations are disposed of.
Changes in the fair value of any derivative instruments that are not hedge
accounted are recognised immediately in the income statement and are classified
within other gains and losses or net finance costs depending on the type of risk
the derivative relates to.
New IFRS accounting standards and interpretations not yet adopted
IFRS 8 Operating Segments replaces the segmental reporting requirements of
IAS 14 Segment Reporting. The key change is to align the determination of
segments in the financial statements with that used by management in their
resource allocation decisions. The Group is currently evaluating the impact that
IFRS 8 will have on disclosure.
The amendment to IAS 1 Presentation of Financial Statements released in
September 2007 redefines the primary statements and expands on certain primary
statement disclosures. Once adopted the Group’s primary statements will be
amended to reflect the presentation required.
IFRS 3 Business Combinations revised makes a number of changes to the accounting
for and disclosure of business combinations. Once adopted the Group will account
for subsequent business combinations in accordance with this standard.
IAS 27 Consolidated and Separate Financial Statements revised requires the effects
of all transactions with non-controlling interests to be recorded in equity if there is
no change in control. Once adopted any transaction within this scope will be
accounted for in accordance with the revised standard.
The following new IFRS accounting standards and interpretations not yet adopted
are not expected to have a significant impact on the Group:
Amendments to IFRS 2 Share-based Payment clarifies the definition of vesting
conditions and the accounting treatment of cancellations. Vesting conditions are
defined as either service or performance conditions. Cancellations by employees
are accounted for in the same way as cancellations by the Group.
Amendment to IAS 39 Financial Instruments: Recognition and Measurement
prohibits designating inflation as a hedgeable component of a fixed rate debt
and inclusion of time value in the one-sided hedged risk when designating options
as hedges.
Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation
of Financial Statements – Puttable Financial Instruments and Obligations Arising on
Liquidation addresses the liability versus equity classification of certain puttable
financial instruments and instruments, or components thereof, which impose upon
an entity an obligation to deliver a pro rata share of net assets on liquidation.
Annual improvements to IFRSs amends a number of standards including changes in
presentation, recognition and measurement plus terminology and editorial changes.
Hedge accounting is discontinued when the hedging instrument expires or is sold,
terminated, exercised, revoked, or no longer qualifies for hedge accounting. At that
time, any cumulative gain or loss on the hedging instrument recognised in equity is
retained in equity until the forecast transaction occurs. If a hedge transaction is no
longer expected to occur, the net cumulative gain or loss previously recognised in
equity is included in the income statement for the period.
IFRIC 16 Hedges of a Net Investment in a Foreign Operation clarifies that net
investment hedging applies to differences in functional currency not presentation
currency, the hedging instrument can be held by any entity in a group and how an
entity should determine the amounts to be reclassified from equity to the income
statement for both the hedging instrument and the hedged item.
Derivatives embedded in other financial instruments or non-financial host
contracts are treated as separate derivatives when their risks and characteristics
are not closely related to those of their host contracts and the host contracts
themselves are not carried at fair value with unrealised gains or losses reported
in the income statement.
Derecognition of financial assets and liabilities
Financial assets are derecognised when the rights to receive cash flows from
the asset have expired, the right to receive cash flows has been retained but an
obligation to on-pay them in full without material delay has been assumed or
the right to receive cash flows has been transferred together with substantially
all the risks and rewards of ownership.
Financial liabilities are derecognised when the associated obligation has been
discharged, cancelled or has expired.
2. Segmental information
Based on risks and returns the directors consider the primary reporting format is by
business segment and the secondary reporting format is by geographical segment.
The analysis of associates’ revenue by business segment is provided here for
completeness and consistency. The segmental analysis of associates’ net income
is shown below and the Group’s aggregate investment in those associates required
by IAS 14 Segment Reporting, is set out in note 16.
The Corporate Activities and Unallocated Costs segment includes insurance costs.
Discontinued operations comprise the Paper and Packaging and Gold segments.
The results for discontinued operations are disclosed in note 35.
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2. Segmental information continued
Primary reporting format – by business segment
For information, a segmental analysis of associates’ operating profit is set out below
to show operating profit for the Group’s continuing operations including associates.
Segment result after
special items and
remeasurements(1)
2008
2007
US$ million
Operating profit before Operating profit after
special items and
remeasurements(1)
2008
special items and
remeasurements(1)
2008
2007
2007
2,187
2,153
2,635
4,338
1,242
1,723
137
(162)
1,158
224
407
(157)
Total subsidiaries and joint ventures –
continuing operations
Associates
Platinum
Diamonds
Ferrous Metals and Industries
Coal
Total associates – continuing operations
Operating profit including associates –
continuing operations
7,981
8,518
6,850
8,272
20
508
1,078
498
2,104
62
484
277
249
1,072
20
282
1,078
498
1,878
62
19
277
249
607
10,085
9,590
8,728
8,879
2,635
4,338
1,155
365
474
(157)
US$ million
Segment revenue
2007
2008
Segment result before
special items and
remeasurements(1)
2008
2007
–
–
(345)
6,288
5,878
26,311(2) 25,470(2) 7,981
1,857
1,742
228
(212)
6,673 2,206
2,505
7,129
4,455
4,207
5,319 2,880
4,581
4,371
–
–
Subsidiaries and joint
ventures
Platinum
Base Metals
Ferrous Metals and
Industries
Coal
Industrial Minerals
Exploration
Corporate Activities
and Unallocated Costs
Total subsidiaries and
joint ventures –
continuing operations
Revenue and net income
from associates
Platinum
Diamonds
Ferrous Metals and
Industries
Coal
Industrial Minerals
Total associates –
continuing operations
Total operations
including net income
from associates –
continuing operations
Net profit on disposals – continuing operations
Total profit from operations and associates – continuing
operations
2,394
1,117
7
1,193
694
10
724
329
–
32,964 30,559
39
3,096
116
3,076
13
237
9,284
5,089
1,303
6,653
(292)
(430)
(333)
8,518
6,850
8,272
38
223
189
190
–
13
47
38
(229)
724
329
–
198
190
–
640
1,113
197
9,158
7,963
1,009
8,469
460
8,972
8,929
(1) Segment result is defined as being segment revenue less segment expense; that is operating
profit. In addition ‘Share of net income from associates’ is shown by segment. There are no material
inter-segment transfers or transactions that would affect the segment result. Special items and
remeasurements are set out in note 7.
(2) This represents segment revenue; the Group’s share of associates’ revenue is provided for additional
information.
The table above represents continuing operations only, as disclosed in the income
statement. Total Group revenue including share of revenue from associates and
revenue from discontinued operations is $32,964 million (2007: $35,674 million)
being $32,964 million (2007: $30,559 million) from continuing operations and nil
(2007: $5,115 million) from discontinued operations. See note 35 for summarised
segmental disclosures relating to discontinued operations.
(1) Associates’ operating profit is reconciled to ‘Share of net income from associates’ as follows:
US$ million
Operating profit from associates before special items and remeasurements –
continuing operations
Operating special items and remeasurements
Operating profit from associates after special items and remeasurements –
continuing operations
Net profit on disposals
Net finance costs (before remeasurements)
Financing remeasurements
Income tax expense (after special items and remeasurements)
Minority interests (after special items and remeasurements)
Share of net income from associates – continuing operations
2008
2007
2,104
(226)
1,072
(465)
1,878
18
(147)
(15)
(606)
(15)
1,113
607
24
(85)
(4)
(303)
(42)
197
‘Operating profit, including associates, before special items and remeasurements –
continuing operations’ is reconciled to ‘Profit for the financial year – continuing
operations’ as follows:
US$ million
2008
2007
9,590
10,085
(246)
–
–
3
(141)
(67)
–
(41)
(465)
(465)
(1,131)
(19)
(352)
(615)
(19)
(91)
50
(85)
(226)
(226)
Operating profit, including associates, before special items
and remeasurements – continuing operations
Operating special items and remeasurements
Subsidiaries and joint ventures
Platinum
Base Metals
Ferrous Metals and Industries
Coal
Industrial Minerals
Exploration
Corporate Activities and Unallocated Costs
Associates
Diamonds
Operating profit, including associates, after special items and
remeasurements – continuing operations
Net profit on disposals
Subsidiaries and joint ventures
Associates
Associates’ net finance costs (before remeasurements)
Associates’ financing remeasurements
Associates’ income tax expense (before special items and
remeasurements)
Associates’ tax on special items and remeasurements
Associates’ minority interests (before special items and
remeasurements)
Associates’ minority interests on special items and
remeasurements
Total profit from operations and associates – continuing
8,929
operations
(137)
Net finance costs (before remeasurements)
29
Financing remeasurements
Profit before tax – continuing operations
8,821
Income tax expense (after special items and remeasurements) (2,451) (2,693)
6,128
Profit for the financial year – continuing operations
8,972
(452)
51
8,571
1,009
18
(147)
(15)
460
24
(85)
(4)
(623)
17
(305)
2
6,120
8,728
8,879
(31)
(42)
16
–
Anglo American plc Annual Report 2008
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Financial statements
Notes to the financial statements continued
2. Segmental information continued
Primary segment disclosures for segment assets, liabilities and capital expenditure are as follows:
Segment assets(1)
Segment liabilities(2)
US$ million
Platinum
Base Metals
Ferrous Metals and Industries
Coal
Industrial Minerals
Exploration
Corporate Activities and Unallocated Costs
Continuing operations
Paper and Packaging
Discontinued operations
Total Group
Unallocated assets and liabilities
Investments in associates
Financial asset investments
Deferred tax assets/(liabilities)
Cash and cash equivalents
Other financial assets/(liabilities) – derivatives
Other non-operating assets/(liabilities)
Other provisions
Borrowings
Net assets
2008
9,713
6,783
11,823
5,300
3,935
3
225
37,782
–
–
37,782
3,612
3,288
258
2,771
376
1,651
– –
– –
2007
2008
2007
Net segment assets
2007
2008
9,926
5,897
4,517
4,987
5,370
1
225
30,923
–
–
30,923
3,341 –
4,780 –
474
3,129 –
535
1,580
(668)
(1,309)
(656)
(1,338)
(600)
(7)
(298)
(4,876)
–
–
(4,876)
–
–
(4,555)
–
(1,497)
(2,515)
(544)
(13,995)
(27,982)
(692)
(908)
(530)
(1,003)
(861)
–
(346)
(4,340)
–
–
(4,340)
(4,650)
(586)
(2,264)
(293)
(8,299)
(20,432)
9,045
5,474
11,167
3,962
3,335
(4)
(73)
32,906
–
–
32,906
3,612
3,288
(4,297)
2,771
(1,121)
(864)
(544)
(13,995)
21,756
9,234
4,989
3,987
3,984
4,509
1
(121)
26,583
–
–
26,583
3,341
4,780
(4,176)
3,129
(51)
(684)
(293)
(8,299)
24,330
49,738
44,762
Capital expenditure(3)
2008
3,026
1,874
7,688
1,705
479
1 –
42
14,815
–
–
14,815
2007
2,512
582
2,412
1,052
352
44
6,954
198
198
7,152
(1) Segment assets at 31 December 2008 are operating assets and consist of intangible assets of $3,006 million (2007: $1,556 million), tangible assets of $29,545 million (2007: $23,534 million), biological assets
of $3 million (2007: $3 million), environmental rehabilitation trusts of $244 million (2007: $252 million), inventories of $2,702 million (2007: $2,344 million), retirement benefit assets of $32 million (2007:
$52 million) and operating receivables of $2,250 million (2007: $3,182 million).
(2) Segment liabilities at 31 December 2008 are operating liabilities and consist of non-interest bearing current liabilities of $3,534 million (2007: $2,965 million), restoration and decommissioning provisions of
$941 million (2007: $931 million) and retirement benefit obligations of $401 million (2007: $444 million).
(3) Capital expenditure reflects cash payments and accruals in respect of additions to intangible assets of $24 million (2007: $9 million), tangible assets of $5,726 million (2007: $4,129 million) and additions
resulting from acquisitions of interests in subsidiaries and joint ventures of $9,065 million (2007: $3,014 million).
Other primary segment items included in the income statement are as follows:
US$ million
Platinum
Base Metals
Ferrous Metals
and Industries
Coal
Industrial Minerals
Exploration
Corporate Activities
and Unallocated Costs
Continuing operations
Paper and Packaging
Discontinued operations
Total Group
Depreciation and
amortisation
2007
2008
(Impairments)/
reversals(1)
2007
2008
Other non-
cash expenses(2)
2008
2007
507
340
87
293
259
–
455
344
100
221
258
–
23
1,509
–
–
1,509
20
1,398
234
234
1,632
–
(140)
(6)
(40)
(71)
45
(2)
(214)
–
–
(214)
–
–
–
(153)
(43)
–
–
(196)
(5)
(5)
(201)
7
113
63
110
44
–
54
391
–
–
391
8
94
48
42
55
–
45
292
12
12
304
(1) See operating special items in note 7.
(2) Other non-cash expenses include share-based payment charges, fair value movements relating to
cash settled share-based payment provisions and charges in respect of environmental rehabilitation
provisions and other provisions.
Secondary reporting format – by geographical segment
The Group’s geographical analysis of revenue, allocated based on the country
in which the customer is located, is as follows. The geographical analysis of
the Group’s attributable revenue from associates is provided for completeness
and consistency.
US$ million
Revenue
2007
2008
Subsidiaries and joint ventures
3,009
4,014
South Africa
178
97
Rest of Africa
9,966 10,718
Europe
1,686
1,476
North America
2,545
2,923
South America
Australia and Asia
6,329
8,840
Total subsidiaries and joint ventures – continuing operations 26,311 25,470
Associates
796
South Africa
82
Rest of Africa
1,498
Europe
520
North America
52
South America
2,141
Australia and Asia
Total associates – continuing operations
5,089
Total operations including associates – continuing operations 32,964 30,559
942
225
1,985
896
84
2,521
6,653
Anglo American plc Annual Report 2008
2. Segmental information continued
The Group’s geographical analysis of segment assets, liabilities and capital expenditure, allocated based on where assets and liabilities are located, is as follows:
US$ million
South Africa
Rest of Africa
Europe
North America
South America
Australia and Asia
2008
13,540
364
4,045
629
15,688
3,516
37,782
Segment assets
2007
Segment liabilities
2007
2008
Net segment assets
2007
2008
Capital expenditure
2007
2008
13,879
526
5,658
465
7,212
3,183
30,923
(1,633)
(30)
(910)
(119)
(1,431)
(753)
(4,876)
(1,661)
(32)
(1,057)
(106)
(935)
(549)
(4,340)
11,907
334
3,135
510
14,257
2,763
32,906
12,218
494
4,601
359
6,277
2,634
26,583
3,841
16
474
195
9,035
1,254
14,815
3,303
64
526
151
2,436
672
7,152
Additional disclosure of secondary segmental information by origin (including attributable revenue and operating profit from associates) is as follows:
US$ million
Subsidiaries and joint ventures
South Africa
Rest of Africa
Europe
North America
South America
Australia and Asia
Total subsidiaries and joint ventures – continuing operations
Associates
South Africa
Rest of Africa
Europe
North America
South America
Australia and Asia
Total associates – continuing operations
Total operations including associates – continuing operations
(1) Special items and remeasurements are set out in note 7.
Revenue
2007
12,003
540
4,995
230
6,234
1,468
25,470
1,374
2,160
872
63 4
96
524
5,089
30,559
Operating profit/(loss)
before special items
and remeasurements(1)
Operating profit/(loss)
after special items
and remeasurements(1)
2008
2007
2008
2007
4,468
78
(226)
(33)
2,612
1,082
7,981
639
389
43
373
656
2,104
10,085
4,043
351
425
30
3,697
(28)
8,518
248
342
88
17 4
198
179
1,072
9,590
4,363
78
(460)
(25)
1,787
1,107
6,850
417
385
43
373
656
1,878
8,728
4,044
351
320
31
3,697
(171)
8,272
222
342
88
(422)
198
179
607
8,879
2008
11,708
280
4,545
451
5,825
3,502
26,311
2,078
2,250
260
254
918
893
6,653
32,964
95
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Financial statements
Notes to the financial statements continued
3. Profit for the financial year
The table below analyses the contribution of each business segment to the Group’s operating profit including operating profit from associates for the financial year and
its underlying earnings, which the directors consider to be a useful additional measure of the Group’s performance. A reconciliation from ‘Profit for the financial year
attributable to equity shareholders of the Company’ to ‘Underlying earnings for the financial year’ is given in note 12.
Operating profit including operating profit from associates is reconciled to ‘Underlying earnings’ and ‘Profit for the financial year attributable to equity shareholders of the
Company’ in the table below:
Net
interest,
tax and
minority
interests
(913)
(252)
(1,136)
(1,539)
(659)
(55)
12
(306)
(4,848)
272
Net
interest,
tax and
minority
interests
(1,398)
(245)
(1,238)
(827)
(124)
(90)
12
(203)
(4,113)
19
(242)
(138)
(4,355)
(119)
2008
Total
1,313
256
1,369
1,396
1,581
173
(200)
(651)
5,237
(22)
5,215
2007
Total
1,299
239
3,100
605
490
384
(145)
(495)
5,477
(183)
5,294
284
1,726
2,010
5,761
1,543
7,304
US$ million
Operating
profit/(loss)
before special
items and
Operating
profit/(loss)
after special
items and
Operating
special
items and
remeasurements(1) remeasurements remeasurements(2)
Net
profit on
disposals(2) remeasurements(2)
Financing
special
items and
By business segment
Platinum
Diamonds
Base Metals
Ferrous Metals and Industries
Coal
Industrial Minerals
Exploration
Corporate Activities and Unallocated Costs
Total/Underlying earnings – continuing operations and total Group
Underlying earnings adjustments – continuing operations and total Group
Profit for the financial year attributable to equity shareholders of the Company – continuing operations and total Group
2,226
508
2,505
2,935
2,240
228
(212)
(345)
10,085
19
226
352
615
19
91
(50)
85
1,357
(1,357)
2,207
282
2,153
2,320
2,221
137
(162)
(430)
8,728
–
–
–
–
–
–
–
–
–
1,027
–
–
–
–
–
–
–
–
–
36
(1) Operating profit includes associates’ operating profit which is reconciled to ‘Share of net income from associates’ in note 2.
(2) Special items and remeasurements are set out in note 7.
US$ million
Operating
profit/(loss)
before special
items and
Operating
profit/(loss)
after special
items and
Operating
special
items and
remeasurements(1) remeasurements remeasurements(2)
Net
profit on
disposals(2) remeasurements(2)
Financing
special
items and
By business segment
Platinum
Diamonds
Base Metals
Ferrous Metals and Industries
Coal
Industrial Minerals
Exploration
Corporate Activities and Unallocated Costs
Total/Underlying earnings – continuing operations
Underlying earnings adjustments – continuing operations
Profit for the financial year attributable to equity shareholders of the Company – continuing operations
2,697
484
4,338
1,432
614
474
(157)
(292)
9,590
2,697
19
4,338
1,435
473
407
(157)
(333)
8,879
Total/Underlying earnings – discontinued operations
Underlying earnings adjustments – discontinued operations
Profit for the financial year attributable to equity shareholders of the Company – discontinued operations
291
526
Total/Underlying earnings – total Group
Underlying earnings adjustments – total Group
Profit for the financial year attributable to equity shareholders of the Company – total Group
10,116
9,170
–
465
–
(3)
141
67
–
41
711
(711)
–
–
–
–
–
–
–
–
–
484
235
(235)
–
2,086
946
(946)
–
2,570
–
–
–
–
–
–
–
–
–
25
–
13
–
38
(1) Operating profit includes associates’ operating profit which is reconciled to ‘Share of net income from associates’ in note 2.
(2) Special items and remeasurements for continuing operations are set out in note 7. Special items and remeasurements for discontinued operations are set out in note 35.
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4. Operating profit from subsidiaries and joint ventures
US$ million
Group revenue
Cost of sales(1)
Gross profit – continuing operations
Selling and distribution costs
Administrative expenses
Other gains and losses (see below)
Exploration expenditure (see note 5)
Operating profit from subsidiaries and joint ventures –
continuing operations
2008
2007
26,311 25,470
(15,551) (14,095)
10,760 11,375
(1,631) (1,453)
(1,643) (1,510)
17
(157)
(424)
(212)
6,850
8,272
(1) Includes special items of $352 million (2007: $251 million), see note 7.
US$ million
Operating profit is stated after charging:
Depreciation of tangible assets (see note 14)
Amortisation of intangible assets (see note 13)
Rentals under operating leases
Research and development expenditure
Operating special items(1)
Employee costs (see note 6)
Adjustment due to provisional pricing(2)
2008
2007
1,505
4
210
36
352
3,281
764
1,396
2
183
41
251
3,691
4
Other gains and losses comprise:
Fair value (losses)/gains on derivatives – unrealised
Fair value losses on derivatives relating to capital expenditure –
realised
Other fair value losses on derivatives – realised
Foreign currency gains/(losses) on other monetary items
Gains on valuation of biological assets
On initial recognition
Change in fair value less estimated point of sale costs
Total other gains and losses
(698)
5
(120)
(108)
501
1
–
1
(424)
–
–
(4)
16
–
16
17
(1) For further information on special items and remeasurements see note 7.
(2) Provisionally priced contracts resulted in a total (realised and unrealised) loss in revenue of
$865 million (2007: $38 million gain) and gain in operating costs of $101 million (2007:
$34 million loss).
US$ million
2008
2007
Auditors’ remuneration – continuing operations
Audit
United Kingdom
Overseas
Other services provided by Deloitte(1)
United Kingdom
Overseas
3
7
2
2
3
7
2
2
(1) ‘Other services provided by Deloitte’ includes charges incurred in respect of the interim review.
A more detailed analysis of auditors’ remuneration for the total Group is provided
below:
2008
Paid/
payable
to auditor
(if not
Paid/
payable
to Deloitte Deloitte)
US$ million
Kingdom Overseas
Total Overseas
United
Statutory audit services(1)
Anglo American plc Annual Report paid to the
Company’s auditor
2.2
–
2.2
–
Subsidiary entities – for purposes of Anglo
American plc Annual Report
Subsidiary entities – additional local
statutory requirements
Subsidiary entities – total
Total
Other services(1)
Other services pursuant to legislation
Tax services
Internal audit services
Corporate finance
Other
Total
–
3.6
3.6
0.1
0.6
0.6
2.8
0.6
0.2
–
0.1
0.5
1.4
3.8
7.4
7.4
0.5
0.6
–
–
1.2
2.3
4.4
8.0
10.2
1.1
0.8
–
0.1
1.7
3.7
0.5
0.6
0.6
–
–
0.4
–
0.2
0.6
(1) $0.1 million was paid/payable in respect of the audit of Group pension schemes. Other services to
these schemes amounted to nil.
2007
Paid/
payable
to auditor
(if not
Paid/
payable
to Deloitte Deloitte)
US$ million
Kingdom Overseas
Total Overseas
United
Statutory audit services(1)
Anglo American plc Annual Report paid to the
Company’s auditor
2.2
–
2.2
–
Subsidiary entities – for purposes of Anglo
American plc Annual Report
Subsidiary entities – additional local
statutory requirements
Subsidiary entities – total
Total
Other services(1)
Other services pursuant to legislation
Tax services
Corporate finance
Other
Total
–
4.8
4.8
0.5
0.5
2.7
0.7
0.4
–
0.9
2.0
4.6
9.4
9.4
0.5
0.7
0.1
1.1
2.4
5.1
9.9
12.1
1.2
1.1
0.1
2.0
4.4
0.1
–
0.1
0.1
–
0.1
–
0.2
0.3
(1) $0.1 million was paid/payable in respect of the audit of Group pension schemes. Other services to
these schemes amounted to $0.1 million.
Anglo American plc Annual Report 2008
98
Financial statements
Notes to the financial statements continued
5. Exploration expenditure
Exploration expenditure is stated before special items.
Compensation for key management was as follows:
US$ million
2008
2007
US$ million
By business segment
Platinum
Base Metals
Ferrous Metals and Industries
Coal
2008
2007
36
123
18
35
212
36
77
12
32
157
Salaries and short term employee benefits
Post employment benefits
Termination benefits
National insurance and social security
Share-based payments
Continuing operations
20
2
2
3
11
38
28
4
4
6
9
51
6. Employee numbers and costs
The average number of employees, excluding associates’ employees and including
a proportionate share of employees within joint venture entities, for continuing
operations was:
Thousand
2008(1)
2007(1)
By business segment
Platinum
Base Metals
Ferrous Metals and Industries
Coal
Industrial Minerals
Corporate Activities and Unallocated Costs
Continuing operations
56
9
15
13
11
1
105
53
10
13
12
11
1
100
(1) Amounts relating to discontinued operations are disclosed in note 35. Average number of employees,
excluding associates’ employees and including a proportionate share of employees within joint
venture entities, for continuing and discontinued operations was 105,000 (2007: 116,000).
The average number of employees for continuing operations by principal location
of employment was:
Thousand
South Africa
Rest of Africa
Europe
North America
South America
Australia and Asia
Continuing operations
2008
2007
79
1
10
1
9
5
105
76
1
11
1
7
4
100
Payroll costs in respect of the employees included in the tables above were:
US$ million
Wages and salaries
Social security costs
Defined contribution plans
Defined benefit plans
Other post employment benefits
Share-based payments
Continuing operations
2008(1)
2007(1)
2,774
153
143
49
7
155
3,281
3,145
158
162
65
23
138
3,691
(1) Amounts relating to discontinued operations are disclosed in note 35. Total payroll costs, including
discontinued operations, were $3,281 million (2007: $4,266 million).
In accordance with IAS 24 Related Party Disclosures, key management personnel
are those persons having authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly, including any director
(executive and non-executive) of the Group.
Key management includes members of the Board and the Executive Committee
(ExCo).
Disclosure of directors’ emoluments, pension entitlements, share options and
long term incentive plan awards required by the Companies Act 1985 and those
specified for audit by the Directors’ Remuneration Report Regulations 2002 are
included in the Remuneration report.
7. Special items and remeasurements
‘Special items’ are those items of financial performance that the Group believes
should be separately disclosed on the face of the income statement to assist in
the understanding of the underlying financial performance achieved by the Group.
Such items are material by nature or amount to the year’s results and require
separate disclosure in accordance with IAS 1 paragraph 86. Special items that
relate to the operating performance of the Group are classified as operating special
items and include impairment charges and reversals and other exceptional items,
including significant legal provisions. Non-operating special items include profits
and losses on disposals of investments and businesses.
Remeasurements comprise other items which the Group believes should be
reported separately to aid an understanding of the underlying financial
performance of the Group. This category includes:
(i)
unrealised gains and losses on ‘non-hedge’ derivative instruments open at
year end (in respect of future transactions) and the reversal of the historical
marked to market value of such instruments settled in the year. The full
realised gains or losses are recorded in underlying earnings in the same year
as the underlying transaction for which such instruments provide an
economic, but not formally designated, hedge (if the underlying transaction
is recorded in the balance sheet, e.g. capital expenditure, the realised amount
remains in remeasurements on settlement of the derivative). Such amounts
are classified in the income statement as financing when the underlying
exposure is in respect of net debt and otherwise as operating.
(ii) foreign exchange gains and losses arising on the retranslation of dollar
denominated De Beers preference shares held by a rand functional currency
subsidiary of the Group. This is classified as financing.
(iii) foreign exchange impact arising in US dollar functional currency entities
where tax calculations are generated based on local currency financial
information (and hence deferred tax is susceptible to currency fluctuations).
Such amounts are included within income tax expense.
Subsidiaries and joint ventures’ special items and remeasurements
Operating special items
US$ million
2008
2007
Impairment of Tarmac assets and restructuring costs
Impairment of Lisheen
Impairment of Black Mountain
Impairment of Coal Australia assets
Reversal of impairment of Silangan exploration asset
Costs associated with ‘One Anglo’ initiatives
Provisions for onerous contracts
Costs associated with proposed sale of Tarmac
Other
Total operating special items – continuing operations
Tax
Minority interests
Net total attributable to equity shareholders of the Company –
continuing operations
(91)
(78)
(62)
(40)
45
(72)
(39)
(3)
(12)
(352)
42
1
(43)
–
–
(153)
–
–
–
(55)
–
(251)
60
–
(309)
(191)
Anglo American plc Annual Report 2008
99
4
i
F
i
n
a
n
c
a
l
s
t
a
t
e
m
e
n
t
s
7. Special items and remeasurements continued
Following structural review of the Industrial Minerals business by management
and as a result of trading conditions in the building industry, restructuring and
impairment charges totalling $91 million have been recorded. The impairment
brings the carrying value in line with fair value (less costs to sell).
Impairments have been recorded at Black Mountain and Lisheen resulting from
a reduction in the near term zinc and lead prices. These charges were based on
a value in use assessment of recoverable amount using a pre-tax, risk free
discount rate which equated to a post tax rate of 6%.
Financing remeasurements
US$ million
2008
2007
Foreign exchange gain/(loss) on De Beers preference shares
Unrealised net gain on non-hedge derivatives related to net debt
Total financing remeasurements – continuing operations
Tax
Net total attributable to equity shareholders of the Company –
continuing operations
28
23
51
–
51
(3)
32
29
(5)
24
Costs associated with ‘One Anglo’ initiatives principally comprise advisory costs
associated with procurement, shared services and information systems.
The unrealised net gain on non-hedge derivatives related to net debt principally
comprises an unrealised gain on an embedded interest rate derivative.
Operating remeasurements
US$ million
Net (loss)/gain on non-hedge derivatives
Realised loss on derivatives relating to capital expenditure
Total operating remeasurements – continuing operations
Tax
Minority interests
Net total attributable to equity shareholders of the Company –
continuing operations
2008
2007
(659)
(120)
(779)
252
135
5
–
5
(1)
–
Tax remeasurements
US$ million
2008
2007
Foreign currency translation of deferred tax balances
Minority interests
Net total attributable to equity shareholders of the Company –
continuing operations
(153)
52
(101)
–
–
–
Total special items and remeasurements – continuing operations
(392)
4
US$ million
2008
2007
The net loss on non-hedge derivatives principally related to a net unrealised loss
on derivatives relating to capital expenditure held by Anglo Ferrous Brazil and Los
Bronces and an unrealised loss on an embedded derivative at Minera Loma de
Níquel. Realised losses on derivatives relating to capital expenditure were
principally incurred on foreign currency instruments held by Anglo Ferrous Brazil
and Los Bronces.
Total special items and remeasurements before tax and minority
interests – continuing operations
Tax remeasurements
Tax on special items and remeasurements
Minority interests
Net total special items and remeasurements attributable
to equity shareholders of the Company – continuing operations
(71)
(153)
247
145
243
–
(17)
34
168
260
Profits and (losses) on disposals
US$ million
2008
2007
Associates’ special items and remeasurements
Associates’ operating special items and remeasurements
Disposal of interest in China Shenhua Energy
Disposal of interest in Minera Santa Rosa SCM
Disposal of Northam Platinum Limited
Copebrás property compensation
Disposal of Tarmac Iberia
Disposal of Namakwa Sands(1)
Part disposal of Exxaro (formerly Kumba Resources)
Disposal of remaining interest in Highveld(1)
Part disposal of AngloGold Ashanti
Tongaat-Hulett and Hulamin BBBEE transactions(1)
Tarmac land sales
Disposal of Boschendal Phase II
Other
Net profit on disposals – continuing operations(2)
Tax
Minority interests
Net total attributable to equity shareholders of the Company –
continuing operations
551
142
101
96
65
49
–
–
–
–
–
–
5
1,009
(47)
(43)
–
–
–
–
–
–
234
140
67
(68)
25
21
41
460
(71)
34
919
423
(1) See Disposals and demerger of subsidiaries and businesses note 33.
(2) Includes charges associated with IFRS 2 on broad based black economic empowerment (BBBEE)
and BEE transactions of nil (2007: $68 million).
In April 2008 the Group sold its investment in China Shenhua Energy for
$704 million, generating a profit on disposal of $551 million.
On 20 August 2008 the Group sold its 22.4% interest in Northam Platinum
Limited for cash proceeds of $205 million. This interest was transferred to a
disposal group in September 2007, where it was held until sale.
The sale of the Group’s 40% interest in Minera Santa Rosa SCM was completed in
December 2008 for consideration of $140 million. This investment had a nominal
carrying value.
US$ million
Impairment of De Beers’ businesses
Impairment of De Beers’ Canadian assets
Share of De Beers’ restructuring costs
Share of De Beers’ class action payment and related costs
Unrealised net loss on non-hedge derivatives
Other impairments
Total associates’ operating special items and remeasurements –
continuing operations
Tax
Minority interests
Net total associates’ operating special items and
remeasurements – continuing operations
2008
2007
(79)
–
(37)
(3)
(101)
(6)
(226)
17
16
–
(434)
(15)
(5)
(3)
(8)
(465)
2
–
(193)
(463)
Due to current trading conditions De Beers has recorded an impairment of $176 million
(attributable share $79 million) in respect of certain of its businesses. The
impairment brings the carrying value of these assets in line with fair value (less
costs to sell), determined using discounted cash flow techniques.
Associates’ profits on disposals
US$ million
2008
2007
Disposal of interests in Williamson, Cullinan and Koffiefontein
Disposal of interests in Acerinox
Disposal of interest in Gope Exploration Company
Other
Associates’ net profit on disposals – continuing operations
15
–
–
3
18
–
12
8
4
24
Anglo American plc Annual Report 2008
100
Financial statements
Notes to the financial statements continued
7. Special items and remeasurements continued
Associates’ financing remeasurements
US$ million
2008
2007
Unrealised net loss on non-hedge derivatives related to net debt
Total associates’ financing remeasurements – continuing
operations
(15)
(15)
(4)
(4)
Total associates’ special items and remeasurements – continuing
operations
US$ million
Total associates’ special items and remeasurements before
tax and minority interests – continuing operations
Tax
Minority interests
Net total associates’ special items and remeasurements –
continuing operations
2008
2007
(223)
17
16
(445)
2
–
(190)
(443)
Operating special items and remeasurements – continuing operations
US$ million
Operating special items
Operating remeasurements
Total operating special items and remeasurements (excluding
associates) – continuing operations
Associates’ operating special items
Associates’ operating remeasurements
Total associates’ operating special items and remeasurements –
continuing operations
Total operating special items and remeasurements (including
associates) – continuing operations
2008
2007
(352)
(779)
(251)
5
(1,131)
(246)
(125)
(101)
(462)
(3)
(226)
(465)
(1,357)
(711)
Operating special items (including associates)
Operating remeasurements (including associates)
Total operating special items and remeasurements (including
associates) – continuing operations
(477)
(880)
(713)
2
(1,357)
(711)
US$ million
Before special
items and
After special
items and
remeasurements remeasurements
2008
2008
Before special
items and
After special
items and
remeasurements remeasurements
2007
2007
Investment income
Interest and other
financial income
Expected return on defined
benefit arrangements
Dividend income from
financial asset investments
Total investment income –
continuing operations
Interest expense
Amortisation of discount
relating to provisions
Interest and other
finance expense
Interest on defined benefit
arrangements
Dividend on redeemable
preference shares
324
215
50
589
324
215
50
589
323
257
36
616
323
257
36
616
(33)
(33)
(36)
(36)
(815)
(815)
(565)
(565)
(201)
(201)
(229)
(229)
Less: interest capitalised
Total interest expense –
continuing operations
Other financing (losses)/gains
Net foreign exchange (losses)/
gains
Fair value (losses)/gains on
derivatives
Net fair value gains/(losses) on
fair value hedges
Other net fair value (losses)/
gains
Total other financing (losses)/
gains – continuing operations
Net finance costs –
continuing operations
(16)
(1,065)
215
(16)
(1,065)
215
(9)
(839)
42
(9)
(839)
42
(850)
(850)
(797)
(797)
(173)
(145)
(2)
2
21
2
(18)
(18)
(191)
(140)
59
(1)
(6)
(8)
44
56
12
(6)
11
73
(452)
(401)
(137)
(108)
8. Net finance costs
Finance costs and exchange gains/(losses) are presented net of effective cash
flow hedges for respective interest bearing and foreign currency borrowings.
The weighted average interest rate applicable to interest on general borrowings
capitalised for continuing operations was 12.0% (2007: 11.4%). Financing
remeasurements are set out in note 7.
9. Financial instrument gains and losses
The net gains and losses recorded in the Consolidated income statement, for the
total Group, in respect of financial instruments were as follows:
US$ million
2008
2007
At fair value through profit and loss
Cash flow hedge derivatives(1)
Fair value hedge derivatives
Fair value hedge underlying instruments
Other fair value movements(2)
Loans and receivables
Foreign exchange
Interest income at amortised cost
Available for sale
Net gain transferred on sale
Other income
Other financial liabilities
Foreign exchange
Interest expense at amortised cost
(380)
(181)
183
(1,723)
(315)
(10)
4
198
(121)
287
476
50
108
308
298
36
479
(631)
(152)
(565)
(1) Gains and losses on derivative instruments designated in cash flow hedge relationships which have
been realised in the year have been recorded in Group revenue (2007: Group revenue).
(2) Includes the impact of provisional pricing which is disclosed in note 4.
Anglo American plc Annual Report 2008
101
2008
2007
1,021
1,058
517
–
1,538
469
3,718
5,245
10. Tax on profit on ordinary activities
a) Analysis of charge for the year from continuing operations
11. Dividends
US$ million
US$ million
2008
2007
18
United Kingdom corporation tax at 28.5%
–
United Kingdom corporation tax at 30%
840
South Africa tax
1,155
Other overseas tax
Prior year adjustments
(78)
Current tax (excluding special items and remeasurements tax) 1,935
610
Deferred tax (excluding special items and remeasurements tax)
2,545
Tax (excluding special items and remeasurements tax)
(94)
Special items and remeasurements tax
2,451
Income tax expense – continuing operations
–
163
812
1,259
(1)
2,233
443
2,676
17
2,693
b) Factors affecting tax charge for the year
The effective tax rate for the year of 28.6% (2007: 30.5%) is approximately equal
to the applicable standard rate of corporation tax for the year ended 31 December
2008 in the United Kingdom (28.5%) (2007: 30%). The reconciling items are:
Final ordinary paid – 86 US cents per ordinary share
(2007: 75 US cents)
Interim ordinary paid – 44 US cents per ordinary share
(2007: 38 US cents)
Interim dividend paid – in specie(1)
(1) In specie dividend relates to the Mondi demerger. See Disposals and demerger of subsidiaries and
businesses note 33.
The Board has decided to suspend dividend payments.
As stated in note 28, the employee benefit trust has waived the right to receive
dividends on the shares it holds although the waiver was temporarily suspended in
respect of the Mondi demerger dividend in specie. Immediately after the dividend
was paid, the waiver was reinstated.
US$ million
2008
2007(1)
12. Earnings per share
Profit on ordinary activities before tax – continuing operations 8,571
Tax on profit on ordinary activities calculated at
United Kingdom corporation tax rate of 28.5%
Tax on profit on ordinary activities calculated at
United Kingdom corporation tax rate of 30%
2,443
–
8,821
–
2,646
Tax effect of share of net income from associates
(317)
(59)
Tax effects of:
Special items and remeasurements
Operating special items and remeasurements
Profits and losses on disposals and financing remeasurements
Tax remeasurements
Items not taxable/deductible for tax purposes
Exploration expenditure
Non-deductible net foreign exchange loss
Non-deductible net interest expense
Other non-deductible expenses
Other non-taxable income
Temporary difference adjustments
Changes in tax rates
Movements in tax losses
Enhanced tax depreciation
Other temporary differences
Other adjustments
Secondary tax on companies and dividend withholding taxes
Effect of differences between local and UK rates
Prior year adjustments to current tax
Other adjustments
Income tax expense – continuing operations
28
(255)
153
20
28
10
127
(78)
(84)
38
(26)
42
634
(181)
(78)
(53)
2,451
15
(71)
–
19
2
–
83
(41)
12
13
(91)
(14)
644
(517)
(1)
53
2,693
(1) Comparatives have been reclassified to align with current year presentation.
IAS 1 requires income from associates to be presented net of tax on the face of the
income statement. Associates’ tax is therefore not included within the Group’s total tax
charge. Associates’ tax included within ‘Share of net income from associates’ for the
year ended 31 December 2008 is $606 million (2007: $303 million). Excluding
special items and remeasurements this becomes $623 million (2007: $305 million).
The effective rate of tax before special items and remeasurements including share
of associates’ tax for the year ended 31 December 2008 was 33.4%. This was an
increase from the equivalent effective rate of 31.8% in the year ended 31 December
2007. The main reasons for this net increase are tax losses not recognised for
deferred tax purposes and changes in the geographical mix of profits around the
Group, partially offset by changes in statutory tax rates and the impact of prior year
adjustments. In addition, the 2007 rate benefited from the availability of enhanced
tax depreciation on certain assets. In future periods it is expected that the effective
tax rate, including associates’ tax, will remain at or above the UK statutory tax rate.
US$
Continuing Discontinued
operations
operations Group operations
2008
Total Continuing Discontinued
2007
Total
operations Group
Profit for the financial
year attributable to
equity shareholders of
the Company
Basic earnings per share
4.34
Diluted earnings per share 4.29
Headline earnings for
the financial year(1)
Basic earnings per share
3.78
Diluted earnings per share 3.74
Underlying earnings for
the financial year(1)
Basic earnings per share
4.36
Diluted earnings per share 4.31
–
–
–
–
–
–
4.34
4.29
4.04
3.99
1.54
1.51
5.58
5.50
3.78
3.74
4.10
4.04
0.08
0.08
4.18
4.12
4.36
4.31
4.18
4.13
0.22
0.21
4.40
4.34
(1) Basic and diluted earnings per share are shown based on headline earnings, a Johannesburg stock
exchange (JSE Limited) defined performance measure, and underlying earnings, which the directors
consider to be a useful additional measure of the Group’s performance. Both earnings measures are
further explained below.
The calculation of the basic and diluted earnings per share is based on the
following data:
4
i
F
i
n
a
n
c
a
l
s
t
a
t
e
m
e
n
t
s
US$ million (unless
otherwise stated)
Continuing Discontinued
operations
operations Group operations
2008
Total Continuing Discontinued
2007
Total
operations Group
5,215
Basic and diluted earnings
Profit for the financial
year attributable to
equity shareholders
of the Company
Number of shares (million)
Basic number of ordinary
shares outstanding(1)
Effect of dilutive potential
ordinary shares(2)
Share options and awards
Diluted number of ordinary
shares outstanding(1)
–
5,215
5,294
2,010
7,304
1,202
1,309
13
18
1,215
1,327
(1) Basic and diluted number of ordinary shares outstanding represent the weighted average for the year.
The average number of ordinary shares in issue excludes the shares held by the employee benefit
trusts and other Anglo American plc shares held by the Group.
(2) Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
in issue on the assumption of conversion of all potentially dilutive ordinary shares. All outstanding
share options and awards are potentially dilutive and have been included in the calculation of diluted
earnings per share. No instruments are anti-dilutive for the year ended 31 December 2008 (2007: nil).
Anglo American plc Annual Report 2008
102
Financial statements
Notes to the financial statements continued
12. Earnings per share continued
The weighted average number of ordinary shares, and accordingly earnings per
share, of the Group have been impacted by the effect of the share buyback
programme as well as the Anglo American share consolidation which on 2 July
2007 resulted in 100 existing Anglo American ordinary shares being exchanged for
91 new Anglo American ordinary shares.
‘Underlying earnings’ is an alternative earnings measure which the directors believe
provides a clearer picture of the underlying financial performance of the Group’s
operations. Underlying earnings is presented after minority interests and excludes
special items and remeasurements (see note 7). Underlying earnings is distinct
from ‘Headline earnings’, which is a JSE Limited defined performance measure.
The calculation of basic and diluted earnings per share for continuing operations,
based on headline and underlying earnings for continuing operations, uses the
following earnings data:
Continuing operations
Earnings
(US$ million)
2007
2008
Basic earnings
per share (US$)
2007
2008
5,215
209
(27)
(1)
(1,009)
47
43
67
(1)
(2)
Profit for the financial year attributable
to equity shareholders of the Company –
continuing operations
Operating special items
Operating special items – tax
Operating special items – minority interests
Net profit on disposals(1)
Net profit on disposals – tax
Net profit on disposals – minority interests
Associates’ special items
Associates’ special items – tax
Associates’ special items – minority interests
Headline earnings for the financial year(2) –
4,541
continuing operations
Operating special items(3)
143
(15)
Operating special items – tax
779
Operating remeasurements
Operating remeasurements – tax
(252)
Operating remeasurements – minority interests (135)
(51)
Financing remeasurements
–
Financing remeasurements – tax
153
Tax remeasurements
(52)
Tax remeasurements – minority interests
116
Associates’ remeasurements
Associates’ remeasurements – tax
(9)
Associates’ remeasurements – minority interests (9)
Associates’ special items(4)
40
(7)
Associates’ special items – tax
Associates’ special items – minority interests
(5)
IFRS 2 charges on BBBEE and BEE transactions –
Underlying earnings for the financial year –
continuing operations
Underlying earnings for the financial year –
discontinued operations
Underlying earnings for the financial year –
total Group
5,237
5,237
–
5,294
196
(54)
–
(528)
71
(34)
418
–
–
5,363
55
(6)
(5)
1
–
(29)
5
–
–
7
–
–
20
(2)
–
68
4.34
0.17
(0.02)
–
(0.84)
0.04
0.04
0.05
–
–
3.78
0.12
(0.01)
0.65
(0.21)
(0.11)
(0.04)
–
0.12
(0.04)
0.10
(0.01)
(0.01)
0.03
(0.01)
–
–
4.04
0.15
(0.04)
–
(0.40)
0.05
(0.02)
0.32
–
–
4.10
0.04
–
–
–
–
(0.02)
–
–
–
–
–
–
0.01
–
–
0.05
5,477
4.36
4.18
284
–
0.22
5,761
4.36
4.40
The calculation of basic and diluted earnings per share for discontinued operations,
based on headline and underlying earnings for discontinued operations, uses the
following earnings data:
Discontinued operations
Profit for the financial year attributable
to equity shareholders of the Company –
discontinued operations
Operating special items
Operating special items – tax
Financing special items
Financing special items – tax
Net profit on disposals
Net profit on disposals – tax
Associates’ special items
Associates’ special items – tax
Headline earnings for the financial year –
discontinued operations
Operating remeasurements
Operating remeasurements – tax
Financing remeasurements
Associates’ remeasurements
Associates’ remeasurements – tax
Underlying earnings for the financial year –
discontinued operations
13. Intangible assets
Earnings
(US$ million)
2007
2008
Basic earnings
per share (US$)
2007
2008
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,010
13
(2)
2
(8)
(2,079)
165
1
2
104
(3)
1
(2)
204
(20)
284
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.54
0.01
–
–
(0.01)
(1.59)
0.13
–
–
0.08
–
–
–
0.16
(0.02)
0.22
2008
2007
Licences
and other
Licences
and other
US$ million
intangibles Goodwill(1)
Total intangibles Goodwill(1)
Total
Cost
At 1 January
Acquired through business
combinations
Additions
Transfer to assets held
for sale
Disposal of assets
Disposal and demerger
of businesses(2)
Reclassifications
Currency movements
At 31 December
Accumulated amortisation
At 1 January
Charge for the year(3)
Impairments
Disposal and demerger
of businesses(2)
Currency movements
At 31 December
Net book value
15
1,546
1,561
88
2,101
2,189
50
24
1,657
–
1,707
24
–
–
(23)
–
(23)
–
–
3
–
–
51
6
–
(2)
51
9
–
(2)
–
15
(2)
102
–
(15)
(250)
2,915
–
–
(252)
3,017
(78)
–
2
15
(633)
–
23
1,546
(711)
–
25
1,561
5
4
2
–
–
11
91
–
–
–
5
4
2
55
5
–
–
–
–
55
5
–
–
–
–
–
–
11
2,915 3,006
(57)
2
5
10
–
–
–
1,546
(57)
2
5
1,556
(1) Excluding associated IFRS 2 charges on BBBEE and BEE transactions.
(2) Headline earnings for the financial year – total Group was $4,541 million (2007: $5,467 million).
(3) Year ended 31 December 2008 includes costs associated with ‘One Anglo’ initiatives, Tarmac
restructuring and proposed sale of Tarmac as well as provisions for onerous leases. Year ended
31 December 2007 includes costs associated with proposed sale of Tarmac.
(1) The goodwill balances provided are net of cumulative impairment charges of $45 million as at
31 December 2008 (2007: $45 million).
(2) 2007 includes cost of $711 million and accumulated amortisation of $57 million relating to the
demerger of Mondi.
(3) Includes amounts in respect of discontinued operations of nil (2007: $3 million).
(4) Includes restructuring costs and legal settlements.
The increase in goodwill relating to acquisition of subsidiaries represents the
excess of purchase price over the fair value of the net assets, including mining
reserves, of businesses acquired. Further detail is given in note 32.
Anglo American plc Annual Report 2008
13. Intangible assets continued
Impairment tests for goodwill
Goodwill is allocated for impairment testing purposes to cash generating units
(CGUs) which reflect how it is monitored for internal management purposes.
This allocation largely represents the Group’s primary reporting segments set
out below. Any goodwill associated with CGUs subsumed within these primary
segments is not significant when compared to the goodwill of the Group, other
than in Ferrous Metals and Industries where the material components of goodwill
are split out below:
US$ million
Platinum
Base Metals
Ferrous Metals and Industries
Anglo Ferrous Brazil
Other Ferrous Metals and Industries
Coal
Industrial Minerals
2008
230
208
2007
230
162
1,556
73
88
760
2,915
–
75
88
991
1,546
The recoverable amount of a CGU is determined based on a fair value or value in
use calculation as appropriate. Value in use calculations use cash flow projections
based on financial budgets and life of mine or non-mine production plans covering
a five year period that are based on latest forecasts for commodity prices and
exchange rates. Cash flow projections beyond five years are based on life of mine
plans where applicable and internal management forecasts and assume constant
long term real prices for sales revenue.
Cash flow projections are discounted using pre-tax discount rates equivalent
to a real post tax discount rate of 6% (2007: 6%), that have been adjusted for
any risks that are not reflected in the underlying cash flows. Where the
recoverability of goodwill allocated to a CGU is supported by fair value less costs
to sell, market observable data (in the case of listed subsidiaries, market share
price at 31 December of the respective listed entity) or detailed cash flow models
are used.
Expected future cash flows are inherently uncertain and could materially change
over time. They are significantly affected by a number of factors including reserves
and production estimates, together with economic factors such as commodity
prices, discount rates, currency exchange rates, estimates of costs to produce
reserves and future capital expenditure. Management believes that any reasonably
possible change in the key assumptions on which the recoverable amount is based
would not cause the carrying amounts to exceed their recoverable amounts.
The Group acquired a controlling interest in Anglo Ferrous Brazil SA on 5 August
2008 resulting in the recognition of provisionally determined goodwill totalling
$1.6 billion. The recoverable amount of this goodwill has been reviewed with
reference to fair value (less costs to sell) as informed by the market price paid by
the Group (underpinned by a discounted cash flow model which has been updated
to reflect latest available information).
103
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14. Tangible assets
US$ million
Cost
At 1 January 2008
Additions
Acquired through business
combinations
Transfer to assets held for sale
Fair value adjustment
Disposal of assets
Disposal of businesses
Reclassifications(2)
Currency movements
At 31 December 2008
Accumulated depreciation
At 1 January 2008
Charge for the year
Impairments
Transfer to assets held for sale
Disposal of assets
Disposal of businesses
Currency movements
At 31 December 2008
Net book value
At 31 December 2008
At 31 December 2007
Mining
properties Land and Plant and
buildings equipment
and leases
Other(1)
Total
12,652 2,256 12,902
436
47
5,363 33,173
5,726
357 4,886
6,341
(66)
–
(5)
(52)
418
(2,600)
17,124
2,652
353
123
(42)
(2)
(12)
(511)
2,561
73
(16)
3
(14)
(1)
508
–
50
(44)
–
(2,682)
7,358
436
(200)
(118)
53
–
(245)
(182)
(131)
(78)
216 2,048
–
(389) (2,702) (1,466) (7,157)
6,615 38,577
2,175 12,663
653
84
19
–
(8)
–
6,126
964
114
(65)
(166)
(29)
(114) (1,281)
5,663
634
208
104
–
–
(19)
–
9,639
1,505
256
(107)
(195)
(41)
(119) (2,025)
9,032
174
14,563
10,000
1,541
1,603
7,000
6,776
6,441 29,545
5,155 23,534
(1) Other tangible assets include $6,050 million of assets in the course of construction, which are not
depreciated.
(2) Relates mainly to amounts transferred from assets in the course of construction.
US$ million
Mining
properties Land and Plant and
buildings equipment
and leases
Other(1)
Total
9,250
98
Cost
At 1 January 2007
Additions
Acquired through business
combinations
Transfer to assets held for sale
Disposal of assets
Disposal and demerger of businesses(2)
Reclassifications(3)
Currency movements
At 31 December 2007
Accumulated depreciation
At 1 January 2007
Charge for the year (4)
Impairments(5)
Transfer to assets held for sale
Disposal of assets
Disposal and demerger of businesses(2)
Reclassifications
Currency movements
At 31 December 2007
Net book value
At 31 December 2007
At 31 December 2006
2,855
(89)
(12)
–
228
322
12,652
2,136
323
162
(30)
(7)
–
–
68
2,652
10,000
7,114
3,833 19,400
379
56
3,481 35,964
4,129
3,596
21
(19)
(29)
53
(67)
(273)
(1,836) (8,003)
817
596
2,256 12,902
116
114
34
(152)
(20)
2,963
(327)
(334)
(692) (10,531)
67
1,242
5,363 33,173
(1,094)
210
1,151
114
2
(10)
(13)
8,901
1,139
31
(33)
(245)
(627) (3,948)
(23)
304
6,126
–
36
653
278 12,466
1,627
51
203
8
(75)
(2)
(18)
(283)
(153) (4,728)
–
429
9,639
23
21
208
1,603
6,776
2,682 10,499
5,155 23,534
3,203 23,498
(1) Other tangible assets includes $4,850 million of assets in the course of construction, which are not
depreciated.
(2) Includes cost of $9,242 million and accumulated depreciation of $4,381 million relating to the
demerger of Mondi.
(3) Relates mainly to amounts transferred from assets in the course of construction and reclassification
of asset values upon finalisation of Peace River Coal acquisition accounting.
(4) Includes amounts in respect of discontinued operations of $231 million.
(5) Includes amounts in respect of discontinued operations of $5 million.
Anglo American plc Annual Report 2008
104
Financial statements
Notes to the financial statements continued
14. Tangible assets continued
Included in the additions above is $215 million (2007: $42 million) of interest
expense incurred on borrowings funding the construction of qualifying assets
which has been capitalised during the year.
The net book value and depreciation charges relating to assets held under finance
leases comprise:
US$ million
2008
Net book
value
Depreciation
Net book
value
2007
Depreciation
Mining properties and leases
Land and buildings
Plant and equipment
Other
12
34
19
1
66
2
24
5
–
31
18
44
17
1
80
2
13
3
–
18
The net book value of land and buildings comprises:
US$ million
Freehold
Leasehold – long
Leasehold – short (less than 50 years)
2008
2007
1,492
39
10
1,541
1,536
51
16
1,603
15. Environmental rehabilitation trusts
The Group makes voluntary contributions to controlled funds that were established
to meet the cost of some of its restoration and environmental rehabilitation
liabilities, primarily in South Africa.
US$ million
At 1 January
Contributions made
Interest earned
Transfer to assets held for sale
Currency movements
At 31 December
The funds comprise the following investments:
US$ million
Equity
Bonds
Cash
2008
2007
252
36
16
–
(60)
244
197
37
12
(2)
8
252
2008
2007
23
82
139
244
19
85
148
252
These assets are primarily rand denominated. Cash is held in short term fixed
deposits or earns interest at floating inter-bank rates and bonds earn interest at
a weighted average fixed rate of 9% (2007: 11%) and are fixed for an average
period of 10.2 years (2007: 9.5 years). These assets are recorded ‘at fair value
through profit and loss’.
These funds are not available for the general purposes of the Group. All income
from these assets is reinvested to meet specific environmental obligations. These
obligations are included in environmental rehabilitation costs under non-current
provisions (see note 25).
16. Investments in associates
US$ million
2008
2007
At 1 January
Net income from associates(1)
Dividends received(2)
Transfer from subsidiary
Transfer to assets held for sale
Transfer to financial asset investments
Actuarial loss on post retirement benefits
Movement on cash flow hedge reserve
Movement on available for sale reserve
Other equity movements
Acquired
Disposed
Other capital distributions
Repayments of capitalised loans(3)
Reversal of impairment
Currency movements
At 31 December(4)
3,341
1,113
(599)
–
–
–
(7)
4
–
4
9
–
–
–
–
(253)
3,612
4,780
107
(327)
393
(74)
(606)
(6)
12
10
31
2
(957)
(32)
(44)
1
51
3,341
(1) Includes amounts in respect of discontinued operations of nil (2007: $90 million loss).
(2) Dividends received include nil (2007: $52 million) relating to discontinued operations. In addition
$10 million (2007: nil) was received from associates classified as held for sale.
(3) Excludes $43 million (2007: $43 million) redemption by De Beers of preference shares included within
financial asset investments.
(4) The fair value of investments in Tongaat-Hulett and Hulamin at 31 December 2008 are $350 million
(2007: $667 million) and $137 million (2007: $292 million) respectively based on the closing share
prices. With effect from 30 June 2007 the Group began accounting for these investments as
associates under the equity method.
The Group’s total investments in associates comprise:
US$ million
Equity
Loans(1)
Total investments in associates
2008
2007
3,279
333
3,612
2,968
373
3,341
(1) The Group’s total investments in associates include long term debt which in substance forms part of
the Group’s investment. These loans are not repayable in the foreseeable future.
The Group’s share of the summarised financial information of associates is as
follows:
US$ million
2008
2007
Total non-current assets
Total current assets
Total current liabilities
Total non-current liabilities
Group’s share of associates’ net assets
Revenue
Operating costs
18
Net profit on disposals
(147)
Net finance costs
(15)
Financing remeasurements
(606)
Income tax expense
Minority interests
(15)
Group’s share of associates’ net income – continuing operations 1,113
–
Revenue
–
Operating costs
–
Net profit on disposals
–
Net finance costs
–
Financing remeasurements
–
Income tax expense
–
Minority interests
–
Group’s share of associates’ net income – discontinued operations
1,113
Group’s share of associates’ net income – total Group
5,734
5,224
3,003
1,864
(1,267) (1,254)
(3,348) (3,003)
3,341
3,612
6,653
5,089
(4,775) (4,482)
24
(85)
(4)
(303)
(42)
197
1,053
(1,072)
7
(30)
13
(51)
(10)
(90)
107
Anglo American plc Annual Report 2008
105
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16. Investments in associates continued
Segmental information is provided for primary and secondary reporting segments
as follows:
18. Financial asset investments
US$ million
By business segment
Platinum
Diamonds
Ferrous Metals and Industries
Coal
Industrial Minerals
Total continuing operations
Gold
Paper and Packaging
Total discontinued operations
Total Group
US$ million
By geographical segment
South Africa
Rest of Africa
Europe
North America
South America
Australia and Asia
Net income Aggregate investment
2007
2008
2007
2008
13
47
724
329
–
1,113
–
–
–
1,113
38
57
(229) 1,623
1,121
198
809
190
–
2
3,612
197
–
(92)
–
2
–
(90)
3,612
107
57
1,802
778
702
2
3,341
–
–
–
3,341
Aggregate investment
2007
2008
2,264
187
(56)
22
686
509
3,612
1,704
677
98
36
641
185
3,341
The Group’s share of associates’ contingent liabilities incurred jointly by investors
is $166 million (2007: $190 million).
Details of principal associates are set out in note 40.
17. Joint ventures
The Group’s share of the summarised financial information of joint venture entities
that is proportionately consolidated in the Group financial statements is as follows:
US$ million
2008
2007
Total non-current assets
Total current assets
Total current liabilities
Total non-current liabilities
1,288
Group’s share of joint venture entities’ net assets
1,414
Revenue
(779)
Operating costs
12
Net finance costs
(115)
Income tax expense
532
Total continuing operations
–
Revenue
–
Operating costs
–
Net finance costs
–
Income tax expense
Total discontinued operations
–
Group’s share of joint venture entities’ profit for the financial year 532
3,148
1,771
999
415
(358)
(389)
(509) (2,862)
927
1,631
(601)
7
(189)
848
113
(96)
(4)
(4)
9
857
The Group’s share of joint venture entities’ contingent liabilities incurred jointly
with other venturers is $22 million (2007: $19 million) and its share of capital
commitments is $414 million (2007: $457 million).
The Group also holds investments in a number of proportionately consolidated jointly
controlled operations. The Group’s share of joint venture operations’ net assets is
$981 million (2007: $480 million). The Group’s share of joint venture operations’ profit
for the financial year is $554 million (2007: $100 million). The Group’s share of joint
venture operations’ contingent liabilities incurred jointly with other venturers is $98 million
(2007: $113 million) and its share of capital commitments is $83 million (2007: nil).
Details of principal joint ventures are set out in note 40.
US$ million
At 1 January 2008
Additions
Interest receivable
Net advances
Disposals
Disposal of businesses
Reversal of impairments
Movements in fair value
Currency movements
At 31 December 2008
Less: non-current portion
Current portion
Available
for sale
Loans and
receivables investments(1)
Total
938
–
44
153
–
(1)
25
(11)
(213)
935
935
–
4,780
3,842
827
827
44
–
153
–
(626)
(626)
(1)
–
45
20
(888)
(899)
(822) (1,035)
2,353 3,288
3,115
2,180
173
173
(1) Balance at 31 December 2008 principally includes investment in AngloGold Ashanti Limited.
US$ million
At 1 January 2007
Additions
Interest receivable
Net advances
Disposals
Disposal and demerger of businesses
Transfer from investments in associates
Retained investment in Mondi
Movements in fair value
Other movements
Reclassifications
Currency movements
At 31 December 2007
Less: non-current portion
Current portion
Available
Loans and
for sale
receivables investments
404
–
59
53
–
(12)
–
–
–
1
410
23
938
938
–
1,569
42
–
–
(540)
(79)
606
318
2,326
–
(395)
(5)
3,842
3,842
–
Total
1,973
42
59
53
(540)
(91)
606
318
2,326
1
15
18
4,780
4,780
–
No items were classified as ‘At fair value through profit or loss’ or ‘Held to
maturity’ during either year presented.
No provision for impairment is recorded against financial assets classified as
‘Loans and receivables’ (2007: $25 million).
19. Inventories
US$ million
Raw materials and consumables
Work in progress
Finished products
2008
2007
774
843
1,085
2,702
703
812
829
2,344
The cost of inventories recognised as an expense and included in cost of sales
amounted to $12,253 million (2007: $14,585 million), of which nil (2007:
$2,212 million) relates to discontinued operations.
Inventories held at net realisable value amounted to $561 million (2007: $167 million).
The write-down of inventories recognised as an expense and included in cost
of sales amounted to $210 million (net of revaluation of provisionally priced
purchases) (2007: $34 million), of which nil (2007: $7 million) relates to
discontinued operations.
Anglo American plc Annual Report 2008
106
Financial statements
Notes to the financial statements continued
20. Trade and other receivables
2008
22. Financial assets
The carrying amounts and fair values of financial assets are as follows:
US$ million
Trade receivables
Amounts owed by
related parties
Other receivables
Prepayments and
accrued income
Due within Due after
one year
one year
Due within Due after
one year
one year
Total
2007
Total
1,969
57
2,026 3,000
30
3,030
US$ million
13
725
222
2,929
–
33
4
94
13
758
16
420
–
125
16
545
226
3,023
136
3,572
4
159
140
3,731
The historical level of customer default is minimal and as a result the ‘credit quality’
of year end trade receivables which are not past due is considered to be high. Of
the year end trade receivables balance the following were past due at 31 December
(stated after associated impairment provision):
US$ million
Less than 1 month
Between 1-2 months
Between 2-3 months
Greater than 3 months
2008
2007
85
30
10
25
150
232
54
16
35
337
The overdue debtor ageing profile above is typical of the industry in which certain
of the Group’s businesses operate. Given this, existing insurance cover (including
letters of credit from financial institutions) and the nature of the related
counterparties these amounts are considered recoverable.
Total trade receivables are stated net of the following impairment provision:
At fair value through profit and loss
Trade and other receivables(1)
Other financial assets (derivatives)(2)
Designated into fair value hedge
Trade and other receivables(1)
Loans and receivables
Cash and cash equivalents
Trade and other receivables(1)
Financial asset investments
Available for sale investments
Financial asset investments
Total financial assets
(1) Trade and other receivables exclude prepayments.
2008
Estimated Carrying Estimated
fair value
fair value
value
2007
Carrying
value
192
376
192
376
591
535
591
535
–
–
14
14
2,771
2,605
906
2,771
2,605
935
3,129
2,986
918
3,129
2,986
938
2,353
9,203
2,353
3,842
3,842
9,232 12,015 12,035
(2) Derivative instruments are analysed between those which are ‘Held for trading’ and those designated
into hedge relationships in note 24.
The fair values of financial assets represent the market value of quoted
investments and other traded instruments. For non-listed investments and other
non-traded financial assets fair value is calculated using discounted cash flows
with market assumptions, unless carrying value is considered to approximate
fair value.
Financial asset risk exposures are set out in note 24.
At 1 January 2007
Charge for the year
Release of provision
Disposal and demerger of businesses
Uncollectible amounts written off, net of recoveries
Currency movements
At 1 January 2008
Charge for the year
Reclassification
Transfer to assets held for sale
Currency movements
At 31 December 2008
21. Trade and other payables
US$ million
Trade payables
Tax and social security
Other payables(1)
Accruals and deferred income
US$ million
23. Financial liabilities
The carrying amounts and fair values of financial liabilities are as follows:
75
10
(7)
(56)
(3)
3
22
16
14
(2)
(9)
41
US$ million
At fair value through profit and loss
Trade and other payables(1)
Other financial liabilities (derivatives)(2)
Designated into fair value hedge
Trade and other payables(1)
Borrowings
Financial liabilities at amortised cost
Trade and other payables(1)
Borrowings
Total financial liabilities
2008
Estimated Carrying Estimated
fair value
fair value
value
2007
Carrying
value
687
1,497
687
1,497
331
586
331
586
–
2,850
–
2,850
12
2,433
12
2,433
3,480
4,391
4,391
10,658 11,145
5,866
20,083 20,570 12,716 12,708
3,480
5,874
2008
2007
non-current payables.
(1) Trade and other payables exclude tax and social security and deferred income and include other
3,183
74
1,162
351
4,770
2,546
115
868
421
3,950
(2) Derivative instruments are analysed between those which are ‘Held for trading’ and those designated
into hedge relationships in note 24.
The fair value of financial liabilities is determined by reference to quoted market
prices for similar issues, where applicable, otherwise the carrying value
approximates fair value.
Financial liability risk exposures are set out in note 24.
(1) On 20 August 2008 Anglo Platinum received $307 million from a subsidiary of Mvelaphanda Resources
Limited (Mvela) in respect of the anticipated disposal of a 50% interest in the Booysendal joint
venture. These funds have been invested in accordance with the terms of sale and will only be
released to Anglo Platinum upon ministerial approval. At 31 December 2008 an amount of $253
million is included within other payables representing the obligation to repay the funds failing the
receipt of such approval.
Anglo American plc Annual Report 2008
23. Financial liabilities continued
An analysis of borrowings is set out below:
US$ million
Due within Due after
one year
one year
2008
Due within Due after
one year
one year
Total
2007
Total
346
678
1,024
146
544
690
Secured(1)
Bank loans and overdrafts
Obligations under
finance leases(2)
Other loans
Unsecured
Bonds issued under
EMTN programme(3)
154
Bank loans and overdrafts 5,114
Commercial paper
1,116
Obligations under
finance leases(2)
Other loans
Total
12
–
358
56
–
734
68
–
1,092
2
–
148
2,679
3,335
–
2,833
8,449
1,116
1,461
2,383
1,895
4
38
6,426
6,784
13
450
17
488
6,477 12,903
7,211 13,995
3
5
5,747
5,895
6
467
1,755
2,404
76
29
649
800
482
–
78
29
797
2,261
2,865
1,895
9
472
7,502
8,299
(1) Assets with a book value of $954 million (2007: $719 million) have been pledged as security, of
which $663 million (2007: $431 million) are tangible assets, $160 million (2007: $149 million) are
financial assets and $131 million (2007: $139 million) are inventories. Of these assets $284 million
(2007: $22 million) were pledged in respect of project financing arrangements.
(2) The minimum lease payments under finance leases fall due as follows:
US$ million
Within one year
Greater than one year, less than five years
Greater than five years
Future finance charges on finance leases
Present value of finance lease liabilities
2008
24
43
86
153
(68)
85
2007
13
42
116
171
(84)
87
(3) The Group issued $2,404 million of bonds under the EMTN programme in 2008 (2007: $9 million).
All notes are guaranteed by Anglo American plc.
24. Financial risk management and derivative financial assets/
liabilities
The Group is exposed in varying degrees to a variety of financial instrument
related risks. The Board has approved and monitors the risk management
processes, inclusive of documented treasury policies, counterparty limits,
controlling and reporting structures. The risk management processes of the
Group’s independently listed subsidiaries are in line with the Group’s own policy.
The types of risk exposure, the way in which such exposure is managed and
quantification of the level of exposure in the balance sheet at year end is provided
as follows (subcategorised into credit risk, liquidity risk and market risk).
Credit risk
The Group’s principal financial assets are bank balances and cash, trade and other
receivables and investments. The Group’s maximum exposure to credit risk is as
follows:
US$ million
Cash and cash equivalents
Trade and other receivables
Financial asset investments
Other financial assets (derivatives)
Other guarantees and loan facilities
2008
2007
2,771
2,797
1,108
376
239
7,291
3,129
3,591
938
535
12
8,205
The Group limits exposure to credit risk on liquid funds and derivative financial
instruments through adherence to a policy of:
•
Where possible acceptable minimum counterparty credit ratings assigned by
international credit-rating agencies (including long term ratings of A- (Standard
& Poor’s), A3 (Moody’s) or A- (Fitch) or better).
107
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•
•
Daily counterparty settlement limits (which are not to exceed three times
the credit limit for an individual bank).
Exposure diversification (the aggregate group exposure to key relationship
counterparties cannot exceed 5% of the counterparty’s shareholders’ equity).
Given the diverse nature of the Group’s operations (both in relation to commodity
markets and geographically), together with insurance cover (including letters
of credit from financial institutions), it does not have significant concentration of
credit risk in respect of trade receivables, with exposure spread over a large
number of customers.
An allowance for impairment for trade receivables is made where there is an
identified loss event, which based on previous experience, is evidence of a
reduction in the recoverability of the cash flows. Detail of the credit quality of trade
receivables and the associated provision for impairment is disclosed in note 20.
Liquidity risk
The Group ensures that there are sufficient committed loan facilities (including
refinancing, where necessary) in order to meet short term business requirements,
after taking into account cash flows from operations and its holding of cash and
cash equivalents, as well as any group distribution restrictions that exist.
Non-wholly owned subsidiaries, where possible, will maintain their own financing
and funding requirements. In most cases the financing will be non-recourse to the
Group. In addition, certain projects are financed by means of limited recourse
project finance, if appropriate.
The expected undiscounted cash flows of the Group’s financial liabilities (including
associated derivatives), by remaining contractual maturity, based on conditions
existing at the balance sheet date are as follows:
US$ million
31 December 2008
Non-derivative financial
liabilities
Net settled derivatives
31 December 2007
Non-derivative financial
liabilities
Gross settled derivatives
Receive leg
Pay leg
Net settled derivatives
US$ million
31 December 2008
Non-derivative financial
liabilities
Net settled derivatives
31 December 2007
Non-derivative financial
liabilities
Gross settled derivatives
Receive leg
Pay leg
Net settled derivatives
Fixed
interest
Within 1 year
Capital
Floating
interest repayment
Fixed
interest
1-2 years
Capital
Floating
interest repayment
(191)
156
(35)
(405) (11,385)
8
(499) (11,377)
(94)
(179)
164
(15)
(245)
(101)
(346)
(732)
(53)
(785)
(144)
(188) (9,643)
(87)
(95)
(440)
–
–
102
(42)
7
–
(1)
–
(118)
291
(306) (9,346)
–
–
52
(35)
–
–
(53)
(148)
–
–
(9)
(449)
Fixed
interest
2-5 years
Floating
Capital
interest repayment
Fixed
interest
+5 years
Floating
Capital
interest repayment
(472)
443
(29)
(422) (4,348)
(304)
9
(726) (4,339)
(345)
345
–
(114) (2,412)
(195)
(400)
(309) (2,812)
(177)
(220) (1,158)
(47)
(171)
(776)
–
–
130
(47)
–
–
–
–
(133)
112
(353) (1,046)
–
–
35
(12)
–
–
(35)
(206)
–
–
–
(776)
Anglo American plc Annual Report 2008
108
Financial statements
Notes to the financial statements continued
24. Financial risk management and derivative financial assets/
liabilities continued
The Group had the following undrawn committed borrowing facilities at
31 December:
US$ million
Expiry date
Within one year(1)
Greater than one year, less than two years
Greater than two years, less than five years
Greater than five years
2008
2007
2,994
5
3,081
25
6,105
2,877
322
3,865
–
7,064
(1) Includes undrawn rand facilities equivalent to $1 billion in respect of a series of facilities with 364 day
maturities which roll automatically on a daily basis, unless notice is served.
In addition, the Group has dedicated, committed financing facilities for Minas-Rio
and Barro Alto totalling $1.6 billion, subject to certain disbursement conditions.
The Group also had a $2 billion European Commercial Paper Programme
established in October 2004. Drawings of $304 million were made at 31 December
2008 (2007: $1,090 million). The Group also had a Rand 20 billion South African
Medium Term Note Programme, established in November 2007, on which total
drawings of Rand 7,273 million ($782 million) (2007: nil) were made at
31 December 2008. Of this drawing Rand 7,074 million ($761 million) was
issued as commercial paper.
Market risk
This is the risk that financial instrument fair values will fluctuate owing to changes
in market prices. The significant market risks to which the Group is exposed are
foreign exchange risk, interest rate risk and commodity price risk.
Foreign exchange risk
As a global business, the Group is exposed to many currencies principally as a result
of non-US dollar operating costs incurred by US dollar functional currency companies
and to a lesser extent, from non-US dollar revenues. The Group’s policy is generally
not to hedge such exposures as hedging is not deemed appropriate given the
diversified nature of the Group though exceptions can be approved by the Board.
In addition, currency exposures exist in respect of non-US dollar approved
capital expenditure projects. The Group’s policy is that such exposure can be
hedged at management’s discretion, within certain pre-defined limits (or with
Board approval).
The exposure of the Group’s financial assets and liabilities (excluding intra-group
loan balances) to currency risk is as follows:
US$ million
At 31 December 2008
US$
Rand
Sterling
Euro
Australian dollar
Other currencies
Total financial liabilities
At 31 December 2007
US$
Rand
Sterling
Euro
Australian dollar
Other currencies
Total financial liabilities
Financial
liabilities
(excluding
derivatives)
Impact of
currency
derivatives(1)
Derivative
liabilities
Total financial
liabilities –
exposure to
currency risk
(7,854)
(5,289)
(1,628)
(1,821)
(528)
(1,953)
(19,073)
(3,261)
(3,879)
(1,325)
(2,103)
(406)
(1,148)
(12,122)
(3,130)
(15)
1,141
1,697
–
307
–
(2,962)
–
606
1,886
–
470
–
(1,056)
(2)
–
–
–
(439)
(1,497)
(560)
(26)
–
–
–
–
(586)
(12,040)
(5,306)
(487)
(124)
(528)
(2,085)
(20,570)
(6,783)
(3,905)
(719)
(217)
(406)
(678)
(12,708)
(1) Where currency derivatives are held to manage financial instrument exposures the notional principal
amount is ‘reallocated’ to reflect the remaining exposure to the Group.
(2) Of these US$ financial assets, $97 million (2007: $571 million) are subject to South African
exchange controls and will be converted to rand within the next six months.
Interest rate risk
Fluctuations in interest rates impact on the value of short term investments and
financing activities, giving rise to interest rate risk. Exposure to interest rate risk
is particularly with reference to changes in US and South African interest rates.
Exposure to Brazilian interest rates is expected to increase in the near term.
The Group policy is to borrow funds at floating rates of interest as this is
considered to give somewhat of a natural hedge against commodity price
movements, given the correlation to economic growth (and industrial activity)
which in turn shows a high correlation with commodity price fluctuation. In certain
circumstances, the Group uses interest rate swap and option contracts to manage
its exposure to interest rate movements on a portion of its existing debt. Also
strategic hedging using fixed rate debt may be undertaken from time to time if
considered appropriate.
In respect of financial assets, the Group’s policy is to invest cash at floating rates
of interest and cash reserves are to be maintained in short term investments (less
than one year) in order to maintain liquidity, while achieving a satisfactory return
for shareholders.
US$ million
At 31 December 2008
US$(2)
Rand
Sterling
Euro
Australian dollar
Other currencies
Total financial assets
At 31 December 2007
US$(2)
Rand
Sterling
Euro
Australian dollar
Other currencies
Total financial assets
Financial
assets
(excluding
derivatives)
Impact of
currency
derivatives(1)
Derivative
assets
Total financial
assets –
exposure to
currency risk
The exposure of the Group’s financial assets (excluding intra-group loan balances)
to interest rate risk is as follows:
3,118
3,895
547
136
290
870
8,856
4,260
4,414
839
301
221
1,465
11,500
(108)
82
(2)
–
(4)
32
–
(99)
88
–
–
(3)
14
–
252
71
–
–
–
53
376
465
17
–
–
–
53
535
3,262
4,048
545
136
286
955
9,232
4,626
4,519
839
301
218
1,532
12,035
US$ million
At 31 December 2008
Financial assets (excluding
derivatives)(2)
Derivative assets
Financial asset exposure to
interest rate risk
At 31 December 2007
Financial assets (excluding
derivatives)(2)
Derivative assets
Financial asset exposure to
interest rate risk
Interest bearing
financial assets
Non-interest bearing
financial assets
Other non-
interest
bearing
Floating
rate
Fixed
Equity
rate(1) investments
Total
3,098
196
464
–
2,180
–
3,114 8,856
376
180
3,294
464
2,180 3,294
9,232
3,013
1
864
11
3,842
–
3,781 11,500
535
523
3,014
875
3,842
4,304 12,035
Anglo American plc Annual Report 2008
(1) Includes $360 million (2007: $476 million) of preference shares in a BEE entity.
(2) At 31 December 2008 and 2007 no interest rate swaps were held in respect of financial asset
exposures.
109
Certain of the Group’s sales and purchases are provisionally priced and as a result
are susceptible to future price movements. The exposure of the Group’s financial
assets and liabilities to commodity price risk is as follows:
US$ million
At 31 December 2008
Total net financial instruments
(excluding derivatives)
Commodity derivatives (net)(2)
Other derivatives not related to
commodity (net)
Total financial instrument exposure
to commodity risk
At 31 December 2007
Total net financial instruments
(excluding derivatives)
Commodity derivatives (net)(2)
Other derivatives not related to
commodity (net)
Total financial instrument exposure
to commodity risk
Commodity price linked Not linked
Subject to
to
Fixed commodity
price
price(1)
price
movements
Total
(291)
(318)
183 (10,109) (10,217)
(318)
–
–
–
–
(803)
(803)
(609)
183 (10,912) (11,338)
325
(480)
461
–
(1,408)
–
(622)
(480)
–
–
429
429
(155)
461
(979)
(673)
(1) Includes financial instruments whose commodity prices are set annually or via contract negotiation.
(2) Includes $249 million (2007: $124 million) derivative embedded in a long term power contract.
Derivatives
In accordance with IAS 32 and IAS 39, the fair value of all derivatives are separately
recorded on the balance sheet within other financial assets (derivatives) and other
financial liabilities (derivatives). Derivatives that are designated as hedges are
classified as current or non-current depending on the maturity of the derivative.
Derivatives that are not designated as hedges are classified as current in accordance
with IAS 1 even when their actual maturity is expected to be greater than one year.
The Group utilises derivative instruments to manage its market risk exposures
as explained above. The Group does not use derivative financial instruments for
speculative purposes, however it may choose not to designate certain derivatives
as hedges. Such derivatives that are not hedge accounted are classified as
‘non-hedges’ and fair value movements are recorded in the income statement.
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24. Financial risk management and derivative financial assets/
liabilities continued
Floating rate financial assets consist mainly of cash and bank term deposits.
Interest on floating rate assets is based on the relevant national inter-bank rates.
Fixed rate financial assets consist mainly of financial asset investments and cash,
and have a weighted average interest rate of 13.5% (2007: 11%) and are fixed for
an average period of four years (2007: four years). Equity investments are fully
liquid and have no maturity period.
The exposure of the Group’s financial liabilities (excluding intra-group loan
balances) to interest rate risk is as follows:
US$ million
At 31 December 2008
Financial liabilities (excluding derivatives)
Impact of interest rate swaps(1)
Derivative liabilities
Financial liability exposure to
interest rate risk
At 31 December 2007
Financial liabilities (excluding derivatives)
Impact of interest rate swaps(1)
Derivative liabilities
Financial liability exposure to
interest rate risk
Interest bearing
financial liabilities
Fixed
rate
Floating
rate
Non-
interest
bearing
financial
liabilities
Total
(10,461) (3,459) (5,153) (19,073)
(2,829) 2,829
–
(1,497) (1,497)
–
–
–
(13,290)
(630) (6,650) (20,570)
(5,425) (2,822) (3,875) (12,122)
–
(2,336) 2,336
(586)
–
–
(541)
(45)
(7,806)
(486) (4,416) (12,708)
(1) Where interest rate swaps are held to manage financial liability exposures the notional principal
amount is ‘reallocated’ to reflect the remaining exposure to the Group.
Interest on floating rate instruments is based on the relevant national inter-bank
rates. Remaining fixed rate borrowings accrue interest at 8% (2007: 8%) and are
at fixed rates for an average period of two years (2007: two years). Average
maturity on non-interest bearing instruments is 17 months (2007: seven months).
Commodity price risk
The Group’s earnings are exposed to movements in the prices of the commodities
it produces.
The Group policy is generally not to hedge price risk, although some hedging may
be undertaken for strategic reasons. In such cases, the Group uses forward,
deferred and option contracts to hedge the price risk.
The use of derivative instruments is subject to limits and the positions are
regularly monitored and reported to senior management.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are
treated as separate derivatives when their risks and characteristics are not closely
related to those of their host contract and the host contract is not carried at fair
value. Embedded derivatives may be designated into hedge relationships and are
accounted for in accordance with the Group’s accounting policy set out in note 1.
Cash flow hedges
In certain cases the Group classifies its forward exchange and commodity price
contracts hedging highly probable forecast transactions as cash flow hedges.
Where this designation is documented, changes in fair value are recognised in
equity until the hedged transactions occur, at which time the respective gains or
losses are transferred to the income statement (or hedged balance sheet item)
in accordance with the Group’s accounting policy set out in note 1.
Fair value hedges
The majority of interest rate swaps (taken out to swap the Group’s fixed rate
borrowings to floating rate, in accordance with the treasury policy) have been
designated as fair value hedges. The respective carrying values of the hedged
debt are adjusted to reflect the fair value of the interest rate risk being hedged.
Subsequent changes in the fair value of the hedged risk are offset against fair
value changes in the interest rate swap and classified within financing costs in the
income statement.
Anglo American plc Annual Report 2008
110
Financial statements
Notes to the financial statements continued
24. Financial risk management and derivative financial assets/
liabilities continued
Non-hedges
The Group may choose not to designate certain derivatives as hedges, for example
certain forward foreign currency contracts that provide a natural hedge of non-US
dollar debt in the income statement or where the Group is economically hedged but
IAS 39 hedge accounting cannot be achieved. Where derivatives have not been
designated as hedges, fair value changes are recognised in the income statement
in accordance with the Group’s accounting policy set out in note 1 and are
classified as financing or operating depending on the nature of the associated
hedged risk.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability
to continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and, with cognisance of forecast future market
conditions and structuring, to maintain an optimal capital structure to reduce the
cost of capital.
In order to manage the short and long term capital structure, the Group adjusts the
amount of ordinary dividends paid to shareholders, returns capital to shareholders
(via, for example, share buybacks and special dividends), arranges debt to fund
new acquisitions and also may sell non-core assets to reduce debt.
The Group monitors capital on the basis of the ratio of net debt to total capital less
investments in associates (gearing). Net debt is calculated as total borrowings less
cash and cash equivalents and current financial asset investments (excluding
derivatives which provide an economic hedge of debt and including the net debt of
disposal groups). Total capital is calculated as ‘Net assets’ (as shown in the
Consolidated balance sheet) excluding net debt. Gearing as at 31 December 2008
was 37.8% (2007: 20.0%). The increase during 2008 resulted primarily from
acquisitions and capital expenditure, partially offset by strong operating cash flows
and asset disposals.
Financial instrument sensitivities
Financial instruments affected by market risk include borrowings, deposits,
derivative financial instruments, trade receivables and trade payables. The
following analysis, required by IFRS 7, is intended to illustrate the sensitivity of
the Group’s financial instruments (as at year end) to changes in commodity prices,
exchange rates and interest rates.
The sensitivity analysis has been prepared on the basis that the components of
net debt, the ratio of fixed to floating interest rates of the debt and derivatives
portfolio and the proportion of financial instruments in foreign currencies are all
constant and on the basis of the hedge designations in place at 31 December.
In addition, the commodity price impact for provisionally priced contracts is based
on the related trade receivables and trade payables at 31 December. As a
consequence, this sensitivity analysis relates to the position as at 31 December.
The following assumptions were made in calculating the sensitivity analysis:
•
•
•
•
•
•
•
•
All income statement sensitivities also impact equity.
The majority of debt and other deposits are carried at amortised cost and
therefore carrying value does not change as interest rates move.
No sensitivity is provided for interest accruals as these are based on pre-agreed
interest rates and therefore are not susceptible to further rate changes.
Changes in the carrying value of derivatives (from movements in commodity
prices and interest rates) designated as cash flow hedges are assumed to be
recorded fully within equity on the grounds of materiality.
No sensitivity has been calculated on derivatives and related underlying
instruments designated into fair value hedge relationships as these are assumed
to materially offset one another.
All hedge relationships are assumed to be fully effective on the grounds of
materiality.
Debt with a maturity below one year is floating rate, unless it is a long term fixed
rate debt in its final year.
Translation of foreign subsidiaries and operations into the Group’s presentation
currency has been excluded from the sensitivity.
Using the above assumptions, the following tables show the illustrative effect on
the income statement and equity that would result from reasonably possible
changes in the relevant commodity price, foreign currency or interest rates:
The fair value of the Group’s open derivative position at 31 December (excluding
normal purchase and sale contracts held off balance sheet), recorded within other
financial assets (derivatives) and other financial liabilities (derivatives) is as follows:
US$ million
Current
Cash flow hedge(1)
Forward foreign currency contracts
Forward commodity contracts
Other
Fair value hedge
Forward foreign currency contracts
Interest rate swaps
Other
Non-hedge (‘Held for trading’)(2)
Forward foreign currency contracts
Cross currency swaps
Other
Total current derivatives
Non-current
Cash flow hedge(1)
Forward foreign currency contracts
Forward commodity contracts
Fair value hedge
Interest rate swaps
Total non-current derivatives
2008
Liability
Asset
2007
Liability
Asset
10
–
–
–
140
2
114
40
66
372
(75)
(49)
–
–
–
–
2
–
11
1
–
–
(529)
(504)
(279)
(1,436)
31
404
86
535
–
(304)
–
(12)
–
–
(25)
(10)
(150)
(501)
–
–
4
4
(57)
(4)
–
(61)
–
–
–
–
–
(53)
(32)
(85)
(1) The timing of the expected cash flows associated with these hedges is as follows:
US$ million
Within one year
Greater than one year, less than two years
Greater than two years, less than five years
Greater than five years
2008
(160)
(80)
(11) –
– –
(251)
2007
(289)
(61)
(350)
The periods when these hedges are expected to impact the income statement generally follow the
cash flow profile with the exception of hedging associated with capital projects which is included in
the capitalised asset value and depreciated over the life of the asset. There are no material capital
expenditure related hedges included in the above.
(2) $78 million (2007: $160 million) of derivative assets and $824 million (2007: $126 million) of
derivative liabilities not designated as hedges and that are classified as current in accordance with
IAS 1 are due to mature after more than one year.
These marked to market valuations are in no way predictive of the future value
of the hedged position, nor of the future impact on the profit of the Group. The
valuations represent the cost of buying all hedge contracts at year end, at market
prices and rates available at the time.
Normal purchase and normal sale contracts
Commodity based contracts that meet the scope exemption in IAS 39 (in that
they are settled through physical delivery of the Group’s production or are used
within the production process), are classified as normal purchase or sale contracts.
In accordance with IAS 39 these contracts are not marked to market.
Anglo American plc Annual Report 2008
111
4
i
F
i
n
a
n
c
a
l
s
t
a
t
e
m
e
n
t
s
24. Financial risk management and derivative financial assets/
25. Provisions for liabilities and charges
liabilities continued
US$ million
Commodity price sensitivities
2008
10% increase in the copper price
10% decrease in the copper price
10% increase in the platinum price
10% decrease in the platinum price
10% increase in the coal price
10% decrease in the coal price
2007
10% increase in the copper price
5% decrease in the copper price
10% increase in the platinum price
15% decrease in the platinum price
5% increase in the coal price
5% decrease in the coal price
Interest rate sensitivities
2008
25 bp increase in US interest rates
25 bp decrease in US interest rates
50 bp increase in South African interest rates
50 bp decrease in South African interest rates
2007
75 bp decrease in US interest rates
50 bp decrease in South African interest rates
75 bp decrease in UK interest rates
Foreign currency sensitivities(1)
2008
+10% US$ to rand
-10% US$ to rand
+10% US$ to Australian dollar
-10% US$ to Australian dollar
+10% US$ to Brazilian real
-10% US$ to Brazilian real
+10% US$ to Chilean peso
-10% US$ to Chilean peso
2007
+5% US$ to rand
-5% US$ to rand
+5% US$ to Australian dollar
-5% US$ to Australian dollar
+5% US$ to Brazilian real
-5% US$ to Brazilian real
+5% US$ to Chilean peso
-5% US$ to Chilean peso
Income
statement
Equity
47
(47)
(9)
9
–
–
89
(45)
(8)
13
–
–
(6)
6
(11)
11
(2)
10
5
45
(46)
20
(20)
(125)
176
(25)
30
18
(18)
(19)
23
(46)
46
8
(9)
47
(47)
(9)
9
(11)
11
66
(33)
(8)
13
(15)
15
(6)
6
(10)
10
(2)
10
5
42
(43)
19
(18)
(128)
180
(42)
51
18
(17)
(19)
23
(46)
46
8
(9)
(1) + represents strengthening of US dollar against the respective currency.
The above sensitivities are calculated with reference to a single moment in time
and will change due to a number of factors including:
•
•
•
•
•
fluctuating trade receivable and trade payable balances;
derivative instruments and borrowings settled throughout the year;
fluctuating cash balances;
changes in currency mix; and
commercial paper with short term maturities, which is regularly replaced or settled.
As the sensitivities are limited to year end financial instrument balances they do
not take account of the Group’s sales and operating costs which are highly
sensitive to changes in commodity prices and exchange rates. In addition, each of
the sensitivities is calculated in isolation, while in reality commodity prices, foreign
exchange rates and interest rates do not move independently.
US$ million
At 1 January 2008
Acquired through business combinations
Disposal of businesses
Charged to the income statement
Capitalised
Reclassifications
Unwinding of discount
Amounts applied
Currency movements
At 31 December 2008
Maturity analysis of total provisions:
US$ million
Current
Non-current
Environmental Decommi-
restoration(1) ssioning(1)
Other
Total
675
13
(1)
134
–
4
19
(12)
(132)
700
256
3
–
10
11
3
14
–
(56)
241
293
94
–
92
119
17
–
(33)
(38)
544
1,224
110
(1)
236
130
24
33
(45)
(226)
1,485
2008
2007
168
1,317
1,485
142
1,082
1,224
(1) The Group makes voluntary contributions to controlled funds to meet the cost of some of its
decommissioning, restoration and environmental rehabilitation liabilities (see note 15).
Environmental restoration
The Group has an obligation to undertake restoration, rehabilitation and
environmental work when environmental disturbance is caused by the
development or ongoing production of a mining property. A provision is recognised
for the present value of such costs. It is anticipated that these costs will be
incurred over a period in excess of 20 years.
Decommissioning
Provision is made for the present value of costs relating to the decommissioning
of plant or other site restoration work. It is anticipated that these costs will be
incurred over a period in excess of 20 years.
Other
Other provisions primarily relate to cash settled share-based payments, indemnities,
warranties and legal claims. It is anticipated that these costs will be incurred over
a five year period.
26. Deferred tax
Deferred tax assets
US$ million
At 1 January
(Charged)/credited to the income statement(1)
(Charged)/credited to the statement of recognised income and
expense
Charged directly to equity
Acquired through business combinations
Transfer to assets held for sale
Disposal and demerger of businesses
Reclassifications
Currency movements
At 31 December
(1) Includes amounts in respect of discontinued operations of nil (2007: $9 million).
2008
474
(31)
(57)
(40)
–
(14)
–
(21)
(53)
258
2007
372
109
30
(2)
10
–
(55)
(2)
12
474
Anglo American plc Annual Report 2008
112
Financial statements
Notes to the financial statements continued
26. Deferred tax continued
Deferred tax liabilities
The Group had the following balances at 31 December 2007 in respect of which
no deferred tax asset was recognised:
US$ million
2008
2007
4,650
398
At 1 January
Charged to the income statement(1)
(Credited)/charged to the statement of recognised income and
expense
Charged directly to equity
Acquired through business combinations
Transfer to liabilities directly associated with assets held for sale
Disposal and demerger of businesses
Reclassifications
Currency movements
At 31 December
(130)
25
798
(28)
(18)
79
(1,219)
4,555
3,687
456
150
–
904
(77)
(649)
2
177
4,650
(1) Includes amounts in respect of discontinued operations of nil (2007: $12 million).
The amount of deferred tax provided in the accounts is as follows:
US$ million
Deferred tax assets
Tax losses
Other temporary differences
Deferred tax liabilities
Capital allowances in excess of depreciation
Fair value adjustments
Tax losses
Other temporary differences
2008
2007
13
245
258
14
460
474
2,333
2,201
(117)
138
4,555
2,640
2,121
(46)
(65)
4,650
The amount of deferred tax charged/(credited) to the income statement (including
amounts related to discontinued operations) is as follows:
US$ million
Capital allowances in excess of depreciation
Fair value adjustments
Tax losses
Other temporary differences
2008
2007
460
(96)
(18)
83
429
373
(63)
(27)
64
347
The current expectation regarding the maturity of deferred tax balances is:
US$ million
Deferred tax assets
Recoverable within 12 months
Recoverable after 12 months
Deferred tax liabilities
Payable within 12 months
Payable after 12 months
2008
2007
62
196
258
163
311
474
218
790
4,337 3,860
4,650
4,555
The Group had the following balances at 31 December 2008 in respect of which
no deferred tax asset has been recognised:
US$ million
Within one year
One to five years
After five years
No expiry date
Tax
losses –
revenue
–
43
21
2,600
2,664
Tax
losses –
capital
–
–
–
1,166
1,166
Other
temporary
differences
–
–
–
5
5
Total
–
43
21
3,771
3,835
Anglo American plc Annual Report 2008
US$ million
Within one year
One to five years
After five years
No expiry date
Tax
losses –
revenue
8
1
22
2,248
2,279
Tax
losses –
capital
–
–
–
1,430
1,430
Other
temporary
differences
–
–
6
–
6
Total
8
1
28
3,678
3,715
The Group also has unused tax credits of $356 million (2007: $211 million) for
which no deferred tax asset is recognised in the balance sheet. These tax credits
have no expiry date.
No liability has been recognised in respect of temporary differences associated with
investments in subsidiaries, branches and associates and interests in joint ventures,
where the Group is in a position to control the timing of the reversal of the temporary
differences and it is probable that such differences will not reverse in the foreseeable
future. The aggregate amount of temporary differences associated with investments
in subsidiaries, branches and associates and interests in joint ventures, for which a
deferred tax liability has not been recognised is $23,866 million (2007: $20,724
million), on which tax may be payable up to $6,682 million (2007: $5,906 million).
27. Retirement benefits
The Group operates defined contribution and defined benefit pension plans for the
majority of its employees. It also operates post retirement medical arrangements
in southern Africa and North America.
Defined contribution plans
The defined contribution pension and medical cost represents the actual
contributions payable by the Group to the various plans. At 31 December 2008
there were no material outstanding or prepaid contributions and so no accrual or
prepayment has been disclosed in the balance sheet in relation to these plans.
The assets of the defined contribution plans are held separately in independently
administered funds. The charge in respect of these plans is calculated on the basis
of the contribution payable by the Group in the financial year. The charge for the
year for defined contribution pension schemes for continuing operations was
$134 million (2007: $157 million) and for defined contribution medical schemes
for continuing operations was $9 million (2007: $5 million).
Defined benefit pension plans and post retirement medical plans
The majority of the defined benefit pension plans are funded. The assets of these
plans are held separately from those of the Group, in independently administered
funds, in accordance with statutory requirements or local practice throughout the
world. The unfunded pension plans are principally in South America.
The post retirement medical arrangements provide health benefits to retired
employees and certain dependants. Eligibility for cover is dependent upon certain
criteria. The majority of these plans are unfunded.
The Group’s provision of anti-retroviral therapy to HIV positive staff has not
significantly impacted the post retirement medical plan liability.
Independent qualified actuaries carry out full valuations every three years
using the projected unit method. The actuaries have updated the valuations to
31 December 2008.
The Group’s plans in respect of pension and post retirement healthcare are
summarised as follows:
US$ million
Africa Americas Europe
Total
Africa Americas Europe
Total
Southern
The
Southern
The
2008
2007
Assets(1)
Defined benefit
pension plans
in surplus
32
–
–
32
48
–
4
52
(1) Amounts are included in ‘Other non-current assets’.
113
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a
l
s
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a
t
e
m
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n
t
s
27. Retirement benefits continued
Income statement
The amounts recognised in the income statement are as follows:
US$ million
Africa Americas Europe
Total
Africa Americas Europe
Total
Southern
The
Southern
The
2008
2007
Liabilities
Defined benefit
pension plans
in deficit
Post retirement
medical plans
in deficit
–
(132) (45) (177)
–
(129)
(6) (135)
(204)
(204)
(20)
(224)
–
(152) (45) (401)
(277)
(277)
(32)
(161)
–
(309)
(6) (444)
US$ million
2008
2007
2006
2005
2004
Defined benefit pension plans
Present value of liabilities
Fair value of plan assets
Net (deficit)/surplus
Surplus restriction
Net deficit after surplus restriction
(2,157) (3,095) (4,256) (3,985) (4,041)
3,479
2,073
(562)
(84)
–
(61)
(562)
(145)
3,539
(446)
(107)
(553)
3,148
53
(136)
(83)
4,160
(96)
(163)
(259)
US$ million
Post
retirement
Pension medical
plans
plans
2008
Total
plans
48
1
49
Post
retirement
Pension medical
plans
plans
54
3
57
8
–
8
2007
Total
plans
62
3
65
43
1
44
5
–
5
(214)
180
(34)
(1)
(215)
(255)
(2)
(257)
21
201
207
22
229
20
(14)
(48)
20
(28)
Analysis of the amount
charged to operating profit
Current service costs
Past service costs
Total within operating costs –
continuing operations
Analysis of the amount
charged to net finance costs
Expected return on
plan assets(1)
Interest costs on
plan liabilities(2)
Net (credit)/charge to
net finance costs –
continuing operations
Total charge to the
income statement –
continuing operations
Actuarial (loss)/gain on plan
assets(1)
Actuarial gain/(loss) on plan
liabilities(2)
Post retirement medical plans
Present value of liabilities
Fair value of plan assets
Net deficit
Actuarial gain on plan assets(3)
Actuarial gain/(loss) on plan
liabilities(4)(5)
(392)
39
308
438
163
10
25
35
9
28
37
208
(48)
(156)
(435)
(198)
(1) Included in ‘Investment income’.
(2) Included in ‘Interest expense’.
(241)
17
(224)
(329)
20
(309)
(422)
16
(406)
(650)
22
(628)
(654)
15
(639)
Actuarial assumptions
The principal assumptions used to determine the actuarial present value of benefit
obligations and pension charges and credits under IAS 19 are detailed below (shown
as weighted averages):
1
1
–
–
–
%
Southern
The
Africa Americas
Southern
The
Africa Americas
Europe
2008
2007
Europe
16
(29)
15
(67)
(22)
(1) Net experience losses on pension plan assets were $392 million (2007: gains of $32 million; 2006:
gains of $314 million).
(2) Net experience losses on pension plan liabilities were $29 million (2007: $112 million; 2006:
$113 million).
(3) Net experience gains on medical plan assets were $1 million (2007: losses of $1 million; 2006:
losses of $1 million).
(4) Net experience losses on medical plan liabilities were $7 million (2007: $4 million; 2006: gains of
$36 million).
(5) Includes actuarial gains of $11 million due to a change in modelling methodology.
Cumulative net actuarial losses recognised in the Consolidated statement of
recognised income and expense are $292 million (2007: $163 million; 2006:
$126 million; 2005: $228 million; 2004: $57 million).
The market value of assets was used to determine the funding level of the
plans. The market value of the assets of the funded plans was sufficient to cover
101% (2007: 105%) of the benefits that had accrued to members after allowing
for expected increases in future earnings and pensions. Companies within the
Group are paying contributions as required in accordance with local actuarial
advice. As the majority of the defined benefit pension plans are closed to new
members, it is expected that contributions (in local currency) will increase as
the members age.
The actual return on plan assets in respect of defined benefit pension schemes for
continuing and discontinued operations was a loss of $178 million (2007: gain of
$307 million).
Defined benefit pension plans
Average discount rate for
plan liabilities
Average rate of inflation
Average rate of increase
in salaries
Average rate of increase
of pensions in payment
Average long term rate
of return on plan assets(1)
Post retirement medical plans
Average discount rate for
plan liabilities
Average rate of inflation
Expected average increase
in healthcare costs
7.3
4.0
8.6
3.7
6.0
2.7
8.2
5.5
7.5
3.6
5.7
3.4
5.3
5.4
2.7
6.8
4.5
3.5
4.0
3.2
2.8
5.5
1.8
3.4
7.6
11.3
5.9
8.5
10.6
6.8
7.3
4.0
7.1
0.5
n/a
n/a
8.0
5.3
5.5
2.6
n/a
n/a
5.4
3.8
n/a
6.8
4.4
n/a
(1) The long term expected return on plan assets has been set with reference to current market yields
on government and corporate bonds and expected equity bond-outperformance in the relevant
jurisdictions. The expected return on cash assets has been set with reference to expected bank base
rates. The overall long term expected rate of return for each class is weighted by the asset allocation
to the class at the balance sheet date.
Mortality assumptions are determined based on standard mortality tables with
adjustments, as appropriate, to reflect experience of conditions locally. In southern
Africa, the PA90 tables (2007: the SA85-90 and the PA90 tables) are used. The
main schemes in Europe use the PXA00 tables (2007: PA92 tables). The main
schemes in the Americas use the RV2004, AT83 and UP24 tables (2007: RV2004,
AT83 and GAM94 tables). The mortality tables used imply that a male or female
aged 60 at the balance sheet date has the following future life expectancy:
Years
Southern Africa
The Americas
Europe
2008
20.5
22.4
25.7
Male
2007
20.3
22.0
25.3
2008
25.5
26.5
28.1
Female
2007
25.2
26.1
26.8
Anglo American plc Annual Report 2008
114
Financial statements
Notes to the financial statements continued
27. Retirement benefits continued
The market value of the pension assets in defined benefit pension plans and long term expected rate of return as at 31 December 2008 and 31 December 2007 are
as follows:
At 31 December 2008
Equity
Bonds
Other
Fair value of pension plan assets
Present value of unfunded obligations
Present value of funded obligations
Present value of pension plan liabilities
Net surplus/(deficit) in pension plans
Surplus restriction related to pension plans
Recognised pension plan assets/(liabilities)
Amounts in the balance sheet
Pension assets
Pension liabilities
At 31 December 2007
Equity
Bonds
Other
Fair value of pension plan assets
Present value of unfunded obligations
Present value of funded obligations
Present value of pension plan liabilities
Net surplus/(deficit) in pension plans
Surplus restriction related to pension plans
Recognised pension plan assets/(liabilities)
Amounts in the balance sheet
Pension assets
Pension liabilities
Rate of
return
%
10.5
11.7
8.9
10.7
10.8
7.8
Southern Africa
Fair value
US$
million
Rate of
return
%
10.0
6.6
5.2
11.0
7.6
7.1
231
422
42
695
–
(602)
(602)
93
(61)
32
32
–
32
273
654
54
981
–
(853)
(853)
128
(80)
48
(129)
48
–
48
The Americas
Fair value
US$
million
49
137
7
193
(102)
(223)
(325)
(132)
–
(132)
–
(132)
(132)
68
167
10
245
(105)
(269)
(374)
(129)
–
–
(129)
(129)
Rate of
return
%
7.4
5.2
2.7
8.1
5.2
5.5
(2)
Europe
Fair value
US$
million
Total
Fair value
US$
million
568
427
190
1,185
(6)
(1,224)
(1,230)
(45)
–
(45)
–
(45)
(45)
1,021
568
333
1,922
(4)
(1,864)
(1,868)
54
(56)
(83)
848
986
239
2,073
(108)
(2,049)
(2,157)
(84)
(61)
(145)
32
(177)
(145)
1,362
1,389
397
3,148
(109)
(2,986)
(3,095)
53
(136)
4
(6)
(2)
52
(135)
(83)
Anglo American plc Annual Report 2008
115
27. Retirement benefits continued
Movement analysis
The changes in the present value of defined benefit obligations are as follows:
28. Called-up share capital and share-based payments
Called-up share capital
US$ million
At 1 January
Current service costs(1)
Acquisition, disposal
and demerger
of businesses
Past service costs and
effects of settlements
and curtailments(2)
Interest costs(3)
Actuarial gains/(losses)
Benefits paid
Contributions paid by
other members
Reclassifications
Currency movements
At 31 December
Post
retirement
Pension medical
plans
plans
2008
Total
plans
Post
retirement
Pension medical
plans
plans
2007
Total
plans
(3,095)
(43)
(329) (3,424) (4,256)
(57)
(48)
(5)
(422) (4,678)
(66)
(9)
–
–
–
1,442
150
1,592
(1)
(180)
208
145
–
(21)
16
16
(1)
(201)
224
161
(1)
(220)
(48)
137
–
(25)
(29)
18
(1)
(245)
(77)
155
(9)
–
818
(2,157)
(3)
–
85
(7)
(12)
(2)
–
903
(83)
(241) (2,398) (3,095)
(2)
–
(10)
(9)
(2)
(93)
(329) (3,424)
(1) Includes nil (2007: $3 million) for pension plans and nil (2007: $1 million) for post retirement medical
plans in respect of discontinued operations.
(2) Includes nil (2007: a gain of $2 million) for pension plans in respect of discontinued operations.
(3) Includes nil (2007: $13 million) for pension plans and nil (2007: $3 million) for post retirement
medical plans in respect of discontinued operations.
The changes in the fair value of plan assets are as follows:
US$ million
At 1 January
Expected return(1)
Actuarial (losses)/gains
Acquisition, disposal
and demerger
of businesses
Contributions paid
by employer
Contributions paid
by other members
Benefits paid
Reclassifications
Currency movements
At 31 December
Post
retirement
Pension medical
plans
plans
2008
Total
plans
Post
retirement
Pension medical
plans
plans
3,148
214
(392)
20
1
1
3,168
215
(391)
4,160
268
39
16
2
1
2007
Total
plans
4,176
270
40
–
–
–
(1,329)
–
(1,329)
50
11
61
69
16
85
9
(145)
–
(811)
2,073
14
5
(161)
(16)
–
–
(5)
(816)
17 2,090
7
(137)
2
69
3,148
2
(18)
–
1
20
9
(155)
2
70
3,168
(1) Includes nil (2007: $13 million) for pension plans in respect of discontinued operations.
Assumed healthcare trend rates have a significant effect on the amounts
recognised in the income statement. A 1% change in assumed healthcare cost
trend rates would have the following effects:
2008
Number of shares US$ million
2007
Number of shares US$ million
Authorised:
5% cumulative preference
shares of £1 each
Ordinary shares of
5486/91 US cents each 1,820,000,000
50,000
–
50,000
–
1,000 1,820,000,000
1,000
1,000
1,000
Called-up, allotted and fully paid:
5% cumulative preference
shares of £1 each
Ordinary shares of
5486/91 US cents each:
At 1 January
Share consolidation
Treasury share
cancellation
Other
At 31 December
1,342,911,897
–
–
7,123
1,342,919,020
50,000
–
50,000
–
738 1,541,653,607
(138,749,193)
–
–
–
(60,000,050)
7,533
738 1,342,911,897
771
–
(33)
–
738
During 2008 7,123 ordinary shares of 5486/91 US cents each were allotted to
certain non-executive directors by subscription of their after tax directors’ fees
(2007: 4,143 ordinary shares of 50 US cents each and 3,390 ordinary shares of
5486/91 US cents each).
In 2008 5,649,992 ordinary shares of 5486/91 US cents each were purchased by
the Company and held in treasury (2007: 27,073,161 ordinary shares of 50 US
cents each and 14,631,542 ordinary shares of 5486/91 US cents each). Excluding
shares held in treasury (but including the shares held by the Group in other
structures, as outlined in the Tenon and Employee benefit trust sections below)
the number of called-up, allotted and fully paid ordinary shares as at 31 December
2008 was 1,316,485,510; $723 million (2007: 1,322,128,379; $726 million).
On 20 June 2007 the Company cancelled 50 ordinary shares of 50 US cents
each previously held in treasury. On 3 August 2007 the Company cancelled
60,000,000 ordinary shares of 5486/91 US cents previously held in treasury.
As at 31 December 2008 the Company held 26,433,510 ordinary shares of
5486/91 US cents in treasury (2007: 20,783,518 ordinary shares of 5486/91 US cents).
Following the demerger of Mondi on 2 July 2007, a share consolidation became
effective with the result that for every 100 existing ordinary shares of 50 US cents
each, shareholders received 91 new ordinary shares of 5486/91 US cents each. This
resulted in a reduction in the number of ordinary shares held of 138,749,193.
At general meetings, every member who is present in person has one vote on a
show of hands and, on a poll, every member who is present in person or by proxy
has one vote for every ordinary share held.
In the event of winding up, the holders of the cumulative preference shares will be
entitled to the repayment of a sum equal to the nominal capital paid up, or credited
as paid up, on the cumulative preference shares held by them and any accrued
dividend, whether such dividend has been earned or declared or not, calculated
up to the date of the winding up.
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US$ million
Effect on the sum of service costs and
interest costs
Effect on defined benefit obligations
1% increase
2007
2008
1% decrease
2007
2008
No ordinary shares were allotted on exercise of employee share option plans
(2007: nil).
3
28
4
39
(3)
(26)
(2)
(22)
The Group expects to contribute approximately $39 million to its defined benefit
pension plans and $20 million to its post retirement medical plans in 2009.
Anglo American plc Annual Report 2008
116
Financial statements
Notes to the financial statements continued
28. Called-up share capital and share-based payments continued
Tenon
Tenon Investment Holdings (Pty) Limited (Tenon), a wholly owned subsidiary of
Anglo American South Africa Limited (AASA), has entered into agreements with
Epoch Investment Holdings Limited (Epoch), Epoch Two Investment Holdings
Limited (Epoch Two) and Tarl Investments Holdings Limited (Tarl) (collectively the
Investment Companies), each owned by independent charitable trusts whose
trustees are independent of the Group. Under the terms of these agreements, the
Investment Companies have purchased Anglo American plc shares on the market
and have granted to Tenon the right to nominate a third party (which may include
Anglo American plc but not any of its subsidiaries) to take transfer of the Anglo
American plc shares each has purchased on the market. Tenon paid the Investment
Companies 80% of the cost of the Anglo American plc shares including associated
costs for this right to nominate which together with subscriptions by Tenon for
non-voting participating redeemable preference shares in the Investment
Companies provide all the funding required to acquire the Anglo American plc
shares through the market. These payments by Tenon are sourced from the cash
resources of AASA. Tenon is able to exercise its right of nomination at any time up
to 31 December 2025 against payment of an average amount of $5.83 per share
to Epoch, $9.07 per share to Epoch Two and $7.53 per share to Tarl which will be
equal to 20% of the total costs respectively incurred by Epoch, Epoch Two and Tarl
in purchasing shares nominated for transfer to the third party. These funds will
then become available for redemption of the preference shares issued by the
Investment Companies. The amount payable by the third party on receipt of the
Anglo American plc shares will accrue to Tenon and, in accordance with paragraph
33 of IAS 32, any resulting gain or loss recorded by Tenon will not be recognised in
the income statement of Anglo American plc.
Under the agreements, the Investment Companies will receive dividends on the
shares they hold and have agreed to waive the right to vote those shares. The
preference shares issued to the charitable trusts are entitled to a participating right
of up to 10% of the profit after tax of Epoch and 5% of the profit after tax of Epoch
Two and Tarl. The preference shares issued to Tenon will carry a fixed coupon of
3% plus a participating right of up to 80% of the profit after tax of Epoch and 85%
of the profit after tax of Epoch Two and Tarl. Any remaining distributable earnings
in the Investment Companies, after the above dividends, are then available for
distribution as ordinary dividends to the charitable trusts.
The structure effectively provides Tenon with a beneficial interest in the price risk
on these shares together with a participation in future dividend receipts. The
Investment Companies will retain legal title to the shares until Tenon exercises its
right to nominate a transferee.
At 31 December 2008 the Investment Companies together held 112,300,129
(2007: 106,356,408) Anglo American plc shares with a market value of $2,511
million (2007: $6,521 million) which represented 9% (2007: 8%) of the ordinary
shares in issue (excluding treasury shares). The Investment Companies are not
permitted to hold more than an aggregate of 10% of the issued share capital of
Anglo American plc at any one time.
Although the Group has no voting rights in the Investment Companies and cannot
appoint or remove trustees of the charitable trusts, the Investment Companies
meet the accounting definition of a subsidiary in accordance with IAS 27
Consolidated and Separate Financial Statements. As a result, the Investment
Companies are consolidated in accordance with the definitions of IAS 27 and the
principles set out in SIC 12 Consolidation – Special Purpose Entities.
Employee benefit trust
The provision of shares to certain of the Company’s share option and share
incentive schemes is facilitated by an employee benefit trust. During 2008
5,248,591 (2007: 9,007,694) shares were sold to employees on exercise of
their options, and provisional allocations were made to options already awarded.
The cost of shares purchased by the trust is presented against retained earnings.
The employee benefit trust has waived the right to receive dividends on these
shares although the waiver was temporarily suspended in respect of the Mondi
demerger dividend in specie. Immediately after the dividend was paid, the waiver
was reinstated.
The market value of the 4,445,244 shares (2007: 9,693,835 shares) held by the
trust at 31 December 2008 was $99 million (2007: $594 million).
The costs of operating the trust are borne by the Group but are not material.
Anglo American plc Annual Report 2008
117
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28. Called-up share capital and share-based payments continued
Share-based payments
During the year ended 31 December 2008, the Group had six share-based payment arrangements with employees, the details of which are described in the remuneration
report. All of the Group’s schemes are equity settled, either by award of options to acquire ordinary shares (ESOS, SAYE and former AAC Executive Share Incentive
Scheme) or award of ordinary shares (BSP, LTIP and SIP). The ESOS and former AAC Executive Share Incentive Scheme are now closed to new participants, having been
replaced with the BSP.
The total share-based payment charge for continuing operations relating to Anglo American plc shares for the year was made up as follows:
US$ million
ESOS
BSP
LTIP
Other schemes
2008
2007
– 3
50
53
9 7
112
41
43
94
The fair values of options granted under the ESOS and SAYE schemes, being the more material option schemes, were calculated using a Black Scholes model. No ESOS
awards were granted in 2008 or 2007. The assumptions used in these calculations for the current and prior years are set out in the tables below:
Arrangement
Date of grant
Number of instruments
Exercise price (£)
Share price at the date of grant (£)
Contractual life (years)
Vesting conditions(2)
Expected volatility
Expected option life (years)
Risk free interest rate
Expected departures
Expected outcome of meeting performance criteria (at date of grant)
Fair value per option granted (weighted average) (£)
2008
SAYE(1)
2007
SAYE(1)
24/04/08
307,297
24.16
30.20
3.5-7.5
3-7
35%
3.5-7.5
4.6%
5%pa
n/a
13.32
26/04/07
315,716
21.42
26.78
3.5-7.5
3-7
30%
3.5-7.5
5.2%
5%pa
n/a
8.68
The fair value of ordinary shares awarded under the BSP and LTIP – ROCE, being the more material share schemes, was calculated using a Black Scholes model. The fair
value of shares awarded under the LTIP – TSR scheme was calculated using a Monte Carlo model. The assumptions used in these calculations for the current and prior
years are set out in the tables below:
Arrangement
Date of grant
Number of instruments
Exercise price (£)
Share price at the date of grant (£)
Contractual life (years)
Vesting conditions
Expected volatility
Expected option life (years)
Risk free interest rate
Expected departures
Expected outcome of meeting performance criteria (at date of grant)
Fair value per option granted (weighted average) (£)
BSP(1)
LTIP – ROCE(1)
LTIP – TSR(1)
BSP(1)
LTIP – ROCE(1)
LTIP – TSR(1)
2008
2007
29/02/08
1,690,350
–
28.21
3
(3)
17/03/08
795,465
–
31.35
3
(4)
35%
3
4.0%
5%pa
44-100%
31.22
35%
3
3.7%
5%pa
100%
26.93
17/03/08
795,465
–
31.35
3
(5)
35%
3
3.7%
5%pa
n/a
19.69
09/03/07
1,642,336
–
24.73
3
(3)
30%
3
5.1%
5%pa
44-100%
24.67
23/03/07
841,211
–
24.63
3
(4)
23/03/07
841,211
–
24.63
3
(5)
30%
3
5.2%
5%pa
100%
23.96
30%
3
5.2%
5%pa
n/a
18.34
(1) The number of instruments used in the fair value models differs to the total number of instruments awarded in the year due to awards made subsequent to the fair value calculations taking place. The fair value
calculated per the assumptions above has been applied to the total number of awards. The difference in income statement charge is not considered significant.
(2) Number of years continuous employment.
(3) Three years continuous employment with enhancement shares having variable vesting based on non-market based performance conditions.
(4) Variable vesting dependent on three years continuous employment and Group ROCE target being achieved.
(5) Variable vesting dependent on three years continuous employment and market based performance conditions being achieved.
The expected volatility is based on historic volatility over the last five years. The expected life is the average expected period to exercise. The risk free rate of return is the
yield on zero-coupon UK government bonds with a term similar to the expected life of the option.
The charges arising in respect of the other employee share schemes that the Group operated during the year are not considered material.
A progressive dividend growth policy has been assumed in all fair value calculations.
Anglo American plc Annual Report 2008
118
Financial statements
Notes to the financial statements continued
28. Called-up share capital and share-based payments continued
A reconciliation of option movements for the more significant share-based payment arrangements over the year to 31 December 2008 and the prior year is shown below.
All options outstanding at 31 December 2008 with an exercise date on or prior to 31 December 2008 are deemed exercisable. Options were exercised regularly during the
year and the weighted average share price for the year ended 31 December 2008 was £25.99 (2007: £29.09).
Executive Share Option Scheme(1)
Options to acquire ordinary shares of 5486/91 US cents were outstanding under the terms of this scheme as follows:
Option price
per share £
Options
outstanding
1 Jan 2008
Options
exercised
in year
Options
forfeited
in year
Options
outstanding
31 Dec 2008
6.98
8.00
7.66
10.19
10.03
8.00
11.50
8.05
9.28
11.41
13.43
11.52
12.73
12.12
14.40
13.94
772,256
29,000
1,056,732
15,000
1,251,064
26,750
1,298,242
11,000
2,350,685
32,937
2,641,345
84,373
11,147
37,579
18,000
5,500
9,641,610
(247,973)
–
(267,610)
(8,944)
(211,600)
–
(220,781)
–
(417,174)
(9,437)
(540,912)
(23,064)
(2,356)
–
–
(2,750)
(1,952,601)
(9,950)
(22,000)
(73,000)
(3,000)
(159,844)
(3,000)
(133,600)
(4,000)
514,333
7,000
716,122
3,056
879,620
23,750
943,861
7,000
(170,500) 1,763,011
22,500
(173,266) 1,927,167
57,309
8,791
37,579
18,000
2,750
(757,160) 6,931,849
(4,000)
–
–
–
–
(1,000)
Option price
per share £
Options
outstanding
1 Jan 2007
Options
exercised
in year
Options
forfeited
in year
Options
outstanding
31 Dec 2007
6.98
8.00
7.66
7.66
10.19
10.03
8.00
11.50
8.05
9.28
11.41
10.81
13.43
11.52
12.73
12.12
14.40
13.94
1,076,806
38,000
1,446,216
5,000
29,000
1,745,658
26,750
1,848,700
11,000
4,022,398
59,760
10,000
6,796,976
194,322
11,147
37,579
18,000
5,500
17,382,812
(288,550)
(9,000)
(368,400)
(5,000)
(14,000)
(430,250)
–
(451,295)
–
(1,420,359)
(21,823)
(10,000)
(3,955,583)
(87,949)
–
–
–
–
(7,062,209)
–
–
–
–
(16,000)
–
772,256
29,000
(21,084) 1,056,732
–
15,000
(64,344) 1,251,064
26,750
(99,163) 1,298,242
11,000
(251,354) 2,350,685
32,937
–
(200,048) 2,641,345
84,373
11,147
37,579
18,000
5,500
(678,993) 9,641,610
(22,000)
–
–
–
–
(5,000)
–
At 31 December 2008
Year of
grant
1999
1999
2000
2000
2001
2001
2002
2002
2003
2003
2004
2004
2004
2005
2005
2005
Date exercisable
24 June 2002 to 23 June 2009
19 October 2002 to 18 October 2009
23 March 2003 to 22 March 2010
12 September 2003 to 11 September 2010
2 April 2004 to 1 April 2011
13 September 2004 to 12 September 2011
18 March 2005 to 17 March 2012
13 September 2005 to 12 September 2012
5 March 2006 to 4 March 2013
13 August 2006 to 12 August 2013
1 March 2007 to 28 February 2014
10 August 2007 to 9 August 2014
29 November 2007 to 28 November 2014
6 January 2008 to 4 January 2015
1 August 2008 to 31 July 2015
19 August 2008 to 18 August 2015
At 31 December 2007
Year of
grant
1999
1999
2000
2000
2000
2001
2001
2002
2002
2003
2003
2003
2004
2004
2004
2005
2005
2005
Date exercisable
24 June 2002 to 23 June 2009
19 October 2002 to 18 October 2009
23 March 2003 to 22 March 2010
26 June 2003 to 25 June 2010
12 September 2003 to 11 September 2010
2 April 2004 to 1 April 2011
13 September 2004 to 12 September 2011
18 March 2005 to 17 March 2012
13 September 2005 to 12 September 2012
5 March 2006 to 4 March 2013
13 August 2006 to 12 August 2013
1 October 2006 to 30 September 2013
1 March 2007 to 28 February 2014
10 August 2007 to 9 August 2014
29 November 2007 to 28 November 2014
6 January 2008 to 4 January 2015
1 August 2008 to 31 July 2015
19 August 2008 to 18 August 2015
See page 121 for footnote.
Anglo American plc Annual Report 2008
119
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28. Called-up share capital and share-based payments continued
SAYE Share Option Scheme(1)
Options to acquire ordinary shares of 5486/91 US cents were outstanding under the terms of this scheme as follows:
At 31 December 2008
Year of
grant
2000
2001
2002
2002
2003
2003
2004
2004
2004
2005
2005
2005
2006
2006
2006
2007
2007
2007
2008
2008
2008
Date exercisable
1 July 2007 to 31 December 2007
1 July 2008 to 31 December 2008
1 September 2007 to 29 February 2008
1 September 2009 to 28 February 2010
1 September 2008 to 28 February 2009
1 September 2010 to 28 February 2011
1 September 2007 to 29 February 2008
1 September 2009 to 28 February 2010
1 September 2011 to 29 February 2012
1 September 2008 to 28 February 2009
1 September 2010 to 28 February 2011
1 September 2012 to 28 February 2013
1 September 2009 to 28 February 2010
1 September 2011 to 29 February 2012
1 September 2013 to 28 February 2014
1 September 2010 to 28 February 2011
1 September 2012 to 28 February 2013
1 September 2014 to 28 February 2015
1 September 2011 to 29 February 2012
1 September 2013 to 28 February 2014
1 September 2015 to 29 February 2016
At 31 December 2007
Year of
grant
1999
2000
2001
2001
2002
2002
2003
2003
2003
2004
2004
2004
2005
2005
2005
2006
2006
2006
2007
2007
2007
Date exercisable
1 September 2006 to 28 February 2007
1 July 2007 to 31 December 2007
1 July 2006 to 31 December 2006
1 July 2008 to 31 December 2008
1 September 2007 to 29 February 2008
1 September 2009 to 28 February 2010
1 September 2006 to 28 February 2007
1 September 2008 to 28 February 2009
1 September 2010 to 28 February 2011
1 September 2007 to 29 February 2008
1 September 2009 to 28 February 2010
1 September 2011 to 29 February 2012
1 September 2008 to 28 February 2009
1 September 2010 to 28 February 2011
1 September 2012 to 28 February 2013
1 September 2009 to 28 February 2010
1 September 2011 to 29 February 2012
1 September 2013 to 28 February 2014
1 September 2010 to 28 February 2011
1 September 2012 to 28 February 2013
1 September 2014 to 28 February 2015
See page 121 for footnote.
Option price
per share £
Options
outstanding
1 Jan 2008
4.85
8.45
9.23
9.23
7.52
7.52
10.81
10.81
10.81
10.15
10.15
10.15
17.97
17.97
17.97
21.42
21.42
21.42
24.16
24.16
24.16
5,528
36,294
2,648
24,738
152,728
40,908
2,506
72,162
18,324
275,727
254,714
48,059
208,452
122,114
34,021
178,172
86,324
36,918
–
–
–
1,600,337
Option price
per share £
Options
outstanding
1 Jan 2007
6.38
4.85
8.45
8.45
9.23
9.23
7.52
7.52
7.52
10.81
10.81
10.81
10.15
10.15
10.15
17.97
17.97
17.97
21.42
21.42
21.42
1,728
330,023
1,531
45,037
105,884
33,704
6,940
176,698
49,827
167,708
92,595
24,050
323,567
288,080
60,555
265,498
146,950
47,708
–
–
–
2,168,083
Options
granted
in year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
194,711
76,937
35,649
307,297
Options
granted
in year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
185,798
90,656
39,262
315,716
Options
exercised
in year
–
(35,392)
(429)
(333)
(147,206)
–
(2,089)
(1,441)
–
(262,405)
(7,419)
(162)
(2,459)
(288)
(133)
(501)
(64)
–
–
–
–
(460,321)
Options
exercised
in year
(1,728)
(324,172)
(319)
(7,792)
(102,187)
(7,544)
(5,776)
(16,963)
(6,488)
(160,787)
(9,239)
(1,588)
(22,208)
(8,936)
(4,079)
(9,868)
(2,911)
(1,798)
(65)
–
–
(694,448)
Options
forfeited
in year
Options
outstanding
31 Dec 2008
(5,528)
(32)
(2,219)
(56)
(1,333)
–
(417)
(1,426)
(195)
(5,589)
(9,924)
(4,837)
(36,051)
(16,688)
(5,189)
(40,556)
(14,174)
(5,927)
(26,486)
(7,706)
(3,271)
–
870
–
24,349
4,189
40,908
–
69,295
18,129
7,733
237,371
43,060
169,942
105,138
28,699
137,115
72,086
30,991
168,225
69,231
32,378
(187,604) 1,259,709
Options
forfeited
in year
Options
outstanding
31 Dec 2007
–
(323)
(1,212)
(951)
(1,049)
(1,422)
(1,164)
(7,007)
(2,431)
(4,415)
(11,194)
(4,138)
(25,632)
(24,430)
(8,417)
(47,178)
(21,925)
(11,889)
(7,561)
(4,332)
(2,344)
–
5,528
–
36,294
2,648
24,738
–
152,728
40,908
2,506
72,162
18,324
275,727
254,714
48,059
208,452
122,114
34,021
178,172
86,324
36,918
(189,014) 1,600,337
Anglo American plc Annual Report 2008
120
Financial statements
Notes to the financial statements continued
28. Called-up share capital and share-based payments continued
Former AAC Executive Share Incentive Scheme(1)
At 31 December 2008
Year of
grant
1998
1999
Date exercisable
1 January 2000 to 4 December 2008
4 January 2001 to 4 January 2009
At 31 December 2007
Year of
grant
Date exercisable
1990-1997 1 January 1999 to 15 December 2007
1 January 2000 to 4 December 2008
1998
4 January 2001 to 4 January 2009
1999
See following page for footnote.
Weighted average
option price
per share £
Options
outstanding
1 Jan 2008
–
–
679,800
38,700
718,500
Options
exercised
in year
(587,560)
(33,900)
(621,460)
Options
expired
in year
Options
outstanding
31 Dec 2008
(92,240)
(4,800)
(97,040)
–
–
–
Weighted average
option price
per share £
Options
outstanding
1 Jan 2007
Options
exercised
in year
Options
outstanding
31 Dec 2007
–
3.37
2.94
49,800
2,636,080
95,500
2,781,380
(49,800)
(1,956,280)
(56,800)
(2,062,880)
–
679,800
38,700
718,500
Long Term Incentive Plan(1)(2)
Ordinary shares of 5486/91 US cents may be awarded for no consideration under the terms of this scheme. The number of shares outstanding is shown below:
Shares
Shares
conditionally
outstanding
1 Jan 2008 awarded in year
Shares
vested
in year
Shares
forfeited
in year
Shares
outstanding
31 Dec 2008
1,806,992
61,993
1,423,723
1,760,571
–
–
5,053,279
–
–
–
–
1,623,929
83,200
1,707,129
(1,563,495)
(61,993)
(14,375)
(5,526)
–
–
(1,645,389)
(243,497)
–
–
–
(207,316) 1,202,032
(150,100) 1,604,945
(47,911) 1,576,018
83,200
(648,824) 4,466,195
–
Shares
Shares
outstanding
conditionally
1 Jan 2007 awarded in year
Shares
vested
in year
118,901
1,572,479
170,323
10,000
2,058,193
61,993
1,492,252
–
5,484,141
–
–
–
–
–
–
–
1,766,921
1,766,921
(116,351)
(738,356)
(79,975)
(10,000)
(233,001)
–
(31,618)
–
(1,209,301)
Shares
forfeited
in year
–
(834,123)
(90,348)
–
(18,200)
–
(36,911)
(6,350)
(985,932)
Shares
expired
in year
Shares
outstanding
31 Dec 2007
(2,550)
–
–
–
–
–
–
–
–
–
–
–
1,806,992
61,993
1,423,723
1,760,571
(2,550) 5,053,279
At 31 December 2008
Year of
grant
2005
2005
2006
2007
2008
2008
Vesting date
2 April 2008
1 June 2008
29 March 2009
23 March 2010
17 March 2011
18 August 2011
At 31 December 2007
Year of
grant
2003
2004
2004
2004
2005
2005
2006
2007
Date exercisable/Vesting date
11 April 2006 to 10 April 2007
25 March 2007
26 April 2007
1 September 2007
2 April 2008
1 June 2008
29 March 2009
23 March 2010
See following page for footnotes.
Anglo American plc Annual Report 2008
28. Called-up share capital and share-based payments continued
Bonus Share Plan(3)
Ordinary shares of 5486/91 US cents may be awarded under the terms of this scheme for no consideration. The number of shares outstanding is shown below:
At 31 December 2008
Year of
grant
2004
2005
2006
2007
2008
Performance period end date
31 December 2006
31 December 2007
31 December 2008
31 December 2009
31 December 2010
At 31 December 2007
Year of
grant
2004
2005
2006
2007
Performance period end date
31 December 2006
31 December 2007
31 December 2008
31 December 2009
Shares
Shares
outstanding
conditionally
1 Jan 2008 awarded in year
Shares
vested
in year
Shares
forfeited
in year
Shares
outstanding
31 Dec 2008
5,684
1,847,813
1,424,558
1,544,288
–
4,822,343
–
–
–
–
1,701,688
1,701,688
(5,684)
(1,709,848)
(75,498)
(54,786)
(28,623)
(1,874,439)
–
–
(137,139)
826
(78,916) 1,270,144
(92,889) 1,396,613
(50,614) 1,622,451
(359,558) 4,290,034
Shares
Shares
outstanding
conditionally
1 Jan 2007 awarded in year
Shares
vested
in year
Shares
forfeited
in year
Shares
outstanding
31 Dec 2007
459,737
2,293,706
1,815,462
–
4,568,905
–
–
–
1,643,559
1,643,559
(454,053)
(381,423)
(283,839)
(81,808)
(1,201,123)
–
5,684
(64,470) 1,847,813
(107,065) 1,424,558
(17,463) 1,544,288
(188,998) 4,822,343
Share Incentive Plan
Ordinary shares of 5486/91 US cents may be awarded under the terms of this scheme for no consideration. The number of shares outstanding is shown below:
Share Incentive Plan
Awards outstanding
at 31 Dec 2008
968,341
Awards outstanding
at 31 Dec 2007
Latest release date
921,574
7 December 2011
(1) The early exercise of share options is permitted at the discretion of the Company upon the termination of employment, ill health or death.
(2) The LTIP awards are contingent on pre-established performance criteria being met. Further information in respect of this scheme is shown in the Remuneration report.
(3) The BSP was approved by shareholders in 2004 as a replacement for the ESOS and the Deferred Bonus Plan. Further information in respect of the BSP, including performance conditions, is shown in the
Remuneration report.
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Anglo American plc Annual Report 2008
122
Financial statements
Notes to the financial statements continued
29. Reconciliation of changes in equity
US$ million
Balance at 1 January 2007
Total recognised income and expense
Dividends paid
Dividends paid to minority interests
Dividend in specie relating to Mondi demerger
Acquisition, disposal and demerger of businesses
Issue of shares to minority interests
Group reinvestment of dividends in Anglo Platinum
Minority conversion of Anglo Platinum’s preference shares
Exercise of share options in Anglo Platinum
Share buybacks
Purchase of shares for share schemes
Share-based payment charges on equity settled schemes
Issue of shares under employee share schemes
Current tax on exercised employee share schemes
Cancellation of treasury shares
IFRS 2 charges arising on BBBEE and BEE transactions
Other
Balance at 1 January 2008
Total recognised income and expense
Dividends paid
Dividends paid to minority interests
Acquisition and disposal of businesses (including issue of shares
to minority interests)
Minority conversion of Anglo Platinum’s preference shares
Share buybacks
Purchase of shares for share schemes
Share-based payment charges on equity settled schemes
Issue of shares under employee share schemes
Current tax on exercised employee share schemes
Treasury shares issued in subsidiary entities
Other
Balance at 31 December 2008
Attributable to equity shareholders of the Company
Total
share
capital(1)
3,484
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(33)
–
–
3,451
–
–
–
–
–
–
–
–
–
–
–
–
3,451
Retained
earnings
19,738
7,276
(1,527)
–
(3,718)
41
–
–
45
–
(6,167)
(23)
–
131
23
–
33
3
15,855
5,113
(1,538)
–
6
6
(595)
(88)
–
97
10
6
(45)
18,827
Share-
based
payment
reserve
Cumulative
translation
adjustment
reserve
Fair value
and other
reserves
247
–
–
–
–
(45)
–
–
–
–
–
–
156
(94)
–
–
–
(2)
262
–
–
–
–
–
–
–
146
(70)
–
–
(50)
288
(38)
58
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20
(4,097)
–
–
–
–
–
–
–
–
–
–
–
(4,077)
840
1,891
–
–
–
112
–
–
–
–
–
–
–
–
–
33
–
(3)
2,873
(1,175)
–
–
–
–
–
–
–
–
–
–
34
1,732
Minority
interests
2,856
844
–
(757)
–
(1,196)
28
86
(45)
51
–
–
–
–
–
–
35
(33)
1,869
487
–
(796)
(45)
(6)
–
–
11
–
–
–
15
1,535
Total
equity
27,127
10,069
(1,527)
(757)
(3,718)
(1,088)
28
86
–
51
(6,167)
(23)
156
37
23
–
68
(35)
24,330
328
(1,538)
(796)
(39)
–
(595)
(88)
157
27
10
6
(46)
21,756
(1) Total share capital comprises called-up share capital of $738 million (2007: $738 million) and the share premium account of $2,713 million (2007: $2,713 million).
Fair value and other reserves comprise:
US$ million
Balance at 1 January 2007
Total recognised income and expense
Acquisition, disposal and demerger of businesses
Cancellation of treasury shares
Other
Balance at 1 January 2008
Total recognised income and expense
Other
Balance at 31 December 2008
Available
for sale
reserve
491
1,889
(7)
–
–
2,373
(1,285)
–
1,088
Cash flow
hedge
reserve
Other
reserves(1)
Total fair value
and other
reserves
(422)
2
116
–
–
(304)
110
–
(194)
771
–
3
33
(3)
804
–
34
838
840
1,891
112
33
(3)
2,873
(1,175)
34
1,732
(1) Other reserves comprise $689 million (2007: $689 million) legal reserve, $34 million (2007: nil) revaluation reserve and $115 million (2007: $115 million) capital redemption reserve.
Anglo American plc Annual Report 2008
123
2008
8,571
1,509
155
71
452
(1)
(1,113)
46
(999)
80
896
(88)
9,579
2007
8,821
1,398
138
(243)
137
(12)
(197)
77
(352)
(389)
53
(56)
9,375
Short term borrowings Medium and long term borrowings
2007
2008
2007
2008
(6,784)
35
–
(6,749)
(5,895)
(31) –
17 –
–
(5,909)
(7,211)
–
–
–
(7,211)
(2,404)
(2,404)
30. Consolidated cash flow analysis
a) Reconciliation of profit before tax to cash inflows from continuing operations
US$ million
Profit before tax – continuing operations
Depreciation and amortisation
Share-based payment charges
Special items and remeasurements of subsidiaries and joint ventures
Net finance costs before remeasurements
Operating fair value gains before special items and remeasurements
Share of net income from associates
Provisions
Increase in inventories
Decrease/(increase) in operating receivables
Increase in operating payables
Other adjustments
Cash inflows from continuing operations
b) Reconciliation to the balance sheet
US$ million
Balance sheet
Balance sheet – disposal groups(2)
Bank overdrafts
Bank overdrafts – disposal groups(2)
Net debt classifications
Cash and cash equivalents(1)
2008
2,771
8 –
(35)
–
2,744
2007
3,129
–
(17)
(38) –
3,074
(1) ‘Short term borrowings’ on the balance sheet include overdrafts which are included within cash and cash equivalents in determining net debt.
(2) Disposal group balances are shown as ‘Assets classified as held for sale’ and ‘Liabilities directly associated with assets classified as held for sale’ on the balance sheet.
c) Movement in net debt
US$ million
Balance at 1 January 2007
Cash flow(4)
Acquisition, disposal and demerger of businesses
Reclassifications
Movement in fair value
Other non-cash movements
Currency movements
Balance at 1 January 2008
Cash flow(4)
Acquisition of businesses
Reclassifications
Movement in fair value
Other non-cash movements
Currency movements
Balance at 31 December 2008
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Cash
and cash
equivalents(1)
2,980
34
–
–
–
–
60
3,074
(143)
–
–
–
–
(187)
2,744
Debt due
within
one year
(2,076)
(2,618)
468
(1,394)
(7)
–
(282)
(5,909)
(1,432)
(209)
190
(11)
–
622
(6,749)
Debt due
after
one year
Current
financial asset
investments(2)
(4,228)
(1,334)
1,858
1,420
10
18
(148)
(2,404)
(5,181)
(461)
(190)
(176)
(15)
1,216
(7,211)
–
–
–
–
–
–
–
–
210
–
–
–
–
(37)
173
Net debt
excluding
hedges
(3,324)
(3,918)
2,326
26
3
18
(370)
(5,239)
(6,546)
(670)
–
(187)
(15)
1,614
(11,043)
Total net debt
including
hedges
Hedges(3)
193
–
–
–
195
–
–
388
(380)
–
–
(305)
–
–
(297)
(3,131)
(3,918)
2,326
26
198
18
(370)
(4,851)
(6,926)
(670)
–
(492)
(15)
1,614
(11,340)
(1) The Group operates in certain countries (principally South Africa and Venezuela) where the existence of exchange controls may restrict the use of certain cash balances. These restrictions are not expected to have
any material effect on the Group’s ability to meet ongoing obligations.
(2) Relates to amounts invested in unlisted preference shares (guaranteed by Nedbank Limited and Nedbank Group Limited) pending completion of the anticipated disposal of the Group’s 50% interest in the
Booysendal joint venture.
(3) Derivative instruments that provide an economic hedge of assets and liabilities in net debt are included above to reflect the true net debt position of the Group at the year end. These consist of net current
derivative liabilities of $437 million (2007: $396 million net assets) and net non-current derivative assets of $140 million (2007: $8 million net liabilities) and are classified within other financial liabilities and
other financial assets respectively on the balance sheet.
(4) Cash flow on debt due within one year includes nil relating to discontinued operations (2007: repayments of $162 million). Similarly, cash flow on debt due after one year includes nil relating to discontinued
operations (2007: receipts of $993 million). Cash flow on debt due after one year includes repayment of finance leases of $3 million (2007: nil) which is included within ‘Other financing activities’ in the
Consolidated cash flow statement.
Anglo American plc Annual Report 2008
124
Financial statements
Notes to the financial statements continued
31. EBITDA by business segment
US$ million
By business segment
Platinum
Diamonds
Base Metals
Ferrous Metals and Industries
Coal
Industrial Minerals
Exploration
Corporate Activities and Unallocated Costs
EBITDA – continuing operations
EBITDA – discontinued operations
EBITDA – total Group
EBITDA is stated before special items and remeasurements and is reconciled to ‘Total profit from operations and associates’ as follows:
US$ million
Total profit from operations and associates
Operating special items and remeasurements (including associates)
Net profit on disposals (including associates)
Associates’ financing remeasurements
Depreciation and amortisation: subsidiaries and joint ventures
Share of associates’ interest, tax, depreciation, amortisation and minority interests
EBITDA – continuing operations
EBITDA – discontinued operations
EBITDA – total Group
2008
2007
2,732
665
2,845
3,064
2,585
487
(212)
(319)
11,847
–
11,847
2008
8,972
1,357
(1,027)
15 4
1,509
1,021
11,847
–
11,847
3,155
587
4,683
1,561
882
732
(157)
(272)
11,171
961
12,132
2007
8,929
711
(484)
1,398
613
11,171
961
12,132
Anglo American plc Annual Report 2008
125
32. Acquisitions
Acquisition of subsidiaries
On 5 August 2008 the Group acquired a 63.3% shareholding in Anglo Ferrous Brazil SA, which holds a 51% interest in the Minas-Rio iron ore project (Minas-Rio) and
a 70% interest in the Amapá iron ore system (Amapá) at a price of R$28.147 ($18.056) per share. At that time the Group committed to extend the offer to the minority
shareholders of Anglo Ferrous Brazil SA. This offer was formally made on 31 October 2008 and as a result, the Group’s shareholding in Anglo Ferrous Brazil SA at
31 December 2008 was 98.9%. Total cash paid to acquire a controlling interest was $3.5 billion. A further $2.0 billion was paid (including cash settlement of a related
derivative instrument ($0.7 billion)) to subsequently acquire minority interests.
This transaction followed on from the prior year acquisition of a 49% interest in each of Minas-Rio and LLX Minas-Rio, which owns the port of Açu (presented as
a comparative in the Acquisition of material joint ventures section).
As a result of these transactions the Group’s effective shareholding in each of the operating entities at 31 December 2008 was 99.4% in Minas-Rio, 49% in LLX
Minas-Rio and 69.2% in Amapá.
In the year ended 31 December 2008, the Group purchased 7,941,964 shares (2007: 4,435,086 shares) in Anglo Platinum Limited for total consideration of $1,108 million
(2007: $671 million). The cash paid in the year ended 31 December 2008 was $1,113 million (2007: $658 million). In the year ended 31 December 2007, the Group also
acquired 3,353,108 shares in Anglo Platinum Limited through a dividend reinvestment plan. The Group’s shareholding in Anglo Platinum Limited increased from 76.5% at
31 December 2007 to 79.6% at 31 December 2008.
The carrying value and fair value of the net assets at the date of acquisition of a controlling interest and related net cash outflows are shown below. The fair values
presented are provisional, and will be finalised in 2009 when the final fair values arising from the fair value assessments are confirmed.
US$ million
Net assets acquired
Tangible assets
Other non-current assets
Current assets
Current liabilities
Non-current liabilities
Minority interests
Add: Value attributable to reserves and resources acquired, net of deferred tax(4)
Less: Investments in associates previously recorded
Less: Fair value of assets contributed
Fair value of net assets acquired
Partial funding of partner cash calls
Goodwill arising on acquisitions
Negative goodwill arising on acquisitions
Total cost of acquisitions
Satisfied by
Net cash acquired
Cash paid in prior year
Net cash paid (5)(6)
Anglo Ferrous Brazil SA(2)
Carrying
value
Provisional
fair value
Carrying
value
56
1
69
(35)
(7)
–
84
930
57
319
(278)
(418)
(235)
375
930
96
388
(278)
(534)
(230)
372
1,590
–
–
1,962
–
1,556
–
3,518
243
–
3,275
Other(3)
Fair
value
67
13
69
(36)
(13)
–
100
59
– –
– –
159
– –
54
– –
213
12
– –
201
2008(1)
2007
Total
provisional
fair value
Total fair
value
997
109
457
(314)
(547)
(230)
472
1,649 4
2,121
1,610
3,731
255
3,476
314
12
65
(54)
(66)
(80)
191
(9)
(59)
127
(12)
51
(2)
164
11
30
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(1) Had all these acquisitions of subsidiaries taken place at 1 January 2008, the Group’s revenue would have been $26,367 million and the Group’s operating profit before special items and remeasurements would
have been $7,929 million for the year ended 31 December 2008.
(2) Since the date of acquisition, Anglo Ferrous Brazil SA has contributed revenue of nil and operating loss before special items and remeasurements of $70 million to the Group.
(3) In total since the date of acquisition, these Other acquisitions have contributed revenue of $179 million and operating profit before special items and remeasurements of $16 million to the Group.
(4) Represents the Group’s share of value (implicit in the transaction) of reserves and resources, capitalised within tangible assets.
(5) Includes net cash paid by discontinued operations of nil (2007: $9 million).
(6) $2,411 million (2007: $658 million) has been paid to acquire minority interests in existing subsidiaries. In 2008 this related primarily to Anglo Ferrous Brazil SA and Anglo Platinum Limited (2007: Anglo Platinum
Limited). These payments are not reflected in the above net cash paid amount. This resulted in total net cash paid for the acquisition of subsidiaries in the year of $5,887 million.
Acquisition of material joint ventures
The Group made one material acquisition of a joint venture in the year ended 31 December 2008 (2007: one).
On 29 February 2008 Anglo Coal Australia completed the acquisition of a 70% interest in the Foxleigh joint venture (Foxleigh) in Queensland, Australia. The total cost of
acquisition was $606 million. The Group has proportionately consolidated 70% of Foxleigh from 29 February 2008.
Anglo American plc Annual Report 2008
126
Financial statements
Notes to the financial statements continued
32. Acquisitions continued
The carrying value and provisional fair value of the net assets at the date of acquisition and related net cash outflow for material joint venture acquisitions are shown below:
US$ million
Net assets acquired
Tangible assets
Value attributable to reserves and resources acquired
Other tangible assets
Other non-current assets
Current assets
Current liabilities
Non-current liabilities
Fair value of net assets acquired and total cost of acquisitions
Satisfied by
Net cash acquired
Deferred consideration
Costs accrued
Net cash paid (2)
Carrying
value
Foxleigh
Provisional
fair value
2008
Minas-Rio
49% interest(1)
2007
Minas-Rio
49% interest
Fair value
Fair value
–
108
–
41
(37)
(47)
65
684
108
–
41
(37)
(190)
606
1
–
–
605
151
–
–
–
–
93
244
–
242
–
2
1,770
86
16
52
(84)
(632)
1,208
48
47
1
1,112
(1) During the year further consideration of $284 million (which is contingent on certain criteria being met) was recognised (reduced from the $600 million recognised in the first half of 2008, as a result of a change in
the assumptions with regards to payment and purchase of an additional interest in Minas-Rio) together with an adjustment to the net deferred tax liability recognised to reflect the future tax benefit from cash
payments made on acquisition. These adjustments resulted in amendments to the ‘Value attributable to reserves and resources acquired’ and deferred tax in the acquisition balance sheet.
(2) In addition, during the year there was further net cash paid of $2 million (2007: $2 million) for other joint venture acquisitions. This resulted in total net cash paid for investments in joint ventures of $609 million
(2007: $1,114 million).
33. Disposals and demerger of subsidiaries and businesses
US$ million
Net assets disposed
Tangible assets
Other non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets(1)
Minority interests
Group’s share of net assets immediately prior to disposal
Less: Retained investments in associates
Less: Retained financial asset investments
Net assets disposed
Cumulative translation differences recycled from reserves
Fair value losses arising on transactions
Dividend in specie relating to Mondi demerger
Other
Net gain on disposals
Net sale proceeds
Net cash and cash equivalents disposed
Costs accrued
Deferred consideration
Realised foreign exchange
Net cash inflow/(outflow) from disposals and demerger(2)
2008
2007
479
6,197
43
1,208
4,194
210
(83) (2,416)
(113) (3,064)
536
6,119
(116) (1,200)
4,919
420
(393)
–
(318)
–
420 4,208
(334)
68
(3,718)
3
157
384
(437)
4
–
–
(49)
(2)
–
–
–
119
537
(4)
4
(56)
(13)
468
(1) 2008 includes net assets of $79 million no longer consolidated following loss of control of a
subsidiary.
(2) 2008 includes nil in relation to discontinued operations (2007: net cash outflow of $159 million).
Disposals of businesses in the year ended 31 December 2008
The disposal of Namakwa Sands was the only material disposal of a business in
the year.
Namakwa Sands
On 1 October 2008 Namakwa Sands was sold to Exxaro Resources Limited
(Exxaro) for consideration of $330 million including deferred consideration.
The net asset position at the date of disposal, together with the resulting profit on
disposal and related cash inflow, is shown below:
US$ million
Tangible assets
Other non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets disposed
Cumulative translation differences recycled from reserves
Net gain on disposal
Net sale proceeds
Deferred consideration
Realised foreign exchange
Net cash inflow from disposal of Namakwa Sands
2008
296
4
91
(15)
(84)
292
1
49
342
(19)
(12)
311
On 3 November 2008 as part of the same transaction, the Group completed the sale
of a 26% interest in both the Black Mountain zinc, lead and copper operation and
the Gamsberg zinc project for consideration of $23 million.
Anglo American plc Annual Report 2008
127
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33. Disposals and demerger of subsidiaries and businesses
continued
Disposals and demerger of subsidiaries and associates in the year
ended 31 December 2007
Significant disposals and demerger of subsidiaries and associates recorded during
the year ended 31 December 2007 are summarised below. For further details refer
to the Group’s financial statements for the year ended 31 December 2007.
34. Disposal groups and non-current assets held for sale
Net assets relating to Namakwa Sands, which were previously classified as held
for sale at 31 December 2007, were disposed of on 1 October 2008 as disclosed
in note 33.
The following assets and liabilities relating to disposal groups were classified as
held for sale. The Group expects to complete the sale of these businesses within
12 months of the year end.
Mondi
On 2 July 2007 the Paper and Packaging business, Mondi, was demerged from
the Group by way of a dividend in specie paid to shareholders of $3,718 million.
The Paper and Packaging business is presented as a discontinued operation.
Refer to note 35 for financial information on discontinued operations. The Group
held a 5.3% interest in Mondi at 31 December 2008 and 31 December 2007
through Epoch, Epoch Two and Tarl. Refer to note 28 for more information on
these companies.
Highveld Steel and Vanadium Corporation (Highveld)
On 4 May 2007 the Group announced the disposal of the remaining 29.2%
shareholding in Highveld to the Evraz Group SA (Evraz) for $238 million. Evraz
was granted an option, subject to regulatory approvals, over this stake as part
of the original transaction in which the Group sold 49.8% of Highveld to Evraz
and Credit Suisse (in July 2006). Evraz exercised their option on 26 April 2007
following requisite regulatory approvals.
Tongaat-Hulett Group
In December 2006 the Tongaat-Hulett Group announced the proposed
unbundling and listing of Hulamin and simultaneous introduction of BBBEE into
both companies.
This transaction was effected on 25 June 2007, and empowerment parties
acquired 25% of Tongaat-Hulett and 15% of Hulamin’s operations. The Group
commenced equity accounting both Tongaat-Hulett and Hulamin as of 25 June
2007. However, in accordance with SIC 12 Tongaat-Hulett and Hulamin are
required to consolidate the entities housing the empowerment interests (as they
supplied significant funding to these parties to effect the transaction). This has
the effect, in accounting terms, of cancelling the shares issued to these parties.
As a result, the Group has equity accounted 49.8% and 44.9% of Tongaat-Hulett
and Hulamin, respectively. The Group’s legal interest in Tongaat-Hulett at
31 December 2008 was 37.1% (2007: 37.2%). The Group’s legal interest in
Hulamin at 31 December 2008 was 38.4% (2007: 38.4%).
AngloGold Ashanti
On 2 October 2007 the Group sold 67.1 million shares in AngloGold Ashanti
Limited for $2.9 billion. This reduced the Group’s shareholding from 41.6% to
17.3%. The Group’s representation on the company’s board was also withdrawn
at this time. The remaining investment is accounted for as a financial asset
investment. The Gold business is presented as a discontinued operation. Refer
to note 35 for financial information on discontinued operations. The Group’s
shareholding at 31 December 2008 was 16.2% (2007: 16.6%).
US$ million
Intangible assets
Tangible assets
Investments in associates
Other non-current assets
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Trade and other payables
Short term borrowings
Other current liabilities
Total current liabilities
Retirement benefit obligations
Deferred tax liabilities
Provisions for liabilities and charges
Total non-current liabilities
Total liabilities
Net assets
2008
Platinum
2007
disposal groups(1)
Total(2)
–
257
–
2
259
–
8
8
16
275
(21)
–
–
(21)
–
(56)
(3)
(59)
(80)
195
3
589
74
4
670
38
50
–
88
758
(53)
(69)
(4)
(126)
(4)
(148)
(9)
(161)
(287)
471
(1) This reflects the reclassification of operations to be sold under previously announced BEE deals. Due
to the significant deterioration in global market conditions, coupled with a material decline in platinum
group metal prices and constrained debt and equity markets, in the fourth quarter of 2008, the
Lebowa mine plan and project pipeline, including the Middelpunt Hill UG2 expansion project, were
placed under critical review in conjunction with Anooraq. Anglo Platinum and Anooraq remain
committed to concluding the transaction as soon as practically possible and have extended the date
for fulfilment of the conditions until 30 April 2009, thus it remains appropriate to classify these
entities as held for sale. Northam Platinum Limited was sold on 20 August 2008 to Mvela. The cash
inflow from the disposal was $205 million. In the event ministerial approval is not received, the sale
of Northam Platinum Limited would be unwound. The split of the total assets, total liabilities and net
assets for the Platinum disposal groups is as follows:
US$ million
Lebowa Platinum Mines Limited
Northam Platinum Limited
Other
Total
assets
265
–
10
275
Total
liabilities
(78)
–
(2)
(80)
2008
Net
assets
187
–
8
195
Total
assets
243
74
11
328
Total
liabilities
(166)
–
(2)
(168)
2007
Net
assets
77
74
9
160
(2) Disposal groups at 31 December 2007 related to Namakwa Sands and Platinum disposal groups.
The net carrying amount of assets and associated liabilities classified as held for
sale during the year was not written down in 2008 or 2007.
Anglo American plc Annual Report 2008
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Financial statements
Notes to the financial statements continued
35. Discontinued operations
On 2 July 2007 the Paper and Packaging business, Mondi, was demerged from the Group by way of a dividend in specie paid to shareholders.
On 2 October 2007 the Group sold 67.1 million shares in AngloGold Ashanti Limited which reduced the Group’s shareholding from 41.6% to 17.3%. The Group’s representation
on the company’s board was also withdrawn at this time. The remaining investment is accounted for as a financial asset investment.
Both of these operations are presented as discontinued.
The results of the discontinued businesses are shown below:
US$ million
Revenue
Total operating costs
Operating profit from subsidiaries and joint ventures – discontinued operations
Net profit on disposals
Share of net income from associates
Total profit from discontinued operations and associates
Net finance costs
Profit before tax – discontinued operations
Income tax expense
Profit for the financial year – discontinued operations
Profit on partial disposal of AngloGold Ashanti(1)
Transaction costs relating to the demerger of Mondi(1)
Tax on net profit on disposal and demerger of discontinued operations
Net profit after tax on disposal and demerger of discontinued operations
Total profit for the financial year – discontinued operations
Before special items
and remeasurements
2007
2008
Special items and
remeasurements
2007
2008
2008
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,062
(3,741)
321
–
97
418
(19)
399
(81)
318
–
–
–
–
318
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(10)
(10)
119
(187)
(78)
–
(78)
1
(77)
1,970
(10)
(157)
1,803
1,726
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2007
4,062
(3,751)
311
119
(90)
340
(19)
321
(80)
241
1,970
(10)
(157)
1,803
2,044
(1) For further details of the demerger of the Paper and Packaging business and disposal of AngloGold Ashanti refer to note 33.
Summary discontinued segment information
Segment revenue and segment result by discontinued business segment were:
US$ million
Subsidiaries and joint ventures
Paper and Packaging
Revenue and net income from associates
Gold
Paper and Packaging
Total associates
Total discontinued operations including net income from associates
Net profit on disposals
Total profit from discontinued operations and associates
Segment revenue
2007
2008
Segment result before special
items and remeasurements(1)
Segment result after special
items and remeasurements(1)
2008
2007
2008
2007
–
–
–
–
–
4,062(2)
1,004
49
1,053
5,115
–
–
–
–
–
–
–
321
95
2
97
418
–
418
–
–
– 2
–
–
–
–
311
(92)
(90)
221
119
340
(1) Segment result is defined as being segment revenue less segment expense; that is operating profit.
(2) This represents segment revenue; the Group’s share of associates of discontinued operations and discontinued associates’ revenue figures are provided for additional information.
Anglo American plc Annual Report 2008
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35. Discontinued operations continued
Summary discontinued special items and remeasurements
The following tables provide an analysis of special items and remeasurements for
discontinued operations:
Subsidiaries and joint ventures’ special items and remeasurements –
discontinued operations
US$ million
2008
2007
Operating special items
Operating remeasurements
Net profit on disposals
Financing special items
Financing remeasurements
Total special items and remeasurements before tax –
discontinued operations
Tax
Net total special items and remeasurements attributable to
equity shareholders of the Company – discontinued operations
–
–
–
–
–
–
–
–
(13)
3
119
(2)
2
109
1
110
37. Contingent liabilities and contingent assets
(i) Contingent liabilities
The Group is subject to various claims which arise in the ordinary course of
business. Additionally, and as set out in the demerger agreement, Anglo American
and Mondi have agreed to indemnify each other, subject to certain limitations,
against certain liabilities. Having taken appropriate legal advice, the Group believes
that the likelihood of a material liability arising is remote. At 31 December 2008
contingent liabilities in respect of the Group’s subsidiaries comprise aggregate
amounts of $548 million (2007: $488 million) in respect of loans and performance
guarantees given to banks and other third parties and are primarily in respect of
environmental restoration and decommissioning obligations. For information
relating to contingent liabilities in respect of associates and joint ventures refer
to notes 16 and 17 respectively.
No contingent liabilities were secured on the assets of the Group at 31 December
2008 or 31 December 2007.
(ii) Contingent assets
There were no significant contingent assets in the Group at 31 December 2008
or 31 December 2007.
Associates’ special items and remeasurements – discontinued
operations
US$ million
2008
2007
Associates’ operating special items and remeasurements
Associates’ net profit on disposals
Associates’ financing remeasurements
Total associates’ special items and remeasurements before tax –
discontinued operations
Tax
Net total associates’ special items and remeasurements –
discontinued operations
–
–
–
–
–
–
(225)
7
13
(205)
18
(187)
(iii) Other
Minera Loma de Níquel
In January 2008 Minera Loma de Níquel (MLdN) was notified of the intention of the
Venezuelan Ministry of Basic Industries and Mining (MIBAM) to cancel 13 of its
exploration and exploitation concessions due to MLdN’s alleged failure to fulfil
certain conditions of the concessions. These concessions do not include the
concessions where the current mining operations and metallurgical facilities are
located. MLdN believes that it has complied with the conditions of these
concessions and has lodged administrative appeals against the notices of
termination and is waiting for a response from MIBAM. MLdN may in the future
undertake further appeals, including with Venezuela’s Supreme Court, if the
MIBAM’s ruling does not adequately protect its interests.
Employee numbers and costs – discontinued operations
The average number of employees, excluding associates’ employees and including
a proportionate share of employees within joint ventures, was:
Thousands
By business segment
Paper and Packaging(1)
Discontinued operations
2008
2007
–
–
16
16
(1) 2007 includes employee numbers for Mondi for the period it was held as a subsidiary pro rated over
the full year.
Payroll costs in respect of the employees included in the table above were:
Anglo American and MLdN continue to strive to resolve the matter by way of
constructive dialogue; however, Anglo American and MLdN believe that there
is a valid legal basis to reverse the notices of termination and will pursue all
appropriate legal and other remedies and actions to protect their respective
interests both under Venezuelan and international law. As such, Anglo American
anticipates restoration of these concessions and renewal of those that expire in
2012. As a result, the Group continues to consolidate MLdN and no impairment
has been recorded for the year ended 31 December 2008.
At 31 December 2008 the Group’s interest in the book value of MLdN, including its
mineral rights, was $443 million (2007: $616 million), as included in the Group’s
balance sheet. In the 12 months to 31 December 2008 MLdN’s contribution to
Group operating profit was $30 million (2007: $370 million).
US$ million
Wages and salaries
Social security costs
Post retirement healthcare costs
Defined benefit pension plan costs
Share-based payments
Discontinued operations
36. Capital commitments
US$ million
Contracted but not provided
2008
2007
–
–
–
–
–
–
473
95
1
2
4
575
Anglo American Sur
Anglo American inherited a 1978 agreement with Codelco, the Chilean state mining
company, when it acquired Disputada de Las Condes (since renamed Anglo
American Sur) in 2002. The agreement grants Codelco the right, subject to certain
conditions and limitations, to acquire up to a 49% minority interest in Anglo
American Sur, the wholly owned Group company that owns the Los Bronces and
El Soldado copper mines and the Chagres smelter. These conditions include limiting
the window for exercising the right to once every three years in the month of
January until January 2027. The right was not exercised in 2009. The calculations
of the price at which Codelco can exercise its right are complex and confidential but
do, inter alia, take account of company profitability over a five year period.
2008
2007
3,465
2,373
Anglo American plc Annual Report 2008
130
Financial statements
Notes to the financial statements continued
38. Operating leases
At 31 December 2008 the Group had the following outstanding commitments
under non-cancellable operating leases:
US$ million
Expiry date
Within one year
One to two years
Two to five years
After five years
2008
2007
64
60
168
197
489
52
42
207
205
506
Operating leases relate principally to land and buildings and vehicles.
39. Related party transactions
The Group has a related party relationship with its subsidiaries, associates and
joint ventures (see note 40).
At 31 December 2008 the Group held $88 million (2007: $131 million) of 10%
non-cumulative redeemable preference shares in DB Investments, the holding
company of De Beers Société Anonyme. The Group has also made loans to
De Beers during the year totalling $118 million. The loans are interest free for two
years, at which point they revert to a market rate of interest, and are convertible
into ordinary shares. These loans are included within Financial asset investments.
In addition to the Group’s normal funding requirements, the shareholders of
De Beers have agreed to provide loans to De Beers, proportionate to their
shareholdings, totalling $500 million. Anglo American holds a 45% interest in
De Beers and will therefore provide a loan of $225 million.
The Company and its subsidiaries, in the ordinary course of business, enter
into various sales, purchase and service transactions with joint ventures and
associates and others in which the Group has a material interest. These
transactions are under terms that are no less favourable than those arranged
with third parties. These transactions are not considered to be significant.
Dividends received from associates during the year totalled $609 million (2007:
$275 million), excluding nil (2007: $52 million) from discontinued operations,
as disclosed in the Consolidated cash flow statement.
At 31 December 2008 the directors of the Company and their immediate relatives
controlled 3% (2007: 3%) of the voting shares of the Company.
Remuneration and benefits received by directors are disclosed in the directors’
remuneration report. Remuneration and benefits of key management personnel
including directors are given in note 6.
Information relating to pension fund arrangements is disclosed in note 27.
Anglo American plc Annual Report 2008
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40. Group companies
The principal subsidiaries, joint ventures, associates and proportionately consolidated joint arrangements of the Group at 31 December 2008, and the Group percentage
of equity capital, joint arrangements and joint venture interests are set out below. All these interests are held indirectly by the parent company and are consolidated within
these financial statements. The Group has restricted the information to its principal subsidiaries as full compliance with Schedule 5 paragraph 15 of the Companies Act
1985 would result in a statement of excessive length.
Subsidiary undertakings
Platinum
Anglo Platinum Limited
Coal
Anglo Coal(2)
Anglo Coal Holdings Australia Limited
Peace River Coal Partnership
Base Metals
Black Mountain Mining (Pty) Limited(3)
Copebrás Limitada
Namakwa Sands(3)
Gamsberg Zinc(3)
Anglo American Brasil Limitada (Barro Alto)
Ambase Exploration (Namibia) Proprietary Limited (Skorpion)
Anglo American Brasil Limitada (Catalão)
Anglo American Sur SA
Anglo American Norte SA
Anglo American Brasil Limitada (Codemin)
Minera Loma de Níquel, CA
Minera Quellaveco SA
Lisheen(4)
Ferrous Metals and Industries
Scaw Metals/Moly-Cop/AltaSteel
Kumba Iron Ore Limited
Anglo Ferrous Brazil SA
Anglo Ferrous Minas-Rio Mineração SA(5)
Anglo Ferrous Amapá Mineração Limitada
Industrial Minerals
Tarmac Group Limited
Tarmac France SA
Lausitzer Grauwacke GmbH
Tarmac Iberia SA
WKSM SA
Tarmac CZ a.s.
Tarmac SRL
Koca Beton Agrega Mining and Construction Industry and Trading
Company Limited
United Marine Holdings Limited(6)
Country of incorporation
Business
Percentage of equity owned (1)
2008
2007
South Africa
Platinum
79.6%
76.5%
South Africa
Australia
Canada
South Africa
Brazil
South Africa
South Africa
Brazil
Namibia
Brazil
Chile
Chile
Brazil
Venezuela
Peru
Ireland
Coal
Coal
Coal
Zinc, lead and copper
Fertilisers and acid
Mineral sands –
Zinc project
Nickel project
Zinc
Niobium
Copper
Copper
Nickel
Nickel
Copper project
Zinc and lead
100%
100%
73.8%
74%
73%
74%
100%
100%
100%
100%
99.9%
100%
91.4%
81.9%
100%
100%
100%
65.9%
100%
73%
100%
100%
100%
100%
100%
100%
99.9%
100%
91.4%
81.9%
100%
South Africa/Chile/Canada
South Africa
Brazil
Brazil
Brazil
Steel, engineering works
and grinding media
Iron ore
Iron ore
Iron ore project
Iron ore system
74%-100% 74%-100%
63.4%
63%
98.9% –
99.4%
69.2% –
UK
France
Germany
Spain
Poland
Czech Republic
Romania
Turkey
UK
Construction materials
Construction materials
Construction materials
Construction materials
Construction materials
Construction materials
Construction materials
Construction materials
Construction materials
100%
100%
100%
–
100%
100%
60%
100%
100%
49%
100%
100%
100%
100%
100%
100%
60%
100%
50%
(1) The proportion of voting rights of subsidiaries held by the Group is the same as the proportion of equity owned, unless stated.
(2) A division of Anglo Operations Limited, a wholly owned subsidiary.
(3) Previously Black Mountain and Gamsberg Zinc were divisions of Anglo Operations Limited, a wholly owned subsidiary. On 1 October 2008 100% of Namakwa Sands and on 3 November 2008, 26% of each of
Black Mountain Mining (Pty) Limited and Gamsberg Zinc were sold. Gamsberg Zinc is a division of Black Mountain Mining (Pty) Limited.
(4) The Group’s interest in the Lisheen operations is held through Anglo American Lisheen Mining Limited, Killoran Lisheen Mining Limited and Lisheen Milling Limited. The Group owns 100% of the equity of each of
these companies.
(5) At 31 December 2007 was named MMX Minas-Rio Mineração SA when a 49% interest was held and accounted for as a joint venture.
(6) 50% held at 31 December 2007 was accounted for as a joint venture.
Anglo American plc Annual Report 2008
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Financial statements
Notes to the financial statements continued
40. Group companies continued
Joint ventures
Compañía Minera Doña Inés de Collahuasi SCM
AI Futtain Tarmac Quarry Products Limited
LLX Minas-Rio Logística SA
Midland Quarry Products Limited(8)
Associates
DB Investments SA
Queensland Coal Mine Management (Pty) Limited
Cerrejón Zona Norte SA
Carbones del Cerrejón LLC
Carbones del Guasare SA
Tongaat-Hulett Limited(9)
Hulamin Limited(10)
Samancor Holdings (Pty) Limited(11)
Groote Eylandt Mining Company (Pty) Limited (GEMCO)(11)
Tasmanian Electro Metallurgical Company (Pty) Limited (TEMCO)(11)
Proportionately consolidated jointly controlled operations(12)
Drayton
Moranbah North
German Creek
Foxleigh
Dawson
Country of incorporation
Business
Chile
Dubai
Brazil
UK
Luxembourg
Australia
Colombia
Anguilla
Venezuela
South Africa
South Africa
South Africa
Australia
Australia
Location
Australia
Australia
Australia
Australia
Australia
Copper
Construction materials
Iron ore
Construction materials
Diamonds
Coal
Coal
Coal
Coal
Sugar, starch, glucose
and property development
Aluminium
Manganese
Manganese
Manganese
Business
Coal
Coal
Coal
Coal
Coal
Percentage of equity owned (7)
2008
44%
49%
49%
50%
45%
33.3%
33.3%
33.3%
24.9%
37.1%
38.4%
40%
40%
40%
2007
44%
49%
49%
50%
45%
33.3%
33.3%
33.3%
24.9%
37.2%
38.4%
40%
40%
40%
Percentage owned
2007
2008
88%
88%
70%
70% –
51%
88%
88%
70%
51%
(7) All equity interests shown are ordinary shares.
(8) During the year the Group ceased accounting for Midland Quarry Products Limited as a subsidiary and began accounting for it as a joint venture as it is now considered to be jointly controlled.
(9) Formerly The Tongaat-Hulett Group Limited.
(10) Unbundled from Tongaat-Hulett in June 2007.
(11) These entities have a 30 June year end.
(12) The wholly owned subsidiary Anglo Coal Holdings Australia Limited holds the proportionately consolidated jointly controlled operations.
41. Events occurring after end of year
Subsequent to the year end, the Group disposed of 15.5 million shares in AngloGold Ashanti for proceeds of $434 million. As a result, the Group’s shareholding in
AngloGold Ashanti has reduced to 11.8%.
With the exception of the above there have been no material reportable events since 31 December 2008.
Anglo American plc Annual Report 2008
42. Financial statements of the parent company
a) Balance sheet of the Company, Anglo American plc, as at 31 December 2008
US$ million
Fixed assets
Fixed asset investments
Current assets
Amounts due from subsidiaries
Prepayments and other debtors
Cash at bank and in hand
Creditors due within one year
Cash held on behalf of subsidiaries
Amounts owed to subsidiaries
Other creditors
Net current assets/(liabilities)
Total assets less current liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium account
Capital redemption reserve
Other reserves
Share-based payment reserve
Profit and loss account
Total shareholders’ funds (equity)
The financial statements were approved by the Board of directors on 19 February 2009.
Cynthia Carroll
Chief executive
René Médori
Finance director
Note
42c
2008
2007
12,925
12,883
1,305
138
2 –
1,445
(59)
(215)
(8)
(282)
1,163
14,088
14,088
738
2,713
115
1,955
22
8,545
14,088
208
114
322
(41)
(596)
(4)
(641)
(319)
12,564
12,564
738
2,713
115
1,955
22
7,021
12,564
42b
42b
42b
42b
42b
42b
133
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Financial statements
Notes to the financial statements continued
42. Financial statements of the parent company continued
b) Reconciliation of movements in equity shareholders’ funds
US$ million
Called-up
share
capital
Share
premium
account
Capital
redemption
reserve
Other
reserves(1)
Share-based
payment
reserve
Balance at 1 January 2007
Profit for the financial year
Issue of treasury shares under employee share schemes
Share-based payments
Capital contribution to group undertakings
Cancellation of treasury shares
Transfer between share-based payment reserve and profit and loss account
Share buybacks
Dividends paid(3)
Dividend in specie relating to Mondi demerger
Balance at 1 January 2008
Profit for the financial year
Issue of treasury shares under employee share schemes
Share-based payments
Capital contribution to group undertakings
Transfer between share-based payment reserve and profit and loss account
Share buybacks
Dividends paid(3)
Balance at 31 December 2008
771
–
–
–
–
(33)
–
–
–
–
738
–
–
–
–
–
–
–
738
2,713
–
–
–
–
–
–
–
–
–
2,713
–
–
–
–
–
–
–
2,713
82
–
–
–
–
33
–
–
–
–
115
–
–
–
–
–
–
–
115
1,955
–
–
–
–
–
–
–
–
–
1,955
–
–
–
–
–
–
–
1,955
15
–
–
11
–
–
(4)
–
–
–
22
–
–
12
–
(12)
–
–
22
Profit
and loss
account(2)
4,075
11,404
143
–
14
–
4
(2,383)
(1,192)
(5,044)
7,021
2,936
41
–
20
12
(259)
(1,226)
8,545
Total
9,611
11,404
143
11
14
–
–
(2,383)
(1,192)
(5,044)
12,564
2,936
41
12
20
–
(259)
(1,226)
14,088
(1) At 31 December 2008 other reserves of $1,955 million (2007: $1,955 million) were not distributable under the Companies Act 1985.
(2) At 31 December 2008 $483 million (2007: $421 million) of the Company profit and loss account of $8,545 million (2007: $7,021 million) was not distributable under the Companies Act 1985.
(3) Dividends paid relate only to shareholders on the United Kingdom principal register excluding dividends waived by Greenwood Nominees Limited as nominees for Butterfield Trust (Guernsey) Limited, the trustee for
the Anglo American employee share scheme. Dividends paid to shareholders on the Johannesburg branch register are distributed by a South African subsidiary in accordance with the terms of the Dividend Access
Share Provisions of Anglo American plc’s Articles of Association.
The audit fee in respect of the parent company was $10,000 (2007: $14,000). Fees payable to Deloitte for non-audit services to the Company are not required to be
disclosed because they are included within the consolidated disclosure in note 4.
Investments in subsidiaries
2007
2008
12,891
22
20
–
12,933
12,883
5,093
14
(5,099)
12,891
(8)
(8)
12,925
12,883
c) Fixed asset investments
US$ million
Cost
At 1 January
Additions
Capital contributions
Disposals and demerger
At 31 December
Provisions for impairment
At 1 January and 31 December
Net book value
At 31 December
Anglo American plc Annual Report 2008
42. Financial statements of the parent company continued
d) Accounting policies: Anglo American plc, the Company
The Anglo American plc (the Company) balance sheet and related notes have
been prepared in accordance with United Kingdom Generally Accepted Accounting
Principles (UK GAAP) and in accordance with UK company law. The financial
information has been prepared on a historical cost basis as modified by the
revaluation of certain financial instruments.
A summary of the principal accounting policies is set out below.
The preparation of financial statements in accordance with UK GAAP requires
the use of estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the period. Although these estimates are based
on management’s best knowledge of the amount, event or actions, following
implementation of these standards, actual results may differ from those estimated.
As permitted by section 230 of the Companies Act 1985, the profit and loss
account of the Company is not presented as part of these financial statements.
The profit after tax for the year of the Company amounted to $2,936 million (2007:
$11,404 million).
Significant accounting policies
Deferred tax
Deferred tax is provided in full on all timing differences that result in an obligation
at the balance sheet date to pay more tax, or a right to pay less tax, at a future
date, subject to the recoverability of deferred tax assets. Deferred tax assets and
liabilities are not discounted.
Share-based payments
The Company has applied the requirements of FRS 20 Share-based Payment.
In accordance with the transitional provisions, FRS 20 has been applied to all
grants of equity instruments after 7 November 2002 that had not vested as
at 1 January 2005.
The Company makes equity settled share-based payments to the directors,
which are measured at fair value at the date of grant and expensed on a straight
line basis over the vesting period, based on the Company’s estimate of shares
that will eventually vest. For those share schemes with market vesting conditions,
the fair value is determined using the Monte Carlo method at the grant date.
The fair value of share options issued with non-market vesting conditions has been
calculated using the Black Scholes model. For all other share awards, the fair value
is determined by reference to the market value of the share at the date of grant.
For all share schemes with non-market related vesting conditions, the likelihood
of vesting has been taken into account when determining the associated charge.
Vesting assumptions are reviewed during each reporting period to ensure they
reflect current expectations.
The Company also makes equity settled share-based payments to certain
employees of certain subsidiary undertakings. Equity settled share-based
payments that are made to employees of the Company’s subsidiaries are treated
as increases in equity over the vesting period of the award, with a corresponding
increase in the Company’s investments in subsidiaries, based on an estimate of
the number of shares that will eventually vest.
Any payments received from subsidiaries are applied to reduce the related
increases in investments in subsidiaries.
Accounting for share-based payments is the same as under IFRS 2 and details
on the schemes and option pricing models relevant to the charge included in the
Company financial statements are set out in note 28 to the consolidated financial
statements of the Group for the year ended 31 December 2008.
Investments
Investments represent equity holdings in subsidiaries, joint ventures and
associates and are held at cost less provision for impairment.
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Anglo American plc Annual Report 2008
136 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Introduction
The Ore Reserve and Mineral Resource estimates presented in this Annual Report are prepared in accordance with the Anglo American plc Policy for the Reporting of Ore
Reserves and Mineral Resources*. This policy requires that the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 edition
(the JORC Code) be used as a minimum standard. Some Anglo American plc subsidiaries have a primary listing in South Africa where public reporting is carried out in
accordance with the South African Code for Reporting of Mineral Resources and Mineral Reserves (the SAMREC Code). The SAMREC Code is similar to the JORC Code and
the Ore Reserve and Mineral Resource terminology appearing in this section follows the definitions in both the JORC (2004) and SAMREC (2007) Codes.
The information on Ore Reserves and Mineral Resources was prepared by or under the supervision of Competent Persons as defined in the JORC or SAMREC Codes, which
include the Recognised Overseas Professional Organisation (ROPO) recognition agreements. All Competent Persons have sufficient experience relevant to the style of
mineralisation and type of deposit under consideration and to the activity which they are undertaking. All the Competent Persons consent to the inclusion in this report of
the matters based on their information in the form and context in which it appears. The names of the Competent Persons are lodged with the Anglo American plc Company
Secretary and are available on request.
Anglo American Group companies are subject to a comprehensive programme of reviews aimed at providing assurance in respect of Ore Reserve and Mineral Resource
estimates. The reviews are conducted by either suitably qualified Competent Persons from within a particular division, or from another division of the Group, or from
independent consultants. The frequency and depth of the reviews is a function of the risks and/or uncertainties associated with a particular Ore Reserve and Mineral
Resource, the overall value thereof and time that has lapsed since an independent third party review has been conducted. Those operations/projects subject to
independent third party reviews during the year are indicated in footnotes to the tables.
The JORC and SAMREC Codes require the use of reasonable economic assumptions. These include long-range commodity price forecasts which are prepared by in-house
specialists largely using estimates of future supply and demand and long term economic outlooks. Ore Reserve estimates are dynamic and are influenced by changing
economic conditions, technical issues, environmental regulations and relevant new information and therefore can vary from year to year. Mineral Resource estimates also
change and tend to be influenced mostly by new information pertaining to the understanding of the deposit and secondly by the conversion to Ore Reserves.
The estimates of Ore Reserves and Mineral Resources are stated as at 31 December 2008. Production forecasts for November and December have been considered to
produce the estimates of the reported reserve figures. Unless otherwise stated, Mineral Resources are additional to those resources which have been modified to produce
the Ore Reserves. The figures in the tables have been rounded and, if used to derive totals and averages, could cause minor computational differences. Ore Reserves in
the context of this Annual Report have the same meaning as ‘Mineral Reserves’ as defined by the SAMREC Code.
In some cases it is relevant to consider a component of Inferred Resources in the Life of Mine (LOM) plan. These resources are declared without application of any
modifying factors.
Tonnages are stated as dry metric tonnes unless otherwise stated. While metric units are predominantly applied, where relevant imperial units (e.g. troy ounces, calories
and cubic feet) are also expressed.
Namakwa Sands is not reported as the business has been disposed of during 2008 as part of the BEE transaction with Exxaro. Black Mountain and the Gamsberg project
are also affected by the same transaction and the attributable percentage to Anglo American plc decreased from 100% to 74% in both cases. Operations and projects
which fall below the internal threshold (25% attributable interest) for reporting have been excluded from the Ore Reserves and Mineral Resources estimates.
* A ‘Mineral Resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are
sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not
verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of
uncertain quality and reliability.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is
based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately
spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on
detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely
enough to confirm geological and grade continuity.
An ‘Ore Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate
assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors.
These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proved Ore
Reserves.
A ‘Probable Ore Reserve’ is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the
material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental,
social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.
A ‘Proved Ore Reserve’ is the economically mineable part of a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments
and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These
assessments demonstrate at the time of reporting that extraction could reasonably be justified.
Anglo American plc Annual Report 2008
In South Africa, the Minerals and Petroleum Resources Development Act, Number 28 of 2002 (MPRDA) was implemented on 1 May 2004, and effectively transferred
custodianship of the previously privately held mineral rights to the State. Mining companies were given up to two years to apply for prospecting permit conversions and
five years to apply for mining licence conversions for existing operations.
A Prospecting Right is a new order right issued in terms of the MPRDA that is valid for up to five years, with the possibility of a further extension of three years, that can
be obtained either by the conversion of existing Old Order Prospecting Rights or through new applications. An Exploration Right is identical to a Prospecting Right, but is
commodity specific in respect of petroleum and gas and is valid for up to three years which can be renewed for a maximum of three periods not exceeding two years each.
A Mining Right is a new order right issued in terms of the MPRDA valid for up to 30 years obtained either by the conversion of an existing Old Order Mining Right, or as
a new order right pursuant to the exercise of the exclusive right of the holder of a new order Prospecting Right, or pursuant to an application for a new Mining Right.
A Production Right is identical to a Mining Right, but is commodity specific in respect of petroleum and gas.
In preparing the Ore Reserve and Mineral Resource statement for South African assets, Anglo American plc has adopted the following reporting principles in respect of
Prospecting Rights and Mining Rights:
• Where applications for new order Mining Rights and Prospecting Rights have been submitted and these are still being processed by the relevant regulatory
authorities, the relevant reserves and resources have been included in the statement;
• Where applications for the conversion of Old Order Mining Rights to new order Mining Rights have not yet been submitted and the required deadline (typically April
2009) for submission has not passed, the relevant reserves and resources have been included in the statement;
• Where applications for new order Prospecting Rights have been initially refused by the regulatory authorities, but are the subject of ongoing legal process and
discussions with the relevant authorities and where Anglo American plc has reasonable expectations that the Prospecting Rights will be granted in due course,
the relevant resources have been included in the statement (any associated comments appear in the footnotes).
137
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138 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Platinum
Anglo Platinum
The Ore Reserve and Mineral Resource estimates were compiled in accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves (The JORC
Code, 2004) as a minimum standard. Where relevant, the estimates were also prepared in compliance with regional codes and requirements (e.g. The South African Code
for Reporting of Mineral Resources and Mineral Reserves, The SAMREC Code, 2007). The Mineral Resources are additional to the Ore Reserves. Merensky and UG2 Reef
Mineral Resources are reported over an economic and mineable cut appropriate to the specific reef. The mineable cuts collectively form the basis of the consolidated reef
figures. Details of the individual operations appear in the Anglo Platinum Annual Report.
The figures reported represent 100% of the Mineral Resources and Ore Reserves attributable to Anglo Platinum Limited unless otherwise noted. Anglo American plc’s
interest in Anglo Platinum is 79.64%. Rounding of figures may cause computational discrepancies.
Anglo Platinum
Ore Reserves
Merensky Reef(3)(4)(5)
UG2 Reef(3)(6)(7)(8)
Platreef(9)
All Reefs
Tailings(12)
Classification
2008
Proved
Probable
Total
Proved
Probable
Total
Proved
Proved primary ore stockpile (10)
Probable
Total
88.6
129.4
217.9
469.9
382.6
852.5
274.5
20.6
112.8
407.9
Proved
Probable
853.6
624.7
Tonnes(1)
million
2007
88.7
117.2
205.8
415.7
413.5
829.2
284.6
19.8
114.0
418.3
808.6
644.6
Total
1,478.3
1,453.3
2008
4E PGE
5.28
5.21
5.24
4E PGE
4.19
4.43
4.30
4E PGE
3.21
2.58
3.56
3.27
4E PGE
3.95
4.44
4.16
Grade(2)
g/t
2007
4E PGE
5.22
5.11
5.16
4E PGE
4.37
4.32
4.35
4E PGE
3.24
2.54
3.51
3.28
4E PGE
4.02
4.32
Contained metal
tonnes
2008
2007
467.4
674.1
1,141.5
1,970.8
1,695.8
3,666.6
880.7
53.1
401.8
1,335.6
462.6
598.5
1,061.1
1,816.0
1,787.1
3,603.1
923.2
50.1
400.1
1,373.4
3,372.1
2,771.7
3,251.9
2,785.7
4.15
6,143.7
6,037.6
2008
Moz
15.0
21.7
36.7
Moz
63.4
54.5
117.9
Moz
28.3
1.7
12.9
42.9
Moz
108.4
89.1
197.5
Total (alternative units) (11)
1,629.6Mton 1,601.9Mton
0.121oz/ton 0.121oz/ton
Proved
Probable
Total
–
33.4
33.4
–
38.6
38.6
4E PGE
–
0.88
0.88
4E PGE
–
0.92
0.92
–
29.5
29.5
–
35.5
35.5
Moz
– –
0.9
0.9
Total (alternative units) (11)
36.8Mton 42.6Mton 0.026oz/ton 0.027oz/ton
Contained metal
million troy ounces
2007
Moz
14.9
19.2
34.1
Moz
58.4
57.5
115.8
Moz
29.7
1.6
12.9
44.2
Moz
104.6
89.6
194.1
Moz
1.1
1.1
(1) Tonnage: quoted as dry metric tonnes.
(2) Grade: 4E PGE is the sum of platinum, palladium, rhodium and gold grades in grammes per tonne (g/t).
(3) Merensky Reef and UG2 Reef: In 2008 Anglo Platinum sold its 22.4% share in Northam to Mvelapanda Resources. The associated Merensky Reef and UG2 Reef Ore Reserves have been excluded from the 2008 Ore
Reserve figures (16.1Mt equivalent to 2.5Moz).
(4) Merensky Reef: The reserve pay-limit varies across all operations between 2.3g/t and 5.7g/t. The variability is a function of various factors including the depth of the orebody, geological complexity and infrastructure.
(5) Merensky Reef: Increase in Ore Reserves is mainly attributable to changes at Amandelbult due to a re-evaluation of the structural and geological model. The re-evaluation shows a reduction in the geological losses and
a commensurate increase in the Normal Merensky Reef facies. These increased Mineral Resources have been converted into Ore Reserves.
(6) UG2 Reef: The reserve pay-limit varies across all operations between 1.6g/t and 4.7g/t. The variability is a function of various factors including the depth of the orebody, geological complexity and infrastructure.
(7) UG2 Reef: Increase in Ore Reserve tonnage is mainly attributable to Amandelbult and Rustenburg. At Amandelbult re-evaluation of the geological losses was undertaken and at Rustenburg a change in the modifying
factors resulted in increased Ore Reserves.
(8) UG2 Reef: Application for conversion to New Order Mining Rights for Modikwa Platinum Mine is in the process of being finalised and it is expected that the application will be lodged early March 2009. Modikwa Platinum
Mine has until 30 April 2009 to lodge this application.
(9) Platreef: The reserve cut-off is 1.7g/t for fresh ore and 3.0g/t for weathered/oxidised ore.
(10) Platreef stockpiles: These are reported separately as Proved Ore Reserves and aggregated into the summation tabulations.
(11) Alternative units: tonnage in million short tons (Mton) and grade in troy ounces per short ton (oz/ton).
(12) Tailings: These are reported separately as Ore Reserves but are not aggregated in the total Ore Reserve figures. Operating tailings dams for current mining operations cannot be geologically assessed and therefore are
not reported as part of the Ore Reserves. At Rustenburg Section historical dams have been evaluated and the tailings are included in the Ore Reserves statement.
Anglo American plc Annual Report 2008
139
Contained metal
million troy ounces
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred
Total
Measured
Indicated
Measured and Indicated
Inferred
Total
131.9
232.0
363.9
749.4
1,113.3
323.6
482.5
806.1
901.3
1,707.3
Measured
Indicated
Measured and Indicated
Inferred
Total
152.4
898.8
1,051.2
1,331.3
2,382.4
Measured
Indicated
Measured and Indicated
Inferred
607.8
1,613.3
2,221.1
2,982.0
Tonnes(1)
million
2007
107.8
276.5
384.3
876.5
1,260.8
337.2
499.7
836.9
1,223.2
2,060.0
176.8
790.6
967.4
1,408.0
2,375.4
621.8
1,566.8
2,188.6
3,507.6
Total
5,203.1
5,696.2
2008
4E PGE
5.39
5.15
5.24
5.37
5.33
4E PGE
5.78
5.63
5.69
5.65
5.67
4E PGE
1.85
2.18
2.13
1.89
2.00
4E PGE
4.71
3.64
3.93
3.90
3.91
Grade(2)
g/t
2007
4E PGE
5.33
5.29
5.30
5.29
5.29
4E PGE
5.69
5.38
5.50
5.22
5.33
4E PGE
1.93
2.21
2.16
1.88
1.99
4E PGE
4.56
3.77
3.99
3.89
Contained metal
tonnes
2008
2007
710.9
1,194.4
1,905.3
4,026.6
5,931.9
1,868.9
2,715.2
4,584.1
5,089.0
9,673.1
282.4
1,956.8
2,239.3
2,519.3
4,758.6
574.4
1,462.7
2,037.1
4,633.0
6,670.1
1,919.0
2,686.9
4,605.9
6,379.8
10,985.7
340.8
1,749.4
2,090.2
2,647.7
4,737.9
2,862.3
5,866.4
8,728.7
11,634.9
2,834.2
5,899.0
8,733.2
13,660.5
3.93
20,363.5
22,393.7
2008
Moz
22.9
38.4
61.3
129.5
190.7
Moz
60.1
87.3
147.4
163.6
311.0
Moz
9.1
62.9
72.0
81.0
153.0
Moz
92.0
188.6
280.6
374.1
654.7
Total (alternative units) (8)
5,735.4Mton 6,278.9Mton
0.114oz/ton 0.115oz/ton
Measured
Indicated
Measured and Indicated
Inferred
–
151.4
151.4
– –
–
151.4
151.4
Total
151.4
151.4
4E PGE
–
1.05
1.05
–
1.05
4E PGE
–
1.05
1.05
–
1.05
–
159.7
159.7
–
159.7
–
159.7
159.7
–
159.7
Moz
– –
5.1
5.1
– –
5.1
Total (alternative units) (8)
166.9Mton
166.9Mton
0.031oz/ton 0.031oz/ton
2007
Moz
18.5
47.0
65.5
149.0
214.4
Moz
61.7
86.4
148.1
205.1
353.2
Moz
11.0
56.2
67.2
85.1
152.3
Moz
91.1
189.7
280.8
439.2
720.0
Moz
5.1
5.1
5.1
Anglo Platinum
Mineral Resources
Merensky Reef(3)(4)(5)
UG2 Reef(3)(4)(6)
Platreef(7)
All Reefs
Tailings(9)
(1) Tonnage: quoted as dry metric tonnes.
(2) Grade: 4E PGE is the sum of platinum, palladium, rhodium and gold grades in grammes per tonne (g/t).
(3) Merensky Reef and UG2 Reef: In 2008 Anglo Platinum sold its 22.4% share in Northam to Mvelapanda Resources and expects to complete the sale of its 50% share in Booysendal in 2009. Consequently the Mineral
Resources associated with Booysendal (Merensky Reef: 113Mt and 16.3Moz, UG2 Reef: 314Mt and 38.5Moz) and a component of Der Brochen (Merensky Reef: 24Mt and 3.7Moz, UG2 Reef: 31Mt and 4.9Moz) are
excluded from the 2008 Mineral Resource figures.
(4) Merensky Reef and UG2 Reef: Application for conversion to New Order Mining Rights for Modikwa Platinum Mine is in the process of being finalised and it is expected that the application will be lodged early March
2009. Modikwa Platinum Mine has until 30 April 2009 to lodge this application.
(5) Merensky Reef: Depending on the reef characteristics a 2.3g/t to 3.8g/t cut-off has been used to identify Mineral Resources.
(6) UG2 Reef: Depending on the reef characteristics a 2.3g/t to 3.7g/t cut-off has been used to identify Mineral Resources.
(7) Platreef: A 1.0g/t cut-off has been used to identify Mineral Resources.
(8) Alternative units: tonnage in million short tons (Mton) and grade in troy ounces per short ton (oz/ton).
(9) Tailings: These are reported separately as Mineral Resources but are not aggregated in the total Mineral Resource figures. Operating tailings dams for current mining operations cannot be geologically assessed and
therefore are not reported as part of the Mineral Resources. At Rustenburg Section historical dams have been evaluated and the tailings are included in the Mineral Resource statement.
The following operations and projects were reviewed during 2008 by independent consultants: Der Brochen, Magazynskraal, Mototolo, Pandora and Mogalakwena Mine (previously PPRust) – Zwartfontein North.
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140 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Platinum continued
Anglo Platinum
Ore Reserves
Other Projects
Zimbabwe
Unki(3)
Great Dyke
Anglo Platinum
Mineral Resources
Other Projects
Zimbabwe
Unki(3)
Great Dyke
Classification
2008
Proved
Probable
Total
4.2
34.6
38.7
Tonnes(1)
million
2007
5.2
43.2
48.4
2008
4E PGE
3.60
3.81
3.79
Grade(2)
g/t
2007
4E PGE
3.60
3.81
3.78
Contained metal
tonnes
Contained metal
million troy ounces
2008
2007
2008
15.1
131.6
146.7
18.8
164.5
183.3
Moz
0.5
4.2
4.7
2007
Moz
0.6
5.3
5.9
Total (alternative units) (4)
42.7Mton
53.4Mton
0.110oz/ton 0.110oz/ton
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred
Total
6.3
9.3
15.6
78.9
94.6
Tonnes(1)
million
2007
7.9
11.7
19.5
98.7
118.2
2008
4E PGE
4.08
4.28
4.20
4.29
4.28
Grade(2)
g/t
2007
4E PGE
4.08
4.28
4.20
4.29
4.28
Contained metal
tonnes
2008
2007
25.7
39.9
65.6
338.8
404.4
32.1
49.9
82.0
423.5
505.5
Contained metal
million troy ounces
2008
Moz
0.8
1.3
2.1
10.9
13.0
2007
Moz
1.0
1.6
2.6
13.6
16.3
South Africa
3E PGE
3E PGE
Moz
Moz
Total (alternative units) (4)
104.2Mton 130.3Mton 0.125oz/ton 0.125oz/ton
Anooraq-Anglo Platinum Boikgantsho(5)
Platreef
Measured
Indicated
Measured and Indicated
Inferred
– –
88.3
88.3
52.0
88.3
88.3
52.0
Total
140.4
140.4
– –
1.35
1.35
1.23
1.31
1.35
1.35
1.23
1.31
Sheba’s Ridge(6)
Canada
River Valley(7)
Brazil
Pedra Branca(8)
Total (alternative units) (4)
154.7Mton 154.7Mton 0.038oz/ton 0.038oz/ton
Measured
Indicated
Measured and Indicated
Inferred
111.8
128.4
240.1
0.9
Total
241.0
138.2
128.4
266.6
0.9
267.5
3E PGE
0.85
0.95
0.90
0.85
0.90
3E PGE
0.87
0.95
0.91
0.85
0.91
Total (alternative units) (4)
265.7Mton 294.9Mton 0.026oz/ton 0.027oz/ton
Measured
Indicated
Measured and Indicated
Inferred
Total
4.3
11.0
15.3
1.2
16.5
4.3
11.0
15.3
1.2
16.5
3E PGE
1.79
1.20
1.37
1.24
1.36
3E PGE
1.79
1.20
1.37
1.24
1.36
Total (alternative units) (4)
18.2Mton
18.2Mton 0.040oz/ton 0.040oz/ton
Measured
Indicated
Measured and Indicated
Inferred
Total
– –
– –
– –
6.6
6.6
6.6
6.6
3E PGE
3E PGE
– –
– –
– –
2.27
2.27
2.27
2.27
Total (alternative units) (4)
7.3Mton
7.3Mton 0.066oz/ton 0.066oz/ton
–
119.2
119.2
64.0
183.3
95.1
122.1
217.2
0.8
218.0
7.6
13.3
20.9
1.5
22.4
– –
–
– –
15.0
15.0
–
119.2
119.2
64.0
183.2
120.4
122.1
242.4
0.8
243.2
7.6
13.3
20.9
1.5
22.4
–
15.0
15.0
– –
3.8
3.8
2.1
5.9
Moz
3.1
3.9
7.0
0.0
7.0
Moz
0.2
0.4
0.7
0.0
0.7
Moz
– –
– –
– –
0.5
0.5
3.8
3.8
2.1
5.9
Moz
3.9
3.9
7.8
0.0
7.8
Moz
0.2
0.4
0.7
0.0
0.7
Moz
0.5
0.5
Anglo American plc Annual Report 2008
(1) Tonnage: quoted as dry metric tonnes.
(2) Grade: 4E PGE is the sum of platinum, palladium, rhodium and gold grades in grammes per tonne (g/t).
3E PGE is the sum of platinum, palladium and gold grades in grammes per tonne (g/t).
(3) Unki: The 2007 reported figures represented 100% of the project, reflective of Anglo American’s shareholding at that time. Anglo Platinum currently holds an attributable interest of 80%, the reported figures for 2008
reflect this position.
(4) Alternative units: tonnage in million short tons (Mton) and grade in troy ounces per short ton (oz/ton).
(5) Anooraq-Anglo Platinum Boikgantsho: Anglo Platinum holds an attributable interest of 50%. A cut-off of US$20.00/t gross metal value was applied for resource definition.
(6) Sheba’s Ridge: In 2007 Mineral Resources were based on the total project. However, the 2008 figures reflect the Joint Venture (JV) component between Anglo Platinum and Ridge Mining. Anglo Platinum holds an
attributable 35% of the JV area.
(7) River Valley: Anglo Platinum holds an attributable interest of 50%. A cut-off of 0.7g/t (platinum plus palladium) was applied for resource definition.
(8) Pedra Branca: Anglo Platinum holds an attributable interest of 51%. A cut-off of 0.7g/t (3E PGE) was applied for resource definition.
The following Operations and Projects contributed to the combined 2008 Ore Reserve and Mineral Resource estimates stated per reef (excluding Other Projects):
(MR = Merensky Reef, UG2 = UG2 Reef, PR = Platreef)
Amandelbult Mine – MR/UG2
BRPM – MR/UG2
Der Brochen Project – MR/UG2
Ga-Phasha PGM Project – MR/UG2
Kroondal PSA 1 – UG2
Lebowa Platinum Mines – MR/UG2
Magazynskraal 3 JQ – MR/UG2
Marikana PSA 2 – UG2
Modikwa Platinum Mine – MR/UG2
Mogalakwena Mine (previously PPRust – Potgietersrust Platinums Ltd.) – PR
Mototolo – UG2
Other Exploration Projects (portions of Driekop) – UG2
Pandora – UG2
Rustenburg Mine – MR/UG2
Twickenham Platinum Mine Project – MR/UG2
Union Mine – MR/UG2
WBJV – MR/UG2
141
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Anglo American plc Annual Report 2008
142 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Base Metals
Anglo Base Metals
The Ore Reserve and Mineral Resource estimates were compiled in accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves (The JORC
Code, 2004) as a minimum standard. The Mineral Resources are additional to the Ore Reserves.
The figures reported represent 100% of the Ore Reserves and Mineral Resources, the percentage attributable to Anglo American plc is stated separately. Rounding of
figures may cause computational discrepancies.
Attributable %
100
Classification
2008
Copper Division
Ore Reserves
Los Bronces (OP)
Sulphide (TCu)(1)
Flotation
Sulphide (TCu)(2)
Dump Leach
El Soldado (OP and UG)
Sulphide (TCu)
Flotation
Oxide (TCu)
Heap Leach
Mantos Blancos (OP)(3)
Sulphide (ICu)
Flotation
Oxide (ASCu)
Vat and Heap Leach
Oxide (ASCu)
Dump Leach
Mantoverde (OP)(4)
Oxide (ASCu)
Heap Leach
Oxide (ASCu)
Dump Leach
100
100
100
Collahuasi (OP)
44.0
Oxide, Mixed and Secondary Sulphides (TCu)(5)
Heap Leach
Sulphide (TCu)(6)
Flotation – direct feed
Low Grade Sulphide (TCu)
Flotation – stockpile
Tonnes
million
2007
697.7
782.7
1,480.4
344.8
672.6
1,017.4
68.7
50.7
119.4
1.5
3.0
4.6
9.4
19.3
28.7
1.5
44.0
45.5
0.5
9.4
10.0
53.5
11.2
64.7
28.1
11.5
39.7
715.4
890.7
1,606.1
303.9
492.6
796.5
71.2
44.2
115.4
3.2
2.8
6.0
12.9
18.5
31.3
1.4
37.6
39.0
0.6
11.6
12.1
45.6
8.0
53.6
20.9
10.1
31.1
0.2
20.3
20.5
315.4
1,224.1
1,539.5
– –
675.1
675.1
43.9
31.2
75.2
279.0
1,180.0
1,459.1
670.1
670.1
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Grade
2007
%Cu
0.76
0.58
0.66
0.33
0.25
0.28
%Cu
1.04
0.82
0.95
0.87
0.74
0.78
%Cu
0.93
1.05
1.01
0.72
0.44
0.45
0.24
0.27
0.27
%Cu
0.62
0.57
0.61
0.36
0.40
0.37
%Cu
0.80
0.88
0.83
0.99
0.96
0.97
0.51
0.51
Contained metal
thousand tonnes
2008
2007
5,222
4,899
10,121
1,003
1,084
2,087
712
393
1,105
28
16
44
120
173
293
10
169
179
1 1
30
31
273
43
317
75
39
115
4
156
160
3,123
11,629
14,752
– –
3,443
3,443
5,303
4,540
9,842
1,138
1,682
2,819
715
418
1,133
13
22
36
87
203
291
11
195
205
26
27
332
64
395
101
46
147
352
275
626
2,762
11,328
14,091
3,418
3,418
2008
%Cu
0.73
0.55
0.63
0.33
0.22
0.26
%Cu
1.00
0.89
0.96
0.89
0.57
0.74
%Cu
0.93
0.94
0.94
0.70
0.45
0.46
0.24
0.26
0.26
%Cu
0.60
0.54
0.59
0.36
0.39
0.37
%Cu
1.60
0.77
0.78
0.99
0.95
0.96
– –
0.51
0.51
Mining method: OP = Open Pit, UG = Underground.
TCu = total copper, ICu = insoluble copper (total copper less acid soluble copper), ASCu = acid soluble copper.
The metal price used for Ore Reserve definition is US$1.15/lb, except for Los Bronces where a copper price of US$1.25/lb has been applied.
(1) Los Bronces – Sulphide (Flotation): A change in the cut-off grade saw some former dump leach ore become available to the flotation circuit (87Mt @ 0.42% TCu).
(2) Los Bronces – Sulphide (Dump Leach): Anhydrite-bearing low grade sulphide material has been excluded (108Mt @ 0.24% TCu).
(3) Mantos Blancos: Changes in Ore Reserves are attributable to changes in economic parameters, production, inclusion of new information and subsequent refinement of the Mineral Resource models.
(4) Mantoverde: Changes in Ore Reserves are attributable to production and a constraint to the Kuroki pit by the rights of the neighbouring Enami Mine.
(5) Collahuasi – Oxide, Mixed and Secondary Sulphides: Significant reduction in Ore Reserves is due to a transfer of Ujina secondary sulphides to the flotation process (42Mt).
(6) Collahuasi – Sulphide (Flotation): A portion of the Probable Reserves from Ujina have been re-allocated to Inferred Resources following third party audits. In contrast, infill drilling and model refinement at Rosario has
resulted in an increase in Ore Reserves.
The Ore Reserves and Mineral Resources of the following operations were reviewed during 2008 by independent consultants: Los Bronces, El Soldado, Mantoverde and Mantos Blancos.
Anglo American plc Annual Report 2008
143
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Tonnes
million
2007
111.7
1,532.4
1,644.1
43.1
312.4
61.2
47.9
109.1
10.8
0.1
0.2
0.3
0.9
17.7
112.8
130.5
4.2
1.0
9.7
10.7
2.2
1.1
57.1
59.6
116.7
0.3
4.3
4.3
0.6
–
6.0
6.0
1.3
3.5
570.3
573.8
374.0
2.9
154.6
157.5
201.0
Grade
2007
%Cu
0.47
0.45
0.45
0.67
0.19
%Cu
0.81
0.73
0.77
0.74
0.87
0.84
0.85
0.88
%Cu
0.75
0.70
0.71
0.82
0.59
0.55
0.55
0.57
0.24
%Cu
0.38
0.36
0.37
0.62
0.33
0.33
0.37
%Cu
0.79
0.79
1.18
1.28
1.10
1.10
0.95
0.50
0.50
0.50
0.50
Contained metal
thousand tonnes
2008
2007
466
5,407
5,872
233
– –
– –
– –
343
360
163
523
99
1 1
1 2
2 3
6 8
104
743
848
3
2 6
54
56
2
– –
– –
– –
1 3
200
157
357
1 2
– –
11
11
1 2
9 –
411 –
420 –
– –
– –
24
24
7
11
2,459
2,470
2,407
5
547
552
450
529
6,896
7,425
289
594
496
349
845
80
133
791
924
34
53
59
13
217
215
432
14
14
48
48
16
45
6,274
6,318
3,553
14
773
787
1,005
2008
%Cu
0.42
0.42
0.42
0.46
– –
– –
– –
0.18
%Cu
0.80
0.81
0.80
0.77
0.67
0.81
0.75
0.80
%Cu
0.72
0.66
0.67
0.77
0.56
0.57
0.57
0.56
– –
– –
– –
0.24
%Cu
0.39
0.39
0.39
0.61
– –
0.32
0.32
0.39
0.78 –
0.72 –
0.72 –
– –
%Cu
– –
1.18
1.18
1.09
0.78
0.85
0.85
0.93
0.47
0.50
0.50
0.50
Attributable %
100
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
110.8
1,287.3
1,398.2
50.7
– –
– –
– –
190.6
100
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
100
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
100
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
45.2
20.2
65.4
12.9
0.1
0.1
0.3
0.8
14.5
112.7
127.2
0.4
0.3
9.5
9.8
0.4
– –
– –
– –
0.3
51.8
40.6
92.4
0.2
– –
3.5
3.5
0.3
1.2
57.1 –
58.2 –
– –
– –
2.0
2.0
0.6
1.4
289.3
290.7
258.9
1.2
109.3
110.5
90.0
Copper Division
Mineral Resources
Los Bronces (OP)(1)
Sulphide (TCu)
Flotation
Sulphide (TCu)
Dump Leach
El Soldado (OP and UG)(1)
Sulphide (TCu)
Flotation
Oxide (TCu)
Heap Leach
Mantos Blancos (OP)(1)
Sulphide (ICu)
Flotation
Oxide (ASCu)
Vat and Heap Leach
Oxide (ASCu)
Dump Leach
Mantoverde (OP)(1)
Oxide (ASCu)
Heap Leach
Oxide (ASCu)
Dump Leach
Sulphide Project (TCu)(2)
Flotation
Collahuasi (OP)(1)
Oxide, Mixed and Secondary Sulphides (TCu)
44.0
Heap Leach
Sulphide (TCu)
Flotation – direct feed
Low Grade Sulphide (TCu)
Flotation – stockpile
Mining method: OP = Open Pit, UG = Underground.
TCu = total copper, ICu = insoluble copper (total copper less acid soluble copper), ASCu = acid soluble copper.
(1) Copper Resources: In 2007 Measured and Indicated Resources were declared as estimated. In 2008 a test of reasonable eventual economic extraction was applied through consideration of an optimised pit shell based
on the Anglo Base Metals long-term copper price. Materials outside the optimised shell are now excluded from the Mineral Resource statement. The decrease in Measured and Indicated Mineral Resources evident at
most of operations is a result of this. Inferred Mineral Resources with reasonable prospects of eventual economic extraction not considered in the Mine Plan in 2008 are as follows:- (Tt = Thousand tonnes)
Los Bronces – Sulphide (Flotation):
El Soldado – Sulphide (Flotation):
El Soldado – Oxide (Heap Leach):
Mantos Blancos – Sulphide (Flotation):
Mantos Blancos – Oxide (Vat and Heap Leach):
Mantoverde – Oxide (Heap Leach):
Mantoverde – Sulphide Project:
Collahausi – Oxide, Mixed and Secondary Sulphides (Heap Leach):
Collahausi – Sulphide (Flotation):
Collahausi – Low Grade Sulphide (stockpile):
0.39% (TCu)
0.56% (TCu)
0.84% (TCu)
0.59% (ICu)
1.6Mt 0.59% (ASCu)
5Mt 0.53% (ASCu)
111.6Mt 0.66% (TCu)
2.3Mt 0.76% (TCu)
1,372Mt 0.90% (TCu)
627.7Mt 0.50% (TCu)
Pit Shell @ US$1.8/lb
Pit Shell @ US$1.8/lb
6 Tt Pit Shell @ US$1.8/lb
Pit Shell @ US$1.8/lb
87Tt
Pit Shell @ US$1.8/lb
10Tt
Pit Shell @ US$1.7/lb (Difference due to relative timing of resource finalisation)
26Tt
Pit Shell @ US$1.7/lb (Difference due to relative timing of resource finalisation)
736Tt
Pit Shell @ US$1.8/lb
17Tt
Pit Shell @ US$1.8/lb
12,350Tt
Pit Shell @ US$1.8/lb
3,138Tt
Tonnes Grade (% Cu) Contained metal Economic criteria
2,472Mt
70.3Mt
0.7Mt
14.8Mt
9,639Tt
394Tt
(2) Mantoverde – Sulphide Project: The project is in a Pre-Feasibility Study stage with completion planned for mid-2009.
Anglo American plc Annual Report 2008
144 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Base Metals continued
Zinc Division
Ore Reserves
Black Mountain (UG)(1)
Deeps(2)
Zinc
Copper
Lead
Lisheen (UG)(3)
Zinc
Lead
Skorpion (OP)(4)
Zinc
Attributable %
74.0
Classification
2008
Tonnes
million
2007
1.3
7.4
8.7
2.9
5.9
8.8
6.6
1.6
8.2
6.9
2.7
9.7
4.8
4.1
9.0
6.4
5.1
11.5
Grade
2007
%Zn
2.50
3.75
3.56
%Cu
0.21
0.81
0.72
%Pb
4.48
4.05
4.12
%Zn
11.25
13.68
11.94
%Pb
1.98
1.61
1.88
%Zn
12.74
9.72
11.41
Contained metal
thousand tonnes
2008
2007
109
170
280
13 3
22
35
93
168
261
779
192
970
127
29
156
624
417
1,041
32
279
311
61
63
59
301
360
782
373
1,155
138
44
182
821
491
1,312
2008
%Zn
3.71
2.89
3.16
%Cu
0.45
0.37
0.40
%Pb
3.16
2.86
2.96
%Zn
11.72
12.01
11.78
%Pb
1.91
1.81
1.89
%Zn
12.94
10.06
11.61
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
100
100
Mining method: OP = Open Pit, UG = Underground.
For the polymetallic deposits, the tonnage figures apply to each metal.
(1) Black Mountain: On 18 January 2007, Exxaro exercised its option to acquire a 26% interest in Black Mountain. The sale was contingent on the conversion of Old Order to New Order Mining Rights which was granted in
November 2008.
(2) Black Mountain – Deeps: Production has been partially offset by updated geological, resource and reserve modelling based on additional information.
(3) Lisheen: Changes are attributable to production.
(4) Skorpion: Changes in Ore Reserves are attributable to production and changes to the operating cost (economic assumptions).
The Ore Reserves and Mineral Resources of the following operations were reviewed during 2008 by independent consultants: Black Mountain and Skorpion.
Anglo American plc Annual Report 2008
Zinc Division
Mineral Resources
Black Mountain (UG)
Deeps(1)
Zinc
Attributable %
74.0
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
1.6
2.6
4.3
2.4
Tonnes
million
2007
0.5
4.5
5.0
3.1
Copper
Lead
Swartberg(2)
Zinc
Copper
Lead
Lisheen (UG)(3)
Zinc
Lead
Skorpion (OP)(4)
Zinc
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
– –
17.3
17.3
– –
17.3
17.3
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
100
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
0.9
0.4
1.3
0.2
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
100
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
0.2
1.0
1.2
0.1
–
–
–
1.0
0.5
1.4
0.4
0.0
0.2
0.2
0.8
145
Contained metal
thousand tonnes
2008
2007
61
96
158
104
10 3
15
25
26
56
113
169
33
– –
109
109
– –
– –
121
121
– –
– –
497
497
– –
114
44
158
37
20
7 9
26
5
13 2
79
92
12
11
160
171
124
28
31
38
10
200
210
40
109
109
121
121
497
497
123
61
184
68
22
31
11
15
17
71
2008
%Zn
3.74
3.66
3.69
4.39
%Cu
0.63
0.57
0.59
1.09
%Pb
3.41
4.29
3.95
1.39
%Zn
– –
0.63
0.63
– –
%Cu
–
0.70
0.70
– –
%Pb
–
2.87
2.87
–
%Zn
12.91
11.39
12.45
17.84
%Pb
2.23
1.74
2.08
2.49
%Zn
7.29
7.87
7.78
9.61
Grade
2007
%Zn
2.23
3.53
3.40
3.96
%Cu
0.65
0.61
0.61
1.23
%Pb
1.97
4.40
4.16
1.28
%Zn
0.63
0.63
%Cu
0.70
0.70
%Pb
2.87
2.87
%Zn
12.67
12.95
12.76
18.24
%Pb
2.30
1.86
2.16
3.05
%Zn
6.99
6.94
6.95
9.16
Mining method: OP = Open Pit, UG = Underground.
For the polymetallic deposits, the tonnage figures apply to each metal.
(1) Black Mountain – Deeps: Broken Hill and the Deeps Mineral Resources are combined for reporting purposes. There are no Inferred Mineral Resources external to those considered in the Mine Plan. At Black Mountain the
definition of Mineral Resources is based on economic and financial parameters determined from the 2000 Feasibility Study. Mineral Resources are estimated to contain 6,646kt of material grading 40g/t silver as a
by-product.
(2) Black Mountain – Swartberg: The Swartberg mine was placed on care and maintenance from January 2007. The Ore Reserves were removed from the mine plan and converted to Mineral Resources. Mineral Resources
are estimated to contain 17,323kt of material grading 35g/t silver as a by-product.
(3) Lisheen: Mineral Resources are quoted above a 6% ZnEq cut-off. Inferred Mineral Resources with reasonable prospects of eventual economic extraction consist of 0.2Mt with a Zn grade of 12.04% containing 28kt zinc
metal and a Pb grade of 2.63% containing 6kt lead metal.
(4) Skorpion: The current Mineral Resources are constrained by geological contacts. A major Mineral Resource update is planned for 2009 on completion of the current drill program. This will include a review of the
parameters that control the eventual economic extraction outlook. At present, the Inferred Mineral Resources external to the current Mine Plan consist of 1.0Mt with an average Zn grade 8.87% containing 92kt zinc metal.
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Anglo American plc Annual Report 2008
146 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Base Metals continued
Nickel Division
Ore Reserves
Barro Alto (OP)(1)
Laterite
Codemin (OP)
Laterite
Loma de Níquel (OP)
Laterite
Nickel Division
Mineral Resources
Barro Alto (OP)(1)
Laterite
Codemin (OP)(2)
Laterite
Loma de Níquel (OP)(3)
Laterite
Mining method: OP = Open Pit.
Attributable %
100
Classification
2008
100
91.4
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
9.5
31.2
40.7
3.2
0.5
3.7
12.1
21.0
33.1
Attributable %
100
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
4.3
16.8
21.1
38.7
100
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
91.4
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
3.4
3.5
6.9
– –
0.9
4.8
5.7
1.7
Tonnes
million
2007
12.3
27.1
39.5
3.2
0.5
3.7
11.9
22.1
34.0
Tonnes
million
2007
–
16.9
16.9
37.5
3.3
3.5
6.9
1.2
4.8
6.0
1.7
2008
%Ni
1.66
1.72
1.70
%Ni
1.33
1.33
1.33
%Ni
1.48
1.46
1.47
2008
%Ni
1.32
1.27
1.28
1.55
%Ni
1.29
1.25
1.27
– –
%Ni
1.38
1.45
1.44
1.39
Grade
2007
%Ni
1.61
1.81
1.75
%Ni
1.33
1.33
1.33
%Ni
1.49
1.47
1.48
Grade
2007
%Ni
–
1.36
1.36
1.56
%Ni
1.29
1.25
1.27
%Ni
1.40
1.45
1.44
1.39
Contained metal
thousand tonnes
2008
2007
158
535
693
42
7 7
49
179
306
485
199
491
690
42
49
178
324
502
Contained metal
thousand tonnes
2008
2007
57 –
213
270
599
43
44
87
– –
13
69
82
23
230
230
585
43
44
87
16
70
86
23
(1) Barro Alto: Mineral Resources are quoted above a 0.9% Ni cut-off. An additional 0.42Mt of stockpiled ferruginous material with an estimated grade of 1.50% Ni containing 6,000 tonnes of nickel is available.
Ore from Barro Alto is currently being processed at the Codemin plant. Inferred Mineral Resources external to the LOM comprise 21.8Mt with an average grade of 1.27% Ni, containing 275,000 tonnes of nickel.
(2) Codemin: Mineral Resources are quoted above a 0.9% Ni cut-off.
(3) Loma de Níquel: Mineral Resources are quoted above a 0.8% Ni cut-off (less than 35% Fe). Inferred Mineral Resources external to the LOM comprise 4.5Mt with an average grade of 1.50% Ni, containing 68,000
tonnes of nickel. Includes Ore Reserves and Mineral Resources in concessions cancelled by MIBAM, which Anglo American plc anticipates will be restored. Refer to note 37 (iii) to the financial statements for further
information regarding these nickel exploration and exploitation concessions.
The Ore Reserves and Mineral Resources of Barro Alto, Codemin and Loma de Níquel will be reviewed during 2009 by independent consultants.
Anglo American plc Annual Report 2008
147
Contained product
thousand tonnes
2008
2007
128
46
174
147
48
195
Contained product
thousand tonnes
2008
2007
210 2
106 3
316 4
5 5
Niobium
Ore Reserves
Catalão (OP)
Carbonatite
Niobium
Mineral Resources
Catalão (OP)(1)
Carbonatite
Phosphate products
Ore Reserves
Copebrás (OP)
Carbonatite
Phosphate products
Mineral Resources
Copebrás (OP)(2)
Carbonatite
Mining method: OP = Open Pit.
Attributable %
100
Classification
2008
Proved
Probable
Total
10.6
4.0
14.6
Attributable %
100
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
16.6
9.0
25.6
0.6
Attributable %
73.0
Classification
2008
Proved
Probable
Total
78.7
160.4
239.1
Attributable %
73.0
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
3.2
84.4
87.6
16.9
Tonnes
million
2007
11.9
4.2
16.0
Tonnes
million
2007
0.2
0.3
0.5
0.6
Tonnes
million
2007
79.6
152.1
231.7
Tonnes
million
2007
0.5
20.3
20.8
15.8
2008
%Nb2O5
1.21
1.14
1.19
2008
%Nb2O5
1.26
1.18
1.23
0.88
2008
%P2O5
13.4
13.3
13.3
2008
%P2O5
9.4
10.4
10.4
12.9
Grade
2007
%Nb2O5
1.24
1.15
1.21
Grade
2007
%Nb2O5
1.05
0.91
0.96
0.90
Grade
2007
%P2O5
13.3
13.4
13.3
Grade
2007
%P2O5
12.4
11.4
11.4
12.9
(1) Catalão: Mineral Resources are quoted above a 0.7% Nb2O5 cut-off (decreased from previous 1% Nb2O5 cut-off). Inferred Mineral Resources external to the LOM comprise 4.3Mt with an average grade of 1.14% Nb2O5,
containing 49,000 tonnes of product.
(2) Copebrás: Mineral Resources are quoted above a 7% P2O5 cut-off. Inferred Mineral Resources external to the LOM comprise 48.1Mt with an average grade of 9.64% P2O5.
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Anglo American plc Annual Report 2008
148 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Base Metals continued
Projects
Ore Reserves
Quellaveco (OP)(1)
Copper
Sulphide
Flotation
Gamsberg (OP)(2)
Zinc
Projects
Mineral Resources
Quellaveco (OP)(1)
Copper
Sulphide
Flotation
Attributable %
80.0
Classification
2008
74.0
Proved
Probable
Total
253.3
636.8
890.1
Proved
Probable
Total
34.2
110.3
144.4
Attributable %
80.0
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
1.9
193.9
195.9
21.8
Tonnes
million
2007
250.1
688.3
938.4
34.3
110.3
144.5
Tonnes
million
2007
1.5
176.7
178.2
41.1
Pebble (OP/UG)(3)(7)(8)(9)
Copper
50.0
Measured(4)
Indicated(5)
Measured and Indicated
Inferred(6)
500.0
4,120.0
4,620.0
2,270.0
655.0
1,760.0
2,415.0
3,180.0
Grade
2007
%Cu
0.76
0.59
0.64
%Zn
7.55
5.55
6.03
Grade
2007
%Cu
0.53
0.46
0.46
0.54
%Cu
0.34
0.30
0.31
0.60
Contained metal
thousand tonnes
2008
2007
1,925
3,885
5,810
2,580
6,124
8,704
1,901
4,061
5,962
2,585
6,124
8,709
Contained metal
thousand tonnes
2008
2007
8 8
834
842
131
813
821
222
1,700
19,776
21,476
8,399
2,227
5,280
7,507
19,234
2008
%Cu
0.76
0.61
0.65
%Zn
7.55
5.55
6.03
2008
%Cu
0.39
0.43
0.43
0.60
%Cu
0.34
0.48
0.46
0.37
Mining method: OP = Open Pit, UG = Underground.
(1) Quellaveco: Based on a feasibility study completed in 2000. Mineral Resources are quoted using a US$ 1.80/lb resource pit constraint. Inferred Mineral Resources with reasonable prospects of eventual economic
extraction not considered in the Mine Plan in 2008 are as follows:- (Tt = Thousand tonnes)
Tonnes Grade (% Cu) Contained metal Economic criteria
392.7Mt 0.48% (Tcu)
1,885Tt Pit Shell @US$1.8/lb
(2) Gamsberg: Based on a feasibility study completed in 2000 and reviewed in 2006 to account for prevailing economic and financial assumptions. Ore Reserves have reduced due to mining of approximately 0.06Mt of
material with an average grade of 7.28% Zn via the exploration adit which was processed at the Black Mountain concentrator. An optimised pit shell includes Inferred Resources of 54.2Mt with an average grade of
4.10% Zn. Gamsberg is owned by Black Mountain Mining (Pty) Ltd – 74% owned by Anglo Operations Limited and 26% by Exxaro group of companies.
(3) Pebble: Copper Equivalent (CuEq) calculations use metal prices of US$1.80/lb copper, US$800/oz gold and US$10.00/lb for molybdenum. The CuEq calculation takes into consideration the relative difference in recovery
between the copper, gold and molybdenum. The estimates of metallurgical recoveries used in the calculation were 91% for copper, 75% for gold and 90% for molybdenum in the western side of the deposits (formerly
Pebble West) and 93% for copper, 80% for gold and 94% for molybdenum in the eastern side of the deposit (formerly Pebble East). The estimates of metallurgical recovery are preliminary results from the ongoing
Prefeasibility study. For 2007, the calculation of CuEq did not take the relative difference in recoveries into account. By definition, Mineral Resources do not have demonstrated economic viability and neither should it be
assumed that all or part of the Inferred Resources will necessarily convert to Indicated or Measured Resources. A test for “reasonable prospects for eventual economic extraction” has been carried out and the mineral
resources fall within a volume defined by metal price estimates of US$2.50/lb for copper, US$900/oz for gold and US$25/lb for molybdenum. The resources are based on drilling to June 2008 and a block model created
in July 2008. The resources in the table are based on a cut-off grade of 0.4%CuEq. At a cut-off of 0.6%CuEq the estimates of Measured plus Indicated Resources are 3090 million tonnes at 0.56%Cu, 0.42g/t Au and
0.030%Mo (0.96%CuEq).
(4) Pebble co-product estimated grades 2008 (Measured): Gold 0.36g/t, Molybdenum 0.018%. CuEq average grade 0.63%.
(5) Pebble co-product estimated grades 2008 (Indicated): Gold 0.37g/t, Molybdenum 0.027%. CuEq average grade 0.83%.
(6) Pebble co-product estimated grades 2008 (Inferred): Gold 0.35g/t, Molybdenum 0.026%. CuEq average grade 0.71%.
(7) Pebble: Previously the deposit was divided into Pebble West and Pebble East. In 2007 Measured and Indicated Resources were all reported from Pebble West at a cut-off of 0.4%CuEq while for the Inferred Resources,
Pebble West (760Mt at 0.27%Cu containing 2,052kt of copper) were reported at a cut-off of 0.4%CuEq and Pebble East (2,420Mt at 0.71%Cu containing 17,182kt of copper) were reported at a cut-off of 0.8%CuEq.
(8) Pebble: Significant changes between 2007 and 2008 resources, include a major upgrade of Inferred Resources in the former Pebble East to Indicated, the change in the cut-off grade of resources reported from the
former Pebble East from 0.8%CuEq to 0.4%CuEq, the application of the test for reasonable prospects for eventual economic extraction and the inclusion of relative recoveries in the calculation of the CuEq. Less
significant changes were due to classification methodology.
(9) Pebble: The property comprises a continuous block of 1,335 located Alaska State mineral claims which total 98,000 acres (39,659 hectares) and which are currently valid. The claims must be renewed annually before
1 December through the payment of rental fees (approx. US$200,000) and registration of work conducted or payment of cash in lieu (approx. US$250,000). There are no known factors affecting the claims.
The Mineral Resources of the following projects were reviewed during 2008 by independent consultants: Pebble.
Anglo American plc Annual Report 2008
Ferrous Metals
Kumba Iron Ore
The Ore Reserve and Mineral Resource estimates were compiled in accordance with The SAMREC Code, 2007. The Mineral Resources are reported as exclusive of those
Mineral Resources modified to produce the Ore Reserve figures, i.e. the Ore Reserves are excluded from the Mineral Resource figures. In contrast, in 2007, Anglo American
reported Mineral Resources for Kumba Iron Ore inclusive of Ore Reserves. The change to an exclusive reporting basis is in alignment with Anglo American’s reporting
practice. These exclusive Mineral Resources are taken from the Kumba Iron Ore Annual Report of 2007.
The figures reported represent 100% of the Ore Reserves and Mineral Resources, the percentage attributable to Anglo American plc is stated separately. Rounding of
figures may cause computational discrepancies.
Saleable product
million tonnes
2008
2007
536@65.0% Fe
187@65.1% Fe
723@65.0% Fe
598@65.2% Fe
174@65.3% Fe
772@65.2% Fe
4@64.9% Fe
1@65.1% Fe
5@64.9% Fe
7@63.5% Fe
1@63.1% Fe
8@63.4% Fe
123@64.1% Fe
91@63.9% Fe
97@64.7% Fe
78@63.6% Fe
214@64.0% Fe 176@64.2% Fe
Iron Ore
Ore Reserves
Sishen Iron Ore Mine (OP)(1)
Attributable %
36.6
Classification
2008
Thabazimbi Iron Ore Mine (OP)
46.6
Sishen South Iron Ore Project (OP)(2)
46.6
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
709.2
247.7
956.9
4.1
0.8
4.9
123.1
91.0
214.1
Iron Ore
Mineral Resources
Sishen Iron Ore Mine (OP)
Within Pit
Outside Pit(3)
Thabazimbi Iron Ore Mine (OP)
Within Pit
Outside Pit
Sishen South Iron Ore Project (OP)
Within Pit(4)
Outside Pit
Mining method: OP = Open Pit.
Attributable %
36.6
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred
46.6
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred
46.6
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan
Measured
Indicated
Measured and Indicated
Inferred
44.8
14.5
59.3
4.2
713.9
701.0
1,414.8
146.6
0.7
0.0
0.7
0.3
18.0
4.8
22.9
2.6
0.9 –
0.8 –
1.7 –
35.4 –
48.6
20.0
68.6
47.1
Tonnes
million
2007
805.3
227.2
1,032.5
7.8
1.5
9.3
97.7
78.2
175.9
Tonnes
million
2007
31.2
23.2
54.5
4.9
617.8
588.5
1,206.3
109.7
0.5
0.1
0.5
0.3
18.1
4.9
23.0
2.7
31.3
55.6
86.8
10.1
2008
%Fe
59.7
59.3
59.6
%Fe
64.5
64.9
64.6
%Fe
64.2
63.9
64.1
2008
%Fe
59.5
57.7
59.1
61.8
54.6
57.4
56.0
59.4
%Fe
61.0
61.8
61.0
61.8
62.4
63.4
62.6
63.5
%Fe
61.1
61.6
61.3
65.5
65.1
65.0
65.1
62.5
Grade
2007
%Fe
59.5
60.0
59.6
%Fe
62.9
62.7
62.9
%Fe
64.7
63.6
64.2
Grade
2007
%Fe
60.7
59.7
60.3
62.4
55.2
58.6
56.9
61.0
%Fe
62.3
61.6
62.2
61.6
62.4
63.4
62.6
63.4
%Fe
–
–
–
–
65.6
64.3
64.8
63.4
The tonnage is quoted as dry metric tonnes and abbreviated as Mt for million tonnes.
Kumba Iron Ore delimit resources within an economic shell based on double the Free On Rail forward-looking long-term iron ore price.
The Mineral Resources in addition to those considered for the Life of Mine (LOM) are reported as Outside Pit.
The Zandrivierspoort Project is no longer reported as Anglo American’s shareholding (23.3%) is below the internal threshold for reporting. Details of this project are presented in the Kumba Iron Ore Annual Report.
(1) Sishen Iron Ore Mine – Ore Reserves: Decrease is predominantly reflective of production with a lesser contribution from changes to the geological model.
(2) Sishen South Iron Ore Project – Ore Reserves: Increase is attributable to an updated geological model, changes in economic assumptions including the increased forward-looking Free On Rail iron-ore price and
a reduced cut-off grade.
(3) Sishen Iron Ore Mine – Outside Pit: Increase is due to revision of geological model based on exploration drilling and the increased forward-looking Free On Rail iron-ore price.
(4) Sishen South Iron Ore Project – Within Pit: Increase is mainly a response to the increased forward-looking Free On Rail iron-ore price.
The Mineral Resources of the following operations were reviewed during 2008 by independent consultants: Sishen Iron Ore Mine.
149
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Anglo American plc Annual Report 2008
150 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Ferrous Metals continued
Anglo Ferrous Brazil
The Minas-Rio project is located in the state of Minas Gerais, Brazil and will include open pit mines and a beneficiation plant producing high grade pellet feed which will be
transported, through a slurry pipeline, over 500km to the Port of Açu in the state of Rio de Janeiro. The project will largely be based on the two main deposits of Serra do
Sapo and Itapanhoacanga. Two ore types, Friable and Hard Itabirite, have been identified at Serra do Sapo and Itapanhoacanga. Only the Friable Itabirite at Serra do Sapo is
being considered for Phase 1 of the project. The planned annual capacity of Phase 1 is 26.5Mtpa of iron ore pellet feed (wet tonnes), for start up during the second quarter
of 2012.
The estimates of Mineral Resources have been audited by an independent Qualified Person from SRK who has compiled a NI 43-101 compliant Technical Report. In the case
of the Serra do Sapo deposit a new Mineral Resource estimate was prepared in 2008 by Anglo Ferrous Brazil and audited by SRK. The Mineral Resources are also JORC
compliant. The Qualified Person has consented to the inclusion of the resources in the table below, and associated footnotes, and agrees with the context and form in
which they occur.
The figures reported represent 100% of the Mineral Resources. Anglo American plc’s effective interest in the Minas Rio Project is 99.4%. Rounding of figures may cause
computational discrepancies.
Minas-Rio Project(1)(7)(8)
Iron Ore
Mineral Resources
Itapanhoacanga (OP)(3)(4)
Friable Itabirite
Hard Itabirite
Attributable %
99.4
Classification
2008
Measured
Indicated
Measured and Indicated
Inferred(2)
Measured
Indicated –
Measured and Indicated
Inferred(2)
– –
83.0
83.0
284.0
– –
–
–
32.0
Serra do Sapo (OP)(5)
99.4
Friable Itabirite and Hematite(6)
Hard Itabirite
Measured
Indicated
Measured and Indicated
Inferred(2)
Measured –
Indicated
Measured and Indicated
Inferred(2)
462.0 –
565.8
1,027.8
143.9
1,650.5
1,650.5
680.8
Tonnes
million
2007
83.0
83.0
284.0
–
32.0
222.0
222.0
313.0
–
171.0
171.0
141.0
2008
%Fe
– –
40.3
40.3
40.4
– –
– –
–
34.2
%Fe
38.1 –
37.5
37.8
34.3
– –
31.0
31.0
30.3
Grade
2007
%Fe
40.3
40.3
40.4
–
34.2
%Fe
41.0
41.0
39.5
34.8
34.8
34.2
Mining method: OP = Open Pit.
(1) Minas-Rio Project: All Mineral Resources are stated as wet metric tonnes and the moisture content is estimated at 7%.
(2) Minas-Rio Project – Inferred Resources: Due to the uncertainty in the estimates of Inferred Resources, it should not be assumed that all of the Inferred Resources will necessarily upgrade to Indicated or Measured
Resources.
(3) Itapanhoacanga: Cut-off grade used is 33% Fe .
(4) Itapanhoacanga – Further lower grade resources above a cut-off of 20% Fe:
Friable Itabirite – an estimated 7Mt of Indicated Mineral Resources at an estimated average grade of 32% Fe;
Friable Itabirite – an estimated 78Mt Inferred Mineral Resources at an estimated average grade of 29% Fe; and
Hard Itabirite – an estimated 19Mt of Inferred Mineral Resources at an estimated average grade of 31% Fe.
(5) Serra do Sapo: A new geological model and resource estimate was completed during 2008. A significant increase in Mineral Resources has occurred due to the inclusion of new drill results. Additional increases are
attributable to a lowering of cut-off grade to 25% Fe from the previous 33% Fe.
(6) Serra do Sapo – Friable Itabirite and Hematite: The hematite material has been included within the friable material type, as it is an attractive material type economically but not significant in tonnage terms.
(7) Serro deposit – Resources above a cut-off of 33% Fe:
Friable plus Hard Itabirite – an estimated 25Mt of Indicated and 56Mt of Inferred Mineral Resources at an estimated average grade of approximately 38% Fe.
Further lower grade resources above a cut-off of 20% Fe:
Friable plus Hard Itabirite – an estimated 101Mt of Indicated and 256Mt of Inferred Mineral Resources at an estimated average grade of 29% Fe.
(8) João Monlevade deposit – Resources above a cut-off of 30% Fe:
Friable Itabirite – an estimated 133Mt of Inferred Mineral Resources at an estimated average grade of 47% Fe.
Amapá iron ore system
Iron Ore
Anglo American acquired an effective 69.2% interest in the Amapá project during 2008. During 2008 new exploration drilling was conducted within the project mineral
rights area. A resource and reserve estimate incorporating all project data will be prepared in 2009.
Anglo American plc Annual Report 2008
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Samancor
The Ore Reserve and Mineral Resource estimates were compiled in accordance with The SAMREC Code, 2007 and The JORC Code, 2004 as applicable. The Mineral
Resources are reported as inclusive of those Mineral Resources modified to produce the Ore Reserve figures, i.e. the Ore Reserves are included in the Mineral Resource
figures.
The figures reported represent 100% of the Ore Reserves and Mineral Resources. Rounding of figures may cause computational discrepancies.
Manganese
Ore Reserves
GEMCO (OP)(1)
Attributable %
40.0
Classification
2008
Hotazel Manganese Mines
Mamatwan (OP)(2)
40.0
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
71.9
43.9
115.8
40.5
8.1
48.6
3.9
14.9
18.8
Wessels (UG)(3)
Manganese
Mineral Resources
GEMCO (OP)(4)
Hotazel Manganese Mines(5)
Mamatwan (OP)(6)
Wessels (UG)(7)
Attributable %
40.0
Classification
2008
Measured
Indicated
Measured and Indicated
40.0
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
74.6
47.5
122.1
51.8
13.9
65.7
6.7
119.6
126.3
2008
49.4
47.0
48.5
% Yield
2007
49.3
47.0
48.5
2008
44.2
44.0
44.1
% Yield
2007
44.2
44.0
44.1
Tonnes
million
2007
81.8
44.7
126.5
44.0
8.1
52.1
4.6
14.8
19.4
Tonnes
million
2007
80.1
47.7
127.8
56.2
15.6
71.8
8.8
30.7
39.5
2008
%Mn
48.2
47.1
47.8
%Mn
37.7
36.8
37.6
46.5
45.3
45.5
2008
%Mn
46.3
46.0
46.2
%Mn
37.6
36.3
37.3
47.3
44.0
44.1
Grade
2007
%Mn
48.2
47.2
47.8
%Mn
37.6
36.4
37.4
46.0
45.2
45.4
Grade
2007
%Mn
46.5
46.0
46.3
%Mn
37.6
36.4
37.3
46.0
45.3
45.5
Mining method: OP = Open Pit, UG = Underground.
Mamatwan tonnages stated as wet metric tonnes. Wessels and GEMCO tonnages stated as dry metric tonnes.
(1) GEMCO – Ore Reserves: Changes are the result of pricing changes (increases) between FY07 and FY08. Culturally significant areas have also been excised from the Ore Reserves (G Quarry rainforest) adjacent to the
local community. This excision equates to 3.24Mt of ROM for 1.29Mt of product at 47.6% Mn at a yield of 40%.
(2) Mamatwan – Ore Reserves: X-Zone included as a reserve.
(3) Wessels – Ore Reserves: Dilution factors as per Ukwazi Mining were used for the resource to reserve conversion. Note that the reserve estimation includes a fines portion of 24% which defines the difference between
ROM and quality product. Changes due to following: Revised structural interpretation and model of the Lower Body; Wessels Mine used to be a high grade mine – mean manganese content for W1Lump being 48%.
As a result only this high grade portion was previously declared while a low grade portion, W4Lump at a mean grade of 41.8% manganese, was declared as an exclusive resource, with the selling of this product being
dependent on marketing requirements. Positive changes in market conditions now allow for the inclusion of all grades above a cut-off of 37.5% Mn; The traditional W1L at a mean grade of 48% was also adjusted to
47% Mn; Changes also due to mine production depletion.
(4) GEMCO – Mineral Resources: The resource has only been depleted due to mine production.
(5) Hotazel Manganese Mines: An agreement has been signed between Samancor Manganese and an empowerment consortium Ntsimbintle Mining (Pty) Ltd, but remains subject to government approval. When approved,
this transaction allows for the inclusion of part of the Prospecting Rights held by Ntsimbintle into the Wessels and Mamatwan Mining Areas in exchange for 9% of the equity in Hotazel Manganese Mines, thereby adding
the resources within the Ntsimbintle Prospecting Right to the Wessels and Mamatwan Mining Rights. The Anglo American share of Wessels and Mamatwan mines (Hotazel Manganese Mines) will consequently drop to
36.4%.
(6) Mamatwan – Mineral Resources: Mineral Resources have been declared above a 35% Mn cut-off grade and also exclude those resources to be contributed by Ntsimbintle Mining (Pty) Ltd.
(7) Wessels – Mineral Resources: Changes due to following: Revised structural interpretation and model of the Lower Body; The Upper Body, after extensive evaluation, was added as an Indicated Resource. Changes also
due to mine production depletion. Figures exclude those resources to be contributed by Ntsimbintle Mining (Pty) Ltd.
Anglo American plc Annual Report 2008
152 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Coal
Anglo Coal
The Coal Reserve and Coal Resource estimates were compiled in accordance with the Australasian Code for Reporting of Mineral Resources and Ore Reserves (The JORC
Code, 2004) as a minimum standard. Where relevant, the estimates were also prepared in compliance with regional codes and requirements (e.g. The SAMREC Code,
2007). The Coal Resources are additional to those resources which have been modified to produce the Coal Reserves. The tonnage is quoted as wet metric tonnes at the
appropriate in-situ moisture content.
The figures reported represent 100% of the Ore Reserves and Mineral Resources, the percentage attributable to Anglo American plc is stated separately. A change to the
100% reporting basis necessitated a change to certain figures as reported in 2007. Rounding of figures may cause computational discrepancies.
Attributable %(2) Classification
100
71.6
Coal Reserves(1)
Australia
Callide (OC)
Domestic Power
Capcoal (UG/OC)
Export Thermal
Coking
Dawson (OC)
Export Thermal
51.0
Coking
Drayton (OC)
Export Thermal
88.2
Domestic Power
Moranbah North (UG)
88.0
Coking
Australia Export Thermal
61.8
Australia Coking
69.1
Australia Domestic Power
99.5
ROM Tonnes(3)
Yield(4)
CV/CSN(5)
Saleable Tonnes(3)
2008
million
134.6
87.7
222.3
million
125.8
90.3
216.1
2007
million
204.8
27.0
231.8
million
135.6
90.1
225.6
million
205.1
123.0
328.1
million
213.6
123.0
336.6
million
26.5
14.4
40.9
million
118.4
17.3
135.8
million
610.4
332.8
943.2
million
30.7
14.6
45.3
million
119.5
23.3
142.8
million
704.1
278.0
982.1
2008
%
97.4
99.2
98.1
%
38.9
39.1
39.0
% %
29.8
17.2
24.5
%
53.2
30.5
44.7
% %
28.0
47.5
35.3
%
69.8
69.8
69.8
% %
25.0
25.0
25.0
%
75.8
74.0
75.6
%
50.8
38.8
45.4
%
51.8
46.0
48.6
%
93.9
96.3
94.8
2007
%
98.7
98.1
98.6
%
41.1
41.3
41.2
29.9
17.3
24.9
%
53.3
30.6
45.0
28.0
47.5
35.1
%
69.8
69.8
69.8
25.0
25.0
25.0
%
77.4
73.0
76.7
%
51.5
39.9
46.5
%
52.2
47.1
49.2
%
96.0
89.2
95.2
2008
kcal/kg
4,530
4,550
4,540
kcal/kg
7,400
7,400
7,400
CSN
8.5
8.5
8.5
kcal/kg
6,600
6,620
6,610
CSN
7.5
7.5
7.5
kcal/kg
6,720
6,740
6,730
kcal/kg
5,780
5,780
5,780
CSN
7.5
8.0
7.5
kcal/kg
6,840
6,980
6,880
CSN
8.0
8.0
8.0
kcal/kg
4,590
4,600
4,590
2007
kcal/kg
4,610
4,480
4,590
kcal/kg
7,400
7,400
7,400
CSN
8.5
8.5
8.5
kcal/kg
6,610
6,570
6,600
CSN
7.5
7.5
7.5
kcal/kg
6,720
6,740
6,730
kcal/kg
5,780
5,780
5,780
CSN
8.0
7.5
8.0
kcal/kg
6,860
6,950
6,890
CSN
8.0
7.5
8.0
kcal/kg
4,650
4,640
4,650
2008
million
131.0
87.0
218.0
million
53.1
38.6
91.7
million
39.1
16.3
55.4
million
114.1
38.9
153.0
million
59.6
61.4
121.0
million
18.5
10.1
28.6
million
6.6
3.6
10.2
million
95.0
13.6
108.6
million
185.7
87.6
273.3
million
193.7
91.4
285.0
million
137.6
90.7
228.3
2007
million
202.1
26.5
228.5
million
57.8
38.6
96.5
million
42.6
16.3
58.9
million
117.8
39.1
156.9
million
62.9
61.4
124.3
million
21.4
10.2
31.6
million
7.7
3.7
11.3
million
97.7
17.9
115.6
million
197.1
87.9
285.0
million
203.1
95.7
298.9
million
209.7
30.1
239.9
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Mining method: OC = Open Cast, UG = Underground.
For the multi-product operations, the ROM tonnage figures apply to each product.
The Saleable tonnage cannot be calculated directly from the ROM reserve tonnage using the air dried yields as presented since the difference in moisture content is not taken into account.
Attributable percentages for country totals are weighted by saleable tonnes and should not be directly applied to the ROM tonnage.
Additional footnotes appear at the end of the section.
Export Thermal refers to low- to high-volatile thermal coal primarily for export in the use of power generation; quality measured by calorific value (CV).
Coking refers to a high-, medium- or low-volatile semi-soft, soft or hard coking coal primarily for blending and use in steel industry, particularly from Australian operations; quality measured as crucible swell number (CSN).
Metallurgical refers to semi soft, soft, hard, semi-hard or anthracite coal, other than Coking Coal, such as pulverized coal injection (PCI) or other general metallurgical coal for the export or domestic market with a wider
range of properties than Coking Coal.
Domestic Power refers to low- to high-volatile thermal or semi-soft coal primarily for domestic consumption for power generation, predominantly in Australia and South Africa; quality measured by calorific value.
Synfuels refers to a coal specifically for the domestic production of synthetic fuel and chemicals; quality measured by calorific value.
Anglo American plc Annual Report 2008
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Attributable %(2) Classification
74.0
Coal Reserves(1)
Canada
Trend (OC)
Export Thermal
Coking
Canada Export Thermal
74.0
Canada Coking
74.0
Coal Reserves(1)
Colombia
Cerréjon (OC)
Export Thermal
Attributable %(2) Classification
33.3
Colombia Export Thermal
33.3
2008
million
10.4
4.2
14.6
million
10.4
4.2
14.6
2008
million
519.3
241.0
760.2
million
519.3
241.0
760.2
ROM Tonnes(3)
2007
million
11.4
4.2
15.6
million
11.4
4.2
15.6
2008
%
2.0 –
2.8 –
2.2
% %
68.0
67.3
67.8
%
2.0 –
2.8 –
2.2
%
68.0
67.3
67.8
Yield(4)
2007
%
–
67.4
66.4
67.1
%
–
%
67.4
66.4
67.1
2008
kcal/kg
5,660 –
5,660 –
5,660
CSN
7.0
7.0
7.0
kcal/kg
5,660 –
5,660 –
5,660
CSN
7.0
7.0
7.0
CV/CSN(5)
2007
kcal/kg
–
CSN
7.0
7.0
7.0
kcal/kg
–
CSN
7.0
7.0
7.0
Saleable Tonnes(3)
2008
million
0.2 –
0.1 –
0.3
million
7.4
3.0
10.4
million
0.2 –
0.1 –
0.3
million
7.4
3.0
10.4
2007
million
–
million
8.0
2.8
10.8
million
–
million
8.0
2.8
10.8
ROM Tonnes(3)
Yield(4)
CV/CSN(5)
Saleable Tonnes(3)
2007
million
649.0
211.2
860.2
million
649.0
211.2
860.2
2008
%
96.9
96.9
96.9
%
96.9
96.9
96.9
2007
%
100
100
100
%
100
100
100
2008
kcal/kg
6,200
6,200
6,200
kcal/kg
6,200
6,200
6,200
2007
kcal/kg
6,130
6,220
6,160
kcal/kg
6,130
6,220
6,160
2008
million
502.9
233.4
736.3
million
502.9
233.4
736.3
2007
million
661.2
215.4
876.6
million
661.2
215.4
876.6
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Mining method: OC = Open Cast, UG = Underground.
For the multi-product operations, the ROM tonnage figures apply to each product.
The Saleable tonnage cannot be calculated directly from the ROM reserve tonnage using the air dried yields as presented since the difference in moisture content is not taken into account.
Attributable percentages for country totals are weighted by saleable tonnes and should not be directly applied to the ROM tonnage.
Additional footnotes appear at the end of the section.
Export Thermal refers to low- to high-volatile thermal coal primarily for export in the use of power generation; quality measured by calorific value (CV).
Coking refers to a high-, medium- or low-volatile semi-soft, soft or hard coking coal primarily for blending and use in steel industry, particularly from Australian operations; quality measured as crucible swell number (CSN).
Metallurgical refers to semi soft, soft, hard, semi-hard or anthracite coal, other than Coking Coal, such as pulverized coal injection (PCI) or other general metallurgical coal for the export or domestic market with a wider
range of properties than Coking Coal.
Domestic Power refers to low- to high-volatile thermal or semi-soft coal primarily for domestic consumption for power generation, predominantly in Australia and South Africa; quality measured by calorific value.
Synfuels refers to a coal specifically for the domestic production of synthetic fuel and chemicals; quality measured by calorific value.
Anglo American plc Annual Report 2008
154 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Coal continued
Attributable %(2) Classification
100
Coal Reserves(1)
South Africa
Goedehoop (UG/OC)
Export Thermal
Metallurgical
Greenside (UG)
Export Thermal
Isibonelo (OC)
Domestic Synfuel
Kleinkopje (OC)
Export Thermal
Domestic Power
Kriel (UG/OC)
Domestic Power
Landau (OC)
Export Thermal
Domestic Power
100
100
100
73.0
100
Mafube (OC)
Export Thermal
50.0
Domestic Power
New Denmark (UG)
Domestic Power
New Vaal (OC)
Domestic Power
Nooitgedacht 5 Seam (UG)
Export Thermal
Metallurgical
100
100
100
Zondagsfontein (UG/OC)
Export Thermal
73.0
Domestic Power
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable –
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable –
Total
Proved
Probable –
Total
Proved
Probable
Total
Proved –
Probable
Total
Proved
Probable
Total
ROM Tonnes(3)
Yield(4)
CV/CSN(5)
Saleable Tonnes(3)
2008
million
50.5
81.2
131.7
million
19.5
12.2
31.7
million
90.6
–
90.6
million
81.9
25.4
107.4
million
82.1
62.4
144.5
million
37.5
27.8
65.3
2007
million
46.7
103.7
150.4
–
million
9.3
47.6
56.9
million
91.5
91.5
million
75.2
64.0
139.2
–
million
94.8
61.4
156.2
million
37.8
35.7
73.5
million
40.6
66.8 –
107.3
million
44.3
44.3
million
41.9
87.6
129.5
million
444.9
–
444.9
million
2.9
–
2.9
million
–
117.7 –
117.7
million
62.6
102.1
164.7
million
477.2
477.2
million
3.6
3.6
–
million
–
–
2008
%
49.9
54.2
52.6
% %
2.0
0.8
%
63.2
60.3
62.1
%
100
– –
100
%
32.9
49.0
36.7
% %
40.6 –
–
31.0
%
100
100
100
%
50.1
48.4
49.4
% %
10.6 –
15.3 –
12.6
%
54.2
36.9 –
43.4
% %
28.0
31.3 –
30.1
%
100
100
100
%
91.2
– –
91.2
%
39.9 –
– –
39.9
% %
30.5
–
30.5
%
– –
40.1 –
40.1
% %
–
40.5 –
40.5
2007
%
57.5
52.9
54.4
3.3
4.2
3.9
%
64.2
60.3
60.9
%
100
100
%
57.7
52.8
55.4
–
%
100
100
100
%
58.5
64.9
61.6
–
%
53.6
53.6
25.9
25.9
%
100
100
100
%
91.7
91.7
%
–
71.9
71.9
%
–
–
2008
kcal/kg
6,200
6,130
6,150
kcal/kg
6,990
–
6,990
kcal/kg
6,240
6,220
6,230
kcal/kg
4,660
– –
4,660
kcal/kg
6,220
6,230
6,220
kcal/kg
4,530 –
– –
4,530
kcal/kg
4,800
4,500
4,670
kcal/kg
6,270
6,260
6,270
kcal/kg
3,340 –
4,690 –
4,040
kcal/kg
6,290
6,270 –
6,280
kcal/kg
5,380
5,080 –
5,190
kcal/kg
4,900
4,850
4,870
kcal/kg
3,500
– –
3,500
kcal/kg
6,200 –
– –
6,200
kcal/kg
6,510
– –
6,510
kcal/kg
– –
6,340 –
6,340
kcal/kg
– –
4,880 –
4,880
2007
kcal/kg
6,160
6,170
6,160
kcal/kg
7,080
7,010
7,030
kcal/kg
6,200
6,190
6,200
kcal/kg
4,870
4,870
kcal/kg
6,170
6,180
6,170
kcal/kg
–
kcal/kg
4,920
4,730
4,850
kcal/kg
6,250
5,730
5,980
kcal/kg
–
kcal/kg
6,260
6,260
kcal/kg
5,050
5,050
kcal/kg
5,140
5,100
5,120
kcal/kg
3,720
3,720
kcal/kg
–
kcal/kg
6,470
6,470
kcal/kg
–
kcal/kg
–
2008
million
26.3
45.1
71.4
million
1.0
–
1.0
million
12.6
7.5
20.1
million
90.6
– –
90.6
million
27.3
12.6
39.9
million
33.2 –
– –
33.2
million
82.1
62.4
144.5
million
18.8
13.4
32.3
million
4.0 –
4.2 –
8.2
million
22.0
24.7 –
46.7
million
11.4
20.9 –
32.3
million
41.9
87.6
129.5
million
417.6
– –
417.6
million
1.2 –
– –
1.2
million
0.9
– –
0.9
million
– –
47.5 –
47.5
million
– –
49.8 –
49.8
2007
million
27.5
56.1
83.6
million
1.5
4.4
5.9
million
6.3
30.4
36.7
million
91.3
91.3
million
43.8
33.9
77.7
million
–
million
94.8
61.4
156.2
million
22.2
23.5
45.7
million
–
million
23.9
23.9
million
12.1
12.1
million
62.6
102.1
164.7
million
448.0
448.0
million
–
million
2.6
2.6
million
–
million
–
Mining method: OC = Open Cast, UG = Underground.
For the multi-product operations, the ROM tonnage figures apply to each product.
The Saleable tonnage cannot be calculated directly from the ROM reserve tonnage using the air dried yields as presented since the difference in moisture content is not taken into account.
Additional footnotes appear at the end of the section.
Anglo American plc Annual Report 2008
155
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Coal Reserves(1)
South Africa
South Africa Export Thermal
86.0
Attributable %(2) Classification
South Africa Metallurgical
100
South Africa Domestic Power
91.6
South Africa Synfuel
100
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Coal Reserves(1)
Venezuela
Guasare (OC)
Export Thermal
Attributable %(2) Classification
25.0
Venezuela Export Thermal
25.0
Proved
Probable –
Total
Proved
Probable –
Total
2008
million
892.4
481.0
1,373.4
ROM Tonnes(3)
2007
million
943.0
414.5
1,357.5
–
–
2008
% %
48.0
46.3
46.5
% %
15.8
15.2
% %
88.4
78.8
85.4
% %
100
–
100
Yield(4)
2007
57.7
56.4
56.9
46.5
4.2
24.8
93.2
100
94.6
100
100
CV/CSN(5)
Saleable Tonnes(3)
2008
kcal/kg
6,240
6,240
6,240
kcal/kg
6,760
–
6,760
kcal/kg
3,870
4,780
4,120
kcal/kg
4,660
– –
4,660
2007
kcal/kg
6,200
6,100
6,150
kcal/kg
6,700
7,010
6,860
kcal/kg
4,070
4,970
4,260
kcal/kg
4,870
4,870
2008
million
108.2
150.9
259.1
million
1.9
–
1.9
million
590.1
225.0
815.1
million
90.6
– –
90.6
2007
million
123.8
143.8
267.6
million
4.2
4.4
8.6
million
617.5
163.5
780.9
million
91.3
91.3
ROM Tonnes(3)
Yield(4)
CV/CSN(5)
Saleable Tonnes(3)
2008
million
136.6
–
136.6
million
136.6
–
136.6
2007
million
141.0
141.0
million
141.0
141.0
2008
%
100
– –
100
% %
100
– –
100
2007
%
100
100
100
100
2008
kcal/kg
7,320
– –
7,320
kcal/kg
7,320
– –
7,320
2007
kcal/kg
7,100
7,100
kcal/kg
7,100
7,100
2008
million
141.1
– –
141.1
million
141.1
– –
141.1
2007
million
145.5
145.5
million
145.5
145.5
ROM Tonnes(3)
Yield(4)
CV/CSN(5)
Saleable Tonnes(3)
Attributable %(2) Classification
2008
2007
Total Coal Reserves
Export Thermal
47.7
Metallurgical
100
Coking
69.3
Domestic Power
93.3
Synfuel
100
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
million
2,169.1
1,059.0
3,228.0
million
2,448.5
907.9
3,356.4
–
–
2008
%
82.6
69.9
77.9
% %
15.8
15.2
% %
52.4
46.7
49.2
% %
89.5
83.8
87.5
% %
100
–
100
2007
%
74.7
61.9
69.7
46.5
4.2
24.8
52.7
47.7
49.8
93.9
98.3
94.7
100
100
2008
kcal/kg
6,500
6,360
6,450
kcal/kg
6,760
–
6,760
CSN
8.0
7.5
8.0
kcal/kg
4,010
4,730
4,230
kcal/kg
4,660
– –
4,660
2007
kcal/kg
6,390
6,330
6,370
kcal/kg
6,700
7,010
6,860
CSN
8.0
7.5
8.0
kcal/kg
4,220
4,910
4,350
kcal/kg
4,870
4,870
2008
million
938.1
472.0
1,410.1
million
1.9
–
1.9
million
201.1
94.3
295.4
million
727.7
315.6
1,043.4
million
90.6
– –
90.6
2007
million
1,127.6
447.2
1,574.7
million
4.2
4.4
8.6
million
211.1
98.5
309.7
million
827.2
193.6
1,020.8
million
91.3
91.3
Mining method: OC = Open Cast, UG = Underground.
For the multi-product operations, the ROM tonnage figures apply to each product.
The Saleable tonnage cannot be calculated directly from the ROM reserve tonnage using the air dried yields as presented since the difference in moisture content is not taken into account.
Attributable percentages for country totals are weighted by saleable tonnes and should not be directly applied to the ROM tonnage.
Additional footnotes appear at the end of the section.
Export Thermal refers to low- to high-volatile thermal coal primarily for export in the use of power generation; quality measured by calorific value (CV).
Coking refers to a high-, medium- or low-volatile semi-soft, soft or hard coking coal primarily for blending and use in steel industry, particularly from Australian operations; quality measured as crucible swell number (CSN).
Metallurgical refers to semi soft, soft, hard, semi-hard or anthracite coal, other than Coking Coal, such as pulverized coal injection (PCI) or other general metallurgical coal for the export or domestic market with a wider
range of properties than Coking Coal.
Domestic Power refers to low- to high-volatile thermal or semi-soft coal primarily for domestic consumption for power generation, predominantly in Australia and South Africa; quality measured by calorific value.
Synfuels refers to a coal specifically for the domestic production of synthetic fuel and chemicals; quality measured by calorific value.
Anglo American plc Annual Report 2008
156 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Coal continued
Coal Resources – Mine Leases(6)
Australia
Callide (OC)
Attributable %(2)
100
Capcoal (UG/OC)
Dawson (OC)
Drayton (OC)
Foxleigh (OC)
Moranbah North (UG)
Australia Sub Total
71.6
51.0
88.2
70.0
88.0
80.2
Coal Resources – Mine Leases(6)
Canada
Trend (OC)
Attributable %(2)
74.0
Canada Sub Total
74.0
Coal Resources – Mine Leases(6)
Colombia
Cerréjon (OC)
Attributable %(2)
33.3
Colombia Sub Total
33.3
Mining method: OC = Open Cast, UG = Underground.
Attributable percentages for country totals are weighted by Measured and Indicated MTIS.
Additional footnotes appear at the end of the section.
Anglo American plc Annual Report 2008
Classification
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
2008
MTIS(6)
317.8
375.3
693.1
0.4
MTIS(6)
181.2
119.8
301.0
8.6
MTIS(6)
162.3
215.1
377.4
2.7
MTIS(6)
9.3
12.4
21.7
1.3
MTIS(6)
1.8
71.0
72.7
MTIS(6)
32.4
22.4
54.7
0.6
MTIS(6)
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
704.7
816.0
1,520.7
13.6
Classification
Measured –
Indicated –
Measured and Indicated
Inferred in Mine Plan(8)
Measured –
Indicated –
Measured and Indicated
Inferred in Mine Plan(8)
2008
MTIS(6)
–
2.4
MTIS(6)
–
2.4
Tonnes
2007
MTIS(6)
253.9
346.0
599.9
1.5
MTIS(6)
121.1
103.8
224.9
13.5
MTIS(6)
5.9
33.0
38.9
2.9
MTIS(6)
6.8
11.7
18.4
1.4
MTIS(6)
–
–
–
–
MTIS(6)
35.4
18.4
53.9
0.8
MTIS(6)
423.1
512.9
936.0
20.1
Tonnes
2007
MTIS(6)
3.2
0.1
3.3
2.5
MTIS(6)
3.2
0.1
3.3
2.5
Classification
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
2008
MTIS(6)
667.1
712.8
1,379.9
MTIS(6)
667.1
712.8
1,379.9
Tonnes
2007
MTIS(6)
204.1
990.2
1,194.3
1.9
MTIS(6)
204.1
990.2
1,194.3
1.9
2008
GAR(7)
4,800
4,740
4,770
4,050
CV
2007
GAR (7)
4,950
4,790
4,860
3,890
GAR(7)
GAR (7)
7,160
7,160
7,160
7,160
7,160
7,160
7,160
7,160
GAR(7)
GAR (7)
6,560
6,590
6,580
6,540
6,350
6,350
6,350
6,540
GAR(7)
GAR (7)
6,730
6,760
6,750
6,860
GAR(7)
7,680
7,420
7,430
–
GAR(7)
6,730
6,730
6,730
6,730
6,740
6,760
6,750
6,860
GAR (7)
–
–
–
–
GAR (7)
6,730
6,730
6,730
6,730
GAR(7)
GAR (7)
5,930
5,900
5,920
6,910
2008
GAR(7)
–
–
–
7,500
GAR(7)
–
–
–
7,500
2008
GAR(7)
6,400
6,290
6,340
–
GAR(7)
6,400
6,290
6,340
–
5,780
5,480
5,620
6,790
CV
2007
GAR (7)
7,500
7,500
7,500
7,500
GAR (7)
7,500
7,500
7,500
7,500
CV
2007
GAR (7)
6,520
6,210
6,270
7,220
GAR (7)
6,520
6,210
6,270
7,220
Coal Resources – Mine Leases(6)
South Africa
Goedehoop (UG/OC)
Attributable %(2)
100
Greenside (UG)
Isibonelo (OC)
Kleinkopje (OC)
Kriel (UG/OC)
Landau (OC)
Mafube (OC)
New Denmark (UG)
New Vaal (OC)
Nooitgedacht 5 Seam (UG)
Zondagsfontein (UG/OC)
South Africa Sub Total
100
100
100
73.0
100
50.0
100
100
100
73.0
85.8
Mining method: OC = Open Cast, UG = Underground.
Attributable percentages for country totals are weighted by Measured and Indicated MTIS.
Additional footnotes appear at the end of the section.
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Classification
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured –
Indicated –
Measured and Indicated
Inferred in Mine Plan(8)
Measured –
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated –
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated –
Measured and Indicated
Inferred in Mine Plan(8)
Measured –
Indicated –
Measured and Indicated
Inferred in Mine Plan(8)
Measured
Indicated –
Measured and Indicated
Inferred in Mine Plan(8)
Measured
Indicated –
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
2008
MTIS(6)
135.4
83.8
219.2
MTIS(6)
–
27.7
MTIS(6)
25.8
25.8
MTIS(6)
31.9
31.9
MTIS(6)
61.8
34.7
96.5
MTIS(6)
34.0
66.3
100.2
MTIS(6)
4.2
4.2
10.7
MTIS(6)
–
78.7
MTIS(6)
2.5
2.5
–
MTIS(6)
1.1
1.1
MTIS(6)
90.8
220.3
311.2
MTIS(6)
361.7
430.9
792.6
117.1
Tonnes
2007
MTIS(6)
132.9
100.6
233.5
–
MTIS(6)
–
–
–
26.6
MTIS(6)
–
25.8
25.8
–
MTIS(6)
–
–
–
–
MTIS(6)
56.9
39.5
96.5
–
MTIS(6)
11.2
62.7
73.9
–
MTIS(6)
12.6
41.9
54.5
–
MTIS(6)
–
–
–
78.6
MTIS(6)
–
8.4
8.4
–
MTIS(6)
1.1
–
1.1
–
MTIS(6)
202.1
343.2
545.3
–
MTIS(6)
416.8
622.1
1,038.9
105.2
2008
GAR(7)
5,010
5,320
5,130
–
GAR(7)
–
–
–
5,120
GAR(7)
–
5,330
5,330
–
GAR(7)
4,960
–
4,960
–
GAR(7)
5,280
4,710
5,080
–
GAR(7)
5,750
6,050
5,950
–
GAR(7)
5,300
–
5,300
5,420
GAR(7)
–
–
–
5,840
GAR(7)
4,230
–
4,230
–
GAR(7)
6,240
–
6,240
–
GAR(7)
4,480
5,200
4,990
–
GAR(7)
4,990
5,320
5,170
5,630
CV
2007
GAR (7)
5,910
5,430
5,700
–
GAR (7)
–
–
–
6,560
GAR (7)
–
5,330
5,330
–
GAR (7)
–
–
–
–
GAR (7)
5,490
4,740
5,180
–
GAR (7)
5,970
6,090
6,070
–
GAR (7)
5,400
5,420
5,410
–
GAR (7)
–
–
–
5,850
GAR (7)
–
3,820
3,820
–
GAR (7)
6,240
–
6,240
–
GAR (7)
5,150
5,120
5,130
–
GAR (7)
5,470
5,260
5,340
6,030
Anglo American plc Annual Report 2008
158 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Coal continued
Coal Resources – Mine Leases(6)
Venezuela
Guasare (OC)
Attributable %(2)
25.0
Venezuela Sub Total
25.0
Coal Resources – Mine Leases(6)
Total Mine Leases
Attributable %(2)
62.8
Coal Resources – Projects(6)
Australia
Dartbrook (UG/OC)
Attributable %(2)
78.0
Grosvenor (UG)
Saddlers Creek (UG)
Taroom (OC)
Theodore (OC)
Australia Sub Total
100
88.0
51.0
51.0
77.9
Mining method: OC = Open Cast, UG = Underground.
Attributable percentages for country totals are weighted by Measured and Indicated MTIS.
Additional footnotes appear at the end of the section.
Classification
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8) –
2008
MTIS(6)
26.9
79.5
106.5
MTIS(6)
26.9
79.5
106.5
Classification
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
2008
MTIS(6)
1,760.5
2,039.2
3,799.7
133.1
Tonnes
2007
MTIS(6)
26.9
79.5
106.5
–
MTIS(6)
26.9
79.5
106.5
–
Tonnes
2007
MTIS(6)
1,074.2
2,204.9
3,279.0
129.7
2008
GAR(7)
7,910
7,860
7,870
–
GAR(7)
7,910
7,860
7,870
–
2008
GAR(7)
5,950
5,990
5,970
5,800
Classification
Measured
Indicated
Measured and Indicated
2008
MTIS(6)
170.1
51.9
222.1
Tonnes
2007
MTIS(6)
170.1
51.9
222.1
2008
GAR(7)
6,200
6,200
6,200
MTIS(6)
MTIS(6)
GAR(7)
Measured
Indicated
Measured and Indicated
227.8
111.9
339.7
195.9
95.7
291.6
6,650
6,660
6,650
MTIS(6)
MTIS(6)
GAR(7)
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
Measured –
Indicated
Measured and Indicated
398.9
137.9
536.8
MTIS(6)
36.4
89.0
125.5
MTIS(6)
358.2
358.2
MTIS(6)
129.9
322.5
452.4
MTIS(6)
–
–
–
MTIS(6)
–
262.4
262.4
MTIS(6)
Measured
Indicated
Measured and Indicated
833.2
749.0
1,582.2
495.9
732.5
1,228.5
6,440
6,340
6,410
GAR(7)
5,560
5,580
5,570
GAR(7)
–
6,250
6,250
GAR(7)
6,410
6,240
6,330
CV
2007
GAR (7)
7,910
7,860
7,870
–
GAR (7)
7,910
7,860
7,870
–
CV
2007
GAR (7)
5,860
5,830
5,840
6,190
CV
2007
GAR (7)
6,200
6,200
6,200
GAR (7)
6,230
6,230
6,230
GAR (7)
6,460
6,560
6,530
GAR (7)
–
–
–
GAR (7)
–
6,290
6,290
GAR (7)
6,280
6,390
6,350
Anglo American plc Annual Report 2008
Coal Resources – Projects(6)
Canada
Roman Mountain (OC)
Attributable %(2)
74.0
Canada Sub Total
74.0
Coal Resources – Projects(6)
China
Xiwan (UG/OC)
Attributable %(2)
60.0
China Sub Total
60.0
Coal Resources – Projects(6)
South Africa
Elders (UG/OC)
Attributable %(2)
73.0
Kriel East (UG)
New Largo (OC)
Nooitgedacht 2+4 Seam (UG)
South Rand (UG/OC)
Vaalbank (UG/OC)
South Africa Sub Total
73.0
73.0
100
73.0
100
76.8
Mining method: OC = Open Cast, UG = Underground.
Attributable percentages for country totals are weighted by Measured and Indicated MTIS.
Additional footnotes appear at the end of the section.
Classification
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
Classification
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
Classification
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
Measured –
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
Measured
Indicated
Measured and Indicated
2008
MTIS(6)
18.2
6.3
24.5
MTIS(6)
18.2
6.3
24.5
2008
MTIS(6)
199.6
128.2
327.8
Tonnes
2007
MTIS(6)
–
–
–
MTIS(6)
–
–
–
Tonnes
2007
MTIS(6)
109.8
389.5
499.2
2008
GAR(7)
6,810
6,810
6,810
GAR(7)
6,810
6,810
6,810
2008
GAR(7)
6,620
6,600
6,610
CV
2007
GAR (7)
–
–
–
GAR (7)
–
–
–
CV
2007
GAR (7)
6,540
6,600
6,590
MTIS(6)
MTIS(6)
GAR(7)
GAR (7)
199.6
128.2
327.8
109.8
389.5
499.2
6,620
6,600
6,610
6,540
6,600
6,590
2008
MTIS(6)
87.7
36.6
124.3
MTIS(6)
41.4
50.8
92.2
MTIS(6)
199.9
186.3
386.3
MTIS(6)
61.6
61.6
MTIS(6)
36.4
220.7
257.1
MTIS(6)
54.6
23.4
77.9
MTIS(6)
420.0
579.4
999.5
Tonnes
2007
MTIS(6)
14.8
150.9
165.7
MTIS(6)
–
–
–
MTIS(6)
639.4
128.2
767.6
MTIS(6)
–
61.6
61.6
MTIS(6)
17.5
0.5
18.0
MTIS(6)
54.6
23.4
77.9
MTIS(6)
726.3
364.6
1,090.8
2008
GAR(7)
5,200
5,170
5,190
GAR(7)
4,980
4,940
4,960
GAR(7)
4,000
4,050
4,020
GAR(7)
–
5,320
5,320
GAR(7)
5,560
5,590
5,590
CV
2007
GAR (7)
5,210
5,110
5,120
GAR (7)
–
–
–
GAR (7)
4,300
4,220
4,290
GAR (7)
–
5,320
5,320
GAR (7)
4,830
4,830
4,830
GAR(7)
GAR (7)
3,900
3,900
3,900
3,900
3,900
3,900
GAR(7)
GAR (7)
4,470
4,910
4,730
4,300
4,760
4,450
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Anglo American plc Annual Report 2008
160 Ore Reserves and Mineral Resources estimates
as at 31 December 2008
Coal continued
Coal Resources – Projects(6)
Total Projects
Attributable %(2)
75.5
Coal Resources – Mine Lease & Projects(6)
Total Coal Resources
Attributable %(2)
68.3
Brown Coal Resources(6)
Monash Energy (OC)
Attributable %(2)
100
Classification
Measured
Indicated
Measured and Indicated
Classification
Measured
Indicated
Measured and Indicated
Inferred in Mine Plan(8)
2008
MTIS(6)
1,471.0
1,462.9
2,933.9
2008
MTIS(6)
3,231,5
3,502.2
6,733.7
133.1
Tonnes
2007
MTIS(6)
1,331.9
1,486.6
2,818.5
Tonnes
2007
MTIS(6)
2,406.1
3,691.4
6,097.5
129.7
Classification
2008
MTIS(6)
Tonnes
2007
MTIS(6)
Measured
Indicated
Measured and Indicated
5,095.0
5,221.0
10,316.0
5,095.0
5,221.0
10,316.0
2008
GAR(7)
5,890
5,750
5,820
2008
GAR(7)
5,920
5,890
5,910
5,800
2008
GAR(7)
1,820
1,790
1,800
CV
2007
GAR (7)
5,220
6,050
5,660
CV
2007
GAR (7)
5,510
5,920
5,760
6,190
CV
2007
GAR (7)
1,820
1,790
1,800
Total Brown Coal Resources
100
MTIS(6)
MTIS(6)
GAR(7)
GAR (7)
Measured
Indicated
Measured and Indicated
5,095.0
5,221.0
10,316.0
5,095.0
5,221.0
10,316.0
1,820
1,790
1,800
1,820
1,790
1,800
Mining method: OC = Open Cast, UG = Underground.
Attributable percentages for country totals are weighted by Measured and Indicated MTIS.
Additional footnotes appear at the end of the section.
Coal Bed Methane
Anglo Coal
Coal Bed Methane (CBM) estimates were compiled by an external independent consultant in accordance with the guidelines and recommendations contained in the
Petroleum Resources Management System 2007 sponsored by the Society of Petroleum Engineers (SPE) and the World Petroleum Council (WPC).
CBM Reserves
Australia
Dawson
Harcourt
Total CBM Reserves
Attributable %(2)
51.0
25.5
46.0
Saleable Volume(9)
Saleable Energy Content(9)
Classification
2008
2007
Proved: 1P
Probable: 2P-1P
Total: 2P
Proved: 1P
Probable: 2P-1P
Total: 2P
Proved: 1P
Probable: 2P-1P
Total: 2P
MMcf
49,882
100,259
150,141
MMcf
–
36,902
36,902
MMcf
49,882
137,161
187,043
MMcf
55,254
100,259
155,513
MMcf
–
–
–
MMcf
55,254
100,259
155,513
2008
PJ
53
106
159
PJ
– –
39 –
39
PJ
53
145
197
2007
PJ
58
106
164
PJ
–
PJ
58
106
164
(1) Coal Reserves are quoted on a Run Of Mine (ROM) reserve tonnage basis which represents the tonnes delivered to the plant. Saleable reserve tonnage represents the product tonnes produced.
Coal Reserves (ROM and Saleable) are on the applicable moisture basis.
(2) Attributable (%) refers to 2008 only. For the 2007 Reported and Attributable figures, please refer to the 2007 Annual Report.
(3) The tonnage is quoted as metric tonnes and where applicable abbreviated as Mt for million tonnes.
(4) Yield (%) represents the ratio of Saleable reserve tonnes to ROM reserve tonnes and is quoted on a constant moisture basis or on an air dried to air dried basis.
The total yield is calculated on the ROM reserves and may differ from the individual yields given for Proved and Probable Reserves.
(5) The coal quality for the Coal Reserves is quoted as either Calorific Value (CV) or Crucible Swell Number (CSN) on a Gross As Received (GAR) basis.
Coal quality parameters for the Coal Reserves for Coking, Metallurgical and Export Thermal collieries meet the contractual specifications for coking coal, PCI, metallurgical coal, steam coal and domestic coal.
Coal quality parameters for the Coal Reserves for Domestic Power and Domestic Synfuels collieries meet the specifications of the individual supply contracts.
CV is rounded to the nearest 10 kcal/kg and CSN to the nearest 0.5 index.
(6) Coal Resources are quoted on a Mineable Tonnage In-Situ (MTIS) basis in million tonnes which are in addition to those resources which have been modified to produce the reported Coal Reserves.
Coal Resources are on an in-situ moisture basis.
(7) The coal quality for the Coal Resources is quoted on an in-situ heat content as Calorific Value (CV) on a Gross As Received (GAR) basis.
CV is rounded to the nearest 10 kcal/kg.
(8) Inferred in Mine Plan refers to Inferred Coal Resources that are included in the life of mine schedule of the respective collieries but which are not reported as Coal Reserves.
(9) CBM Reserves are reported in terms of saleable volume (million cubic feet – MMcf) and saleable energy (Petajoules – PJ, or one thousand trillion Joules).
Anglo American plc Annual Report 2008
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China
Xiwan:
Colombia
Cerréjon:
South Africa
Elders:
Goedehoop:
Greenside:
Kleinkopje:
Landau:
Mafube:
New Denmark:
New Largo:
Summary of material changes (±10%) at reporting level
Australia
Callide:
Capcoal:
An increase of approximately 93 Mt in resources is due to additional new drilling information.
Resource and reserve numbers were derived by depletion. Resources in Mine Lease were adjusted by approximately 71 Mt that were previously allocated to resources in the mine plan.
An attributable percentage of 71.6% was calculated from the Anglo Coal ownership of 70% in the Mitsui JV and 86.4% in the Marubeni JV weighted against Saleable Reserves, and does not reflect the
shareholding in the respective entities.
Resource and reserve numbers were derived by depletion. Resources in Mine Lease were adjusted by approximately 338 Mt that were previously allocated to resources in the mine plan.
Resource and reserve numbers were derived by depletion.
Foxleigh was a new acquisition in March 2008, but no reliable reserve estimates are available and all reserves are therefore reported as Resources in Mine Lease only.
An increase of approximately 46 Mt in resources was due to exploration drilling.
Not reported in 2008 due to <25% attributable interest.
Dawson:
Drayton:
Foxleigh:
Grosvenor:
Jellinbah:
Saddlers Creek: An increase of approximately 84 Mt in resources was due to exploration drilling particularly in the deep underground areas.
Taroom:
Theodore:
Not reported previously – exploration drilling resulted in upgrade in classification and initial reporting of resources.
Not reported previously – increase of approximately 95 Mt in resources due to initial reporting of Theodore Central.
Canada
Trend:
Roman Mountain: Not reported previously – exploration drilling resulted in upgrade in classification and initial reporting of resources.
A decrease of approximately 3 Mt from resources to non-economic representing the coal between the original pit shell and the new pit shell design.
The deeper potential underground resources of approximately 212 Mt were reclassified as intrinsically non-economic pending further mineability investigation.
An increase of approximately 574 Mt in reserves and approximately 798 Mt in resources was due to the change in reporting basis from 33.3% to 100% in 2008. A decrease in reserves of approximately
30 Mt was due to changes in the geological model. A reduction in resources of approximately 62 Mt was due to changes in the geological model, whereas a gain of approximately 246 Mt in resources
was due to a consolidation of resource blocks resulting in new resources not previously reported.
A decrease of approximately 35 Mt in resources was due to a reclassification of Inferred Resources previously reported as Indicated Resources.
A decrease in Saleable of metallurgical coal of approximately 5.6 Mt was due to a change of product mix, and the decision to cease production of such coal.
A decrease of approximately 21 Mt in resources was due to the exclusion of low yield areas.
Changes in block ranking and cut-off depths resulting in transfer of reserves >70 m from surface and a resulting decrease of approximately 33 Mt in reserves and corresponding increase in resources.
The Saleable products changed from Export Thermal to mixed Export Thermal and Domestic Thermal (Power Station) due to the change in product mix from 5 West, which now supplies Domestic
Thermal product.
Approximately 8 Mt of reserve was reclassified as non-economic pending the Environmental Management Programme Report (EMPR) approval at Umlalazi South. Saleable products changed from
Export Thermal to mixed Export Thermal and Domestic Thermal (Power Station) due to the change in product mix from Navigation West, which now supplies a mixed product.
An increase in reserves and resources resulted from the change of reporting basis from 50% to 100% in 2008. All reserves are classified as Probable pending the outcome of EMPR approval.
A significant increase of approximately 68 Mt reserves is due to the conversion of Resources in Mine Lease at Nooitgedacht.
A decrease of approximately 30 Mt in reserves was due to changes in layout and mine design.
A loss of approximately 725 Mt resulted from changes to the geological model from raw coal to washed product model.
An increase of approximately 269 Mt in resources resulted from an increased amount of wash data through exploration.
Approximately 8 Mt of resources was sterilised due to permanent infrastructure and out-of-pit losses.
An increase of approximately 239 Mt in resources resulted from exploration drilling.
New Vaal:
South Rand:
Zondagsfontein: An increase of approximately 118 Mt resulted from the conversion of resources to reserves following mine planning after approval of project, but was assigned to the Probable category pending Mining
Right approval.
Venezuela
Guasare:
Brown Coal
Monash Energy:
Coal Bed Methane
Dawson:
Harcourt:
The 2008 Guasare resource and reserve numbers have been derived by depletion. An increase of approximately 106 Mt in reserves and approximately 80 Mt in resources resulted from the change in
reporting basis from 25% to 100% in 2008.
Resource estimates have not changed from 2007 because no additional data were added in 2008. The brown coal is a substantial resource suitable as a feedstock to many chemical processes but
requires technological breakthroughs to allow the economic development of clean coal plants.
Initial reserves calculated in 2006 were depleted for gas production, consumption and venting for the 2008 estimates.
CBM resources for PLA 210 are reported for the first time in 2008.
Assumption with respect to Mineral Tenure
South Africa:
All pending mining right conversions and applications were granted in 2008. Cession of the Mining Right at Kriel Colliery from Anglo Coal to Anglo Inyosi Coal (Pty) Limited remains pending,
although Anglo Coal has reasonable expectation that this will be granted in due course.
Three Prospecting Rights are still the subject of ongoing legal review and Anglo Coal has reasonable expectations that these rights will be granted in due course, and the relevant Project Coal
resources have been included in the statement.
Cession of Prospecting Rights from Anglo Coal to Anglo Inyosi Coal (Pty) Limited was granted during 2008, with the exception of the South Rand project. Anglo Coal has reasonable expectation
that these rights will be granted in due course, and the relevant Project Coal resources have been included in the statement.
Venezuela:
Although the Carbones del Guasare mining concession terminates in 2013, Coal Resources in the Mine Lease that may be included in a mine plan beyond this date are included in the 2008 statement.
Royalty Payment
South Africa:
Royalty payments are scheduled to commence in April 2009 and have been taken into consideration in economic assessment of the reserves.
Reviews by independent third parties were carried out in 2008 on the following Operations and Project areas:
Australia:
China:
South Africa:
Callide, Dawson, Grosvenor, Moranbah North, Saddlers Creek
Xiwan
Elders Extension, Isibonelo, Kriel, Mafube
Anglo American plc Annual Report 2008
162 Other information
Production statistics
The figures below include the entire output of consolidated entities and the Group’s share of joint ventures, joint arrangements and associates where
applicable, except for Collahuasi in Base Metals and De Beers which are quoted on a 100% basis.
Anglo Platinum (troy ounces)(1)(2)
Platinum
Palladium
Rhodium
Nickel (tonnes)(3)
Copper (tonnes)(3)
Gold
Anglo Coal (tonnes)
South Africa
Eskom
Trade – Thermal
Trade – Metallurgical
Australia
Thermal
Metallurgical
South America
Thermal
Canada
Thermal
Metallurgical
Total
Anglo Coal (tonnes)
South Africa
Bank
Greenside
Goedehoop
Isibonelo
Kriel
Kleinkopje
Landau
New Denmark
New Vaal
Nooitgedacht
Mafube
Australia
Callide
Drayton
German Creek (Capcoal)
Jellinbah East
Moranbah
Dawson Complex
Foxleigh
South America
Carbones del Guasare
Carbones del Cerrejón
Canada
Peace River Coal
Total
2008
2007
2,386,600
1,318,800
299,300
4,004,700
15,500
8,800
78,500
36,158,100
22,286,800
971,900
59,416,800
14,696,300
13,144,900
27,841,200
2,474,000
1,389,700
328,800
4,192,500
19,200
11,000
97,900
34,064,000
23,952,400
1,143,700
59,160,100
15,059,300
10,145,400
25,204,700
11,484,500
11,259,800
140,100 –
632,300 –
772,400 –
99,514,900
–
3,401,100
7,449,400
5,152,100
10,344,400
4,545,600
4,089,300
5,272,500
17,034,400
454,600
1,673,400
59,416,800
9,582,700
3,711,500
5,621,900
1,033,900
3,181,500
3,537,200
1,172,500 –
27,841,200
1,074,200
10,410,300
11,484,500
772,400 –
99,514,900
95,624,600
51,900
3,314,900
8,456,200
5,001,000
11,210,100
3,490,700
4,058,200
5,134,700
17,119,500
565,700
757,200
59,160,100
10,031,100
3,902,700
4,115,700
891,800
3,211,600
3,051,800
25,204,700
1,384,400
9,875,400
11,259,800
95,624,600
(1) See the published results of Anglo Platinum Limited for further analysis of production information.
(2) Northam Platinum Limited was transferred to a disposal group in September 2007. Production information excludes Northam Platinum Limited and 2007 information has been adjusted accordingly. Northam
Platinum Limited was sold on 20 August 2008.
(3) Also disclosed within total attributable nickel and copper production.
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100% basis (Anglo American 45%)
Debswana
Namdeb
De Beers Consolidated Mines
Williamson
Canada
Anglo Base Metals
Copper
Collahuasi
100% basis (Anglo American 44%)
Ore mined
Ore processed
Ore grade processed
Production
Total copper production for Collahuasi
Anglo American Sur
Los Bronces mine
Ore mined
Marginal ore mined
Las Tortolas concentrator
Production
El Soldado mine
Ore mined
Ore processed
Ore grade processed
Production
Chagres Smelter
Production
Total copper production for Anglo American Sur
2008
2007
32,276,000
2,122,000
11,960,000
134,000
1,640,000
48,132,000
33,638,000
2,176,000
14,998,000
220,000
81,000
51,113,000
Oxide
Sulphide
Oxide
Sulphide
Copper concentrate
Copper cathode
Copper in concentrate
Ore processed
Ore grade processed
Average recovery
Copper concentrate
Copper cathode
Copper in concentrate
Total
Open pit – ore mined
Open pit – marginal ore mined
Underground (sulphide)
Total
Oxide
Sulphide
Oxide
Sulphide
Copper concentrate
Copper cathode
Copper in concentrate
Total
Copper concentrate smelted
Copper blister/anodes
Acid
tonnes
tonnes
tonnes
% Cu
% Cu
dry metric tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
% Cu
%
dry metric tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
% Cu
% Cu
dry metric tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
57,699,800
7,317,400
42,377,400
0.6
1.1
1,574,000
49,400
415,000
464,400
21,045,100
36,008,900
20,012,700
1.1
84.9
677,900
45,800
190,000
235,800
5,305,800
21,700
1,312,700
6,640,200
821,800
7,179,700
1.3
0.8
174,100
6,700
43,100
49,800
148,400
146,100
486,600
285,600
61,969,800
7,129,200
43,679,900
0.8
1.0
1,346,000
58,100
393,900
452,000
26,503,300
35,744,000
21,125,300
1.0
85.3
607,400
48,300
182,900
231,200
6,283,000
76,600
1,514,900
7,874,500
791,900
7,400,900
1.4
1.1
229,700
7,500
65,300
72,800
168,100
164,100
493,400
304,000
Anglo American plc Annual Report 2008
164 Other information
Production statistics continued
Oxide
Sulphide
Marginal ore mined
Oxide
Sulphide
Marginal ore
Copper concentrate
Copper cathode
Copper in concentrate
Total
Oxide
Marginal ore
Oxide
Marginal ore
Copper cathode
Anglo Base Metals (continued)
Anglo American Norte
Mantos Blancos mine
Ore processed
Ore grade processed
Production
Mantoverde mine
Ore processed
Ore grade processed
Production
Total copper production for Anglo American Norte
Black Mountain
Total Anglo Base Metals copper production
Anglo Platinum copper production
Production(1)
Total attributable copper production
Nickel, Niobium, Mineral Sands and Phosphates
Nickel
Codemin
Ore mined
Ore processed
Ore grade processed
Production
Loma de Níquel
Ore mined
Ore processed
Ore grade processed
Production
Total Anglo Base Metals nickel production
Anglo Platinum nickel production
Production(1)
Total attributable nickel production
Niobium
Catalão
Ore mined
Ore processed
Ore grade processed
Production
2008
2007
tonnes
tonnes
tonnes
% Cu (soluble)
% Cu (insoluble)
% Cu (soluble)
dry metric tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
% Cu (soluble)
% Cu (soluble)
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
% Ni
tonnes
tonnes
tonnes
% Ni
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
Kg Nb/tonne
tonnes
4,694,800
4,311,100
5,003,000
0.7
1.2
0.3
132,300
39,600
46,800
86,400
9,556,900
4,300,400
0.7
0.4
62,500
148,900
2,500
641,300
8,800
650,100
498,400
475,900
2.1
9,100
811,000
676,800
1.6
10,900
20,000
15,500
35,500
768,100
818,100
11.1
4,600
4,587,900
3,879,800
5,862,900
0.7
1.1
0.3
105,900
48,700
40,200
88,900
9,280,700
5,511,100
0.7
0.3
61,000
149,900
2,200
655,000
11,000
666,000
539,300
522,600
2.1
9,900
1,183,200
1,096,100
1.6
15,700
25,600
19,200
44,800
852,500
831,700
10.9
4,700
(1) Northam Platinum Limited was transferred to a disposal group in September 2007. Production information excludes Northam Platinum Limited and 2007 information has been adjusted accordingly. Northam
Platinum Limited was sold on 20 August 2008.
Anglo American plc Annual Report 2008
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Mineral Sands
Namakwa Sands(1)
Ore mined
Production
Smelter production
Phosphates
Copebrás
Sodium tripolyphosphate
Phosphates
Zinc and Lead
Black Mountain
Ore mined
Ore processed
Ore grade processed
Production
Lisheen
Ore mined
Ore processed
Ore grade processed
Production
Skorpion
Ore mined
Ore processed
Ore grade processed
Production
Total attributable zinc production
Total attributable lead production
Ilmenite
Rutile
Zircon
Slag tapped
Iron tapped
Zinc
Lead
Copper
Zinc in concentrate
Lead in concentrate
Copper in concentrate
Zinc
Lead
Zinc in concentrate
Lead in concentrate
Zinc
Zinc
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
% Zn
% Pb
% Cu
tonnes
tonnes
tonnes
tonnes
tonnes
% Zn
% Pb
tonnes
tonnes
tonnes
tonnes
% Zn
tonnes
tonnes
tonnes
(1) Production information included until date of disposal on 1 October 2008.
2008
2007
13,418,600
240,900
19,100
97,400
118,500
78,800
10,200
982,100
1,199,800
1,204,800
3.0
4.2
0.4
27,900
47,000
2,500
1,561,900
1,516,900
12.1
1.6
167,200
15,900
1,390,400
1,333,300
11.7
145,400
340,500
62,900
18,111,700
300,300
24,500
114,800
151,300
101,800
56,700
1,037,800
1,065,200
1,099,600
3.2
4.3
0.3
28,300
41,900
2,200
1,584,700
1,513,600
12.0
1.9
164,700
20,200
1,402,300
1,379,600
11.7
150,100
343,100
62,100
Anglo American plc Annual Report 2008
166 Other information
Production statistics continued
Anglo Ferrous Metals and Industries
Kumba Iron Ore
Lump
Fines
Amapá(1)
Sinter feed
Pellet feed
Total iron ore production
Scaw Metals
South Africa – Steel Products
International – Steel Products
Samancor Manganese(2)
Manganese ore
Manganese alloys(3)
Anglo Industrial Minerals
Aggregates
Lime products
Concrete
2008
2007
22,042,000
14,657,000
128,000 –
584,000 –
37,411,000
771,000
879,000
2,704,000
306,000
93,095,000
1,353,000
6,312,000
19,043,000
13,357,000
32,400,000
776,000
803,000
2,411,000
310,000
95,393,300
1,468,200
8,858,400
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
tonnes
m3
(1) Production from Amapá is included from 5 August 2008. Amapá is not currently in commercial production. Until commercial production is reached all revenue and related costs are being capitalised. Amapá
production for full year 2008 was 1.2 Mt.
(2) Saleable production.
(3) Production includes Medium Carbon Ferro Manganese.
Anglo American plc Annual Report 2008
Quarterly production statistics(1)
December 2008 September 2008
June 2008
March 2008 December 2007 September Q08
December Q07
Quarter ended
% Change
December Q08 v December Q08 v
Anglo Platinum(2)
Platinum (troy ounces)
Palladium (troy ounces)
Rhodium (troy ounces)
Nickel (tonnes)
Anglo Coal (tonnes)
Eskom
Thermal
Metallurgical
De Beers (diamonds recovered – carats)
100% basis (Anglo American 45%)
Diamonds
Anglo Base Metals (tonnes)
Copper
Nickel
Zinc
Lead
Anglo Ferrous Metals and Industries (tonnes)
Iron ore(3)
South Africa Steel Products
International Steel Products
Manganese ore(4)
Manganese alloys(4)(5)
(1) Excludes Anglo Industrial Minerals.
842,300
450,500
107,100
4,100
543,200
321,700
75,300
4,000
572,500
300,800
59,400
3,700
428,600
245,800
57,500
3,700
669,000
381,900
87,400
5,000
9,465,900
8,193,800
12,247,300 12,377,600 12,819,800 11,163,000 12,764,100
2,599,200
3,955,200
8,363,000
4,389,300
2,773,000
9,692,200
3,631,600
8,637,000
55%
40%
42%
3%
(2)%
(1)%
9%
26%
18%
23%
(18)%
16%
(4)%
52%
10,795,000 13,111,000 12,452,000 11,774,000 12,143,000
(18)%
(11)%
172,000
4,800
82,900
14,400
148,600
5,600
86,500
16,700
161,000
5,000
88,200
14,700
159,700
4,600
82,900
17,100
176,400
6,500
87,700
18,100
10,098,000 10,250,000
187,000
230,000
732,000
81,000
167,000
215,000
565,000
72,000
8,873,000
211,000
221,000
741,000
76,000
8,190,000
206,000
213,000
666,000
77,000
8,992,000
178,000
212,000
645,000
84,000
16%
(14)%
(4)%
(14)%
(1)%
(11)%
(7)%
(23)%
(11)%
(2)%
(26)%
(5)%
(20)%
12%
(6)%
1%
(12)%
(14)%
(2) Northam Platinum Limited was transferred to a disposal group in September 2007. Production information excludes Northam Platinum Limited and 2007 information has been adjusted accordingly. Northam
Platinum Limited was sold on 20 August 2008.
(3) Production from Amapá is included from 5 August 2008. Amapá is not currently in commercial production. Until commercial production is reached all revenue and related costs are being capitalised. Amapá
production for full year 2008 was 1.2 Mt.
(4) Saleable production.
(5) Production includes Medium Carbon Ferro Manganese.
Anglo American plc Annual Report 2008
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2008
2007
8.27
0.54
0.68
1.17
524
9.30
0.69
0.72
1.44
637
7.05
0.50
0.73
1.19
522
6.84
0.50
0.68
1.14
498
2008
2007
1,585
355
6,564
315
953
85
95
922
186
1,250
132
490
51
43
1,304
355
6,200
323
1,686
147
118
1,537
368
6,850
303
1,170
104
115
US$/oz
US$/oz
US$/oz
US cents/lb
US cents/lb
US cents/lb
US cents/lb
US$/oz
US$/oz
US$/oz
US cents/lb
US cents/lb
US cents/lb
US cents/lb
168 Other information
Exchange rates and commodity prices
US$ exchange rates
Average prices for the year
Rand
Sterling
Euro
Australian dollar
Chilean peso
Closing spot prices
Rand
Sterling
Euro
Australian dollar
Chilean peso
Commodity prices
Average market prices for the year
Platinum(1)
Palladium(1)
Rhodium(1)
Copper(2)
Nickel(2)
Zinc(2)
Lead(2)
31 December spot prices
Platinum(1)
Palladium(1)
Rhodium(1)
Copper(2)
Nickel(2)
Zinc(2)
Lead(2)
(1) Source: Johnson Matthey.
(2) Source: LME daily prices.
Anglo American plc Annual Report 2008
Key financial data
US$ million (unless otherwise stated)
Group revenue including associates
Less: Share of associates’ revenue
Group revenue
Operating profit including associates before special items and remeasurements
Special items and remeasurements (excluding financing special items and remeasurements)
Net finance costs (including financing remeasurements), tax and minority interests of associates
Total profit from operations and associates
Net finance costs (including financing special items and remeasurements)
Profit before tax
Income tax expense
Profit for the financial year – continuing operations
Profit for the financial year – discontinued operations
Profit for the financial year – total Group
Minority interests
Profit attributable to equity shareholders of the Company
Underlying earnings(2) – continuing operations
Underlying earnings(2) – discontinued operations
Underlying earnings(2) – total Group
Earnings per share ($) – continuing operations
Earnings per share ($) – discontinued operations
Earnings per share ($) – total Group
Underlying earnings per share ($) – continuing operations
Underlying earnings per share ($) – discontinued operations
Underlying earnings per share ($) – total Group
Ordinary dividend per share (US cents)
Special dividend per share (US cents)
Weighted average basic number of shares outstanding (million)
EBITDA(3) – continuing operations
EBITDA(3) – discontinued operations
EBITDA(3) – total Group
EBITDA interest cover(4) – total Group
Operating margin (before special items and remeasurements) – total Group
Ordinary dividend cover (based on underlying earnings per share) – total Group
Balance sheet
Intangible and tangible assets
Other non-current assets and investments
Working capital
Other net current liabilities
Other non-current liabilities and obligations
Cash and cash equivalents and borrowings(5)
Net assets classified as held for sale
Net assets
Minority interests
Equity attributable to the equity shareholders of the Company
Total capital(6)
Cash inflows from operations – continuing operations
Cash inflows from operations – discontinued operations
Cash inflows from operations – total Group
Dividends received from associates and financial asset investments –
continuing operations
Dividends received from associates and financial asset investments –
discontinued operations
Dividends received from associates and financial asset investments – total Group
Return on capital employed(7) – total Group
EBITDA/average total capital(6) – total Group
Net debt to total capital (gearing)(8)
2008
32,964
(6,653)
26,311
10,085
(330)
(783)
8,972
(401)
8,571
(2,451)
6,120
–
6,120
(905)
5,215
5,237
–
5,237
4.34
–
4.34
4.36
–
4.36
44.0
–
1,202
11,847
–
11,847
28.3
30.6%
9.9
32,551
7,494
861
(1,565)
(6,729)
(11,051)
195
21,756
(1,535)
20,221
32,799
9,579
–
9,579
2007
30,559
(5,089)
25,470
9,590
(227)
(434)
8,929
(108)
8,821
(2,693)
6,128
2,044
8,172
(868)
7,304
5,477
284
5,761
4.04
1.54
5.58
4.18
0.22
4.40
124.0
–
1,309
11,171
961
12,132
42.0
28.4%
3.5
25,090
9,111
1,966
(877)
(6,261)
(5,170)
471
24,330
(1,869)
22,461
29,569
9,375
470
9,845
2006(1)
29,404
(4,413)
24,991
8,888
24
(398)
8,514
(71)
8,443
(2,518)
5,925
997
6,922
(736)
6,186
5,019
452
5,471
3.51
0.70
4.21
3.42
0.31
3.73
108.0
67.0
1,468
10,431
1,766
12,197
45.5
25.4%
3.5
25,632
7,969
3,096
(1,177)
(5,790)
(3,244)
641
27,127
(2,856)
24,271
30,451
9,012
1,045
10,057
2005(1)
24,872
(4,740)
20,132
5,549
16
(315)
5,250
(220)
5,030
(1,208)
3,822
111
3,933
(412)
3,521
3,335
401
3,736
2.35
0.08
2.43
2.30
0.28
2.58
90.0
33.0
1,447
7,172
1,787
8,959
20.0
18.5%
2.9
33,368
5,556
3,538
(1,492)
(8,399)
(4,993)
–
27,578
(3,957)
23,621
32,571
5,963
1,302
7,265
2004(1)
22,610
(5,429)
17,181
3,832
556
(391)
3,997
(385)
3,612
(765)
2,847
1,094
3,941
(440)
3,501
2,178
506
2,684
1.84
0.60
2.44
1.52
0.35
1.87
70.0
–
1,434
5,359
1,672
7,031
18.5
14.7%
2.7
35,816
5,547
3,543
(611)
(8,339)
(8,243)
–
27,713
(4,588)
23,125
35,956
3,857
1,434
5,291
659
311
251
468
380
–
659
36.8%
38.0%
37.8%
52
363
37.8%
40.4%
20.0%
37
288
32.4%
38.7%
12.9%
2
470
19.2%
26.0%
17.0%
16
396
14.6%
21.2%
25.4%
(1) Comparatives were adjusted in the 2007 Annual Report to reclassify amounts relating to discontinued operations where applicable.
(2) Underlying earnings is net profit attributable to equity shareholders, adjusted for the effect of special items and remeasurements and any related tax and minority interests.
(3) EBITDA is operating profit before special items, remeasurements, depreciation and amortisation in subsidiaries and joint ventures and share of EBITDA of associates.
(4) EBITDA interest cover is EBITDA divided by net finance costs, excluding other net financial income, exchange gains and losses on monetary assets and liabilities, amortisation of discounts on provisions, special
items and financial remeasurements, but including share of associates’ net interest expense.
(5) This differs from the Group’s measure of net debt as it excludes the net debt of disposal groups (2008: $8 million; 2007: $(69) million; 2006: $(80) million; 2005: nil; 2004: nil), and excludes the impact of
derivative instruments that provide an economic hedge of assets and liabilities in net debt (2008: liabilities of $297 million; 2007: assets of $388 million; 2006: assets of $193 million; 2005: nil; 2004: nil).
For more detail see note 30 Consolidated cash flow analysis.
(6) Total capital is net assets excluding net debt (excluding the impact of derivative instruments).
(7) Return on capital employed is calculated as total operating profit before impairments for the year divided by the average of total capital less other investments and adjusted for impairments.
(8) Net debt to total capital is calculated as net debt (excluding the impact of derivative instruments) divided by total capital less investments in associates.
Anglo American plc Annual Report 2008
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Summary by business segment
US$ million
Continuing operations
Platinum
Diamonds
Base Metals
Copper
Collahuasi
Anglo American Sur
Anglo American Norte
Other –
Nickel, Niobium, Mineral Sands and Phosphates
Codemin
Loma de Níquel
Catalão
Namakwa Sands
Copebrás
Zinc
Black Mountain
Lisheen
Skorpion
Other –
Ferrous Metals and Industries
Kumba Iron Ore
Scaw Metals
Samancor Manganese
Tongaat-Hulett/Hulamin(4)
Anglo Ferrous Brazil –
Highveld Steel –
Other 6
Coal
South Africa
Australia
South America
Canada
Projects and corporate
Industrial Minerals
Exploration –
Corporate Activities and Unallocated Costs –
Total continuing operations
Discontinued operations
Gold
Paper and Packaging
Mondi Packaging
Mondi Business Paper
Other
Total discontinued operations
Total Group
2008
6,327
3,096
5,878
3,907
1,134
1,965
808
–
1,381
198
210
141
177
655
590
115
196
279
–
6,849
2,573
1,927
1,526
817
–
6
6,436
2,210
3,119
947
139 –
21
4,378
–
–
32,964
–
–
–
–
–
–
32,964
Revenue(1)
2007
6,789
3,076
7,129
4,507
1,383
2,273
851
1,583
325
553
106
184
415
1,039
165
364
510
5,400
1,635
1,432
665
1,293
369 –
3,574
1,538
1,389
627
20
4,591
30,559
1,004 –
4,111 –
2,296 –
1,204 –
611 –
5,115 –
35,674
2008
2,732
665
2,845
2,226
682
1,265
288
(9)
563
132
48
80
59
244
209
37
40
132
(153)
3,064
1,667
309
998
115
(4)
(21)
2,585
814
1,353
446
15 –
(43)
487
(212)
(319)
11,847
11,847
EBITDA(2)
2007
Operating profit/(loss) (3)
2008
2007
Underlying earnings
2007
2008
3,155
587
4,683
3,192
1,062
1,630
507
(7)
842
242
390
57
44
109
729
93
242
394
(80)
1,561
879
204
249
140
(9)
108 –
(10)
882
481
166
271
8
(36)
732
(157)
(272)
11,171
401
560
316
198
46
961
12,132
2,226
508
2,505
2,017
613
1,157
255
(8)
507
123
30
78
59
217
136
26
22
88
(155)
2,935
1,618
274
980
92
(8)
(21)
2,240
736
1,144 9
396
–
(44)
228
(212)
(345)
10,085
–
–
–
–
–
–
10,085
2,697
484
4,338
2,983
998
1,518
474
(7)
786
234
370
55
44
83
654
83
227
344
(85)
1,432
834
172
225
114
(9)
108 –
(12)
614
414
227
(36)
474
(157)
(292)
9,590
202
324
195
105
24
526
10,116
1,313
256
1,369
1,171
367
699
113
(8)
218
94
(97)
70
46
105
128
28
15
85
(148)
1,396
558
165
658
53
(30) 5
(8)
1,581
543
797
257
11 –
(27)
173
(200)
(651)
5,237
–
–
–
–
–
–
5,237
1,299
239
3,100
2,060
701
1,026
340
(7)
555
178
243
60
31
43
558
65
174
319
(73)
605
274
97
169
44
18
(2)
490
296
24
175
(5)
384
(145)
(495)
5,477
95
189
137
62
(10)
284
5,761
(1) Revenue includes the Group’s share of revenue of joint ventures and associates. Base Metals’ revenue is shown after deduction of treatment charges and refining charges (TC/RCs).
(2) EBITDA is operating profit before special items, remeasurements, depreciation and amortisation in subsidiaries and joint ventures and share of EBITDA of associates.
(3) Operating profit includes operating profit before special items and remeasurements from subsidiaries and joint ventures and share of operating profit (before interest, tax, minority interests, special items and
remeasurements) of associates.
(4) Includes 100% of the results of the Tongaat-Hulett Group from 1 January to 25 June 2007, and the Group’s equity accounted share of Tongaat-Hulett and Hulamin since that date. For more detail see note 33 to the
Financial statements.
Anglo American plc Annual Report 2008
Reconciliation of subsidiaries’ and associate’s reported
earnings to the underlying earnings included in the consolidated
financial statements
for the year ended 31 December 2008. note only key reported lines are reconciled.
US$ million
Anglo Platinum Limited
IFRS headline earnings (US$ equivalent of published)
Exploration
Exchange rate difference
Operating remeasurements (net of tax)
Other adjustments
Minority interests
Depreciation on assets fair valued on acquisition (net of tax)
Contribution to Anglo American plc underlying earnings
DB Investments (DBI)
De Beers underlying earnings (100%)
Difference in IAS 19 accounting policy
De Beers underlying earnings – Anglo American plc basis (100%)
Anglo American plc’s 45% ordinary share interest
Income from preference shares
Other
Contribution to Anglo American plc underlying earnings
Kumba Iron Ore Limited (KIO)
IFRS headline earnings (US$ equivalent of published)(1)
Exploration
Other adjustments
Minority interests
Depreciation on assets fair valued on acquisition (net of tax)
Contribution to Anglo American plc underlying earnings
(1) KIO IFRS headline earnings for the year ended 31 December 2008 assume a minority interest of 20% in KIO’s underlying mining assets.
2008
2007
1,607
36
64 4
17 –
6
1,730
(376)
(41)
1,313
515
18
533
240
13
3 –
256
872
8 –
12 7
892
(328)
(6)
558
1,748
36
(10)
1,778
(443)
(36)
1,299
483
13
496
223
16
239
434
441
(155)
(12)
274
Anglo American plc Annual Report 2008
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The business – an overview
Precious
Anglo Platinum
100% owned
South Africa
Rustenburg Section
Amandelbult Section
Mogalakwena Mines (formerly Potgietersrust Platinums)
Lebowa Platinum Mines
Western Limb Tailings Retreatment
Waterval Smelter (including converting process)
Polokwane Smelter
Rustenburg Base Metals Refinery
Precious Metals Refinery
Twickenham Mine
De Beers(1)
100% owned
South Africa
De Beers Group Services
(Exploration and Services)
De Beers Marine
Canada
De Beers Canada
Snap Lake
Victor
Base
Anglo Base Metals
100% owned
Copper
Chagres (Chile)
El Soldado (Chile)
Los Bronces (Chile)
Mantos Blancos (Chile)
Mantoverde (Chile)
Michiquillay (Peru)
Nickel
Codemin (Brazil)
Barro Alto (Brazil)
Trading and Marketing
The Diamond Trading Company
Zinc/Lead
Lisheen (Ireland)
Skorpion (Namibia)
Niobium
Catalão (Brazil)
Anglo American plc Annual Report 2008
Other interests
South Africa
Union Section
Joint ventures or sharing agreements
Modikwa Platinum Joint Venture
Kroondal Pooling and Sharing Agreement
Bafokeng-Rasimone Joint Venture
Marikana Pooling and Sharing Agreement
Mototolo Joint Venture
Masa Chrome Company
Pandora Venture
Overall ownership:
79.6%
85%
50%
50%
50%
50%
50%
74%
42.5%
Other interests
South Africa
De Beers Consolidated Mines(2)
Finsch
Kimberley Mines
Namaqualand Mines
The Oaks
Venetia
South African Sea Areas
(SASA)
78%
78%
78%
78%
78%
78%
Botswana
Debswana (Damtshaa,
Jwaneng, Orapa and
Lethlakane mines)
50%
Other interests
Copper
Collahuasi (Chile)
Palabora (South Africa)
Quellaveco (Peru)
Pebble (US)
Nickel
Loma de Níquel (Venezuela)
Zinc/Lead
Black Mountain (South Africa)
Gamsberg (South Africa)
Phosphate products
Copebrás (Brazil)
Overall ownership:
45%
Namibia
Namdeb (Mining Area No. 1,
Orange River Mines,
Elizabeth Bay and Marine
concessions)
De Beers Marine Namibia
50%
70%
Trading and Marketing
DTC Botswana
Namibia DTC
Industrial Diamonds
Element Six
50%
50%
60%
Diamond jewellery retail
De Beers Diamond Jewellers 50%
Overall ownership:
100%
44%
17%
82%
50%
91%
74%
74%
73%
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Bulk
Anglo Ferrous Metals and Industries
100% owned
Industries
Vergelegen (South Africa)
Overall ownership:
100%
Other interests
Ferrous Metals
Kumba Iron Ore (South Africa)
Samancor (South Africa and Australia)
Minas-Rio (Brazil)
Amapá (Brazil)
LLX Minas-Rio (Brazil)
Scaw Metals (worldwide)
Exxaro Resources (southern Africa and Australia)
Industries
Tongaat-Hulett (southern Africa)
Hulamin (South Africa)
63%
40%
99.4%
69.2%
49%
74%-100%
10%
37.1%
38.4%
Anglo Coal
100% owned
South Africa
Bank
Goedehoop
Greenside
Isibonelo
Kleinkopje
Kriel(3)
Landau
New Denmark
New Vaal
Nooitgedacht
Australia
Callide
Other interests
South Africa
Mafube
50%
Australia – other
Monash Energy Holdings Ltd
South Africa – other
Richards Bay Coal Terminal 27%
Canada
Peace River Coal
Colombia
Carbones del Cerrejón
Venezuela
Carbones del Guasare
74%
33%
25%
Overall ownership:
100%
Australia
Dawson Complex
Drayton
German Creek
Jellinbah East
Moranbah North
Foxleigh
Australia – other
Dalrymple Bay Coal
Terminal Pty Ltd
Newcastle Coal Shippers
Pty Ltd
51%
88%
70%
23%
88%
70%
32%
20%
Other business
Anglo Industrial Minerals
100% owned
Aggregates and Building Materials
Tarmac Group (UK)
Tarmac France (France and Belgium)
Tarmac Germany
Tarmac Poland
Tarmac Czech Republic
Tarmac Turkey
Tarmac International Holdings (Europe and Middle East)
United Marine Holdings(4)
(1) An independently managed associate.
(2) De Beers’ 78% holdings include a 4% indirect holding via the Key Employee Trust.
Other interests
Aggregates and Building Materials
Tarmac Romania
Overall ownership:
100%
60%
(3) Kriel forms part of the proposed Anglo Inyosi Coal of which Anglo Coal will own 73%. The outstanding conditions precedent to the transactions are expected to be fulfilled in the first half of 2009 following
which the transaction will complete.
(4) On 26 January 2008 the Group acquired the remaining 50% shareholding in United Marine Holdings.
Anglo American plc Annual Report 2008
174 Other information
Shareholder information
Annual General Meeting
Will be held at 11:00 am on 15 April 2009, at The Royal Society,
6-9 Carlton House Terrace, London, SW1Y 5AG.
Shareholders’ diary 2009/10
Interim results announcement
Annual results announcement
Annual Report
Annual General Meeting
August 2009
February 2010
March 2010
April 2010
Shareholding enquiries
Enquiries relating to shareholdings should be made to the Company’s
UK Registrars, Equiniti or the South African Transfer Secretaries,
Link Market Services South Africa (Pty) Limited, at the relevant address below:
UK Registrars
Equiniti
The Causeway
Worthing
West Sussex BN99 6DA
England
Telephone:
In the UK: 0871 384 2026*
* Calls charged at 8p per minute from a BT landline. Other telephony providers’ costs may vary.
From outside the UK: +44 121 415 7558
Transfer Secretaries in South Africa
Link Market Services South Africa (Pty) Limited
11 Diagonal Street
Johannesburg 2001, South Africa
(PO Box 4844, Johannesburg 2000)
Telephone: +27 (0) 11 630 0800
Enquiries on other matters should be addressed to the
Company Secretary at the following address:
Registered and Head Office
Anglo American plc
20 Carlton House Terrace
London SW1Y 5AN
England
Telephone: +44 (0)20 7968 8888
Fax: +44 (0)20 7968 8500
Registered number: 3564138
Website: www.angloamerican.co.uk
Additional information on a wide range of shareholder services
can be found in the Shareholder Information section of the Notice
of AGM and on the Group’s website.
Anglo American plc Annual Report 2008
Other Anglo American publications
• 2007/8 Fact Book
• 2008 Notice of AGM and Shareholder Information Booklet
• 2008 Report to Society
• Optima – Anglo American’s current affairs journal
• Transformation Report
• Good Citizenship: Our Business Principles
If you would like to receive copies of Anglo American’s publications,
please write to:
Investor and Corporate Affairs Department
Anglo American plc
20 Carlton House Terrace
London SW1Y 5AN
England
Alternatively, publications can be ordered online at:
http://www.angloamerican.co.uk/aa/siteservices/requestreport/
The 2008 Annual Report and the booklet containing the Notice
of AGM and other shareholder information are available free of
charge from the Company, its UK Registrars and South African
Transfer Secretaries.
Charitable partners
This is just a selection of the charities which Anglo American,
The Chairman’s Fund and the Anglo American Group Foundation
have worked with in 2008:
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Anglo American plc Annual Report 2008
Anglo American plc Annual Report 2008
Anglo American is committed
to delivering operational
excellence in a safe and
responsible way, adding value
for shareholders, customers,
employees and the communities
in which we operate
Highlights
$10.1 bn
Operating profit (2007: $10.1 bn)
$5.2 bn
Underlying earnings (2007: $5.8 bn)
$4.36
Earnings per share (2007: $4.40)
• Group operating profit of $10.1 billion, with operating
profit from core operations up 10% to $9.8 billion
• Strong performances from Coal and Ferrous Metals
with increased production of coal and iron ore
• 2009 capital expenditure reduced by more than
50% to $4.5 billion
• $2 billion target by 2011 from cost saving and
efficiency initiatives
Above: Bucket-wheel excavator at Kumba Iron Ore’s Sishen open pit in South Africa’s Northern Cape.
Measuring 11 kilometres by 1.5 kilometres and almost 400 metres deep, this is one of the world’s largest
open pits, producing around 34 million tonnes of iron ore in 2008
FIND OUT MORE>>
www.angloamerican.co.uk
Underlying earnings per share
US$
Dividends per share
US cents
Cover: Martin van Heerden, mine overseer (left) and
Jacques Nortier, supervisor at Anglo Coal South Africa’s
Kriel Colliery, inspect a new type of fan. Much quieter
than previous models, the new fans are helping to make
the workplace less stressful and reduce the potential for
noise induced hearing loss
Excludes discontinued operations
4.40 4.36
3.73
4.18
3.42
2.58
1.87
2.30
1.52
04 05 06 07 08
Interim
Final
Special
86
33
62
75
67
51
28
19
33
38
44
04
05
06
07
0
08
Operating profit includes share of associates’ operating profit (before share of associates’ tax, finance
charges and minority interest) and is before special items and remeasurements, unless otherwise stated.
See note 3 to the financial statements for operating profit on a total Group basis. For definition of special
items and remeasurements see note 7 to the financial statements and see note 35 for information on
discontinued operations.
Operations considered core to the Group are Base Metals, Platinum, Ferrous Metals’ core businesses
(Kumba Iron Ore, Scaw Metals, Samancor Manganese and Anglo Ferrous Brazil), Coal and Diamonds.
Unless otherwise stated tonnes are metric tons, ‘Mt’ denotes million tonnes and ‘kt’ denotes thousand tonnes.
Unless otherwise stated ‘$’ and ‘dollar’ denote US dollars.
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Anglo American plc
20 Carlton House Terrace
London SW1Y 5AN
England
Tel +44 (0)20 7968 8888
Fax +44 (0)20 7968 8500
Registered number 3564138
www.angloamerican.co.uk
A global business
fit for the future
Annual Report 2008