ANNUAL REPORT 2016
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DELIVERING CHANGE
BUILDING RESILIENCE
FOUNDATIONS FOR THE FUTURE
INTRODUCTION
DELIVERING CHANGE
BUILDING RESILIENCE
FOUNDATIONS FOR THE FUTURE
In 2016, Anglo American articulated its objective of creating
a more resilient business, by materially strengthening its
balance sheet through sustainably improving cash flows
and focusing its portfolio around its highest quality assets.
Delivering that objective – through cost and productivity
improvements, disciplined capital allocation and applying
strict value thresholds to those assets that we chose to divest,
and others that we considered divesting – has significantly
strengthened Anglo American’s financial position. Upon the
completion of other agreed asset sale transactions during
2017, in addition to continued material operational progress,
Anglo American will be well advanced towards embedding
the financial, operational and commercial resilience that
will ensure the sustainable creation of value for all our
stakeholders – building the foundations for the future.
ANNUAL REPORT 2016
1
2
3
DELIVERING CHANGE
BUILDING RESILIENCE
FOUNDATIONS FOR THE FUTURE
4
4. Debmarine
Namibia’s new
diamond-sampling
vessel, the
SS Nujoma, is
scheduled to
commence
operations off
the Namibian
coast during 2017.
Featured is the
vessel soon after
its launch in
January 2016.
Cover images
1. In South Africa,
control room operators
Priscilla Tsheole (left)
and Maggy Botsanara
monitor the stability
of operations at the
North Concentrator
at Mogalakwena,
Anglo American’s
flagship platinum
mine.
2. Process plant
superintendent Terry
Pinske walks up the
ramp alongside the
conveyor carrying
diamond-bearing ore
into the recently
commissioned
Gahcho Kué process
plant, based in
northern Canada.
3. Concentrate
the Mine™ is an
integrated mining
systems approach
pioneered by
Anglo American.
It integrates three
enabling technologies:
mine-to-mill; coarse
particle recovery;
and the separation of
ore from waste rock.
Featured are
maintenance
foreman Pedro
Andrade (left) and
supplies senior
administrator,
Pilar Méndez at the
particle recovery
plant at Los Bronces
copper mine in Chile.
Other sources of information
You can find this report and additional information about
Anglo American on our corporate website.
Although we have chosen not to produce an ‘integrated report’,
we have included a comprehensive overview of our non-financial
performance in this report. More detailed information on our
sustainability performance is provided in our Sustainability Report.
This can be found on our corporate website.
For more information, visit
www.angloamerican.com/investors/annual-reporting
Throughout the Strategic Report we use a range of
financial and non-financial measures to assess our
performance. A number of the financial measures,
including underlying earnings, underlying EBIT,
underlying EBITDA, underlying earnings per share,
net debt, attributable return on capital employed
(ROCE) and attributable free cash flow are not
defined under IFRS, so they are termed ‘Alternative
Performance Measures’ (APMs).
Management uses these measures to monitor the
Group’s financial performance alongside IFRS
measures because they help illustrate the underlying
financial performance and position of the Group.
We have defined and explained the purpose of each
of these measures on pages 188 to 190, where we
provide more detail, including reconciliations to the
closest equivalent measure under IFRS.
These APMs should be considered in addition to, and
not as a substitute for, or as superior to, measures of
financial performance, financial position or cash flows
reported in accordance with IFRS. APMs are not
uniformly defined by all companies, including those
in the Group’s industry. Accordingly, APMs may not
be comparable with similarly titled measures and
disclosures by other companies.
‘Tonnes’ are metric tons, ‘Mt’ denotes million tonnes,
‘kt’ denotes thousand tonnes and ‘koz’ denotes
thousand ounces; ‘$’ and ‘dollars’ denote US dollars
and ‘cents’ denotes US cents.
SUSTAINABILITY REPORT 2016DELIVERING CHANGE BUILDING RESILIENCE WORKING IN PARTNERSHIP PERFORMANCE HIGHLIGHTS
CONTENTS
GROUP
PERFORMANCE
UNDERLYING EBITDA◊
OPERATING PROFIT/(LOSS)
$6.1 bn
$1.7 bn
2016
2015
$6.1 bn
2016
$1.7 bn
$4.9 bn
$(4.1) bn
2015
UNDERLYING EARNINGS
PER SHARE◊
PROFIT/(LOSS) ATTRIBUTABLE
TO EQUITY SHAREHOLDERS
$1.72
$1.6 bn
2016
2015
$0.64
$(5.6) bn
2015
$1.72
2016
$1.6 bn
ATTRIBUTABLE FREE
CASH FLOW◊
$2.6 bn
EARNINGS PER SHARE
$1.24
2016
$2.6 bn
2016
$1.24
$(1.0) bn
2015
$(4.36)
2015
NET DEBT◊
$8.5 bn
2016
2015
$8.5 bn
TOTAL DIVIDENDS PAID PER SHARE
$0
2016
$0
$12.9 bn
2015
$0.32
GROUP ATTRIBUTABLE ROCE◊
NUMBER OF FATALITIES
11%
2016
2015
5%
TOTAL RECORDABLE CASE
FREQUENCY RATE (TRCFR)
0.71
2016
2015
11
11%
2016
2015
11
6
GHG EMISSIONS
17.8 Mt CO2 equivalent
0.71
2016
2015
0.93
17.8 Mt
18.3 Mt
Strategic imperative: Drive consistent delivery
Strategic imperative: Develop core business processes
Strategic imperative: Deliver a high performance culture
Strategic report
02 At a glance
04 Chairman’s statement
06 Marketplace review
09 Our business model
12 Chief Executive’s statement
16 Strategic imperative: Focus the portfolio
20
24
30
34 Key performance indicators
36 Group financial review
40 Managing risk effectively
46 De Beers
49 Platinum
52 Copper
54 Nickel, Niobium and Phosphates
57
Iron Ore and Manganese
61 Coal
64 Corporate and other
Governance
65 Chairman’s introduction
66 Directors
69 Executive management
The Board in 2016
71
78
Sustainability Committee
79 Nomination Committee
80 Audit Committee
82 Audit Committee report
84 Directors’ remuneration report
88 Remuneration Committee
89 Directors’ remuneration policy
98 Annual report on remuneration
110 Statement of directors’ responsibilities
110 Responsibility statement
Independent auditor’s report
Financial statements
112
116 Primary statements
120 Notes to the financial statements
175
178 Summary by business operation
179 Key financial data
180 Exchange rates and commodity prices
Financial statements of the parent company
Ore Reserves and Mineral Resources
182 Estimated Ore Reserves
184 Estimated Mineral Resources
Other information
186 Glossary of terms
188 Alternative Performance Measures
191 Production statistics
194 Quarterly production statistics
195 Non-financial data
196 The business – an overview
198 Directors’ report
201 Shareholder information
202 Other Anglo American publications
ENERGY CONSUMPTION
TOTAL NEW WATER CONSUMED
105 Million GJ
191 Mm³
2016
2015
105 Million GJ
106 Million GJ
2016
2015
191 Mm³
222 Mm3
Alternative Performance Measures
Words with this symbol ◊ are defined in the
Alternative Performance Measures section
of the Annual Report on pages 188-190.
01
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT AT A GLANCE
OUR BUSINESS
AT A GLANCE
2
CANADA
Anglo American is a globally diversified business.
Our portfolio of world class competitive mining
operations and undeveloped resources provides
the raw materials to meet the growing
consumer and other demands of the world’s
developed and maturing economies.
1
COLOMBIA
PERU
3
CHILE
BRAZIL
3
Mining assets
DIAMONDS
PGMs
DE BEERS
PLATINUM
COPPER
COPPER
BULK COMMODITIES AND OTHER MINERALS
NICKEL
NIOBIUM AND
PHOSPHATES
$1,406 million
Underlying EBITDA◊
23%
Group EBITDA◊
11%
ROCE◊
8
Mining assets(1)
27.3 Mcts
Production
(100% basis)(2)
Botswana
South Africa
Namibia
Canada
Asset locations
$532 million
Underlying EBITDA◊
$903 million
Underlying EBITDA◊
$57 million
Underlying EBITDA◊
$118 million
Underlying EBITDA◊
9%
Group EBITDA◊
4%
ROCE◊
9
Mining assets(1)
2,382 koz
Production platinum
South Africa
Zimbabwe
Asset locations
1%
Group EBITDA◊
(1)%
ROCE◊
2
Mining assets(1)
44.5 kt
Production
Brazil
Asset locations
15%
Group EBITDA◊
6%
ROCE◊
3
Mining assets(1)
577.1 kt
Production (attributable)
Chile
Asset locations
Finland (Sakatti)
Peru (Quellaveco)
Projects
2%
Group EBITDA◊
19%
ROCE◊
The sale of the
niobium and
phosphates business
was completed on
30 September 2016.
4.7 kt
Production niobium
864.3 kt
Production
phosphates fertiliser
Brazil
Asset locations
For more information
See page 46
For more information
See page 49
For more information
See page 52
For more information
See page 54
For more information
See page 54
(1) Number of operating mining assets as at 31 December 2016. Reflects the niobium and phosphates business, Rustenburg, Foxleigh, and Callide disposals. De Beers’ mining assets include Orapa,
Letlhakane and Damtshaa which are managed as one operation, the ‘Orapa regime’. Damtshaa was placed onto temporary care and maintenance in January 2016. Namdeb includes Elizabeth Bay,
Midwater, Mining Area 1 and Orange River operations.
(2) With the exception of Gahcho Kué, which is on an attributable 51% basis.
02
Anglo American plc Annual Report 2016 FINLAND
UNITED KINGDOM
BOTSWANA
ZIMBABWE
2
NAMIBIA
1
23
2
SOUTH AFRICA
SINGAPORE
5
AUSTRALIA
BULK COMMODITIES AND OTHER MINERALS
CORPORATE AND OTHER
IRON ORE AND
MANGANESE
COAL
$1,536 million
Underlying EBITDA◊
$1,646 million
Underlying EBITDA◊
$(123) million
Underlying EBITDA◊
25%
Group EBITDA◊
12%
ROCE◊
4
Mining assets(1) (3)
57.6 Mt
Production iron ore
3.1 Mt
Production
manganese ore
137.8 kt
Production
manganese alloys
South Africa
Brazil
Asset locations
27%
Group EBITDA◊
29%
ROCE◊
16
Mining assets(1)
20.9 Mt
Production
metallurgical – export
32.5 Mt
Production
thermal – export
South Africa
Colombia
Australia
Asset locations
(2)%
Group EBITDA◊
United Kingdom
(Headquarters
and Marketing),
Australia,
Brazil, Chile,
Singapore
(Marketing hub),
South Africa
Corporate office
locations
For more information
See page 57
For more information
See page 61
For more information
See page 64
BRAZIL(1)
Iron Ore and Manganese
Nickel
Employees(4)
CHILE(1)
Copper
Employees(4)
1 mine
2 mines
5,000
3 mines
4,000
OTHER SOUTH AMERICA(1)
Coal
Employees(4)
1 mine
200
CANADA(1)
De Beers
Employees(4)
2 mines
1,000
SOUTH AFRICA(1)
2 mines
De Beers
Platinum
8 mines
Iron Ore and Manganese(3) 3 mines
10 mines
Coal
Employees(4)
61,000
OTHER AFRICA(1)
De Beers
Platinum
Employees(4)
AUSTRALIA/ASIA(1)
Coal
Employees(4)
4 mines
1 mine
4,000
5 mines
3,000
(3) The Group’s 40% share in Samancor, classified as located in
South Africa, is considered to be one asset within the portfolio.
(4) Average number of employees, excluding contractors
and associates’ and joint ventures’ employees, and including
a proportionate share of employees within joint operations.
03
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT CHAIRMAN’S STATEMENT
RESPONSIVE THROUGH THE DOWNTURN,
AND IN SHAPE FOR THE FUTURE
Sir John Parker
During a year of continued slow global economic
recovery and low commodity prices on average,
Anglo American executed significant cost and
productivity improvements, and in the second
half benefited from sharply increasing prices
for several of its products. This combination
enabled a remarkable sector-leading recovery
for Anglo American.
FINANCIAL AND OPERATING PERFORMANCE
Since the start of the mining commodities crisis some
three years ago, Anglo American has reduced its number
of operating assets by 26. Crucially though, we were
determined not to sell assets below their inherent value –
not even during the dark days of late 2015 and early 2016,
after the slump in mining stocks had accelerated, abetted
by the aggressive ‘shorting’ actions of certain hedge
funds, which at one stage accounted for about 20%
of our share register.
Accordingly, in the first six months of the year, the only major
asset we agreed to sell was our niobium and phosphates
business in Brazil, for which we received $1.5 billion – well
above market expectations.
Later in the second half, however, market sentiment
improved on the back of substantially strengthening prices
for iron ore and both metallurgical and thermal coal. We also
disposed of a number of minor assets as we continued to
tidy up our portfolio so that total proceeds for disposals
amounted to $1.8 billion(1) for the year.
We delivered a profit for the financial year attributable to
equity shareholders of $1.6 billion and underlying EBITDA
of $6.1 billion. At the same time, continued capital discipline
resulted in capital expenditure(2) declining from $4.0 billion
to $2.5 billion, while no new major projects were approved.
The performance was bolstered by an across-the-business
improvement in productivity of 18% as we progressively
rolled out our Operating Model and sold a number of less
productive assets, with copper equivalent unit costs
declining by 9% in dollar terms.
Net debt was reduced by $4.4 billion, from $12.9 billion
to $8.5 billion, considerably below our year-end target
of $10 billion, with net debt to EBITDA of 1.4 times. We
continue to plan for somewhat lower debt levels, given
the continued volatility in the mining industry.
(1) Proceeds from
disposals of
$1.8 billion were
received in 2016.
Total nominal cash
inflows are expected
to reach $2.0 billion
over time, subject
to prices.
(2) Excluding capitalised
operating cash flows.
04
Although we maintained a high level of liquidity, with cash
and undrawn facilities of around $16 billion, the imperative
to restore the balance sheet meant, regrettably, that
dividends remained suspended. With the company now
in a much healthier state than a year ago, however, and
prospects for prices a little more positive, the Board is
targeting reinstatement of the dividend for the end of 2017
(payable in 2018). When the dividend resumes, we will move
to a payout ratio-based policy, the details of which we will
define at that time.
ASSET FOCUS AND OPTIONALITY
In February 2016, when, as it turned out, prices for mining
products were around their lowest point in the current
commodities downturn, we announced that we would be
concentrating our capital on our portfolio of diamond,
platinum group metals (PGMs) and copper interests, and
that we intended to explore the sale of many of our coal
and iron ore assets.
As the benefits of our own cost and productivity improvements
started to come through, and as we successfully divested a
number of coal and platinum assets, in addition to the niobium
and phosphates business, with prices also firming for a
majority of our products during the second half – all of those
factors served to accelerate the repair of our financial position.
The pressures on us to divest further major assets have
therefore diminished considerably.
Although we still believe that the top-tier asset positions we
hold in De Beers, PGMs and Copper form the bedrock of a
financially stronger and more competitive Anglo American,
we continue to benefit from the much improved operational
performance of a number of other high quality iron ore, coal
and nickel assets. As a result, we now have a much greater
degree of optionality with regard to asset retentions, and to
our geographic balance.
SAFETY AND HEALTH
Throughout Anglo American, safety is our paramount
consideration. In 2016, we experienced a better total
recordable injuries performance, with a 24% reduction
in recordable injury rates compared with 2015. It is
distressing, however, to record a steep rise in fatal injuries,
with 11 lives lost at the Group’s operations, including
seven in deep mines, of which four were in mines we have
subsequently sold. This was clearly against the trend
of recent years, and all the more surprising given the
heightened focus on safety throughout the Group, including
an increasing emphasis on critical controls and more
thoroughgoing safety initiatives such as our Global Safety
Day campaign. Any loss of life in the workplace is a tragic
event – and is quite unacceptable – and a deeply
saddening aspect is that several of the fatal incidents
were eminently preventable, arising, as they did, from
front-line operational practice not being aligned with
our stringent safety policies. We must reverse this
performance, and the Board, and particularly its
Sustainability Committee under the chairmanship
of Jack Thompson, an experienced miner, has been
engaging closely with chief executive Mark Cutifani
and his management team to address this challenge.
Anglo American plc Annual Report 2016 Our Sustainability Committee is heavily involved in
searching inquiry into all major accidents and fatal incidents,
and in assessing operational risks across the business. This
includes significant attention to all our 90 tailings storage
facilities. Although we have confidence in the integrity
of the dams, and our tailings dam monitoring exceeds
legal-compliance requirements, we have nonetheless
increased our degree of surveillance, inspection monitoring
and risk assurance.
I am pleased that a landmark step has been taken on
resolving the silicosis issue in South Africa. In March 2016,
Anglo American South Africa and AngloGold Ashanti
concluded an agreement which resolves fully and finally
4,400 stand-alone silicosis claims. We believe that the
agreement to settle this litigation is in the best interests
of the plaintiffs, their families, our company and its
wider stakeholders.
CLIMATE CHANGE
We continue to work in partnership and consultation with
all of our stakeholders, including our shareholders, to help
address the causes and impacts of climate change. As part
of this outreach, we have been consulting with the ‘Aiming
for A’ coalition, which was established in 2012 by a group
of investors, including some of our largest shareholders, to
enhance extractive companies’ reporting commitment to
address climate change, including how they manage its
impacts on their business.
OUR CULTURE AND VALUES
At Anglo American, each one of us, in our daily lives, makes
a contribution as we seek to earn the trust that gives us our
licence to operate.
Trust is integral to our deep-seated reputation for doing the
right thing, including acting with integrity and displaying care
and respect for the rights and livelihoods of our colleagues,
communities and the natural environments in which we
work. To assist us in this, we have recently revised, and are
continuing to roll out to all employees in the Group, our Code
of Conduct – an initiative in which the Board was directly
involved. Intended to be a single point of reference, the Code
makes very clear what standards of behaviour the company
expects. It has at its core our shared values which describe
what we should be doing to protect Anglo American’s good
name, and to make a positive difference.
GOVERNANCE
The role of the board in leading an organisation, and in
leading by example, is especially important in times of
corporate stress and difficulty. As I mention in my Statement
on page 65 of this Report, the non-executive directors
worked closely with management through the deepening
commodity crisis in the latter months of 2015 and early 2016
to help steer the company through this period.
Executive remuneration
As you know, at the AGM held in April 2016, we received a
substantially lower percentage of support from shareholders
than that achieved in previous years. Although there is no
perfect remuneration system, the Board believes that at
Anglo American there is a relatively good correlation
between profitability and levels of variable remuneration,
and that our remuneration system is fair, performance-based
and peer-comparable. Following further consultation with
shareholders, we will be presenting a revised remuneration
policy at the forthcoming AGM, which we hope you will
support, and which you can read on pages 84 to 109 in
this Annual Report.
Board composition
During the year, sadly, we saw the departure of non-
executives Ray O’Rourke and Judy Dlamini. Ray joined the
Board in 2009 and stepped down to concentrate on his
business commitments as chairman and chief executive
of Laing O’Rourke. His wise counsel and experience of
complex projects, safety and innovation were of great value
to us. Judy joined us in January 2014 and left to devote
more time to her business commitments as chair of Mbekani
Group in South Africa; her contributions to the Board and
its Committees, drawing on her experiences across a range
of geographies and sectors, including mining, were greatly
appreciated by her colleagues. We are now nearing the
end of the process to recruit replacement non-executive
directors with similar skills and experience, and will
announce one or more appointments in the near future.
After an exhaustive international search, we appointed
Stephen Pearce as our new finance director following
René Médori’s decision to retire. René has rendered great
professional service to the Group for 12 years, for which
we thank him, and we wish him all success in the future.
Stephen, who comes to us from Fortescue Metals Group
in Australia, joined us at the end of January and will succeed
René at the conclusion of the AGM in April. René will remain
with us until the end of the year to provide continuity in the
transition and focus on specific projects.
Chairman succession
In February 2017, I informed the Nomination Committee
that I believed the time was right for the Board to seek a
successor. I will have served some eight years and have
seen Anglo American emerge in a strong position following
the mining commodities crisis. I am honoured to have
served as chairman of such a great company and I will leave
behind not only a highly competent Board but a world class
management team.
MY THANKS
I am grateful to my fellow directors for their wise counsel
and support during a most challenging few years, and I
particularly wish to acknowledge the substantial additional
time and effort they spent on building the company’s
resilience in the face of the crisis in the mining industry.
On behalf of the Board, I also wish to thank Mark Cutifani
and his executive team, who are delivering value in so
many ways. I also would like to express my gratitude in
this, our centenary year, to everyone who is working for
Anglo American during this turbulent period, which has
meant considerable restructuring in our business.
OUR STRATEGIC REPORT
Our 2016 strategic report, from pages 2 to 64, was reviewed
and approved by the Board on 20 February 2017.
Sir John Parker
Chairman
05
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT MARKETPLACE REVIEW
MARKETPLACE
REVIEW
UNCERTAINTY BECOMES
THE WATCHWORD
For the fourth year in a row, the world economy in 2016
continued to languish, with the IMF progressively lowering
its growth forecasts for the year, and also for 2017. Global
GDP growth was 3.1% for 2016, according to the latest
estimates from the IMF, considerably lower than its
original forecast.
China, however, surprised on the upside, with fiscal
stimulus there appearing to have bought the country
time for a more controlled economic rebalancing towards
consumption. The US, too, continued to sustain its slow
recovery; though elsewhere, the story was generally one
of only lacklustre growth.
Some sectors of the mining commodities market, however,
notably both metallurgical and thermal coal, experienced
spectacular changes in fortune, helping to lift mining
companies off their extreme lows experienced early in
the year – albeit in a price and demand environment that
continues to be characterised by considerable volatility.
CHINA’S SLOWDOWN
While concerns continue to be raised around China and its
debt-fuelled economy, the country is still in the process of
slowing down, with growth declining to 6.6% against 6.9%
in 2015, though this growth rate remains stronger than was
expected. This reflects the ongoing moves by the authorities
to rebalance the economy away from investment towards
consumption, including a housing stimulus that managed to
shore up the housing sector and its associated commodity
demand. However, despite China appearing to be prepared
to manage the economy down gradually, there remain
concerns around whether the country has reached the end
of the investment boom, with a diminishing potential for
‘catch-up’ growth, a shrinking workforce and a significant
debt overhang in the corporate sector.
The Indian economy under Narendra Modi was expected
to perform well at an annualised 7.6% GDP growth for 2016,
until money supply issues were encountered as a result of
the withdrawing of old-currency banknotes in November.
While near term impacts have been severe, the move is
still seen as directionally positive, opening the potential
for enhanced contributions to the fiscus and sustained
future growth.
World
Euro area
China
India
Korea
Japan
United States
Source: IMF
%
4.85
3.56
3.08
1.72
1.63
1.66
9.48
6.30
6.58
8.14
7.45
7.61
3.98
3.15
2.72
1.34
1.00
0.51
3.39
2.83
1.57
2011
2015
2016
2011
2015
2016
2011
2015
2016
2011
2015
2016
2011
2015
2016
2011
2015
2016
2011
2015
2016
POLITICAL UNCERTAINTY
The advanced economies also recorded low levels of
growth, moving up by only 1.6% year-on-year, with the
US recording a figure of 1.6% and Japan and South Korea
0.5% and 2.7%, respectively. In spite of the UK voting to
leave the EU, the country grew at an estimated 1.8%,
compared with the Eurozone (1.7%), and Germany (1.7%),
France (1.3%) and Italy (0.8%).
With the US Federal Reserve increasing interest rates in
December 2016, despite US growth being lower than the
average over the past 15 years, there seems to be greater
acceptance of the ‘new normal’ of lower global economic
growth. What this means for global trade and demand for
commodities remains uncertain, with a high likelihood of
volatility as globalisation takes a new, more populist turn.
For mining commodities, however, with millions of people
joining the ranks of the middle classes, the expectation is for
commodity demand growth to be focused in the higher-end,
fast-growing consumer sectors of the global economy.
06
Anglo American plc Annual Report 2016
Indexed 2016 prices
.
0
1
=
6
1
0
2
y
r
a
u
n
a
J
1
,
x
e
d
n
I
e
c
i
r
P
3.0
2.6
2.2
1.8
1.4
1.0
Jan 2016
Iron ore (Platts 62% CFR China)
Metallurgical coal
Thermal coal
Source: Anglo American Commodity Research
Copper
Nickel
Platinum
Diamonds
Anglo American basket price
Dec 2016
Metallurgical coal
Iron ore
Thermal coal
Anglo American
Copper
Nickel
Platinum
Diamonds
141%
76%
47%
27%
16%
16%
9%
(5)%
The net effect of maintained production and demand, with
a marginally higher supply from recycling, led to a reduced
deficit in 2016 in comparison with both the previous year
and earlier forecasts.
Palladium mine supply was broadly in line with 2015, with
outflows from Exchange Traded Funds (ETFs) slowing
and recycling flows growing slightly. This was not sufficient,
however, to offset growing demand from the automotive
sector; consequently, there was a greater deficit than in
2015, contributing to a rally in the price of the metal as the
year progressed.
In the near future, platinum markets are expected to
remain balanced, with limited potential for demand growth
or upside for mine output from South Africa or elsewhere.
Palladium is expected to remain in deficit for the foreseeable
future as gasoline engine automotive demand continues its
upward trend, with limited opportunity for an increase in
primary production.
Gross platinum demand by geography (2016)
koz
Europe
China
Japan
North America
Rest of World
Total
Source: Johnson Matthey
%
29
25
16
13
17
2,426
2,138
1,354
1,115
1,402
8,435
POLICY CHANGES MAKING AN IMPACT
While there has been significant economic uncertainty in
the wake of global developments, gloomy global growth
expectations for 2016 have, at least, been deferred. The
resilience of the Chinese economy, and particularly its
housing sector, resulted in higher than expected demand
for steelmaking materials, boosting bulk commodity prices
in the year. Coal prices saw an additional benefit as China
reduced its domestic coal output in response to new state
energy and environmental policies. In other metals and in
diamonds, there was limited price recovery, with supply
generally higher than anticipated for most of the year, and
lacklustre demand outside of China.
Diamonds
Sustained diamond jewellery demand growth in the US
and marginally positive growth for the full year in China
(in local currency, though declining slightly in US dollar
terms) contrasted with weakening demand in the other
main diamond markets. In India, a month-long jewellers’
strike in March and the government’s surprise
demonetisation programme had a considerable negative
impact on demand. For the full year, global consumer
demand, in US dollars, is estimated to be in line with 2015.
Additional marketing in the US, China, India and Japan in
the final quarter of the year, the main selling season, had a
positive impact. Looking ahead, some significant downside
risks remain owing to foreign exchange volatility and
macro-economic and geopolitical factors.
Precious metals
Platinum supply in 2016 declined by 1.7%, following
lower sales of stock from South Africa and Russia.
Supply from recycling increased by around 10%, with
Chinese jewellery recycling up by 53%, though supply
from autocatalyst recycling continued to underperform
in the low-price environment.
Higher platinum offtake(1) by the autocatalyst (+2%)
and industrial (+10%) sectors was largely offset by a
15% decrease in demand from the jewellery sector.
Platinum jewellery demand in China remained subdued,
with a third consecutive year of decline. Meanwhile,
demand for platinum climbed across a range of industrial
sectors, including the chemical, glass and electrical
industries. Investment demand is estimated to have
been broadly in line with 2015, with platinum bar and
coin sales in Japan remaining robust.
(1) Figures quoted are
on a gross basis.
07
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT MARKETPLACE REVIEW
MARKETPLACE REVIEW continued
Base metals
After an uninspiring 2015, global refined copper
consumption growth of 2% beat market expectations,
mainly as a result of stronger construction and infrastructure
activity, such as power grid investment, in China.
Despite robust demand, copper prices underperformed
other base metals for most of the year. This was partly the
result of stronger than expected ramp-up of new mine
supply and fewer project-related and weather disruptions
at existing operations. Copper prices only started to show
sustained increases in the fourth quarter of the year,
breaking above $5,650/tonne in December, compared
with an average for the first nine months of around
$4,725/tonne, as sentiment towards the Chinese economy
improved and disruptions on the supply side reverted to
more normal levels.
Over the long term, supply is still expected to struggle
to meet the growing demand for primary copper, given
the difficulty of finding new deposits of scale, a limited
project pipeline, declining grades and more challenging
mining conditions.
Total copper consumption estimates by end use (2016)
kt
%
24
11
10
24
31
Consumer and general 6,716
Transport
Machinery
Electrical network
Construction
3,080
2,913
6,660
8,715
Total
28,084
Source: Wood Mackenzie
Nickel demand was 6% higher in 2016, this strong
performance being driven primarily by increases in Chinese
stainless steel output from new capacity additions. Refined
production fell as the low nickel prices of 2015 and early
2016 finally led to price-related cutbacks. In the Philippines,
mine depletion and price- and weather-related cutbacks
constrained ore exports to China, reducing nickel pig iron
production there. The decline in offtake by China, however,
was more than offset by the ramp-up of new pig iron
production in Indonesia.
Overall, the nickel market saw its first deficit in five years.
Despite LME stocks remaining at high levels, and prices
recovering by 16% since the start of 2016, the average
price for the year was around 19% lower than for 2015.
Bulk commodities
After a weak 2015, global steel demand was broadly flat in
2016, supported by better than expected Chinese steel
consumption. This was driven by a government-led credit
stimulus which saw a recovery in housing and construction
markets. In addition, Chinese light-duty vehicle production
was 7% higher, supported by a temporary sales tax cut
on light vehicles. As a result, global demand for both
metallurgical coal and iron ore remained fairly stable.
Despite such relative stability in demand, seaborne thermal
and metallurgical coal prices soared in the second half
owing to various supply-side drivers, the most significant
being the imposition of production controls on Chinese coal
mines. An increased focus on safety and permitting, along
with a reduction of working days from 330 to 276 per
year, reduced domestic supply and boosted demand for
seaborne imports. Seaborne producers, however, were not
able to quickly fill the gap, and prices in the second half rose
spectacularly – 130% in the case of metallurgical coal and
45% for thermal coal. A subsequent partial relaxation of
production controls (for those mines producing higher
quality coal with the best safety records) has alleviated
some of the tightness in the coal markets.
Iron ore prices also fared better than in 2015, but with
significant volatility during the year. Around 35 Mt of
low-cost (mainly Australian) supply was estimated to
have been added to the market, however, Chinese
imports hit record levels, partly on the back of the country’s
displacement of marginal domestic iron ore tonnages. The
closure of steel capacity in China, including scrap-based
furnaces, as part of capacity rationalisation and an
environmental improvement drive, supported both steel
and iron ore prices. In addition, a depreciation of the
renminbi against the dollar and the higher incentive
prices of Tier 2 and Tier 3 suppliers supported prices
above expectations.
A CAUTIOUS AND VOLATILE OUTLOOK
Despite the uptick in near term economic performance
spilling over into some commodity markets and prices,
the key question is how long the global economy, and
particularly the Asian economies, can maintain current
growth rates and associated commodity demand before
moving to lower, and more sustainable, long term levels.
Given the continued high macro-economic and political
uncertainty, we expect ongoing commodity price volatility.
08
Anglo American plc Annual Report 2016 STRATEGIC REPORT OUR BUSINESS MODEL
OUR BUSINESS
MODEL
The mining industry continues to face considerable
external pressures as global economic and political
uncertainties prevail. We responded decisively by
sustainably improving cash flow generation, materially
strengthening our balance sheet through selective
asset disposals and actively managing our diversified
portfolio to focus on our differentiated asset and
product mix.
The high quality assets across our De Beers, platinum
group metals (PGMs) and Copper businesses underpin
our positions in those respective markets and are the
cornerstone of a more resilient and competitive business,
through the economic and commodity price cycle. In
addition, Anglo American also benefits from the
performance of a number of other high quality, individual
assets across the bulk commodities and other minerals,
including iron ore, coal and nickel, which are optimised
operationally to continue to contribute cash and returns,
while ensuring appropriate capital investment to both
preserve and enhance value. The value from our mineral
resources and market positions is optimised by our
dedicated Marketing business, driving appropriate
commercial decisions across the value chain.
In summary, our ambition is to create a resilient business
that delivers robust profitability and sustainable, positive
cash flows through the cycle.
We have a clearly defined approach for how we will
achieve this:
Vision: To be partners in the future.
It is our belief that Anglo American, and mining as an
industry, has both the potential and responsibility to act as
a development partner, for the long term benefit of society.
Mission: Together, we create sustainable value that
makes a real difference.
We cannot meet our ultimate objective on our own. We
will work together with our diverse range of stakeholders
to ensure we deliver value on a sustainable basis that
makes a positive and lasting difference.
VALUES AT THE CORE
We are creating an organisation where all our people
are treated in such a way that they willingly give their best.
Acting according to our values – Safety, Care and respect,
Integrity, Accountability, Collaboration and Innovation –
defines our culture as an organisation, underpinning our
reputation and the promise we make to all our stakeholders:
Real Mining. Real People. Real Difference.
WHAT MAKES US DIFFERENT: BUILDING STRATEGIC ADVANTAGE
Across De Beers, PGMs and Copper, our assets are characterised
by having world class orebodies, competitive industry cost positions,
long reserve lives and significant resource potential, offering
considerable organic growth opportunities, thereby representing three
businesses in which we have leading competitive positions. These are
complemented by a number of other high quality, individual assets
across iron ore, coal and nickel. Underpinning our uniquely diversified
portfolio of differentiated assets is Anglo American’s expertise
across a number of core processes – exploration, innovation, project
development and sustainability – while our Marketing business
optimises value from our resources and market positions. The benefits
of a systematically embedded Operating Model and the functional
governance structure of the Organisation Model combine to create
optimal and sustainable value.
For more information on our core processes
See page 10
DIFFERENTIATED ASSETS IN A UNIQUELY DIVERSIFIED PORTFOLIO:
De Beers
De Beers has a global leadership
position in diamonds, producing
and selling around one-third of
the world’s rough diamonds by
value. Our major diamond mining
assets have large, long life and
scalable resource bases and
we have well-established
partnerships in South Africa
and with the governments of
Botswana and Namibia.
PGMs
We are the world’s leading
PGMs producer, with positions
in the world’s two largest PGM
deposits – the Bushveld Complex
in South Africa and the Great Dyke
in Zimbabwe. We operate the
world’s highest margin platinum
mine at Mogalakwena – a long life,
scalable open pit operation that
has the potential to lift production
significantly as market demand
requires.
Copper
Anglo American has a world
class position in copper, with
the potential to establish a global
leadership position built around
its interests in two of the world’s
largest copper mines – Los Bronces
and Collahuasi – and its feasibility
phase Quellaveco project in
southern Peru. The mineral
endowments of these assets
underpin our organic copper
growth opportunities, in
addition to a number of future
potential projects.
Bulk commodities
and other minerals
Anglo American also benefits
from a number of other high
quality assets across the bulk
commodities of iron ore and coal,
as well as nickel.
These assets are optimised
operationally to continue to
contribute cash and returns,
while being allocated capital to
preserve and enhance value,
as appropriate.
DISTRIBUTION AND RETAIL
MARKETING
De Beers’ leading position is
further enhanced by its rough
diamond sales operation selling
to term customers, accredited
buyers and auction sales
customers. It also has a presence
in the downstream through
Forevermark™ and De Beers
Diamond Jewellers.
The value from our mineral resources and market positions is optimised by our dedicated Marketing
business. Built on direct customer relationships, Marketing creates value across the entire value chain from
mine to market through appropriate commercial decisions aligned to our customers’ specific requirements
– including product specification, volume and timing. In addition, Marketing proactively develops new
markets for our products through, for example, investing in new technologies that are expected to drive new
sources of demand for PGMs – such as fuel cell electric vehicles – and building consumer awareness in
emerging platinum jewellery markets, such as India.
09
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT OUR BUSINESS MODEL
GROUP INPUTS
Financial
Our corporate centre
allocates our financial
resources where they can be
put to work most effectively
to deliver optimal financial
returns for our shareholders.
Know-how
We link our industry-leading
technical and marketing
knowledge to ensure we
invest our efforts and capital
in key leverage points in the
‘mine to market’ value chain.
Other natural resources
Mining and processing
activities have long been
major users of water and
energy. Our technical and
social expertise combines to
provide advice and hands-on
support to the operations to
mitigate our requirements,
while also developing new
technologies that have the
potential to significantly
reduce our environmental
footprint.
Relationships with
our stakeholders
Open and honest engagement
with our stakeholders is critical
in gaining and maintaining our
social and legal licences to
operate and, therefore, the
sustainability of our business.
We engage with a wide range of
stakeholders to ensure effective
two-way relationships.
Ore Reserves and
Mineral Resources
We have an extensive
resource base across our
businesses and across a
wide geographic footprint,
providing a suite of options
for delivering value over the
long term.
Plant and equipment
Our procurement and
technical teams form strong
relationships with major
suppliers to deliver tailored
equipment and other
solutions to enable
best in class operating
performance and cost
effectiveness.
OUR UNIQUELY
DIVERSIFIED
PORTFOLIO
1 Focus on asset quality and
resource potential.
2 Leading positions in diamonds, PGMs
and copper, complemented by high
quality assets in iron ore, coal and nickel.
3 Value optimised through dedicated marketing
expertise, leveraging global supply/demand dynamics.
OUR LEVERAGED
VALUE CHAIN
FIND
PLAN AND
BUILD
HOW
WE CREATE
SHARED VALUE
Anglo American draws
upon a number of key
inputs from both its
central expertise and
the operating businesses
that, through expert
allocation, development,
extraction and marketing,
create sustainable value
for our shareholders and
our diverse range of
stakeholders.
People
Our people are the business.
We aim to resource the organisation
with a capable, engaged and
productive workforce and are
committed to ensuring
no harm comes
to any of
our people.
RISK AND
GOVERNANCE
Our robust system of risk
identification, supported by established
governance controls, ensures we
effectively respond to such risks, while
acting ethically and with integrity
for the benefit of all
our stakeholders.
People
Our simplified
organisation model
allows our businesses to
design structures and roles that
provide clear accountability
and appropriate authority
to get our work done.
OPERATING BUSINESS INPUTS
Financial
Our businesses’ strong
focus on working capital
management, productivity
and cost discipline helps to
drive sustainable positive
cash flows.
Know-how
Our businesses work closely
with our Technical function
and Marketing business to
apply innovative mining
methods and technologies
to realise even greater value
from our resource base, and
optimise mine production
plans to ensure we provide
products to our customers
around the world, meeting
their specific technical and
logistical requirements.
Other natural resources
It is critical that our
businesses responsibly
manage all the natural
resources used in their
processes, given the finite
nature of the mineral
resources, scarcity of water
and energy sources at some
of our operations, and input
cost pressures.
Relationships with
our stakeholders
Working within our social
performance framework, it is
the goal of our operations to
build and sustain constructive
relationships with our host
communities and countries
that are based on mutual
respect, transparency
and trust.
Ore Reserves and
Mineral Resources
Our exploration teams
work with our businesses
to discover mineral deposits
in a safe and responsible way
to replenish the resources
that underpin our future
success – both to extend the
lives of existing mines and to
provide longer term brown-
and greenfield options.
Plant and equipment
Our businesses implement
local procurement policies
that support suppliers based
in the host communities close
to our operations – making a
significant socio-economic
contribution and building
stronger communities, as well
as lowering logistics costs.
10
For our Principal Risks
See pages 41-45
OUR CORE PROCESSES
Exploration
Our award winning exploration teams discover mineral
deposits in a safe and responsible way to replenish the
resources that underpin our future success.
Innovation Model
Our strengthened in-house technology capability provides world
class, innovative solutions across our assets, supporting the
delivery of step change operating performance.
Operating Model
The application of our Operating Model drives a
more stable, predictable and higher level of
operating performance, resulting in improved
safety and productivity, and lower costs.
Project development
The successful development
and execution of our capital
projects reduces expenditure
and ensures predictability
of outcome against our
performance
objectives.
Anglo American plc Annual Report 2016 OUTPUTS
Our outputs are the products that
meet the growing consumer and other
demands of the world’s developed and
maturing economies. Mining and
processing activities also result
in the unavoidable disturbance of land,
generation of mineral residue, as well
as atmospheric and water emissions, all
of which we strive to minimise through
our innovative approach.
HOW WE MEASURE
THE VALUE WE CREATE
Our seven pillars of value underpin
everything we do. Each pillar has defined
Key Performance Indicators and targets
that we set the business and against
which we measure performance, both
financial and non-financial.
GROUP PRODUCTION GROWTH(1)
2%
CASH FLOWS FROM OPERATIONS
$5.8 billion
NEW WATER CONSUMPTION
191 million m3
CO2 EQUIVALENT EMISSIONS
17.8 Mt CO2e
We will invest in those points in the value chain that provide
us with the best return on our investment. From the financial,
technical, marketing and other expertise provided from the
corporate centre, through our entire value chain from mine
to market, it is our people that create the sustainable value that
all our stakeholders demand and expect.
MINE
PROCESS
MOVE
MARKET
END OF LIFE
PLAN
Focusing on our core processes to leverage value
chain investment to provide competitive advantage
Marketing
The value from our mineral resources and market positions
is optimised by our dedicated Marketing business, driving
appropriate commercial decisions across the value chain
– from mine to market – including working directly to tailor
products to our customers’ specific needs.
Sustainability model
Integrating sustainability into core business processes
has been a longstanding priority for Anglo American.
The corporate centre drives the sustainability
agenda and offers expert advice, and hands-on
support, to operations facing complex
sustainability challenges.
Organisation Model
Our Organisation Model ensures we
have the right people in the right roles
doing the right value-adding work
at the right time, with clear
accountabilities, thereby
minimising work duplication
and increasing capability
and effectiveness.
OUTCOMES
As a mining company,
we create and sustain jobs,
help communities to develop
new skills, support education, build
infrastructure, and help improve
healthcare for our employees, their families
and the local communities around our mines.
It is through our core business activities –
employing people, paying taxes to
governments and procuring from host
communities – that we make the most
significant and sustainably positive
contribution to our host countries.
SAFETY AND HEALTH
To do no harm to our people.
For our KPIs
See page 34
ENVIRONMENT
To minimise our
environmental footprint.
For our KPIs
See page 34
SOCIO-POLITICAL
To partner in the benefits of
mining with local communities
and government.
For our KPIs
See page 34
PEOPLE
Create sustainable competitive
advantage through capable people
and an effective, performance-
driven organisation.
For our KPIs
See page 34
PRODUCTION
To sustainably deliver valuable
product to our customers.
For our KPIs
See page 34
COST
To be competitive by operating
as efficiently as possible.
For our KPIs
See page 34
TAXES BORNE AND COLLECTED(2)
FINANCIAL
$3.5 billion
WAGES AND BENEFITS PAID
$3.6 billion
COMMUNITY INVESTMENT SPEND
$84 million
LOCAL PROCUREMENT SPEND
$2.0 billion
To deliver sustainable returns
to our shareholders.
For our KPIs
See page 34
11
(1) Pro forma growth in copper equivalent production, excluding disposals.
(2) Taxes borne and collected are based on numbers disclosed within the Group’s
income statement and exclude the impact of certain associates and joint ventures.
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
DECISIVE ACTIONS
STRENGTHENED FOUNDATIONS
Mark Cutifani
The actions we took across the business to
drive free cash flow and further refine our
portfolio, despite still weaker prices, delivered
the significantly strengthened financial position
required to create the foundations for the future.
The decisive and wide-ranging operational, cost, capital
and portfolio actions we set out in 2016 – to sustainably
improve cash flows and strengthen the balance sheet –
have enabled us to reduce net debt by 34% to $8.5 billion,
significantly below our $10 billion target.
While the prices for many of our products recovered during
the second half of 2016 – including a particularly sharp
increase for metallurgical coal in the fourth quarter – the
average price for our basket of products for the year as a
whole remained marginally below that for the prior year,
reminding us of the scale of the price decreases that the
industry incurred during late 2015.
Against that backdrop, and with our continued sharp
focus on operational costs and productivity, we delivered
a $3.5 billion increase in attributable free cash flow, a
25% increase in underlying EBITDA to $6.1 billion and
grew our underlying EBITDA margin by five percentage
points to 26%. Profit for the financial year attributable to
equity shareholders increased to $1.6 billion, compared
with a $5.6 billion loss in 2015. Following a 20% increase
in copper equivalent productivity between 2012 and 2015,
we delivered an additional 18% productivity increase
during 2016.
The $1.5 billion sale of the niobium and phosphates
business further supported our balance sheet recovery
goal and, combined with the sale of a number of coal and
platinum assets during the year, we received $1.8 billion(1)
of disposal proceeds in 2016.
Keeping our people safe at work has always been an
absolute priority. In 2016, we reported a 24% reduction
in recordable case frequency rates, but an increase in fatal
incidents. Tragically, we lost 11 colleagues during the year,
largely due to failures around our critical safety risk areas.
We can never accept even one serious injury and our efforts
are concentrated around those major risk areas. We are
determined that our goal of zero harm is achievable and
we are working with every employee to get there.
In terms of environmental performance, there is no
doubt that improved work planning and a greater focus
on risk assessment has delivered a further reduction in
the number of incidents, now 85% fewer than in 2013.
(1) Proceeds from
disposals of
$1.8 billion were
received in 2016.
Total nominal cash
inflows are expected
to reach $2.0 billion
over time, subject
to prices.
12
OPERATIONAL PERFORMANCE
I regularly state that creating a platform of operational
excellence is fundamental to delivering the full potential
from our asset base, independent of the market’s external
influences. In fact, weaker or more volatile markets
emphasise a greater need for operating discipline, to
ensure that we are operating to deliver optimal cash
flows while preserving the assets’ longer term integrity.
The actions we have taken to improve the quality of our
asset portfolio as a whole, and to lift operating performance
at the asset level through the implementation of our
Operating Model, is driving materially stronger results.
Compared with 2012, we produced in aggregate in 2016,
8% more physical product from one-third fewer assets
and at a 31% lower unit cost, on a copper equivalent basis,
together representing a 41% increase in productivity
over that four year period. This performance is the clearest
illustration of the fundamental changes we have made to
the way we run the business and the progress we have
made to increase the quality of the portfolio. In dollar
terms, we delivered $1.5 billion of cost and volume
improvements, net of such headwinds as the snowfall
and strikes at Los Bronces and the smelter run-out in our
Platinum business.
In 2017, we are aiming to deliver an incremental $1 billion
of net cost and volume improvements, 75% of which has
already been identified.
REFINING THE PORTFOLIO
The transformation of our portfolio is well advanced,
moving from 68 assets in 2013 to 42 at the end of 2016.
In 2016, we received $1.8 billion(1) from disposal
transactions, largely from the $1.5 billion sale of our niobium
and phosphates business in Brazil to China Molybdenum
Co. Ltd., which completed in September 2016.
During the year, we also completed the divestments of
the Callide and Foxleigh coal mines in Australia, and our
9.7% interest in Exxaro in South Africa; and in November,
following the receipt of all regulatory approvals, we
completed the sale of our Rustenburg platinum operations
in South Africa to Sibanye.
We will continue to refine our asset portfolio on an
ongoing basis in order to ensure that our capital is
deployed effectively to generate enhanced returns
for our shareholders.
THE NEW ANGLO AMERICAN
Our business strategy is based on the quality of the assets in
our portfolio and, in certain product areas, the aggregation
of those assets to create leading market positions. The
assets are further enhanced by the marketing, technical
and other critical, value-adding core processes that are
delivered by the Group.
The high quality assets across our De Beers, PGMs
and Copper businesses underpin our positions in those
respective markets and are the cornerstone of a
Anglo American plc Annual Report 2016 more resilient and competitive Anglo American, through
the economic and commodity price cycle. In addition, we
continue to benefit from the performance of a number of
other world class assets across the bulk commodities of
iron ore and coal, as well as nickel. We will continue to
pursue opportunities to improve returns across each of
our assets and product suites.
During 2016 and into 2017, we have continued to increase
the overall quality of the portfolio through the completed or
announced divestments of a number of assets, including the
Rustenburg and Union platinum operations in South Africa and
several of our smaller coal assets in Australia, amongst others.
In addition, and in response to the need to strengthen our
financial position in light of the sharp falls in commodity
prices in late 2015, we also decided to sell our niobium
and phosphates business in Brazil. Through an extensive
and competitive sale process, we agreed to sell those
businesses to China Molybdenum, generating cash
proceeds considerably higher than market expectations.
While we saw strong interest in a number of the major
assets for which we also held sale processes during 2016
to further strengthen our financial position, we adhered to
our strict value thresholds and chose not to transact. We
will continue to upgrade our portfolio as a matter of course,
although asset disposals for the purposes of deleveraging
are no longer required. We therefore retain the world class
Moranbah and Grosvenor metallurgical coal assets in
Australia and our much upgraded nickel assets in Brazil,
ensuring that they continue to be optimised operationally
to contribute cash and returns, while being allocated capital
to both protect and enhance value.
In South Africa, we continue to work through all the potential
options for our export thermal coal and iron ore interests,
recognising the high quality and performance of these
businesses and ensuring that value is optimised for all our
shareholders. The retention of these assets remains a viable
position given our recent improvements and our focus on
continuing improvements as we go forward.
Despite our significant progress, it is critical that the lessons
of recent years are applied and, although there is confidence
in the long term outlook for our products, the balance sheet
must be able to withstand expected price volatility in the
short to medium term. Our priority in 2017 is to deliver
further productivity improvements while maintaining capital
and cost discipline in order to be in a position to resume
dividend payments for the end of 2017, and to restore an
investment grade credit rating.
In 2017, capital expenditure(2) will be maintained at
$2.5 billion, with stay-in-business capital increased to
$1.2 billion. Capital will be appropriately prioritised, with
care taken to ensure that we protect the long term value
of our assets. We retain a number of attractive organic
options, particularly in our Copper business, which we
will continue to progress appropriately and assess in
light of our overall capital structure and the prevailing
macro environment.
Our portfolio constitutes a highly attractive, competitive
and well balanced business, with the leverage of scale,
technical and marketing expertise and mineral
endowment options, which offer considerable upside
potential over the long term.
PARTNERS IN THE FUTURE
Developing and maintaining positive relationships with
host communities continues to be a priority. We made good
progress in rolling out the updated Social Way, our rigorous
management standard for community issues. During 2016,
we eliminated serious non-compliances for the first time
and almost halved moderate non-compliances. Overall
compliance reached 84% (2015: 66%).
An innovative and low cost SMS-based community survey
mechanism was piloted in 2016 with positive results. The
surveys highlighted the importance to host communities
of high quality stakeholder engagement and a sense of
fairness in our dealings with communities, in particular for
the handling of complaints, managing negative impacts and
generating widespread benefits from our operations. The
surveys were also able to provide near real-time feedback
on community sentiment and concerns, greatly aiding the
ability of sites to respond to local priorities. Survey findings
were also successfully combined with local social media
activity to create new channels for stakeholder engagement.
We will be rolling out the SMS surveys at priority sites as an
ongoing programme through 2017.
We continued to drive the implementation of our innovative
economic development model at a number of our
operations. The model focuses on leveraging the value
chains and skills within the business, and prioritises actions
such as local procurement, enterprise development and
skills-based employee volunteering. It was particularly
gratifying to see our approach supported by the Inter-
American Development Bank, which has contributed
$2 million of co-funding to enhance our supplier and
enterprise development programmes across Latin America.
We have also piloted an innovative spatial development
planning approach in Limpopo, South Africa. This has
identified a wide range of near term economic development
opportunities that we are now discussing with government
and other stakeholders.
Our approach at community level continues to be informed
by broader stakeholder engagement at national and
international level. We have continued to be a progressive
voice in dialogues with governments, faith groups and
NGOs on topics such as the Sustainable Development
Goals, revenue transparency and ethical value chains in
the mining sector.
In 2016, the engagement between leaders in the mining
sector and faith groups grew and was formalised as the
Mining and Faith Reflections Initiative. An independent
secretariat was established to support the initiative and
there were new dialogues established in Zambia and Peru.
In South Africa, where discussions are most advanced,
the focus for 2016 was on exploring how the faith group-
industry collaboration can bring meaningful benefits to
communities in mining areas, with a particular emphasis on
health and economic development. We are very hopeful of
seeing the first results from these efforts in 2017.
13
(2) Excludes capitalised
operating cash flows.
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT CHIEF EXECUTIVE’S STATEMENT
OUTLOOK
THANK YOU
In 2016, we have seen how unpredictable the economic
and political environment is, emphasising the importance
of asset quality, balance sheet strength, operational
excellence and overall resilience. And, as we look ahead,
we do expect ongoing price volatility for many of our
products. However, with supply generally more constrained
following a number of years of low capital investment and
a generally more cautious approach across the industry,
coupled with still growing demand as China seeks to balance
its economy via both stimulus and a managed slowdown,
the fundamental picture is sound. The world’s consuming
and aspirational middle class continues to grow in size at
a considerable rate, further supporting demand for our
products that are more skewed to the later stages of the
development cycle.
In this, Anglo American’s centenary year, and on behalf
of my colleagues on the Group Management Committee,
I would like to thank all our people across the business for
their hard work and commitment in what was a year of
significant change and market volatility, and also thank
our widespread and diverse stakeholders for their
understanding and support.
As a result of our decisive actions in 2016, and the
results delivered by our people across the company,
Anglo American is now more robust, with a stronger
balance sheet and more competitive cost structure
around a world class and uniquely diversified asset base.
Anglo American’s strategic direction is clear and we have
a highly motivated team that understands how we create
sustainable value through the way we run the business.
OUR MISSION:
Together, we create
sustainable value
that makes a real
difference
OUR VISION:
To be partners
in the future
DELIVERING CHANGE
FOCUS THE PORTFOLIO
• Transforming portfolio: 68 assets in 2013 to
Prioritising time and capital on the
assets that offer the most attractive
long term value creation potential.
42 at end 2016.
• $1.8 billion(1) of disposal proceeds received in the
year; including: niobium and phosphates business
($1.5 billion); Rustenburg platinum mines; and 9.7%
interest in Exxaro.
• A number of other disposal transactions
completed including the Foxleigh and Callide
coal mines in Australia.
• Continue to refine and upgrade asset portfolio.
DRIVE CONSISTENT DELIVERY
• Volume and cost improvement delivered: $1.5 billion
Maintaining a highly competitive
mindset with innovation and
outstanding delivery at the forefront
of how we drive change.
in year.
• Net debt reduced below $10 billion target: $8.5 billion.
• Two major projects completed ahead of schedule and
within budget; Gahcho Kué (De Beers) and Grosvenor
(Coal Australia).
DEVELOP CORE BUSINESS
PROCESSES
Becoming industry leaders in critical
areas, extracting maximum value
from our assets and products.
• Operating Model rolled out at nine operations.
• Marketing business ensuring value optimisation
across the value chain.
• Avoided energy costs in 2016 estimated at $90 million,
driven by business improvement projects.
DELIVER A HIGH PERFORMANCE
CULTURE
Ensuring our organisation and
people have the critical core skills
to improve returns.
• Productivity improved by 41% since 2012.
• Headcount reduced by 40% since 2013.
• 32% reduction in occupational diseases reported
since 2015.
(1) Proceeds from disposals of $1.8 billion were received in 2016. Total nominal cash inflows are expected to reach $2.0 billion over time, subject to prices.
14
Anglo American plc Annual Report 2016 As he prepares for his much deserved retirement after
12 years of service, I am also grateful to our finance
director, René Médori, for his steady hand and wise counsel.
Stephen Pearce will be joining the Board as René’s
successor after the AGM in April and we look forward to
drawing on his broad-based financial and commercial
leadership experience.
I would also like to recognise our chairman, Sir John Parker,
for his guidance and leadership across many fronts. On
behalf of the entire management team, we thank him and
wish him well as he steps down as chairman during 2017.
Lastly, I thank all the members of the Board for their
unwavering support for the changes we have made to
deliver our much strengthened position as we continue
to build the foundations for Anglo American’s future.
Mark Cutifani
Chief Executive
BUILDING RESILIENCE
THE NEW ANGLO AMERICAN
• High quality assets across our De Beers,
PGMs and Copper businesses underpin
our competitive positions in those
respective markets.
• We also benefit from a number of other high
quality, individual assets across iron ore, coal
and nickel, which are optimised to continue to
contribute cash and returns.
• Capital is appropriately prioritised, with care
taken to ensure that we protect the long term
value of all our assets.
• 2017 priorities to restore an investment grade
credit rating and resume dividend payments.
A highly attractive, competitive
and well balanced business, with the
leverage of scale, technical and marketing
expertise and mineral endowment options
to offer considerable upside potential
over the long term.
Creating a resilient business that
delivers robust profitability and
sustainable, positive cash flows
through the cycle.
For more information on how we measure our performance
through our pillars of value see page 34.
REMUNERATION
Anglo American’s directors’ remuneration policy, which will be
put to shareholders for approval at the 2017 AGM, is designed
to encourage delivery of the Group’s strategy and creation of
stakeholder value in a responsible and sustainable manner.
The main elements of the remuneration package are basic
salary, annual bonus and long term incentive plan (LTIP).
ANNUAL BONUS
Annual bonus performance measures include:
• 50% on underlying earnings per share (EPS). EPS is one of the
Group’s key financial measures of performance and is set on
an annual basis to ensure targets are demanding yet realistic
• The remaining measures are non-financial and include project
delivery, business improvement, stakeholder engagement and
talent management
• A modifier is applied depending on the extent to which
safety targets are met.
• To help ensure sustainable long term performance, 60% of
any annual bonus is deferred into shares for a minimum of
three years and is subject to clawback.
LONG TERM INCENTIVE PLAN
The LTIP performance measures are aligned to our strategic
objectives over a three-year performance period. Vested
LTIP awards are subject to clawback and must be held for
an additional two years to encourage alignment of executive
and shareholder interests.
The proposed LTIP performance measures and weightings are:
• 70% subject to Group Total Shareholder Return (TSR), with
two-thirds relative to the Euromoney Global Mining Index
and one-third relative to the constituent of the FTSE 100 index
• 30% subject to a balanced scorecard of financial and
strategic objectives
Full details are set out in the directors’
remuneration report on pages 84-109.
15
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
FOCUS THE PORTFOLIO
The high quality assets across our De Beers, platinum group metals (PGMs) and
Copper businesses underpin our position in those respective markets and are the
cornerstone of a more resilient and competitive Anglo American. In addition, we
continue to benefit from the performance of a number of other world class assets
across the bulk commodities of iron ore and coal, as well as nickel.
REDUCTION IN NUMBER OF ASSETS
SINCE 2013
38%
DISPOSAL PROCEEDS RECEIVED
IN THE YEAR
$1.8 billion
CARATS OF ROUGH DIAMONDS
EXPECTED OVER THE LIFE OF
THE RECENTLY COMMISSIONED
GAHCHO KUÉ DIAMOND MINE
53 million
For more information
See pages 17-19
GAHCHO KUÉ – DELIVERING THE LARGEST
NEW DIAMOND MINE IN MORE THAN A DECADE
Gahcho Kué, the world’s largest new diamond mine in the last 13 years, officially
opened in September 2016, ahead of schedule and in line with the projected
C$1 billion (US$0.9 billion) capital budget. The mine, a joint venture between De Beers
(51%) and Mountain Province Diamonds (49%), is expected to produce approximately
53 million carats of rough diamonds, from around 34 million tonnes of material, over its
projected 12-year life, from 2017.
A fly-in/fly-out remote mine site, where winter temperatures can regularly plunge as
low as minus 40⁰C or colder, Gahcho Kué lies 280 kilometres north-east of Yellowknife
in Canada’s Northwest Territories (NWT). The mine, which was commissioned in
August 2016, is on track to reach full commercial operation in the first quarter of 2017.
It will mine three open pits, and will employ a total of 530 employees and long term
contractors. In 2016, Gahcho Kué supported a total of 2,050 direct and indirect full
time equivalent (FTE) jobs, with an induced employment impact of 660 FTE’s(1).
Over the life of the mine, Gahcho Kué is expected to contribute a total of C$5.7 billion
into the economy of NWT, which derives more than half of its gross domestic product
from mining activities. Partnering with local indigenous communities, which have a
say on the use of resources in their ancestral lands, has ensured that the majority of
workers during both the construction phase and the ongoing operation of the mine
are drawn from the local community.
Production from Gahcho Kué will more than compensate for the loss of output
following the placement of Snap Lake onto extended care and maintenance at the
end of 2015. The mine will make an important contribution to rough diamond supply
in an environment characterised by a steady rise in consumer demand from the
growing middle classes in emerging markets, and from millennials, combined with
supply constraints as economically viable kimberlite resource discoveries continue
to be rare events.
PILLARS OF VALUE
Financial
For more on pillars of value and our KPIs
See page 34
(1) See Canada Impact Report, ‘The socio-economic
impact of Gahcho Kué’ for further details.
16
Gahcho Kué diamond mine in Canada’s Northwest Territories came on stream in August 2016 following major participation
by the local indigenous community in its development. New diamond mine openings are rare events, and Gahcho Kué will
make a significant contribution to global rough diamond supply. Process plant superintendent Terry Pinske walks up the ramp
alongside the conveyor carrying diamond-bearing ore into the process plant.
Anglo American plc Annual Report 2016 As the mining industry continues to recover from
the sharp price decreases of late 2015 and the early
months of 2016, Anglo American has materially
strengthened its balance sheet by generating
significantly improved free cash flows and by
completing the sale of a number of assets. Greater
project, operating capital and cost discipline, combined
with a 41% increase in productivity since 2012, are
restoring our competitive advantage. We are building
strong foundations for a more resilient Anglo American,
more attuned to changing market dynamics, and well
positioned to deliver robust profitability and cash flows
through the cycle.
BUILDING STRATEGIC ADVANTAGE
The primary source of competitive advantage in the mining
industry is to own high quality, low cost, long life assets of
scale, with positions that can be further enhanced if those
assets deliver products into structurally attractive markets.
In assessing our asset portfolio, we consider:
• The stand-alone quality of individual assets, including their
relative cost position and resource and growth potential;
• Our global competitive position within the individual
product groups; and
• The additional value potential generated through our
dedicated marketing expertise.
De Beers
De Beers has a global leadership position in diamonds,
producing around a third of the world’s rough diamonds,
by value. Within its portfolio, De Beers (Anglo American:
85% interest), in partnership with the Government of the
Republic of Botswana, has one of the largest diamond
resources, by volume, in the world at Orapa and one of the
richest diamond mines, by value, at Jwaneng. The recently
commissioned Gahcho Kué mine, in Canada’s Northwest
Territories, will add an additional 53 million carats of rough
diamonds over its projected 12-year life, from 2017.
Our major diamond mining assets have large, long life and
scalable resources and we are continuing to invest in our
existing operations to extend our mining activities. The
‘Cut-8’ expansion of Jwaneng will increase the depth of the
mine from 400 metres to 650 metres, while, in South Africa,
Venetia is being extended underground, extending the life
of mine to 2046(1).
The lack of any significant economic kimberlite discoveries
over many years, combined with the ongoing growth in
consumer demand for diamond jewellery in both mature
and developing markets, points to strong prospects for
the diamond business.
Through its differentiated rough diamond distribution
model, which comprises term contract sightholders,
accredited buyers and auction sales customers, De Beers
has a range of insights into its customers’ demand patterns.
De Beers seeks to stimulate consumer demand for
diamonds through its Forevermark™ brand and De Beers
Diamond Jewellers, a retail joint venture with LVMH Moët
Hennessy Louis Vuitton.
Platinum Group Metals (PGMs)
Our Platinum business (held through a 78% interest in
Anglo American Platinum) is the world’s leading PGM
producer. It occupies the pre-eminent position, in terms of
production, mining, processing and refining assets and the
quality and size of its resource base in the world’s largest
PGM deposit – the Bushveld Complex in South Africa –
and has a significant stake in the world’s No. 2 PGM deposit
on the Great Dyke in Zimbabwe. Our flagship platinum
mine, Mogalakwena, is the highest-margin producer in the
industry and, as the only large open pit PGM mine globally,
is at the centre of a more flexible, competitive and lower
risk business.
Platinum is continuing its ongoing repositioning around a
leaner, best in class operating footprint at the Mogalakwena
and Amandelbult mines in South Africa, and Unki in
Zimbabwe, alongside its joint venture interests in the
Bafokeng-Rasimone, Mototolo and Modikwa mines in
South Africa.
PORTFOLIO CHOICES DRIVEN BY ASSET QUALITY
De Beers
Platinum
Copper
(1) The current Mining
Right expires in 2038.
An application to
renew the Mining
Right will be submitted
at the appropriate
time. There is a
reasonable
expectation that
such renewal will
not be withheld.
Botswana
South Africa
Namibia
Canada
• Jwaneng
• Orapa
• Venetia
• Voorspoed
• Debmarine
Namibia
• Namdeb
• Gahcho Kué
• Victor
South Africa
• Mogalakwena
• Amandelbult
• BRPM
• Mototolo
• Modikwa
Chile
Projects
• Los Bronces
• Collahuasi
• El Soldado
• Quellaveco
• Sakatti
Zimbabwe
• Unki
Bulk commodities
and other minerals
Iron ore and
manganese
Coal
Nickel
• Kumba
Iron Ore
• Minas-Rio
• Samancor
• SA Thermal
• Australia
• Cerrejón
• Barro Alto
• Codemin
17
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
FOCUS THE PORTFOLIO continued
Demand for PGMs is forecast to increase over time,
given the ongoing trend towards cleaner emission vehicles,
driven by increasingly stringent global emissions legislation.
Increasing demand by the automotive industry is likely to
be augmented by growing opportunities for emerging new
applications, including hybrid and hydrogen fuel cell electric
vehicles, while emerging countries such as India offer the
potential of developing, from a relatively low base, into
significant platinum jewellery markets.
Our business is well positioned to proactively shape
demand for platinum, including through targeted campaigns
in emerging jewellery markets, creating new investment
demand for the metal as a store of value and through direct
investment in a number of companies developing new
technologies that are expected to drive industrial demand
for PGMs, such as fuel cells for electric vehicles.
Copper
Anglo American has a world class asset position in copper,
with the potential to establish a leading position built around
its interests in two of the world’s largest copper mines –
Los Bronces (a 50.1% owned subsidiary) and Collahuasi
(44% owned), with Reserve Lives of 24 years and 69 years,
respectively. The resource base of these assets underpins
our future brownfield opportunities, in addition to a number
of future potential projects, including our feasibility phase
Quellaveco project in southern Peru – one of the world’s
largest untapped copper orebodies – and the polymetallic
Sakatti deposit in Finland.
The copper market, although expected to be broadly
balanced in the medium term, is expected to struggle to
meet longer term demand growth as declining grades
and more challenging physical and environmental
conditions, along with tougher licensing and permitting
requirements, will all affect the industry’s ability to deliver
new copper supply to the market.
Bulk commodities and other minerals
Anglo American also benefits from a number of other high
quality individual assets across the bulk commodities of
iron ore, metallurgical and thermal coal, as well as nickel.
Anglo American’s iron ore operations provide customers
with niche, high iron content ore, a large percentage
of which is direct-charge product for blast furnaces.
In South Africa, we have a majority share (c. 70%) in
Kumba Iron Ore, where the Sishen and Kolomela mines
produce leading quality lump ore and also a premium fine
ore. In Brazil, we have developed the integrated Minas-Rio
operation (100% ownership), consisting of an open pit
mine and beneficiation plant in Minas Gerais, which
produces pellet feed. The iron ore produced is transported
through a 529 kilometre pipeline to the Ferroport iron ore
handling and shipping facilities at the port of Açu, in
which Anglo American has a 50% shareholding.
PGMs – FUELLING THE FUTURE
For years, PGMs have not only been essential in curbing
noxious emissions in both petrol- and diesel-fuelled
vehicles, but have been vital to the fields of medicine,
electronics and jewellery, as well as an array of industrial
applications. Today, PGMs are playing an increasing part
in helping create a cleaner, more sustainable future.
As the contribution of burning fossil fuels to global
warming continues to cause concern, and governments
impose increasingly stringent vehicle emissions
targets, the world needs to identify viable and
economic renewable technologies for powering cars.
Anglo American believes that PGM-containing fuel
cell technologies provide one proven response to this
global challenge.
With refuelling taking just a few minutes and with a
range similar to petrol or diesel vehicles, fuel cell electric
vehicles, or FCEVs, employ platinum as the principal
catalyst to cleanly and efficiently convert energy from
hydrogen into electrical power in an electrochemical
process whose only emission is water.
With fuel cells expected to result in annual platinum
demand of several hundred thousand ounces by
2025, the industry presents a major opportunity for
the platinum mining industry. At Anglo American, we
are working with partners around the world to promote
fuel cell technology in a number of applications. In
South Africa, we have partnered with Ballard to
deploy the world’s first off-grid, fuel cell mini-grid to
provide primary power to a rural community. In the UK,
we are leasing a Hyundai ix35 fuel cell-powered car for
four years as part of the London Hydrogen Network
Expansion project. We are also working closely with Fuel
Cell Hydrogen and Energy Association (in the US) and
Hydrogen Europe to promote and advocate FCEVs and
hydrogen fuelling infrastructure.
Anglo American believes that PGM-containing fuel cell technologies provide
a proven response to the global challenge of cleaner transportation and is
leasing this Hyundai ix35 fuel cell-powered car as part of its visible commitment
to encouraging the development of the hydrogen economy.
18
Anglo American plc Annual Report 2016 DELIVERING OUR PORTFOLIO RESTRUCTURING
Number of assets
2016 portfolio changes
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
68
Disposal
Completed
sales
42
Sale
announced
Restructure
Closure
Care and
maintenance
Rustenburg
Callide
Foxleigh
Niobium and Phosphates
Tarmac Middle East
Exxaro
Kimberley
Pandora
Dartbrook
Thabazimbi
Drayton
Twickenham
2013 (start)
2016(1)
(1) Reflects Niobium and Phosphates, Rustenburg, Foxleigh and
Callide disposals.
Platinum
De Beers
Niobium and Phosphates
Corporate and Other
Copper
Iron Ore and Manganese
Nickel
Coal
Our Tier 1 coal assets include the Moranbah North
(88% ownership) and Grosvenor (100% ownership)
metallurgical coal mines, both located in Queensland,
Australia. The mines are underground longwall operations
and produce hard coking coal. In Colombia, Anglo American,
BHP Billiton and Glencore each have a one-third
shareholding in Cerrejón, the country’s largest thermal
coal exporter.
Our Barro Alto nickel operation (100% ownership) produces
ferronickel and is based in Goiás, Brazil.
In South Africa, we continue to work through all the potential
options for our export thermal coal and iron ore interests,
including retention, recognising the high quality and
performance of these businesses and ensuring that value
is optimised for all our shareholders.
Our Bulk commodities and other minerals assets have been
optimised operationally to ensure ongoing and sustainable
cash generation and returns, while being allocated capital to
both preserve and enhance value, as appropriate.
We will continue to refine and upgrade our asset portfolio
on an ongoing basis in order to ensure that our capital is
deployed effectively to generate enhanced returns for
our shareholders.
Portfolio restructuring in the year
The disposal of a number of assets completed to date,
has contributed to the substantial $4.4 billion reduction
of net debt during 2016. By year end, net debt stood at
$8.5 billion, significantly below the targeted level of
$10 billion.
Disposals announced and completed in 2016
During 2016, we received $1.8 billion(1) of disposal proceeds,
including the $1.5 billion sale of our niobium and phosphates
business in Brazil to China Molybdenum Co. Ltd.
We completed the disposal of two coal assets in
Queensland, Australia in the year; a 70% interest in the
Foxleigh metallurgical coal mine, and the sale of our 100%
interest in the Callide thermal coal mine. The terms of both
transactions remain confidential.
The disposal of the Rustenburg platinum mines to
Sibanye Gold, announced in 2015, was completed in
2016. Anglo American also sold its 9.7% interest in
Exxaro Resources Limited.
Sales have also been agreed for the Dartbrook coal
mine in Australia and the Pandora platinum joint venture
in South Africa, subject to a number of conditions. The
disposal of the remaining interests in Tarmac operations
located in the Middle East was completed in 2016.
Other portfolio changes
The Group has ceased, or is ceasing, production at a
number of operations. Operations that have been closed
or placed onto care and maintenance since 2015 include:
Snap Lake (diamonds) in Canada; Damtshaa (diamonds,
temporary care and maintenance) in Botswana;
Drayton coal mine in Australia; and Twickenham platinum
mine and Thabazimbi (iron ore), both in South Africa.
In February 2017, we agreed the sale of our 85%
interest in the Union platinum mine in South Africa
to Siyanda Resources.
19
(1) Proceeds from
disposals of
$1.8 billion were
received in 2016.
Total nominal cash
inflows are expected
to reach $2.0 billion
over time, subject
to prices.
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
DRIVE CONSISTENT DELIVERY
As global economic and political uncertainty continues and commodity prices remain
generally volatile, it is important to continue driving improvements through our business.
In this challenging environment, we are committed to managing what is in our control;
achieving cost and productivity improvements; to enhance cash flows through the cycle;
and further strengthen our balance sheet.
34% NET DEBT◊ REDUCTION
$8.5 billion
COST AND VOLUME IMPROVEMENTS◊
$1.5 billion
NET DEBT: EBITDA RATIO◊
1.4x
CAPITAL EXPENDITURE◊(1) IN 2016
$2.5 billion
For more information
See pages 21-23
SISHEN – COMING THROUGH THE DOWNTURN,
PREPARED FOR THE UPTURN
During 2015, confronted by steadily declining prices as iron ore markets continued
to deteriorate, Kumba Iron Ore took bold action to ensure that South Africa’s premier
iron ore producer remained profitable.
In a series of moves in response to the worsening price environment, the huge open
pit at Sishen mine was progressively redesigned, with a final pit design achieved in late
2015. This design called for considerably less waste rock stripping, which would allow
Sishen to operate at a reduced cash break even price. More generally, it enabled a more
flexible and responsive approach to mining operations, with lower execution risk.
The ramifications of the reconfiguration of pit design and change in mining approach,
however, were to be felt far more widely – and it would take a multi-disciplinary team
effort if Kumba was to successfully deliver on its plans.
On the operational side, the mine and the Group’s technical and financial teams worked
closely together on a series of business improvement projects, with additional support
provided by the ongoing implementation of Anglo American’s Operating Model.
Two areas of the business merited particular focus: operating hours and mining fleet
utilisation had to increase materially – by as much as 30%; and substantial changes
needed to be made to the shift-roster system. The first was largely achieved by the
fourth quarter as a new rigour was applied to seeking greater efficiencies. Secondly,
new rosters enabled a more effective handover between shifts and reduced break
times, leading to a 10% increase in productivity in this area.
In many ways, however, the impact on people’s lives was even more challenging. The
changes meant that some 1,500 employees, along with 1,000 contractors, would have
to leave the operation. Through a comprehensive process of engagement, at all levels
of the organisation, with affected stakeholders, Kumba was able to undertake the
largest restructure in its history while avoiding industrial action.
PILLARS OF VALUE
Production
Cost
Financial
For more on pillars of value and our KPIs
See page 34
(1) Excludes capitalised operating cash flows.
20
The introduction of Anglo American’s operating model at Kumba’s Sishen iron ore mine in South Africa, in tandem with
progressive redesign of the huge open pit in light of a worsening price environment, has led to a more resilient operation able
to operate at a reduced cash break even price.
Anglo American plc Annual Report 2016 We are continuing to implement Anglo American’s
Operating Model in order to deliver ongoing
productivity improvements, lower operating costs
and to carry out work safely. Leveraging the Group’s
considerable technical expertise, the Operating Model
provides the structure and discipline to optimise the
operation of our world class assets and provides the
foundation for improvements across the business.
These operational improvements, our rigorous
approach to capital allocation, and the proceeds
received from asset disposals in the year have
improved free cash flows, reducing net debt to
significantly below $10 billion and materially
strengthening the Group’s balance sheet.
BUILDING A STABLE OPERATIONAL PLATFORM
Delivery of the Operating Model is leading to greater
confidence in our ability to deliver to our plans and improve
work management, as work is now planned, scheduled
and resourced well ahead of execution. The Operating
Model also provides greater role clarity, with distinct
accountabilities and responsibilities, enabling sustainable
and stable processes that deliver the expected outcomes.
Although there are three components to the Operating
Model, which address operational strategy, work
management, and continuous improvement, the focus
to date has been on work management execution. By the
end of 2016, various components of the Operating Model
had been fully or partially implemented at nine sites.
At Kolomela, implementation of the Operating Model in
the plant area has seen a marked improvement in work
execution, with scheduled work completion now in excess
of 95%. Screening-tonnes throughput improved by 18%
during the ‘go-live’ phase, and a further 18% during the
stabilisation phase. The plant’s process stability has also
improved significantly.
At Sishen, initial mining work management implementation
resulted in significant improvements in the amount of ore
and waste moved. The restructuring of the business,
however, and the resultant lower production and waste
removal targets for the year, has reduced the extent of
operational improvements compared with previous
roll-outs. Work management for the reconfigured mining
set-up is now under way.
At Jwaneng, the Operating Model went live in September,
and is currently in the stabilisation phase, with early
indications showing promising results. The model’s work
management component is now being implemented at
the Letlhakane Tailings Retreatment plant.
At De Beers’ Venetia mine, implementation of the
Operating Model is in the project set-up phase while at
Gahcho Kué, the implementation of the Operating Model
is more advanced.
Delivery of the Operating Model continued at
Mogalakwena (production and maintenance) at the
South Concentrator, while implementation at the North
concentrator was completed earlier in the year.
The improvement in work performance indicators has
already led to an increase of approximately 10% in daily
milling output.
A significant improvement has also been realised in work
execution performance at Minas-Rio, with scheduled work
completion currently standing at 85%.
At both Los Bronces’ processing operations, milling
circuit availability has increased, while there has been a
reduction in process variability. Implementation of the work
management component in the mining operations went
live at the end of 2016. All remaining work at Los Bronces
is scheduled to be completed in 2017.
During 2017, the main focus of the Operating Model’s work
management component will be on the Platinum business,
with Amandelbult scheduled to go live towards the end of
the year. Additional projects will also be carried out
concurrently at the Rustenburg Base Metal Refinery.
ENHANCING PERFORMANCE
AT MOGALAKWENA
Anglo American’s Operating Model is aimed at getting
the best out of the company’s assets – and particularly
assets such as Mogalakwena in South Africa.
At the mine’s North Concentrator, where PGM-bearing
ore is processed into high-grade PGM-bearing
concentrate, we are unlocking value through continually
modernising processing technologies and through
maximising efficiencies in processing.
Key initiatives to enhance concentrator productivity
and profitability include: measures to enhance flotation
kinetic response; the optimisation of fine grinding
techniques in order to mitigate metal losses of locked
minerals; modifications to the configuration of
the flotation circuit; and taking a hard look at
equipment constraints.
Such measures have led to improved nominal
throughput rates, which have assisted in increasing
metal production while also lowering unit costs.
New processing technologies being adopted at Mogalakwena, following the
implementation there of Anglo American’s Operating Model, are leading to
higher ore-milling rates and increased plant throughput. Here, control room
operators Priscilla Tsheole (left) and Maggy Botsanara monitor the stability
of operations at the North Concentrator.
21
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
DRIVE CONSISTENT DELIVERY continued
CAPITAL ALLOCATION
Effective capital allocation throughout the cycle is
critical to delivering value, given the long term and
capital intensive nature of our business. The Group
applies a dynamic capital allocation process, while
maintaining a strong focus on capital discipline.
In the near term, the focus remains on further
strengthening the balance sheet and to restore an
investment grade credit rating, while continuing to allocate
the capital expenditure needed, across our portfolio of
assets, to both sustain our business and to protect value.
We aim to reinstate dividend payments as soon as possible
and expect to do so by the end of 2017. The Group will
continue to seek to upgrade the quality of its portfolio
of assets, including through ensuring an appropriate
geographic balance. Excess capital will be returned to
shareholders unless there are compelling value-accretive
opportunities for investment.
CASH FLOW FROM OPERATIONS
Anglo American seeks to improve operating free cash
flow through five key levers: improving productivity
and lowering input costs across all operations
(including through deployment of the Operating Model);
reducing overhead expenditure (including through
implementation of the Functional Model); timely delivery
of new projects (primarily Grosvenor and Barro Alto
during 2016); maximising revenue (including through
improvement in our marketing activities); and optimising
our investment in working capital.
During 2016, cash flows from operations increased to
$5.8 billion (2015: $4.2 billion), driven by the delivery of cost
and volume improvements of $1.5 billion, which included a
recovery in sales volumes at De Beers, contributions from
recently completed projects, and cost reductions across the
Group. Working capital cash inflows improved by $0.4 billion
following improvement initiatives across all areas. The
recently completed Grosvenor (Coal Australia) and Barro
Alto (Nickel) projects both ramped up during 2016, together
contributing $0.2 billion to cash flow from operations.
Results from Gahcho Kué (De Beers) are expected to
cease to be capitalised in the first quarter of 2017, and from
Minas-Rio (Iron Ore Brazil) with effect from January 2017,
after which these assets will also contribute to cash flow
from operations.
SUSTAINING CAPITAL EXPENDITURE
We continue to focus on capital discipline and
stay-in-business capital efficiency, while maintaining
the operational integrity of all our assets. A sustainable
level of total capital expenditure for the current
portfolio of assets, excluding growth projects, is
approximately $2.5 billion per year.
Stay-in-business capital expenditure decreased to
$1.0 billion (2015: $1.4 billion), primarily due to a focus
on capital discipline and the continued roll-out of the
Operating Model across our assets.
(1) Excludes capitalised
operating cash flows.
(2) Proceeds from
disposals of
$1.8 billion were
received in 2016.
Total nominal cash
inflows are expected
to reach $2.0 billion
over time, subject
to prices.
22
Development and stripping capital expenditure decreased
to $0.6 billion (2015: $0.7 billion), primarily as a result of the
redesign of the pit at Kumba’s Sishen iron ore operation,
where the transition was made to a lower strip ratio and
operational cost position.
During 2016, continued progress was made on our ongoing
expansion projects, including the construction of De Beers’
Venetia underground mine in South Africa, where the
decline advanced to more than 2,000 metres. The project
is now 26% complete, with the underground operation
expected to be the mine’s principal source of ore from 2023.
BALANCE SHEET FLEXIBILITY
Consistent with our objective to restore an investment
grade credit rating, our near term objective is to
continue to reduce net debt and ensure the Group’s
net debt/EBITDA ratio remains below 1.5.
Net debt at 31 December 2016 was $8.5 billion, significantly
lower than the year-end target of $10 billion, resulting in a
net debt/EBITDA ratio of 1.4. The $4.4 billion reduction in
net debt since 31 December 2015 was primarily driven by
strong operating cash inflows of $5.8 billion, capital
expenditure of $2.5 billion(1) and cash proceeds from
disposals, before tax, of $1.8 billion(2).
BASE DIVIDEND
The commitment to a sustainable dividend remains a
critical part of the overall capital allocation approach.
Given the need to conserve cash and reduce debt, dividend
payments remained suspended for 2016. The Board has
recommended that, upon reinstatement, Anglo American
should adopt a payout ratio in order to provide shareholders
with exposure to improvements in commodity prices, while
retaining cash flow flexibility during periods of weaker
pricing. It is currently expected that dividend payments will
be reinstated for the end of 2017 (payable in 2018).
Cash flow from operationsBalance sheet flexibilitySustaining capexBasedividendCash flow from operationsBase dividendAdditional shareholder returnsPortfolio upgradeFuture project options Sustaining capex Balance sheet flexibilityAnglo American plc Annual Report 2016 ADDITIONAL SHAREHOLDER RETURNS
Excess capital will be returned to shareholders unless
there are compelling value-accretive opportunities
for investment.
The current focus remains on deleveraging the balance
sheet further and to restore an investment grade
credit rating.
PORTFOLIO UPGRADE
We remain focused on upgrading the portfolio, through
improving asset quality, maintaining future optionality
and seeking the appropriate geographic balance.
During 2016, we received $1.8 billion(1) from divestment
transactions. The sale of the niobium and phosphates
business in Brazil to China Molybdenum Co. Ltd ($1.5 billion)
supported our balance sheet recovery goal, while we also
continued to upgrade the portfolio through the divestment
of a number of other assets: the Rustenburg platinum mines
to Sibanye Gold; our 9.7% interest in Exxaro Resources;
and our interests in the Callide and Foxleigh coal mines in
Australia. The disposal of Dartbrook (Coal Australia) was
agreed in 2015, and is expected to complete in the first half
of 2017. The disposal of the remaining interests in Tarmac
operations located in the Middle East was completed in
2016. Twickenham (Platinum) was placed onto care and
maintenance during the year. In February 2017, we agreed
the sale of our 85% interest in the Union platinum mine in
South Africa to Siyanda Resources. We will continue to
refine the portfolio in this way, ensuring that capital is
deployed to generate enhanced returns through the cycle.
FUTURE PROJECT OPTIONS
Strict value criteria are applied to the assessment
of future options. Where appropriate, we will seek
partners on major greenfield projects, and are likely
to not commit to more than one major project at
any given time. No major new project approvals
are planned until dividend payments are resumed.
The Group will continue to maintain optionality to
progress with value-accretive projects, should
market conditions and capital availability permit.
We continue to retain and advance select studies,
maintaining our established social commitments and
managing the costs of maintaining these options
appropriately. Our approach to studies and evaluation has
a strong emphasis on assessing a broad range of options
early on in the study phase, so that we can mitigate risk,
identify opportunities and minimise sunk costs. This position
is enhanced by the application of innovative concepts and
new technologies stemming from our FutureSmart™ mining
(FutureSmart™) programme in order to build and maintain a
portfolio of high-value replacement and organic options.
Our 81.9% investment in the open-cut Quellaveco copper
project in Peru remains one such key option for the Group,
with feasibility costs of $0.1 billion spent in 2016. At the
Gahcho Kué diamond mine in Canada, which accounted
for capital expenditure of $0.2 billion in 2016, production
has commenced and ramp-up is nearing completion.
Evaluation expenditure reduced to $105 million in 2016
(2015: $145 million) and expenditure on exploration
activities decreased by 31% to $107 million
(2015: $154 million).
GROUP CAPITAL EXPENDITURE◊
Capital expenditure(2) decreased to $2.5 billion (2015:
$4.0 billion), owing to rigorous capital discipline applied to
all project investments, as well as to the benefits accruing
from the commissioning of the Minas-Rio, Gahcho Kué
and Grosvenor projects. In 2017, we expect capital
expenditure to be approximately $2.5 billion.
Capital expenditure*
$ million
Expansionary
Stay-in-business
Development and stripping
Proceeds from disposal of
property, plant and equipment
Total
Capitalised operating cash flows
Total capital expenditure
Year ended
31 Dec 2016
Year ended
31 Dec 2015
967
1,042
551
(23)
2,537
(150)
2,387
1,936
1,384
740
(30)
4,030
147
4,177
* See page 189 for the definition of capital expenditure.
Group historical capital expenditure◊
2012–2016
($ billion)
8
6
4
2
0
5.9
6.1
6.0
4.0
2.5
2012
2013
2014
2015
2016
23
(1) Proceeds from
disposals of
$1.8 billion were
received in 2016.
Total nominal cash
inflows are expected
to reach $2.0 billion
over time, subject
to prices.
(2) Excludes capitalised
operating cash flows.
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
DEVELOP CORE
BUSINESS PROCESSES
At Anglo American, our core business processes refer to the fundamentals of our work
across our entire value chain – from exploration and discovery to delivering our products
to our customers. With innovation and outstanding delivery at the forefront of how we
deliver value, the business processes we are implementing are vital to the success of
our core activities and achieving best practice across the Group.
ESTIMATED ENERGY COST SAVINGS
$90 million
WATER SAVED AS A RESULT
OF WATER-SAVING PROJECTS
ACROSS THE GROUP
23 million m3
REDUCTION IN DEMURRAGE
COSTS AT COPPER
Resulting from the implementation
of Marketing’s ISOP process
37%
For more information
See pages 25-29
THE CONCENTRATED MINE
One of the greatest challenges facing the mining industry today is how to develop and
implement step-change innovations in order to drive improved productivity and cost
performance, while minimising a mine’s total physical and environmental footprint.
Concentrate the Mine™ is an integrated mining-systems approach pioneered by
Anglo American. It integrates three enabling technologies:
• Advanced mine-to-mill uses new blasting technologies to increase plant throughput
and minimise processing costs
• Coarse particle recovery (CPR) is designed to augment advanced mine-to-mill
technologies to coarsen the grinding and to reduce energy and water consumption
while maintaining, or potentially improving, recovery
• Early-stage gangue rejection separates ore from waste before ore enters the
crushing and grinding phase. By rejecting the worthless waste rock earlier in the
process, we effectively increase the grade, while reducing processing costs as well
as water and energy consumption.
The potential benefits of these Concentrate the Mine™ techniques and technologies
are significant, with broad application across our copper, platinum and diamond
businesses. Together, they have the potential to deliver a step-change increase in
output, without incurring a similar increase in operating and capital costs, in tandem
with the prospect of greatly reduced energy and water use.
The Concentrate the Mine™ concept is being developed at the Los Bronces copper
mine in Chile. First-phase trials will be completed in the first half of 2017, and early
indications are promising. For example, even with only part-implementation of
advanced mine-to-mill technologies, we are already achieving a 7% increase in
plant throughput and an 84% reduction in blast vibrations.
PILLARS OF VALUE
Environment
Socio-political
Production
Cost
Financial
For more on pillars of value and our KPIs
See page 34
24
Concentrate the Mine™ is an integrated mining systems approach pioneered by Anglo American. It is already being developed
at our Los Bronces copper operation in Chile, and has the potential for broad application across other copper assets, as well as
our platinum and diamond businesses.
Anglo American plc Annual Report 2016
We are starting to see tangible benefits from the
roll-out of our Operating Model across our major
assets; a more stable and predictable operating
performance is leading to improved productivity
and costs, fewer environmental incidents and a fuller
understanding of our mine-to-market value chain.
Working together with all our stakeholders, we are
beginning to deliver on the full potential of our
portfolio and enhance the sustainable value we
can create for all our stakeholders.
DELIVERING VALUE THROUGH INNOVATION
By accelerating the implementation of the Operating
Model, we have made good progress at a number of our
major assets, and we now have clear foundations in place
for how we do our work.
Operating excellence remains a focus for our technical
function and we aim to continually improve our operating
standards which, in turn, helps to boost cash generation.
For example, at the Los Bronces molybdenum plant in Chile,
metal recovery has increased by more than 10 percentage
points. This performance reflected a range of technical
improvements, including improved understanding of the
mineralogy and orebody, and processing optimisation that
builds on a solid knowledge of plant capacity, allowing
stable, maximum feed through the plant.
It is essential that we continually focus on, and invest in,
innovation and technology development if we are to
find more productive, efficient and sustainable ways of
extracting value from the minerals we mine and deliver
to our customers.
Traditional means of innovating are translating into new
approaches that are more collaborative and inclusive.
Anglo American’s FutureSmart™ approach to innovation
includes bringing together stakeholders with different
perspectives to reframe challenges, produce rough
prototypes to quickly test ideas and co-create user-centred
solutions that can be adopted faster.
During 2015 and 2016, we convened FutureSmart™ Open
Forums covering four major challenges – Sustainability,
Processing, Mining, and Energy. We have also formulated
a disciplined approach to innovation implementation which
combines the exploration of long term possibilities with
pragmatic implementation activities that realise short term
value. Our unique innovation process, named ‘SmartPath’,
allows us to move quickly from new ideas to new knowledge.
It does so through a process of continuous assessment, with
the aim of achieving relatively low cost, high reward capital
expansions that can improve our position on the cost curve.
This is essential in a prevailing environment of economic
uncertainty, water scarcity and energy shortages, declining
ore grades, and a productivity decline of around one-third in
the mining industry over the past decade.
The most aspirational element of FutureSmart™ is our
ambition to make dry tailings a normal operating practice.
Water sent to tailings disposal often represents the largest
water loss at a mine. Fine particle slurries are particularly
difficult to dewater and current dry disposal options have
prohibitive capital and operating costs. We are examining
how we can reduce the cost of dewatering and are looking
at the physical and chemical properties of the fine ore
particles to understand why they cling so resolutely to
water. If successful, we have the potential to significantly
limit how much fresh water we draw, while also gaining
access to orebodies in water-stressed areas that are
critical to supplying the world’s ongoing demand for
metals and minerals.
MARKETING PRODUCTS FOR FULL VALUE
During 2016, our Marketing business made good progress
with marketing activities designed to create maximum
value across the entire value chain – from mine to customer.
These activities are designed to contribute value to the
Group in a number of ways: improving EBIT; enhancing
cash flow through tighter working capital management;
better risk- and control-management; and stimulating
sustainable demand for PGMs through a structured market
development programme.
Focusing on our principal strategic ‘levers’ to generate
additional EBIT across the Group, we continue to deliver
value through:
• Marketing excellence: continuing to build direct customer
relationships and obtain full value for our products.
Through our dedicated sales and marketing hubs in
Singapore and London, we continue to strengthen
customer focus and build on our strong relationships.
Throughout the year we sold all our equity volume
available while managing supply challenges through
proactive action such as the purchase of third party
material. Close customer relationships have seen us
explore and develop innovative propositions that have
delivered shared benefits and additional value. Marketing
excellence activities have continued to generate a large
proportion of Marketing’s value for the Group.
• Value chain optimisation: integrated sales and operations
planning (ISOP) capability to ensure we make the most
of our mineral resource in light of market conditions;
ensuring customers get the right products, at the right
time; and leveraging our logistics capabilities and
shipping services.
Our approach to planning and execution through our
ISOP activities is now established across the majority of
our commodities. This has realised specific benefits in
higher throughput, lower logistics costs, and improved
margins on qualities and quantities shipped.
25
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
DEVELOP CORE BUSINESS PROCESSES continued
EFFICIENTLY MANAGING THE
INTERFACE BETWEEN PRODUCTION
AND MARKETING
ISOP is a core element of Anglo American’s Operating
Model that is now established across the majority of our
commodities. ISOP is Marketing’s process for planning
the movement of product from the mines’ finished-goods
stockpiles to end-customer delivery. Through the ISOP
process, marketing and mine production plans are
reconciled to maximise the value of product delivery into
the market within the constraint of our supply capacity.
ISOP provides a structured framework for planning,
scheduling and execution from mine to market across
two time horizons: an 18-month Sales & Operations
(S&OP) planning horizon; and an eight-week Tactical
Planning horizon.
ISOP in action at Copper
ISOP was introduced in Copper in January 2016. The
S&OP process allowed us to assess potential risks and
opportunities beyond the two-month Tactical Planning
horizon. For example, the S&OP process typically aligns
operation and maintenance plans between our mines,
smelter and port. This year, when operations and
maintenance plans at the Chagres smelter could not be
aligned with Los Bronces’ and El Soldado’s, ISOP identified
an opportunity to source third party concentrate, thereby
optimising the smelter’s feed and financial performance.
The shorter Tactical Planning process has provided
increased visibility of the production forecast which has,
in turn, led to an improved shipping schedule, and a 37%
reduction in demurrage costs.
ISOP in action at Thermal Coal
ISOP was introduced in Thermal Coal operations in 2013.
In early 2016, the market anticipated high demand for
lower calorific value (CV) product by India. ISOP provided
the agility to react to this trend and maximise the value
presented by the recently negotiated extra rail capacity.
Through integrating production, logistics and demand
plans, ISOP enabled four South African coal mines to
supply the Indian market with low CV coal at higher yields,
realising significant additional value for our Coal business.
During the year, several other value chain optimisation
activities created additional earnings, including the further
expansion of our shipping portfolio, with linked freight
trades that yielded cost advantages and benefits relative to
stand-alone routes. It was a year when we shipped record
volumes across our bulk commodities on a CFR basis.
• Customer value proposition: through creating our own
capability to access financial and third party physical
markets, broadening the offer we make to customers.
Thermal coal trading continues to perform well and
we are therefore now active in related areas, including
price-risk management in other commodity groups.
Good progress has also been made with our PGMs market
development activities. Short term demand drivers include
the jewellery and investment sectors; while in the longer
term, we are investing in new technologies that are expected
to drive new sources of demand for PGMs – such as fuel cell
electric vehicles.
All Marketing activities are executed in an increasingly
sophisticated risk-management environment. Ensuring
the risk factors which affect marketing – including price,
credit, operational, and regulatory risks – are transparent
and comprehensively managed remains a key priority,
helping to maximise value for the Group.
Throughout the year, in addition to progress against our
levers, we made good progress on a number of enabling
projects to improve our effectiveness and efficiency, and
more importantly, set us up for future growth. These
included improving our sales operation processes and
supporting our IT systems globally.
MANAGING OUR IMPACTS ON COMMUNITIES
AND THE ENVIRONMENT
As a responsible miner, our social and legal licences to
operate stem largely from our ability to demonstrate
compliance with permitting requirements, responsible
environmental management and the equitable distribution
of the economic value generated by our operations. Our
aim is to have a net positive lasting impact on our host
communities through forming mutually beneficial
partnerships, as reflected in our vision: ‘partners in
the future’.
The principal environmental and social risks facing our
business are associated with socio-economic development,
water quality and security, climate change and extreme
weather, and mine closure. We report extensively on our
approach and performance related to these and other
material sustainability issues in our Sustainability Report.
For more information, visit
http://www.angloamerican.com/investors/annual-reporting
The Richards Bay Coal Terminal (23.2% interest held) achieved its best ever
shipping performance in 2016, while export sales at Coal South Africa were the
second highest ever recorded.
26
Anglo American plc Annual Report 2016 MITIGATING ENVIRONMENTAL IMPACTS
The past three years have shown a steady decline in the
number of environmental incidents reported, indicating
continued improvement in the management of
environmental controls across operations. In both 2015
and 2016, no Level 4 or Level 5 incidents (high impact)
were reported. During 2016, four Level 3 (medium impact)
environmental incidents were reported that resulted in no
lasting harm to the environment (2015: six Level 3).
Water
Water management is of great significance to our business
activities, given that a large proportion of our current
portfolio is located in regions with high levels of water risk.
The water related challenges faced by our sites typically
fall into three categories: water security; managing highly
variable rainfall; and mitigating the impact of mining
activities on water quality and the rights of other users.
In line with International Council on Mining and Metals
(ICMM) guidance, we have developed a new water
management standard in partnership with our regional
stakeholders, which has a more focused and structured
approach to managing basin-wide water risks. We are
working towards more ambitious water savings targets
for 2020, which include reducing our absolute freshwater
intake by 20% and recycling/re-using water for 75% of
our water requirements.
Water security across the Group has improved, with eight
sites reporting water shortages during 2016, down from
11 sites in 2015. Continued drought conditions and water
restrictions in South Africa and possible shortages in
Minas Gerais State in Brazil, however, may increase water
scarcity risk in the future.
In South Africa, our Platinum business has started modelling
water supply scenarios for the next 20 years for each of its
water stressed operations, where there are rapidly growing
demands for water to support agricultural, mining, industrial
and domestic consumption. In Limpopo province, the
business has developed a bulk-water strategy and
infrastructure plan to safeguard long term water availability
for its operations and surrounding communities. Since a
high number of our assets are in southern Africa, we have
developed a collaborative water strategy for the region,
which will be launched in 2017.
In Chile, our Los Bronces copper mine continues to
mitigate water supply challenges by implementing technical
solutions that promote water efficiency and water resilience.
The site has reduced its water consumption by 20% from
0.69 m3/tonne of ore to around 0.54 m3/tonne. During 2016,
additional technical solutions were identified that could
reduce operational water consumption further.
Water saving projects saved the Group a further
23 million m3 of water in 2016 (2015: 25 million m3).
Anglo American’s total new-water consumption decreased
by 14% from 222 million m3 in 2015 to 191 million m3 in
2016. The decrease was primarily due to divestments and
efficiency measures.
Total water consumed against business as usual
2012–2016
Million m3
250
200
150
100
50
0
2012
2013
2014
2015
2016
Water consumed in ongoing business
Water consumed by divested businesses
Water savings
Climate change and energy
In April 2016, the Board supported a special resolution
proposed by a group of shareholders that was then passed
by shareholders at the AGM, in support of strategic climate
resilience for 2035 and beyond. The resolution was
prepared by the ‘Aiming for A’ coalition of institutional
investors, and seeks a step change in companies’ disclosure
to investors on how they measure and manage climate
change risks and opportunities to their businesses. Further
information on our response to the resolution is available in
the Anglo American Sustainability Report.
Our climate change strategy is designed to safeguard the
business and host communities against climate change
risks, and to contribute to mitigating global greenhouse gas
(GHG) emissions. We expect that climate change will affect
our business in three principal ways: climate regulation and
taxation will have a financial impact; demand for PGMs and
copper – critical products in enabling alternative energy
technologies – will increase, while demand for thermal coal
will decrease over the long term; and the physical and social
impacts of a changing climate may affect our operations and
host communities.
We anticipate a range of carbon pricing and offset/
incentive policies to emerge in all our operating
geographies. Carbon pricing scenarios are factored into
project investment decisions and climate change risk
and adaptation assessments have been conducted at
vulnerable operations.
Progress on operational energy and carbon performance
is driven through our energy- and carbon-management
programme, ECO2MAN. In 2015, the Group set new
reduction targets for 2020, including: 8% for energy and
22% for GHG emissions, with 2015 set as the base year.
These were agreed in the context of capital constraints and
market complexities and uncertainties, and are subject to
divestments and significant business changes.
27
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
DEVELOP CORE BUSINESS PROCESSES continued
Total energy consumed against business as usual
2012–2016
Million GJ
140
120
100
80
60
40
20
0
2012
2013
2014
2015
2016
Energy consumed in ongoing business
Energy consumed by divested businesses
Energy savings
Total GHG emissions against business as usual
2012–2016
Million tonnes CO2e
25
20
15
10
5
0
2012
2013
2014
2015
2016
GHGs emitted in ongoing business
GHGs emitted by divested businesses
GHGs savings
In 2016, our ECO2MAN energy- and GHG-reduction
programme prevented 4.5 million tonnes of CO2-equivalent
(MtCO2e) emissions from entering the atmosphere. By year
end, a total of 320 ECO2MAN and business improvement
projects had accounted for estimated energy savings of
5.8 million GJ, representing energy cost savings of
approximately $90 million. Performance is driven through
the implementation of discrete projects that reduce energy
and emissions intensity at the operations concerned.
In 2016, Anglo American operations were responsible for
17.8 Mt CO2e (2015: 18.3 Mt CO2e). The Group’s total
energy consumption was 105 million GJ (2015: 106 million
GJ). Total energy used decreased slightly (1%), while GHG
emissions fell by 3% when compared with 2015. A large
increase in energy consumption at Barro Alto in Brazil
following the furnaces’ rebuild (around 7 million GJ) was
offset by lower consumption across most other businesses
owing to divestments, efficiency measures and operational
changes. The reduction in GHG emissions was a result
of divestments, lower electricity emissions factors in
Brazil and South Africa, and GHG mitigation projects.
Tailings storage facilities
Tailings storage facilities are classified as one of our
top 10 major risks and are subject to a rigorous risk
management programme.
In February 2014, we began implementing a new mineral
residue management technical standard, to be fully
implemented by the end of 2017, for tailings and water
retaining dams. Most businesses are phasing in the new
standard and its requirements ahead of schedule.
During 2016, we completed a comprehensive inventory
of, and updated risk tables for, all the containment facilities
in Anglo American (90 tailings storage facilities and
213 water containment structures). Critical controls at
facilities are audited internally on a rotational basis and each
of the businesses is addressing identified priority issues.
External technical review panels are being established for
our mineral residue facilities to undertake independent
reviews, and are already in place at several of our operations.
PARTNERS IN THE FUTURE
As a major mining company, with the great majority of our
operations in developing markets, we are committed to
supporting our host governments to achieve social
development goals. We endeavour to design and execute
our projects according to the highest social standards, and
to ensure our presence in host countries leaves a positive
lasting legacy.
Our drive to manage social impacts and enhance positive
benefits to communities is influenced significantly by
growing legal and regulatory requirements, as well as
by evolving societal and stakeholder expectations. This
has highlighted the growing strategic significance of
environmental, social and governance issues, and
emphasised the important business benefits in building
trusted and constructive relationships across stakeholder
groups. This is essential to effectively manage social risks,
maintain and strengthen our socio-political licence to
operate, and support business milestones to achieve our
vision of becoming ‘partners in the future’.
Managing our social impacts
Inclusive stakeholder engagement underpins our approach
to respecting human rights and to responding to legitimate
stakeholder aspirations and concerns.
Our Social Way defines Anglo American’s governing
framework for social performance. It provides clear
requirements for all Anglo American-managed sites to
ensure that policies and systems are in place to engage
with affected communities; to avoid, prevent and mitigate
adverse social impacts; and to optimise development
opportunities. Each site is assessed annually against the
Social Way requirements and is required to implement
an improvement plan for requirements that are not met
in full; progress is monitored at executive level on a
quarterly basis.
28
Anglo American plc Annual Report 2016
Our industry-leading Socio-Economic Assessment Toolbox
(SEAT) is used to improve operations’ understanding of
their positive and negative socio-economic effects,
enhance stakeholder dialogue and the management of
social issues, build our ability to support local socio-
economic development, and foster greater transparency
and accountability.
Through our responsible sourcing programme, we aim to
ensure that the goods and services we procure do not cause
harm to individuals or the natural environment.
Social instability leading to community unrest remains a
particular challenge in South Africa, and particularly for
our operations in Limpopo province. To address this, we
continue to seek to engage and work collaboratively with
employees, trade unions and the South African government,
and with communities around our mines. We have placed a
particular strategic focus on mitigating social conflict and
promoting socio-economic development across Limpopo.
Optimising the benefits of mining
Our strategic focus is on improving the productivity of local
markets and public institutions to support sustainable job
creation and effective public service delivery. Our integrated
approach is concentrated on promoting local and
preferential procurement, enterprise development and
workforce development, working with local institutions to
strengthen their capacity, maximise the socio-economic
benefits from our own infrastructure, and deliver social
investment that supports those most in need.
This approach is most advanced at our South American
operations, where we believe that our leading socio-
economic development initiatives are a driver of competitive
advantage. This is recognised in the $2 million of grant
funding secured from the Inter-American Development
Bank to expand our integrated enterprise and supplier
development programmes in the region.
Our focus on leveraging our core business activities and
skills in collaboration with expert partners, enables us to
have a significantly greater positive impact on host
communities at a much lower cost than conventional
social investment-led approaches.
Global expenditure by country
South Africa
Peru
Chile
Brazil
Canada
Namibia
Botswana
United Kingdom
Rest of World
Australia
Total
$ million
40.1
13.6
10.3
9.9
4.9
3.0
1.0
0.8
0.3
0.2
84.1
%
48
16
12
12
6
4
1
1
–
–
In 2016, 23% ($2.0 billion) of supplier expenditure was
with host communities (2015: $1.8 billion, 17%), while our
enterprise development programmes in Botswana, Brazil,
Chile, South Africa and Peru supported 62,447 businesses
and created/sustained 116,298 jobs.
In 2016, Anglo American’s corporate social investment
(CSI) expenditure in local communities, including by the
Anglo American Chairman’s Fund and Zimele, totalled
$84.1 million (2015: $124.1 million). This figure represents
2.5% of underlying EBIT, less underlying EBIT of associates
and joint ventures.
Responsible mine closure and divestment
We design, plan and operate our mines with closure in
mind, and plan for ‘post-closure’ long term sustainability in
consultation with communities and other stakeholders. In
doing so, we aim to reduce long term risks and liabilities to
our business from an environmental and socio-economic
perspective, and to ensure that we leave a positive legacy
when our mines conclude their operational lives.
Our Mine Closure Toolbox provides a structured approach
to closure planning and management. It is aimed at ensuring
that the full spectrum of opportunities, risks and liabilities is
effectively identified, that plans are fully costed, and that
financial provision is made for premature closure.
When operations are divested or placed onto care and
maintenance (C&M) there are impacts on employees,
communities and the environment. Our aim is to divest
businesses responsibly by ensuring that new owners are
credible and ethical, that liabilities are fully transparent,
and that our legal and other social and environmental
commitments are honoured. Efforts around mitigating
the effects of C&M focus on stakeholder engagement,
mitigating job losses and wider social impacts, and ongoing
environmental care and monitoring.
Global expenditure by type
Community
development
$ million
50.9
Education and training
15.0
Water and sanitation
Health and welfare
Other
Sports, art, culture
and heritage
Institutional
capacity development
Environment
Disaster and
emergency relief
Energy and
climate change
5.3
5.1
3.0
2.2
1.8
0.6
0.1
0.1
Total
84.1
%
60
18
6
6
4
3
2
1
–
–
29
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
DELIVER A HIGH
PERFORMANCE CULTURE
We foster a high performance culture through building an organisation where
our operations and functions are structured to maximise the effectiveness of the
Anglo American Operating Model, resourcing the Group with capable people and
designing reward structures that differentiate performance without compromising
our values or the health and safety of our employees.
HEADCOUNT(1) REDUCTION – DRIVEN
MAINLY BY ASSET DISPOSALS
CENTRE FOR EXPERIENTIAL LEARNING
32,500
REDUCTION IN RECORDABLE
INJURY FREQUENCY RATE
24%
REDUCTION IN OCCUPATIONAL
DISEASES REPORTED
32%
For more information
See pages 31-33
Anglo American’s Centre for Experiential Learning (CEL) is a state of the art facility
in Johannesburg, focused on embedding business improvement across the Group.
The CEL delivers programmes comprised of business improvement processes,
tools and techniques that aim to achieve stable and capable processes that reduce
variability and waste; and in coaching and facilitation skills to improve project
execution. The courses are designed to support the roll-out of Anglo American’s
Operating Model and are aligned with technical and safety training initiatives to
improve efficiency and effectiveness of individual and team development.
Both areas of work play a vital role in the delivery of Anglo American’s strategy,
helping to develop core business processes and deliver a high performance culture.
Learning is achieved through experiential activities related to the particular
improvement initiative the delegate is working on. Participants are expected to reflect
on the activity, develop a theory and then conduct experiments to test the theory’s
validity before attempting to initiate a solution, i.e. doing, reflecting, investigating,
validating and then practising to enhance performance, with the assistance of an
experienced business improvement coach. This approach provides employees with
tangible skills and outcomes which can be effectively applied to real work processes
and individual and team development.
In 2016, the CEL continued to support the Group in the delivery of its strategy and
development of our people. In total, business improvement training – including
inter-personal skills and Operating Model training – was conducted with more than
1,500 employees. These employees attended more than 90 events, representing
teams from across the business – in both functional and operational areas – totalling
more than 3,000 training days.
The focus for the CEL in 2017 will be to continue to support the roll-out of the Operating
Model and collaborate with sites on leading business improvement practices.
TO BE UPDATED
PILLARS OF VALUE
Safety and Health
People
For more on pillars of value and our KPIs
See page 34
(1)
Includes employees and contractors from subsidiaries and
operations over which Anglo American has management
control; it does not include independently managed operations,
such as Cerrejón and Samancor.
30
Anglo American’s Centre for Experiential Learning in Johannesburg offers a unique adult-learning business environment
designed to drive business improvement throughout the Group.
Anglo American plc Annual Report 2016
MANAGING TALENT AND DEVELOPING SKILLS
Building capability
Equipping Anglo American with an engaged and productive
workforce is essential for our success. In assessing
capability, we consider technical skills and knowledge that
have been acquired through experience and practice; mental
processing ability; social process skills; and application
(the degree of drive and commitment a person displays).
We continue to invest in developing a pipeline of future
talent. As part of that process, we provide development
and training opportunities to our managers and workforce,
which are vital in encouraging our people to grow in their
work. We have a range of external and internal development
programmes in use across the Group, investing more
than $73 million on training in 2016. In an increasingly
competitive market for skills, we continue to invest in
developing a pipeline of future talent through our support
of 2,700 graduates, bursars, apprentices and trainees.
Anglo American has numerous initiatives focused on
supporting education and development, from schools
through to tertiary institutions, as well as programmes
targeted at building skill and leadership capability. In
South Africa, the 2016 South African Graduate Employers
Association (SAGEA) survey recognised Anglo American as
the Employer of Choice in the South African Mining Sector
for the fifth consecutive year.
Diversity
Anglo American embraces diversity. We seek a workforce
that represents the regions within which we operate and we
provide opportunities for broader development within those
regions. A diverse workforce brings greater diversity of
thought to tackle the challenges we face. We continually
develop our workforce so that we will have this diversity
among our leaders of the future. By year end, women made
up 18% of our overall workforce (2015: 18%) and 25% of
managers (2015: 25%).
In our South African operations, we continue to promote
transformation. By year end, 62% of our management
comprised historically disadvantaged South Africans
(2015: 60%).
Encouraging sound industrial relations
Approximately 75% of our current permanent workforce
is represented by works councils, trade unions or other
similar bodies, and covered by collective bargaining
agreements. We continue to seek to improve relations with
our employees and their representative bodies, and have
consulted widely with unions throughout our restructuring
process. In total, in 2016, there were four instances of
industrial action lasting longer than a week.
As Anglo American’s portfolio evolves, we continue
to create a leaner and more effective business that is
built around strong, product-focused operating units,
supported by functions that provide value-adding
expert leadership, improve business performance
and ensure effective governance.
ORGANISATION DESIGN THAT ENHANCES
BUSINESS PERFORMANCE
During 2016, we continued the review of our organisation
to structure work more effectively, establish clear
accountabilities and authorities, and remove role
duplication. The review has taken place in line with the
principles of the Operating Model, which has been rolled
out at nine of our operations. As we implement the
Operating Model, we are adapting our operational
structures in order to derive maximum benefit from its
design. We are also reshaping our corporate functions to
maximise the value of the relationships that exist between
functions and operations, while reducing costs.
The resultant design, known as the Functional Model,
intends functions to become more cohesive, for their work
to become more integrated and for functions to have a
higher level of accountability for business outcomes.
In practice, this means that, rather than having support
staff based within, and supporting, individual business
units or operations, each function is accountable for
providing the Group with the most effective support
and delivering it in the most cost-effective manner.
This new Functional Model is delivering benefits through
our ability to:
• better promote the sharing of resources and the
dissemination of best practice
• bring consistency and the highest level of functional
expertise to all business units and their operations
• support the development and retention of highly capable
people by creating career paths and opportunities that go
beyond the boundaries of a single site or business unit.
While the primary focus has been on designing our functions
to maximise the value they can provide, the streamlining of
the Group’s portfolio has also required the size of corporate
structures and overheads to be reviewed to ensure they
remain fit for purpose.
At year end, Anglo American’s total headcount was 95,000,
a reduction of 32,500 people from 2015. This was largely
driven by the divestment of the Rustenburg platinum
operations, the niobium and phosphates business,
De Beers’ Kimberley Mines and the Foxleigh and Callide
coal assets in Australia, in addition to staff reductions across
the entire portfolio. The number of people working in
indirect roles (that is, not directly involved in production)
across the Group reduced from 11,500 to 8,700, as our
support functions were rightsized in line with asset
divestments. We will continue to review the size of our
support structures as the portfolio evolves over time.
31
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT STRATEGIC IMPERATIVE
DELIVER A HIGH PERFORMANCE CULTURE continued
Supporting labour rights
As expressed in our Human Rights Policy, and as
signatories to the United Nations Global Compact, we
are committed to the labour rights principles set out in
the International Labour Organization core conventions,
including the right to freedom of association and collective
bargaining, the eradication of child and forced labour
and non-discrimination. Observance of these rights is
required of all our operations, irrespective of location,
as well as for suppliers.
REWARD STRUCTURES WHICH
DIFFERENTIATE PERFORMANCE
A high performance organisation hinges on strong
leadership from line managers and a culture centred
on rewarding successful business outcomes. It is critical
that we provide appropriate remuneration to attract,
retain and motivate the right calibre of employee,
wherever we operate.
We implement a performance management and
remuneration framework that is designed to reward our
people on the basis of their performance, giving equal
emphasis to delivery and behaviour through short term
incentives. Our structured performance management
and appraisal process is geared to support a values-driven,
high performance culture.
Senior leaders within the organisation are incentivised
with longer term awards which are provided upon meeting
predetermined objectives that are in line with those of
shareholders.
In total, 15% of employees receive formal performance
and development reviews.
Code of conduct
In 2016, Anglo American launched a new Code of Conduct,
which encapsulates what we stand for as a company. While
we focus on building a results-focused culture (the ‘what’),
we will not be compromised on our values in doing this (the
‘how’). The Code of Conduct explains the boundaries within
which we must work every day and brings together in one
place our material ethical principles and policies. It has at
its core our shared values, which describe how we must
behave consistently to continue to earn the trust that gives
us our licence to operate.
EMPLOYEE SAFETY AND HEALTH
Protecting the safety and health of employees and
contractors at work is one of the most fundamental
human rights issues facing Anglo American and other
mining companies. While protecting our workforce from
harm is a moral imperative for us, our focus on ‘zero harm’
also constitutes a direct investment in the productivity of
the business. A safe and healthy workforce contributes to
an engaged, motivated and productive workforce that
prevents operational stoppages, and reduces potential
legal liabilities.
Ensuring a safe working environment
The safety, health and well-being of our employees are a
top priority and a core value at Anglo American. We strive to
achieve our goal of zero harm by managing our activities in
a way that eliminates incidents, minimises risk and promotes
excellence in the performance of our operations.
The Group’s safety performance is at the front end of the
agenda at every Board meeting. Safety performance
measures form part of the incentive-based remuneration
for all senior executives.
In 2016, we regret to report that 11 employees and
contractors lost their lives in work-related activities at
operations managed by Anglo American. Seven of the
fatalities were at our Platinum operations in South Africa.
Eleven fatalities represents a very disappointing increase
compared with the six lives lost in 2015.
Any loss of life is unacceptable and we remain unwavering
in our commitment to achieving our vision of zero harm.
Throughout 2016, we strengthened our control
improvement programme by placing an emphasis on the
effective management and use of critical controls. The
programme is supported by the work management
elements of our Operating Model. This work will continue
during 2017, with the aim of achieving a consistent approach
and standard across all our sites.
Our ongoing focus on ensuring safety in the workplace
was positively reflected by a 24% decrease in our total
recordable case frequency rate, compared with 2015. While
there was a decrease in the number of regulatory stoppages
at Platinum, the extent of those was wider and resulted in an
increase in production losses.
For each incident resulting in loss of life or a critical injury, an
independent investigation is conducted to understand the
causes and remedial actions required. The lessons learnt
from each are shared via our Group Learning from Incidents
process and discussed at Board Sustainability Committee,
executive and site management levels. Particular emphasis
is placed on ensuring that actions relating to critical controls
are implemented in a timely manner to prevent repeats.
Our operations continue to increase and improve reporting
of, and learning from, high potential incidents (HPIs) as a
preventative tool to improve safety performance. This has
now been extended to include high potential hazards, as
this allows gaps or control failures to be identified, and
addressed, before an incident occurs. Transportation, falls
of ground, moving machinery and isolation/lock-out remain
the main areas where HPIs occur.
Our safety strategy and management approach is risk-
based and concentrates on integrating safe working
practices into every aspect of what we do. It is founded on
three key principles: a mindset of zero harm; no repeats;
and the application of simple, non-negotiable standards.
During 2016, we added further impetus to critical control
management and strengthening Visible Felt Leadership
across the Group. These will remain priorities in 2017 and
will be supported by additional programmes to further
strengthen leadership and accountability for safety at
every level.
32
Anglo American plc Annual Report 2016 Promoting health and well-being
Effective management of health risks protects our people,
enhances productivity and is essential in minimising
potential long term liabilities, as well as being critical in
maintaining our licence to operate. Extending our health
promotion activities to the broader community also
supports our internal health drive in line with our values
of care and respect
In 2016, the number of employees reported to be working
in environments with noise levels in excess of the eight-hour
exposure limit of 85 dB(A) reduced considerably to 26,280
(2015: 40,869) following the divestment of Platinum’s
Rustenburg mines. The number of employees reported to
be working in environments where they were potentially at
risk of exposure to inhalable hazards at levels in excess of
the relevant occupational exposure limits also decreased to
3,705 (2015: 5,225).
While we have intensive programmes in place to ensure that
employees and contractors working in such environments
are trained to use personal protective equipment, our focus
is on addressing the source of occupational health risk.
Our overall approach to occupational hygiene is aligned with
the Anglo American Operational Risk Management (ORM)
process, which requires that operations identify health risks,
implement controls to mitigate those risks, monitor the
effectiveness of controls, and learn from incidents in order
to prevent repeats. We continue to focus on rolling out our
health-critical control management process to facilitate
proactive engineering and operational control solutions.
Targets for the implementation of the ORM influence the
performance-based remuneration of senior executives.
In 2016, the number of reported health incidents, which
signify failing controls of health-hazard management
systems, decreased significantly across all levels,
indicating good progress in health-hazard prevention
and control measures.
The number of new cases of occupational disease
reported was 111 (2015: 163). The reduction in absolute
numbers was largely a result of continuing progress
towards eliminating noise-induced hearing loss.
Anglo American has recorded no cases of silicosis owing
to exposure at our operations since 2011. However, despite
the significant year-on-year decrease last year, we continue
to report cases of coal workers’ pneumoconiosis. Such
cases are thoroughly investigated to better understand
their causes, including the past and current occupational
exposure profiles of those who become ill, as well as the
potential sources of coal dust in the workplace. Our Coal
business has set an objective with respect to exposure
to coal dust of zero instances exceeding the permitted
occupational exposure limit, and is introducing a number
of initiatives in the year to help achieve this objective.
Through the industry work group that was formed by
Anglo American and other South African mining peers, we
continue to address issues relating to compensation and
medical care for occupational lung disease in the gold
mining industry in South Africa.
Total number of fatal injuries and fatal injury
frequency rate 2012–2016
Fatalities
15
10
5
0
2013
2014
2015
2016
2012
FIFR
Fatalities
Lost time injuries, medical treatment cases and
total recordable case frequency rate 2012–2016
FIFR
0.008
0.007
0.006
0.005
0.004
0.003
0.002
0.001
0
2,500
2,000
1,500
1,000
500
0
2012
2013
2014
2015
2016
Lost-time injuries
Medical treatment cases
TRCFR
TRCFR
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0
33
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT KEY PERFORMANCE INDICATORS
KEY PERFORMANCE
INDICATORS
PILLARS OF VALUE
KEY PERFORMANCE INDICATORS (KPIs)(1)
Safety and Health
To do no harm to our people.
For more information, see
Deliver a high performance
culture on page 30
Work related fatal injury frequency rate (FIFR)
FIFR is the number of employee or contractor fatal
injuries due to all causes per 200,000 hours worked.
New cases of occupational disease (NCOD)
Number of new cases of occupational disease diagnosed
among employees during the reporting period.
Total recordable case frequency rate (TRCFR)
TRCFR is the number of fatal injuries, lost time injuries
and medical treatment cases for both employees and
contractors per 200,000 hours worked.
RESULTS AND TARGETS
Environment
To minimise our
environmental footprint.
For more information, see
Develop core business
processes on page 24
Energy consumption
Measured in million gigajoules (GJ).
Greenhouse gas (GHG) emissions
Measured in million tonnes of CO2 equivalent emissions.
Total new water consumed
Total new water entering the operation which is used for
the operation’s primary activities, measured in million m3.
Level 3-5 environmental incidents
Those environmental incidents that we consider to
have prolonged impacts on the local environments.
Energy consumption(2)
Million GJ total energy used
Target: 8% saving by 2020 vs. 2015
GHG emissions(2)
Mt CO2 -equivalent
Total new water consumed(2)
Mm3 new water consumed
Target: 22% saving by 2020 vs. 2015
Target: 20% saving by 2020 vs. 2015
Level 3-5 environmental
incidents(2)
Target: Year-on-year reduction
2016
2015
105
106
2016
2015
17.8
18.3
2016
2015
191
222
2016
2015
4
6
Socio-political
To partner in the benefits of mining
with local communities and
governments.
For more information, see
Develop core business
processes on page 24
Social Way Implementation
Our Social Way defines Anglo American’s governing
framework for social performance. Each operation’s
compliance with the Social Way requirements is
assessed annually, with every operation required to
implement an improvement plan for those relevant
requirements that are not met in full.
Social Way assessment scores 2015–2016*
0%
1%
16%
33%
Serious non-
compliance
Moderate non-
compliance
51%
46%
Compliant
26%
16%
Good
practice
7%
4%
Best
practice
2016
2015
* Social Way assessment scores for 2015 did not include
De Beers’ joint venture operations in Namibia and Botswana;
however, these sites have been included in the 2016
assessment scores. The 2015 and 2016 data does not
include operations that were divested, closed, or for which
sale agreements were concluded during the period. Sites
targeted for divestment were granted exemptions on
selected requirements; these requirements were not
assessed during 2016.
People
To create sustainable, competitive
advantage through capable people
in an effective, performance-driven
organisation.
For more information, see
Deliver a high performance
culture on page 30
Production
To sustainably deliver valuable
product to our customers.
For more information, see
Group Financial Review on page 36
Voluntary labour turnover
Number of permanent employee resignations
as a percentage of total permanent employees.
Gender diversity
Percentage of women, and female managers, employed
by the Group.
Voluntary labour turnover(2)
Gender diversity(2)
Gender diversity(2)
Women as a percentage of management
Women as a percentage of total workforce
South Africa transformation
Percentage of management in South Africa comprised
of historically disadvantaged South Africans (‘HDSAs’).
2016
2015
2.2%
1.9%
2016
2015
25%
25%
2016
2015
18%
18%
Production volumes
Production volumes for the year are discussed at
a commodity level within each business unit section
of the Annual Report (see pages 46-64).
The Group production variance shown is based on copper
equivalent production. Quarterly production figures are
shown on page 194.
Production change
% change vs. 2015
Group (copper equivalent)(3) 2%
Cost
To be competitive by operating
as efficiently as possible.
For more information, see
Group Financial Review on page 36
Unit costs of production◊
Unit costs of production are discussed at a commodity
level within each business unit section of the annual
report (see pages 46-64). The Group cost variance shown
is based on copper equivalent unit cost of production.
Other factors that impact costs across the Group are
discussed in the Group Financial Review (see page 36).
Financial
To deliver sustainable returns
for our shareholders.
For more information, see
Group Financial Review on page 36
Attributable ROCE◊
The return on adjusted capital employed attributable to
equity shareholders of Anglo American. It excludes the
portion of the return and capital employed attributable
to non-controlling interests in operations where
Anglo American has control but does not hold 100%
of the equity. It is calculated as annualised underlying
EBIT divided by adjusted capital employed.
Underlying earnings per share◊
Underlying earnings are net profit attributable to equity
shareholders, before special items and remeasurements.
Attributable free cash flow◊
The cash flow generated from operations less total capital
expenditure, cash tax paid, net interest, dividends paid to
minority interests and dividends from associates and joint
ventures. The metric also excludes the receipt of disposal
proceeds and the payment of the plc dividend.
(1) Detailed definitions and calculation methodology are given on pages 186-190.
(2) The results and targets in the KPI table above include subsidiaries and joint operations over which Anglo American has management control.
34
(5)% De Beers
Nickel
47%
0% Coal
Platinum (produced ounces)
2%
(8)%
Kumba
(19)%
Copper
Iron Ore Brazil
76%
Group unit cost movements – US$ nominal basis
% change vs. 2015
(9)%
Group (copper equivalent)(3)
(11)%
Copper
(7)% Coal – Australia and Canada
(19)%
De Beers
(19)%
Nickel
(13)%
Coal – South Africa
(12)%
Platinum
(13)%
Kumba
Group attributable ROCE◊
Underlying EPS◊
Attributable free cash flow◊
2016
2015
5%
11%
2016
2015
$0.64
$(982) million
2015
$1.72
2016
$2,562 million
Anglo American plc Annual Report 2016
PILLARS OF VALUE
KEY PERFORMANCE INDICATORS (KPIs)(1)
Safety and Health
To do no harm to our people.
For more information, see
Deliver a high performance
culture on page 30
Work related fatal injury frequency rate (FIFR)
FIFR is the number of employee or contractor fatal
injuries due to all causes per 200,000 hours worked.
New cases of occupational disease (NCOD)
Number of new cases of occupational disease diagnosed
among employees during the reporting period.
Total recordable case frequency rate (TRCFR)
TRCFR is the number of fatal injuries, lost time injuries
and medical treatment cases for both employees and
contractors per 200,000 hours worked.
RESULTS AND TARGETS
FIFR(2)
Target: Zero fatal incidents
TRCFR(2)
Target: 10% year-on-year reduction
The ultimate goal of zero harm remains
NCOD(2)
Target: Year-on-year reduction
2016
2015
11fatalities, 0.007 FIFR
6 fatalities, 0.004 FIFR
2016
2015
0.71
0.93
2016
2015
111
163
Environment
To minimise our
environmental footprint.
For more information, see
Develop core business
processes on page 24
Energy consumption
Measured in million gigajoules (GJ).
Greenhouse gas (GHG) emissions
Total new water consumed
Total new water entering the operation which is used for
the operation’s primary activities, measured in million m3.
Measured in million tonnes of CO2 equivalent emissions.
Level 3-5 environmental incidents
Those environmental incidents that we consider to
have prolonged impacts on the local environments.
Energy consumption(2)
Million GJ total energy used
Target: 8% saving by 2020 vs. 2015
GHG emissions(2)
Mt CO2 -equivalent
Target: 22% saving by 2020 vs. 2015
Total new water consumed(2)
Mm3 new water consumed
Target: 20% saving by 2020 vs. 2015
Level 3-5 environmental
incidents(2)
Target: Year-on-year reduction
2016
2015
105
106
2016
2015
17.8
18.3
2016
2015
191
222
2016
2015
4
6
Socio-political
Social Way Implementation
To partner in the benefits of mining
with local communities and
governments.
For more information, see
Develop core business
processes on page 24
Our Social Way defines Anglo American’s governing
framework for social performance. Each operation’s
compliance with the Social Way requirements is
assessed annually, with every operation required to
implement an improvement plan for those relevant
requirements that are not met in full.
Social Way assessment scores 2015–2016*
0%
1%
16%
33%
Serious non-
compliance
Moderate non-
compliance
51%
46%
Compliant
26%
16%
Good
practice
7%
4%
Best
practice
2016
2015
* Social Way assessment scores for 2015 did not include
De Beers’ joint venture operations in Namibia and Botswana;
however, these sites have been included in the 2016
assessment scores. The 2015 and 2016 data does not
include operations that were divested, closed, or for which
sale agreements were concluded during the period. Sites
targeted for divestment were granted exemptions on
selected requirements; these requirements were not
assessed during 2016.
Voluntary labour turnover
Number of permanent employee resignations
as a percentage of total permanent employees.
Gender diversity
by the Group.
Percentage of women, and female managers, employed
Voluntary labour turnover(2)
Gender diversity(2)
Women as a percentage of management
Gender diversity(2)
Women as a percentage of total workforce
South Africa transformation
South Africa transformation – HDSAs
as a percentage of management
South Africa transformation
Percentage of management in South Africa comprised
of historically disadvantaged South Africans (‘HDSAs’).
2016
2015
2.2%
1.9%
2016
2015
25%
25%
2016
2015
18%
18%
2016
2015
62%
60%
Production
Production volumes
Production volumes for the year are discussed at
The Group production variance shown is based on copper
a commodity level within each business unit section
equivalent production. Quarterly production figures are
of the Annual Report (see pages 46-64).
shown on page 194.
Production change
% change vs. 2015
Group (copper equivalent)(3) 2%
(19)%
Copper
Iron Ore Brazil
76%
(5)% De Beers
Nickel
47%
0% Coal
Platinum (produced ounces)
2%
(8)%
Kumba
Group unit cost movements – US$ nominal basis
% change vs. 2015
(9)%
Group (copper equivalent)(3)
(11)%
Copper
(7)% Coal – Australia and Canada
(19)%
De Beers
(19)%
Nickel
(13)%
Coal – South Africa
(12)%
Platinum
(13)%
Kumba
Group attributable ROCE◊
Underlying EPS◊
Attributable free cash flow◊
2016
2015
5%
11%
2016
2015
$1.72
2016
$2,562 million
$0.64
$(982) million
2015
(3) Copper equivalent is normalised for the sale of Anglo American Norte (Copper), Kimberley Mines (De Beers), the niobium and phosphates business,
Foxleigh and Callide (Coal) and to reflect Snap Lake (De Beers) being placed onto care and maintenance, and the closure of Drayton (Coal).
35
People
To create sustainable, competitive
advantage through capable people
in an effective, performance-driven
organisation.
For more information, see
Deliver a high performance
culture on page 30
To sustainably deliver valuable
product to our customers.
For more information, see
Group Financial Review on page 36
Cost
To be competitive by operating
as efficiently as possible.
For more information, see
Group Financial Review on page 36
To deliver sustainable returns
for our shareholders.
For more information, see
Group Financial Review on page 36
Unit costs of production◊
Unit costs of production are discussed at a commodity
Other factors that impact costs across the Group are
level within each business unit section of the annual
discussed in the Group Financial Review (see page 36).
report (see pages 46-64). The Group cost variance shown
is based on copper equivalent unit cost of production.
Financial
Attributable ROCE◊
Underlying earnings per share◊
The return on adjusted capital employed attributable to
Underlying earnings are net profit attributable to equity
equity shareholders of Anglo American. It excludes the
shareholders, before special items and remeasurements.
portion of the return and capital employed attributable
to non-controlling interests in operations where
Anglo American has control but does not hold 100%
of the equity. It is calculated as annualised underlying
EBIT divided by adjusted capital employed.
Attributable free cash flow◊
The cash flow generated from operations less total capital
expenditure, cash tax paid, net interest, dividends paid to
minority interests and dividends from associates and joint
ventures. The metric also excludes the receipt of disposal
proceeds and the payment of the plc dividend.
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT GROUP FINANCIAL REVIEW
GROUP FINANCIAL
REVIEW
Operating profit of $1.7 billion increased
by $5.8 billion (2015: $4.1 billion loss)
while underlying EBITDA increased by
25% to $6.1 billion.
Anglo American reported a profit for the financial year
attributable to equity shareholders of $1.6 billion (2015:
$5.6 billion loss) with underlying earnings of $2.2 billion
(2015: $0.8 billion). Net debt decreased by $4.4 billion
to $8.5 billion (2015: $12.9 billion). During 2016, the
company did not pay a dividend (2015: $0.32 per share).
Although average prices decreased by 3%, realised prices
were comparable with 2015. Metallurgical coal and Kumba’s
iron ore prices increased by 24% and 21%, respectively, but
were offset by a 10% decrease in the average realised rough
diamond price and an 8% decrease in the platinum US dollar
basket price. Weaker producer country currencies favourably
contributed to earnings ($0.7 billion impact), driven
principally by a 15% weakening of the South African rand
against the dollar.
Higher sales volumes at De Beers, following a weaker 2015,
materially benefited underlying EBITDA, as did the ramp-up
at Grosvenor following the start of commercial production
during the third quarter, and a strong plant performance
at Collahuasi. This was partially offset by expected lower
volumes at Kumba Iron Ore following the pit reconfiguration
at Sishen, and lower volumes at Los Bronces owing to
expected lower grades and the adverse weather conditions
during the year.
OPERATIONAL PERFORMANCE
Overall, operational performance was maintained
across the business. Total platinum production (metal
in concentrate) was 2% higher, driven by a continued
strong performance at Mogalakwena and Amandelbult
in South Africa and at Unki in Zimbabwe. Rough diamond
production decreased by 5%, reflecting the decision taken
in 2015 to reduce production in response to prevailing
trading conditions. In South Africa, iron ore production at
Sishen decreased by 10%, in line with the mine’s lower-cost
pit configuration. Production was affected by restructuring,
as well as a higher number of rainfall and safety stoppages.
Production in the second half showed considerable
improvement as the benefits attributable to improved mining
productivity, as well as access to low strip ratio ore and
higher plant yields, started to be realised. In Chile, copper
production at Los Bronces was 24% lower as the operation
faced a number of challenges, driven by significantly lower
expected grades, adverse weather conditions and illegal
industrial action by contractor unions. In contrast, both
Collahuasi and El Soldado had strong performances,
with attributable production increasing by 11% and 31%,
respectively, as a consequence of operational improvements
and higher grades. Total production from Coal South Africa’s
Export mines increased by 9% as a result of various
36
productivity improvement initiatives. Excluding the impact
of divestments, Australian coal production decreased by
4% following cessation of production at Drayton.
In total, four projects commenced or continued to ramp-up,
or reached nameplate capacity during 2016. Iron ore
production from Minas-Rio increased by 76% as the
ramp-up progressed, while Grosvenor produced its first
longwall metallurgical coal in May, seven months ahead of
schedule, and entered commercial production during the
third quarter. Gahcho Kué, a diamond project in Canada,
was commissioned in August, and at Barro Alto in Brazil,
the furnace rebuild was completed. Production at Barro Alto
is now close to nameplate capacity, with nickel output
increasing by 47% year-on-year.
The Group achieved a favourable cost performance in
2016, primarily as a consequence of cost-reduction initiatives
and the benefits of weaker producer country currencies. Unit
cash costs at De Beers decreased by 19% as a result of cost
savings, favourable exchange rate movements and a change
in production mix following portfolio changes. Unit costs
at Coal Australia decreased by 7%, following significant
cost-reduction initiatives, particularly in the open cut
operations, while on-mine local currency unit costs at Coal
South Africa decreased by 2%, reflecting the benefit of
increased production at the export mines, driven by
productivity improvements across all operations. At Copper,
unit costs decreased by 11%, reflecting cost-reduction
initiatives and benefits resulting from the divestment of
Anglo American Norte; these more than compensated for
the effects of lower output. FOB cash costs at Kumba were
13% lower. This was attributable to savings in operating
costs, mainly from the reduced mining profile at Sishen mine
following restructuring, as well as productivity gains in mining
and processing operations, and the benefit of the weaker
South African rand. At Platinum, unit costs also decreased
by 12%, owing mainly to a weaker South African rand
and cost containment. Nickel unit costs declined by 19%,
chiefly attributable to increased production volumes from
Barro Alto, as well as favourable exchange rates and lower
energy and consumable costs.
Underlying EBITDA◊ reconciliation 2015 to 2016
$ million
2015 Underlying EBITDA◊
Price
Foreign exchange
Inflation
Volume
Cost
Platinum non-cash
inventory adjustment
Net cost and volume improvements
Other
2016 Underlying EBITDA◊
4,854
(79)
694
(578)
1,465
(281)
6,075
433
1,175
(143)
Anglo American plc Annual Report 2016 INCOME STATEMENT
Profit/(loss) for the financial year attributable
to equity shareholders of the Company
Profit for the financial year attributable to equity
shareholders of the Company was $1.6 billion, compared
with a loss of $5.6 billion in 2015.
Underlying earnings
Group underlying earnings increased by 167% to $2.2 billion
(2015: $0.8 billion).
Underlying EBITDA
Group underlying EBITDA increased by 25% to $6.1 billion
(2015: $4.9 billion).
Underlying earnings◊
$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates
Iron Ore and Manganese
Coal
Corporate and other
Total
Underlying EBITDA◊
$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates
Iron Ore and Manganese
Coal
Corporate and other
Total
Year ended
31 Dec 2016
Year ended
31 Dec 2015
1,406
532
903
57
118
1,536
1,646
(123)
6,075
990
718
942
(3)
146
1,026
1,046
(11)
4,854
Year ended 31 Dec 2016
Depreciation
and
amortisation
Net finance
costs and
income tax
expense
Non-
controlling
interests
Underlying
earnings◊
(387)
(347)
(642)
(72)
(39)
(261)
(534)
(27)
(242)
(101)
(9)
(42)
(1)
(304)
(183)
(236)
(110)
(19)
102
–
–
(405)
(16)
10
667
65
354
(57)
78
566
913
(376)
Underlying
EBITDA◊
1,406
532
903
57
118
1,536
1,646
(123)
6,075
(2,309)
(1,118)
(438)
2,210
Reconciliation to underlying earnings from profit/(loss) for the financial year
attributable to equity shareholders of the Company
$ million
Profit/(loss) for the financial year attributable to equity shareholders of the Company
Operating special items
Operating remeasurements
Non-operating special items
Financing special items and remeasurements
Special items and remeasurements tax
Non-controlling interests on special items and remeasurements
Share of associates’ and joint ventures’ special items and remeasurements
Underlying earnings◊
Underlying earnings per share◊ ($)
Earnings per share ($)
Year ended
31 Dec 2016
Year ended
31 Dec 2015
1,594
1,632
33
(1,203)
314
(44)
(109)
(7)
2,210
1.72
1.24
(5,624)
5,972
178
1,278
(615)
(47)
(584)
269
827
0.64
(4.36)
37
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT GROUP FINANCIAL REVIEW
GROUP FINANCIAL REVIEW continued
Net debt◊
$ million
Opening net debt◊
Underlying EBITDA◊ from subsidiaries and joint operations(1)
Working capital movements
Other cash flows from operations
Cash flows from operations
Capital expenditure◊
Cash tax paid(2)
Dividends from associates, joint ventures and financial asset investments
Net interest(3)
Dividends paid to non-controlling interests
Attributable free cash flow◊
Dividends paid to Company shareholders
Disposals (net proceeds)(2)
Other net debt movements
Total movement in net debt◊
Closing net debt(4)◊
2016
(12,901)
2015
(12,871)
5,469
391
(22)
5,838
(2,387)
(465)
172
(581)
(15)
2,562
–
1,619
233
4,419
25
(204)
4,240
(4,177)
(596)
333
(540)
(242)
(982)
(1,078)
1,745
285
4,414
(8,487)
(30)
(12,901)
(1) EBITDA is operating profit before depreciation, amortisation, special items and remeasurements.
(2) Excludes tax payments of $146 million (2015: nil), relating to 2016 disposals which are shown as part of net disposal proceeds.
(3)
Includes cash inflows of $89 million (2015: $169 million), relating to interest payments on derivatives hedging net debt, which are included in cash flows from derivatives related
to financing activities.
(4) Net debt excludes the own credit risk fair value adjustment on derivatives of $73 million (2015: $555 million).
Net finance costs
Net finance costs, before special items and
remeasurements, excluding associates and joint ventures,
were $209 million (2015: $458 million). The decrease
was driven by a net foreign exchange gain on cash and
borrowings of $84 million (2015: $180 million loss)
principally due to a strengthening in the Brazilian real
and South African rand during the year.
For further details on net finance costs, see note 7 to the
Consolidated financial statements on page 130.
Tax
The underlying effective tax rate◊ was 24.6% (2015: 31.0%).
The decreased rate in 2016 was due to a benefit received
in relation to the reassessment of withholding tax provisions,
including in respect of Chile (4.7%), and the utilisation of
losses and similar tax attributes not previously recognised,
primarily in Australia (3.9%), partially offset by the impact of
enhanced tax depreciation, primarily in Chile (2.5%), and
other items, including prior year adjustments (0.7%). For
further details on the effective tax rate, see note 8 to the
Consolidated financial statements on page 131.
The tax charge for the year, before special items and
remeasurements, was $742 million (2015: $435 million).
Special items and remeasurements
Special items and remeasurements include impairment
charges of $1.5 billion relating to Coal and Copper, gains
on the disposals of Callide ($0.6 billion) and the niobium
and phosphates business ($0.5 billion), and a provision in
respect of a tax matter in Kumba ($0.1 billion). Full details
of the special items and remeasurements recorded in the
year are included in note 6 to the Consolidated financial
statements on pages 128-129.
ROCE◊
ROCE increased to 11% in 2016 (2015: 5%), primarily as
a consequence of higher sales volumes at De Beers, the
ramp-up of production at Grosvenor mine in Australia and
ongoing delivery of cost savings across the portfolio. The
Group also benefited from weaker producer country
currencies. Average attributable capital employed was lower
at $27.4 billion (2015: $32.6 billion) owing to ongoing asset
depreciation and a number of asset divestments completed
in the year, and selected asset impairments taken in the
first half of 2016. This was partially offset by ongoing
capital expenditure.
ROCE is the primary return measure used in the Group and
is a significant Alternative Performance Measure (APM)
used across the business. A full description of the measure
is available on page 189 of this Annual Report.
38
Anglo American plc Annual Report 2016 Attributable free cash flow
Attributable free cash flow increased by $3.5 billion to an
inflow of $2.6 billion (2015: outflow of $1.0 billion). The
improvement was driven by an increase in cash flows from
operations of $1.6 billion and a $1.8 billion reduction in
capital expenditure to $2.4 billion (2015: $4.2 billion).
The reduction in capital expenditure was driven by a 50%
decline in expansionary capital expenditure, chiefly as a
result of the ramp-up of the Minas-Rio iron ore operation
in Brazil and the Grosvenor metallurgical coal operation
in Australia, and a 25% decrease in stay-in-business
expenditure as a result of lower expenditure at Kumba Iron
Ore, De Beers and Coal. A full reconciliation is shown in note
22 to the Consolidated financial statements on page 142.
For more detail on our capital expenditure programme,
see pages 22-23.
LIQUIDITY AND FUNDING
At 31 December 2016, the Group had undrawn committed
bank facilities of $9.7 billion and cash of $6.0 billion. The
Group’s liquidity position was maintained in the year, while
gross debt, including related derivatives, decreased
by $5.3 billion to $14.5 billion (2015: $19.8 billion) primarily
owing to a $1.8 billion bond buyback transaction, the full
repayment of BNDES loans in Brazil ($1.7 billion, including
related derivatives) and $1.4 billion of bond maturities. In
January 2017, the Group retired the $1.05 billion Club facility
which was entered into in 2016 in the context of the bond
buyback transaction. The Group’s forecasts and projections,
taking account of reasonable possible changes in trading
performance, indicate the Group’s ability to operate within
the level of its current facilities. The Group has certain
financial covenants in place in relation to external debt which
are not expected to be breached in the foreseeable future.
BALANCE SHEET
Net assets of the Group increased by $3.0 billion to
$24.3 billion (2015: $21.3 billion). This reflected the
reduction in net debt and foreign exchange gains relating
to operations with Australian dollar and South African rand
functional currencies. These factors were partially offset
by the impairment of Coal and Copper operations and the
impact of disposals. Capital expenditure◊ of $2.4 billion
was largely offset by depreciation.
NET DEBT
Net debt (including related hedges) of $8.5 billion was
$4.4 billion lower than at 31 December 2015, representing
gearing of 25.9% (2015: 37.7%). Net debt is made up of
cash and cash equivalents of $6.0 billion (2015: $6.9 billion)
and gross debt, including related derivatives, of $14.5 billion
(2015: $19.8 billion). The reduction in net debt was driven
by strong operating cash inflows, a decrease in capital
expenditure and proceeds from disposals.
Anglo American received gross proceeds from disposals
of $1.8 billion(1) (2015: $1.7 billion), primarily from the sale
of the niobium and phosphates business, which contributed
$1.5 billion, and the sale of its 9.7% stake in Exxaro
Resources, contributing $0.2 billion. The post-tax proceeds
on disposals was $1.6 billion (2015: $1.7 billion).
CASH FLOW
Cash flows from operations
Cash flows from operations increased by $1.6 billion to
$5.8 billion (2015: $4.2 billion). The 25% increase in
underlying EBITDA was supported by a focus on cost
savings, an increase in sales volumes at De Beers, and
weakening foreign exchange rates. Cash inflows on
operating working capital were $0.4 billion (2015: inflows
of $25 million), primarily reflecting a reduction in inventories
at De Beers of $0.3 billion and an increase in operating
payables at Platinum of $0.4 billion, half of which relates
to a key customer advancing pre-payment for future
guaranteed delivery of metal, with the remainder due to an
increase in purchase of concentrate following the sale of
Rustenburg. These inflows were offset by an increase in
operating receivables of $0.4 billion, driven by higher prices
in Coal and Iron Ore and Manganese.
(1) Proceeds from
disposals of
$1.8 billion were
received in 2016.
Total nominal cash
inflows are expected
to reach $2.0 billion
over time, subject
to prices.
39
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT MANAGING RISK EFFECTIVELY
MANAGING RISK
EFFECTIVELY
Anglo American recognises that risk is inherent
in all its business activities. Our risks can have a
financial, operational or reputational impact. The
volatility in commodity markets over the past few
years provides a good illustration of risk inherent
in our business. As understanding our risks and
developing appropriate responses are critical
to our future success, we are committed to an
effective, robust system of risk identification,
and an effective response to such risks, in order
to support the achievement of our objectives.
HOW DOES RISK RELATE TO OUR
STRATEGIC ELEMENTS?
Risks can arise from events outside of our control or
from operational matters. Each of the risks described
on the following pages can have an impact on our
ability to achieve our strategic elements:
• Where we compete: optimising and streamlining
our portfolio
• How we win: maximising our performance
• Critical core skills: creating a capable organisation.
Anglo American’s assessment of strategic,
operational, project and sustainable
development related risks
4
1
3
2
40
Byron
Grote
Chairman,
Audit
Committee
VIABILITY STATEMENT
Context
An understanding of our business model and strategy is
key to assessment of our prospects. Our ambition is to
create a resilient business that delivers robust profitability
and sustainable, positive cash flows through the cycle.
Details of our business model are provided on pages 9-11.
While the mining industry has seen some recovery from
the sharp decreases in commodity prices in 2015 and
early 2016, current geopolitical and macro-economic
uncertainties are expected to cause continued commodity
price volatility. Such volatility is further exacerbated in a
commodity pricing environment that is now almost entirely
spot priced, compared to the quarterly and longer term
contract pricing mechanisms that used to be the norm,
and with the accompanying very significant non-physical
trading activity. Against that background, the Board has
low appetite for risk in major new projects and investments
unless they are world class orebodies with competitive
cost positions and long reserve lives. New greenfield
projects are likely to be syndicated with other investors
to reduce our risk profile and capital requirements.
The assessment process and key assumptions
Assessment of the Group’s prospects is based upon
the Group’s strategy, its financial plan and principal risks.
The Group’s strategy during 2016 has focused on
improving cash flow generation and executing selective
asset disposals to strengthen the balance sheet and
focus our portfolio to create sustainable value.
1. Identifying risks
A robust methodology is used to identify key risks across the
Group; at business units, operations and projects. This is being
applied consistently through the development and ongoing
implementation of a Group integrated risk management
framework and associated guidelines.
2. Analysing risks and controls to manage
identified risks
Once identified, the process will evaluate identified risks to
establish root causes, financial and non-financial impacts, and
likelihood of occurrence. Consideration of risk treatments is
taken into account to enable the creation of a prioritised register
and in determining which of the risks should be considered as a
principal risk.
3. Determining management actions required
The effectiveness and adequacy of controls are assessed.
If additional controls are required, these will be identified
and responsibilities assigned.
4. Reporting and monitoring
Management is responsible for monitoring progress of actions
to mitigate key risks and to determine if any such risk falls outside
the limits of our risk appetite. Management is supported through
the Group’s internal audit programme, which evaluates the
design and effectiveness of controls. The risk management
process is continuous; key risks are reported to the Audit
Committee, with sustainability risks also being reported to the
Sustainability Committee.
Anglo American plc Annual Report 2016 CATASTROPHIC RISKS
We also face certain risks that we deem catastrophic risks.
These are very high severity, very low likelihood events that
could result in multiple fatalities or injuries, an unplanned
fundamental change to strategy or the way we operate, and
have significant financial consequences. We do not consider
likelihood when assessing these risks as the potential
impacts mean these risks must be treated as a priority.
Catastrophic risks are included as principal risks.
Catastrophic risks 9-12 on pages 44-45
RISK APPETITE
We define risk appetite as ‘the nature and extent of risk
Anglo American is willing to accept in relation to the pursuit
of its objectives’. We look at risk appetite from the context of
severity of the consequences should the risk materialise,
any relevant internal or external factors influencing the risk,
and the status of management actions to mitigate the risk.
A scale is used to help determine the limit of appetite for
each risk, recognising that risk appetite will change over time.
If a risk exceeds appetite, it will threaten the achievement of
objectives and may require a change to strategy. Risks that
are approaching the limit of the Group’s risk appetite may
require management actions to be accelerated or enhanced
in order to ensure the risks remain within appetite levels.
Further details on the risk management and internal control systems
and the review of their effectiveness are provided on pages 82-83
SUMMARY
Our risk profile has changed during the course of 2016,
as the external economic and political environment has
evolved and progress has been made in the mitigation of
our risks. We no longer consider ‘Organisation change’ and
‘Portfolio restructuring’ as principal risks, but we have added
‘Future demand for diamonds’, ‘Future demand for platinum
group metals (PGMs)’ and ‘Delivery of cash targets’ as new
principal risks.
A financial forecast covering the next three years is prepared
based on the context of the strategic plan and is reviewed on
a regular basis to reflect changes in circumstances. The
financial forecast is based on a number of key assumptions,
the most important of which include commodity prices and
foreign exchange rates.
The principal risks are those that we believe could prevent the
Group from delivering its strategic objectives. A number of
these risks are deemed catastrophic to the Group’s prospects
and have been considered as part of the Group’s viability.
Assessment of viability
The assessment of the Group’s prospects have been made
with reference to the Group’s current position and expected
performance over a three year period, using budgeted
commodity prices and foreign exchange rates. Financial
performance and cash flows have then been subjected to
stress and sensitivity analysis over the three year period
using a range of severe but plausible scenarios. The
scenarios tested include:
• Commodity price reductions of 10% from budget prices
over three years with no offsetting foreign exchange
rate improvement
• Operational incidents that have a significant impact
on production at key sites in the Group
• Technology developments impacting demand
for diamonds
• Our ability to supply products due to infrastructure
constraints
• Failure to achieve budgeted level of financial performance
due to cost inflation and interest expense increases.
Viability statement
The directors confirm they have a reasonable expectation
that the Group will continue in operation and meet its
liabilities as they fall due for the next three years. This
period has been selected for the following reasons:
• The Group’s strategy and budgeting process is aligned
with a three-year view
• The volatility in commodity markets in recent years
makes confidence in a longer assessment of prospects
highly challenging
• The Group will be managing the reduction of net debt
over this period.
PRINCIPAL RISKS
We define a principal risk as a risk or combination of
risks that would threaten the business model, future
performance, solvency or liquidity of Anglo American.
In addition to these principal risks, we continue to be
exposed to other risks related to currency, inflation,
information and cyber security, community relations,
environment, infrastructure and human resources. These
risks are subject to our normal procedures to identify,
implement and oversee appropriate mitigation actions.
Principal risks 1-8 on pages 42-44
41
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT MANAGING RISK EFFECTIVELY
MANAGING RISK EFFECTIVELY continued
This risk has decreased since 2015
Risk appetite: Operating within
the limits of our appetite.
Commentary: The target
of reducing net debt to below
$10 billion by the end of 2016
was achieved, which has improved
our resilience to this risk.
1. COMMODITY PRICES
Pillars of value:
Global macro-economic conditions
leading to sustained low commodity
prices and/or volatility.
Root cause: The most significant factors
contributing to this risk at present are a
continued slowdown in growth in China and
other emerging markets, low growth rates in
developed economies and an oversupply of
commodities into the market. Other factors
such as weak regional economies, fiscal crises
and conflict can also influence the economic
environment and contribute to weak
commodity prices.
Impact: Low commodity prices can result
in lower levels of cash flow, profitability and
valuation. Debt costs may rise owing to rating
agency downgrades and the possibility of
restricted access to funding. The Group may be
unable to complete its divestment programme
within the desired timescales or achieve
expected values. The capacity to invest in
growth projects is constrained during periods
of low commodity prices – which may, in turn,
affect future performance.
Mitigation: High levels of liquidity will be
maintained during the current cycle. An
organisation change programme incorporating
cost reductions has been implemented, while
the roll-out of the Operating Model, reductions in
capital expenditure and the divestment of certain
assets for value are continuing. The Board
regularly monitors progress of these actions.
This risk has reduced over the course of 2016,
owing to improving commodity prices and
progress in implementing management actions.
2. POLITICAL AND REGULATORY
Pillars of value:
No change in risk
Uncertainty and adverse changes to
mining industry regulation, legislation
or tax rates can occur in any country in
which we operate.
Root cause: The Group has no control
over political acts or changes in local tax rates.
Our licence to operate through mining rights is
dependent on a number of factors, including
compliance with regulations.
Risk appetite: Operating within
the limits of our appetite.
Commentary: Current global
economic conditions have a
significant impact on countries
whose economies are exposed
to the downturn in commodities,
placing greater pressure on
governments to find alternative
means of raising revenues, and
increase the risk of social and
labour unrest. These factors could
increase the political risks faced
by the Group.
Impact: Uncertainty over future business
conditions leads to a lack of confidence in
making investment decisions, which can
influence future financial performance.
Increased costs can be incurred through
additional regulations or resource taxes, while
the ability to execute strategic initiatives that
reduce costs or divest assets may also be
restricted, all of which may reduce profitability
and affect future performance. Political stability
can also result in civil unrest or nullification of
existing agreements, mining permits or leases.
These may adversely affect the Group’s
operations or performance of those operations.
Mitigation: Anglo American has an active
engagement strategy with the governments
and regulators within the countries in which we
operate or plan to operate. We assess portfolio
capital investments against political risks and
avoid or minimise exposure to jurisdictions with
unacceptable risk levels. We actively monitor
regulatory and political developments on a
continuous basis.
PILLARS OF VALUE:
Safety and Health
Environment
Socio-political
People
42
Production
Cost
Financial
Anglo American plc Annual Report 2016
3. FUTURE DEMAND FOR DIAMONDS
Pillars of value:
A new principal risk
Demand for diamonds reduces as a result
of developments in the synthetic industry.
Root cause: Technological developments
are making the production of man-made gem
synthetics commercially viable and there are
increased distribution sources. The marketing
of synthetics seeks to place them as being
environmentally or socially superior.
Impact: Potential loss of polished and rough
diamond sales leading to a negative impact
on revenue, cash flow, profitability and value.
Mitigation: De Beers has a mitigation
strategy based on a number of measures,
including differentiation of diamonds from
synthetics, and the technology to detect
all synthetics.
Risk appetite: Operating within
the limits of our appetite.
Commentary: This is a new
principal risk.
4. FUTURE DEMAND FOR PGMs
Pillars of value:
A new principal risk
Demand for PGMs is impacted by
fundamental shifts in market forces.
Impact: A negative impact on revenue,
cash flow, profitability and valuation.
Risk appetite: Operating within
the limits of our appetite.
Root cause: Future demand is at risk from
declining combustion engine manufacturing
and a switch to battery operated vehicles
instead of fuel cell electric vehicles, which
continue to use higher volumes of PGMs.
Mitigation: Anglo American Platinum has
a strategy to grow PGMs demand in industrial
and jewellery sectors through marketing and
investment initiatives in research, product
development and market development
opportunities.
Commentary: While this is a new
principal risk, we see this as a longer
term threat to the business.
5. MINAS-RIO
Pillars of value:
No change in risk
Delay in obtaining the operating
licence extension.
Root cause: Increased regulatory scrutiny
for the licence extension can be expected
as a result of a major tailings dam incident
involving loss of life at a competitor facility in
Brazil in 2015. There is also the continuing
need to manage community issues. This may
delay completion of the civil works associated
with the mine’s development, while delays in
obtaining licences would cause operational
constraints. The licence process is complex,
with multiple stakeholders involved in the
approval process at federal, state and local
community levels.
Impact: Inability to achieve planned production
and revenues and/or reductions in the cost of
production. This may also result in loss of
investor confidence and reputational damage.
Mitigation: A comprehensive stakeholder
engagement plan is in place to manage the
licence extension and actions are being taken
to address the ramp-up risks identified.
Risk appetite: Operating within
the limits of our appetite.
Commentary: An extension to the
operating licence has been granted
which takes projected production to
the second half of 2018. The process
to obtain the Step 3 licences to allow
the mine to reach its nameplate
capacity of 26.5 Mtpa (wet basis)
has also started and is expected to
be secured in late 2018.
43
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT MANAGING RISK EFFECTIVELY
MANAGING RISK EFFECTIVELY continued
6. SOUTH AFRICA POWER
Pillars of value:
No change in risk
Electricity supply not able to meet the
country’s demands, leading to unplanned
outages and failure of the national grid.
Root cause: Anglo American is a significant
consumer of power owing to the extent of our
operations in South Africa. The risk is created
through lack of investment in generating
capacity due to funding challenges and a
maintenance backlog in some generating
facilities, leading to unplanned outages.
Impact: Unplanned and short-notice power
supply outages can lead to production shortfalls,
with a negative effect on revenue, costs and
productivity. There are potential safety
implications, particularly for underground mines
and process activities. Loss of critical computing
systems can interrupt normal business activities.
Mitigation: A central electricity monitoring
system enables measurement and analysis of
site level power consumption. Business units
have emergency generation capability for
deep-level shafts and procedures are in place to
minimise disruption. Regular interactions are held
with management of the state-owned power
supplier to understand operational challenges.
Risk appetite: Operating within
the limits of our appetite.
Commentary: Reduced industrial
demand has improved the position,
but new generation capacity has not
yet been delivered to the extent
required. A complete failure of the
national grid is considered to be a
very low likelihood event.
7. DELIVERY OF CASH TARGETS
Pillars of value:
A new principal risk
Inability to deliver the EBIT improvement
targets of $1 billion in 2017.
Impact: Inability to deliver required levels
of cash flow and loss of investor confidence.
Risk appetite: Operating within
the limits of our appetite.
Root cause: Unplanned and unexpected
operational issues will affect delivery of the
target. Delivery will require the support of joint
venture partners for non-wholly-owned
operations.
Mitigation: A number of initiatives are under
way and regular tracking and monitoring
mechanisms are in place. Implementation of
our Operating Model is one of the key initiatives
that mitigates this risk.
Commentary: This is a new
principal risk for 2016.
8. SAFETY
Pillars of value:
Failure to deliver a sustained improvement
in safety performance.
Root cause: Inability to deliver a sustained
improvement in safety performance will result
from management interventions and training
initiatives failing to translate into behavioural
change by all employees and contractors.
Non-compliance with critical controls is a
common failure in safety incidents.
Impact: Loss of life, workplace injuries and
safety-related stoppages all immediately affect
production, while, over the longer term, such
factors are also a threat to our licence to operate.
Mitigation: A continued, relentless focus
on safety improvement and safety risk
management is adopted by executive
management. Operating standards and
guidelines are in place to mitigate safety
risk, supported by a robust risk management
and risk assurance processes.
This risk has increased since 2015
Risk appetite: Operating within
the limits of our appetite.
Commentary: During 2016 there
were 11 fatalities compared with
six in 2015. Although the total
recordable case frequency rate
(TRCFR) reduced from 0.93 to
0.71 per 200,000 hours worked,
management has increased the
risk rating to ensure an appropriate
response to the increase in fatalities.
9. TAILINGS DAM FAILURE
Pillars of value:
No change in risk
A release of waste material leading
to loss of life, injuries, environmental
damage, reputational damage, financial
costs and production impacts.
Root cause: Tailings dam failures can result
from over-topping, poor operating practices,
instability of pit slopes, inadequate design and
construction, or seismic events.
Risk appetite: Operating within
the limits of our appetite.
Commentary: Tailings dam failure
is considered a catastrophic risk –
i.e. a very high severity but very low
frequency event that must be treated
with the highest priority.
Impact: Potential for multiple fatalities
and injuries, at the mine site and in local
communities, long term environmental
damage, significant reputational damage
and loss of licence to operate. The financial
impact associated with clean-up costs and
legal liability claims could be substantial.
Mitigation: Anglo American employs
technical standards that provide minimum
design criteria and operational performance
requirements; all of which are regularly
inspected by technical experts. Assurance work
is conducted to monitor the controls associated
with management of tailings dam facilities.
44
Anglo American plc Annual Report 2016
10. SLOPE WALL FAILURE
Pillars of value:
No change in risk
A sudden and unexpected failure of a
slope causing landslides and inrush to pit
or other asset (such as a pipeline), leading
to loss of life, injuries, environmental
damage, reputational damage, financial
costs and production impacts.
Root cause: Slope wall failure can result
from inadequate design, unexpected adverse
geological conditions, shortcomings in the
mining process, or natural events such as
seismic activity or excessive rainfall.
Impact: Potential for multiple fatalities or
injuries, significant production impact and
damage to assets. Financial costs associated
with recovery and legal claims may be extensive.
Regulatory issues may result and community
relations may be affected.
Mitigation: Technical standards exist that
provide minimum criteria for slope stability
design and operation. Monitoring of slope
movement is conducted at all open pit
operations. Inspections and training and
awareness programmes are provided by
technical experts, and assurance work is
conducted to assess the effectiveness
of controls.
Risk appetite: Operating within
the limits of our appetite.
Commentary: Slope wall failure
is considered a catastrophic risk –
i.e. a very high severity but very low
frequency event that must be treated
with the highest priority.
11. MINESHAFT FAILURE
Pillars of value:
No change in risk
A sudden and unexpected failure of
a mineshaft.
Root cause: Mineshaft failure can occur
as a result of rope failure, fire and explosion
in a shaft, flooding, power failure, mud rush,
conveyance failure or structural failure.
Impact: Multiple fatalities and injuries, damage
to assets, production loss and reputational
damage. Financial costs associated with
recovery and liability claims may be significant.
Mitigation: Technical standards exist that
provide minimum criteria for mineshaft
management. Inspections are carried out
by technical experts and assurance work
is conducted to assess the effectiveness
of controls.
Risk appetite: Operating within
the limits of our appetite.
Commentary: Mineshaft failure
is considered a catastrophic risk –
i.e. a very high severity but very low
frequency event that must be treated
with the highest priority. The sale
of the Rustenburg operations has
reduced the number of vertical
shafts in the Group and the exposure
to this risk.
12. FIRE AND/OR EXPLOSION
Pillars of value:
No change in risk
Fire and explosion risks are present
at all mining operations, and processing
facilities such as smelters and refineries,
in our Platinum, Copper and Nickel
businesses.
Impact: Multiple fatalities and injuries, damage
to assets, loss of production, reputation damage
and loss of licence to operate. Financial costs
associated with recovery and liability claims
may be significant.
Root cause: The combined presence of
fuel, heat and oxygen, as well as conditions
that can lead to the concentration and
confinement of these elements, can
cause an explosion – including gas, coal
dust (particularly in underground mines),
sulphide dust or furnace gas explosions.
Mitigation: Technical standards exist that
provide minimum criteria for prevention of
underground explosions and fire. Inspections
are carried out by technical experts and
assurance work is conducted to assess the
effectiveness of controls. Third-party reviews
of fire risk are conducted at each location
where significant risk is present.
Risk appetite: Operating within
the limits of our appetite.
Commentary: Fire and explosion
is considered a catastrophic risk –
i.e. a very high severity but very low
frequency event that must be treated
with the highest priority.
PILLARS OF VALUE:
Safety and Health
Environment
Socio-political
People
Production
Cost
Financial
45
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT DE BEERS
DE BEERS
Bruce
Cleaver
CEO –
De Beers
Group
Anglo American owns 85% of De Beers, the world’s leading diamond company. The
balance of 15% of De Beers is owned by the Government of the Republic of Botswana.
De Beers operates across all key parts of the diamond value chain, including
exploration, production, sorting, valuing and selling of rough diamonds, and the
marketing and retailing of polished diamond jewellery.
CANADA
HIGHLIGHTS
2
1
30% REVENUE GROWTH
$6.1 billion
19% REDUCTION IN UNIT COSTS◊
$67/carat
1 Victor
2 Gahcho Kué
SOUTH AFRICA
1 Voorspoed
2 Venetia
BOTSWANA & NAMIBIA
BOTSWANA
1 Jwaneng
2 Orapa(1)
3 Damtshaa(1)
4 Letlhakane(1)
NAMIBIA
5 Namdeb
6 Debmarine Namibia
5
(1) Orapa, Damtshaa and
Letlhakane are managed as
one operation, the ‘Orapa
regime’. Damtshaa was placed
onto temporary care and maintenance
in January 2016. Namdeb includes
Elizabeth Bay, Midwater, Mining Area 1
and Orange River operations.
6
46
14% INCREASE IN NUMBER OF FOREVERMARK™ DOORS(1)
2,010 doors
(1) Forevermark™ is a trademark of the De Beers Group of Companies.
STRATEGIC FOCUS
• Gahcho Kué diamond mine commissioned in August 2016.
• Venetia Underground continues to progress, and is expected
to become the mine’s principal source of ore from 2023.
• Jwaneng’s Cut-8 is expected to become the mine’s main source
of ore in 2018.
• Snap Lake placed onto extended care and maintenance; the
underground workings are being flooded to preserve the orebody.
• Sale of Kimberley Mines completed in January 2016.
2
1
• Enhanced marketing, both Forevermark™ and generic, including
in partnership with Diamond Producers Association.
4
3
2
1
Debmarine Namibia’s new diamond-sampling vessel, the SS Nujoma, is scheduled to commence
operations off the Namibian coast during 2017. Featured is the vessel soon after its launch in
Norway in January 2016.
Anglo American plc Annual Report 2016 Key performance indicators(1)
De Beers
Prior year
Debswana
Prior year
Namdeb Holdings
Prior year
South Africa
Prior year
Canada
Prior year
Trading
Prior year
Other(6)
Prior year
Production
volume
(’000 cts)
Sales
volume
(’000 cts)(2)
Price
($/ct)(3)
Unit cost◊
($/ct)(4)
Revenue◊
($m)(5)
Underlying
EBITDA◊
($m)
Underlying
EBITDA
margin
Underlying
EBIT◊
($m)
Capex◊
($m)
ROCE◊
27,339
28,692
20,501
20,368
1,573
1,764
4,234
4,673
1,031
1,887
–
–
–
–
29,965
19,945
–
–
–
–
–
–
–
–
–
–
–
–
187
207
152
178
528
553
121
131
271
275
–
–
–
–
67
83
26
27
245
243
53
58
212
182
–
–
–
–
6,068
4,671
–
–
–
–
–
–
–
–
–
–
–
–
1,406
990
571
379
184
147
268
282
79
154
378
107
(74)
(79)
23%
21%
–
–
–
–
–
–
–
–
–
–
–
–
1,019
571
543
352
163
120
172
174
13
65
371
100
(243)
(240)
526
697
90
101
65
30
156
279
184
254
3
2
28
31
11%
6%
–
–
–
–
–
–
–
–
–
–
–
–
(1) Prepared on a consolidated accounting basis, except for production which is stated on a 100% basis, with the exception of the Gahcho Kué joint venture, which is on an attributable 51% basis.
(2) Sales volumes on a 100% basis were 32.0 million carats (2015: 20.6 million carats).
(3) Pricing for the mining business units is based on 100% selling value post-aggregation of goods. The group realised price includes the price impact of the sale of non-equity product and, as a result,
is not directly comparable to group unit costs, which relate to equity production only.
(4) Unit cost is based on total production and operating costs, excluding depreciation and operating special items, divided by carats recovered. Comparatives have been restated.
(5)
Includes rough diamond sales of $5.6 billion (2015: $4.1 billion).
(6) Other includes Element Six, downstream, acquisition accounting adjustments, projects and corporate.
INTRODUCTION
MARKETS
Sustained diamond jewellery demand growth in the US
and marginally positive growth for the full year in China
(in local currency, though declining slightly in US dollars)
contrasted with weakening demand in the other main
diamond markets. In India, a month-long jewellers’ strike
in March, and the government’s surprise demonetisation
programme which started in November, had a considerable
negative impact on demand. For the full year, global
consumer demand, in US dollar terms, is estimated to be
in line with 2015. Additional marketing in the US, China,
India and Japan in the final quarter of the year, the main
selling season, had a positive impact.
Producers destocked during 2016, as sentiment in the
midstream improved and rough and polished inventories
normalised, supported by a series of initiatives put in place
by De Beers, starting in the second half of 2015. These
included lowering rough prices, providing flexibility
to Sightholders for their purchase arrangements and
increased marketing activity to drive consumer demand.
For more information, refer to the Marketplace review section
See pages 06-08
De Beers and its partners produce about a third
of the world’s rough diamonds by value, with the
majority sold via De Beers Global Sightholder Sales
to term contract customers (Sightholders) and
accredited buyers, and the remainder via De Beers
Auction Sales to auction customers. Downstream
assets include the De Beers Diamond Jewellers
joint venture and the Forevermark™ brand, which
now features in 2,010 outlets in 25 key consumer
markets around the world. Finally, Element Six
sells synthetic diamonds for industrial diamond
supermaterials applications.
FINANCIAL AND OPERATING OVERVIEW
Underlying EBITDA increased by 42% to $1,406 million
(2015: $990 million). This was the result of higher revenues
from stronger rough diamond demand, which led to reduced
inventory levels, reflecting improved trading conditions
compared with those experienced in the second half of
2015. Results also benefited from cost-saving programmes,
portfolio changes, and the impact of favourable exchange
rates. Unit costs decreased by 19% from $83/carat to
$67/carat.
Total revenue increased by 30% to $6.1 billion
(2015: $4.7 billion), driven by higher rough diamond sales,
which increased by 37% to $5.6 billion. This was attributable
to a 50% increase in consolidated sales volumes to
30.0 million carats (2015: 19.9 million carats), partly offset
by a 10% decrease in the average realised rough diamond
price to $187/carat (2015: $207/carat), reflecting the 13%
lower average rough price index, offset to some extent by
an improved sales mix.
47
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT DE BEERS
DE BEERS continued
OPERATING PERFORMANCE
Mining and manufacturing
Rough diamond production decreased by 5% to
27.3 million carats (2015: 28.7 million carats), reflecting
the decision, taken in 2015, to reduce production in
response to prevailing trading conditions.
Debswana maintained production at close to the
previous year’s levels, with output of 20.5 million carats
(2015: 20.4 million carats). Jwaneng’s production increased
by 23%; driven by higher tonnes treated, largely offset
by Orapa, where production was 20% lower. By year end,
85% of the 500 million tonnes (Mt) of waste stripping
required to expose the ore had been mined at Jwaneng
Cut-8. The first Cut-8 ore to the processing plant remains
scheduled for the first half of 2017, with Cut-8 becoming
the main source of ore from 2018. Damtshaa (a satellite
operation of Orapa) was placed onto temporary care and
maintenance from 1 January 2016.
Production at Namdeb Holdings decreased by 11% to
1.6 million carats (2015: 1.8 million carats), with reduced
output at Debmarine Namibia (as a result of the Mafuta
vessel undergoing extended planned in-port maintenance)
and lower grades at Namdeb’s land operations. Debmarine
Namibia’s new sampling vessel, the SS Nujoma, was
completed three months ahead of schedule and within
budget, and sea trials commenced in November. The
vessel is expected to become operational during 2017.
In South Africa, production declined by 9% to 4.2 million
carats (2015: 4.7 million carats), mainly due to the early
completion of the sale of Kimberley Mines in January
2016, partly offset by an increase of 12% at Venetia owing
to the processing of higher grades. Construction of the
Venetia Underground mine continues to progress, with the
underground operation expected to become the mine’s
principal source of ore from 2023.
In Canada, production declined by 45% to 1.0 million
carats (2015: 1.9 million carats) owing to Snap Lake being
placed onto care and maintenance in December 2015. In
July 2016, approval was granted to flood the underground
workings, which will reduce the costs of care and
maintenance while preserving the long term viability of
the orebody. Following conclusion of an unsuccessful
process to gauge interest in an acquisition of Snap Lake,
flooding commenced in January 2017. Production at Victor
decreased by 7% to 0.6 million carats. Development of the
Gahcho Kué project was completed on schedule, with the
ramp-up to commercial production expected to be reached
during the first quarter of 2017.
Owing to continuing depressed markets in key industrial
sectors (principally oil and gas), Element Six, the industrial
diamonds business, experienced a challenging year.
The reduction in contribution arising from lower sales
has been largely offset through a comprehensive
cost-reduction programme.
Brands
Forevermark™ (the diamond brand of the De Beers Group
of Companies) continues to expand its retailer network and
is available in 2,010 outlets (a 14% increase) in 25 markets,
including the new markets of Hungary, Thailand and now
South Korea. In June 2016, Forevermark™ launched the
Black Label collection (an innovative collection of fancy-
shape diamonds) and, in the final quarter of the year,
launched a US national television campaign featuring the
Ever Us™(1) two-stone diamond collection. In the first half
of 2016, De Beers also invested in category marketing
campaigns to stimulate diamond jewellery demand during
key gifting periods in both China and Hong Kong, as well as
India (the latter in partnership with the Gem and Jewellery
Export Promotion Council, commencing in the second half
of 2016). In the third quarter, The Diamond Producers
Association, co-funded by De Beers and other leading
producers, launched “Real is Rare”, a new marketing
platform targeting millennial consumers in the US.
De Beers Diamond Jewellers (a joint venture between
LVMH Moët Hennessy Louis Vuitton and De Beers)
maintained its focus on fast-growing markets, with
34 stores in 17 key consumer markets around the world.
The significant growth in mainland China sales helped
to offset the impact of lower Chinese tourist levels in France
and Hong Kong, while the highlight of the year was the
successful relocation in November of the New York flagship
store to a new location on Madison Avenue, completing the
repositioning of the brand in the US.
Namibia sales agreement
In May 2016, the Government of the Republic of Namibia
and De Beers signed a new 10-year sales agreement
for the sorting, valuing and sale of Namdeb Holdings’
diamonds. This represents the longest sales agreement
ever concluded between the parties.
OUTLOOK
Macro-economic conditions underpinning consumer
demand for diamonds remain broadly stable in aggregate,
with the US expected to continue to be the main driver of
global growth in 2017. The extent of global growth will,
however, be dependent upon a number of macro-economic
factors, including the new administration in the US, the
strength of the US dollar impacting consumer demand,
economic performance in China, the effects of Indian
demonetisation, and sentiment following the main
US and Chinese New Year retail season.
With midstream stocks having returned to more typical
levels in 2016, rough diamond demand is expected to
normalise in 2017, reflecting underlying consumer and
retail demand. While producers continue destocking,
forecast diamond production (on a 100% basis, except
Gahcho Kué on an attributable 51% basis) for 2017 is
expected to be in the range of 31-33 million carats,
subject to trading conditions.
(1) Used under licence
from Signet.
48
Anglo American plc Annual Report 2016 STRATEGIC REPORT PLATINUM
PLATINUM
Chris
Griffith
CEO –
Anglo
American
Platinum
Anglo American is the leading primary producer of platinum group metals, providing
around 40% of all newly mined platinum. All of our operations are located in the
Bushveld Complex in South Africa, with the exception of Unki mine on the Great Dyke
formation in Zimbabwe.
ZIMBABWE & SOUTH AFRICA
HIGHLIGHTS
ZIMBABWE
1 Unki
SOUTH AFRICA
2 Bushveld Complex
SOUTH AFRICA: BUSHVELD COMPLEX(1)
1
2
12% DECREASE IN UNIT COSTS◊
$1,330/ounce
TOTAL PLATINUM PRODUCTION
2.38 million ounces
STRATEGIC FOCUS
• The sale of the Rustenburg operations to Sibanye Gold, announced
in 2015, was completed in November for up-front cash proceeds
of R1.5 billion and additional minimum deferred proceeds of
R3 billion (nominal), in total $0.3 billion.
• The sale of Platinum’s 42.5% interest in the Pandora joint venture
to Lonmin plc was announced in November 2016. In February 2017,
Anglo American Platinum agreed to sell its 85% interest in the
Union Mine in South Africa to Siyanda Resources.
• The Twickenham platinum mine/project was placed onto care
and maintenance in the year, removing 10,000 ounces of
unprofitable platinum.
2
9
8
7
3
4
5
6
JOHANNESBURG
2 Mogalakwena
3 Amandelbult
4 Union
5 BRPM
6 Kroondal
7 Mototolo
8 Modikwa
9 Bokoni
(1) Excludes Rustenburg and Pandora disposals and Twickenham, which was placed onto
care and maintenance during 2016.
Asset manager Willem van Loggerenberg (left) and fitter Hendrik Landsberg recording data
at one of the ore-slurry pumps at the concentrator at Amandelbult, a mine which, unusually,
has both underground and opencast operations.
49
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT PLATINUM
PLATINUM continued
Key performance indicators
Platinum
Prior year
Mogalakwena
Prior year
Amandelbult
Prior year
Other operations
Prior year
Project and corporate
Prior year
Production
volume
(koz)(1)
2,382
2,337
412
392
467
437
1,503
1,508
–
–
Sales
volume
(koz)
2,416
2,471
415
422
474
433
1,527
1,616
–
–
Price
($/Pt oz)(2)
Unit cost◊
($/Pt oz)(3)
Revenue◊
($m)
Underlying
EBITDA◊
($m)
Underlying
EBITDA
margin
Underlying
EBIT◊
($m)
Capex◊
($m)
ROCE◊
1,753
1,905
2,344
2,585
1,566
1,641
n/a
n/a
–
–
1,330
1,508
1,262
1,369
1,256
1,382
n/a
n/a
–
–
4,394
4,900
968
1,092
739
712
2,687
3,096
–
–
532
718
393
496
102
97
77
177
(40)
(52)
12%
15%
41%
45%
14%
14%
3%
6%
n/a
n/a
185
263
269
368
46
36
(90)
(89)
(40)
(52)
314
366
157
151
25
53
129
156
3
6
4%
4%
–
–
–
–
–
–
–
–
(1) Production disclosure reflects own mine production and purchases of metal in concentrate.
(2) Average US$ basket price.
(3) Total cash operating costs – includes on-mine, smelting and refining costs only.
INTRODUCTION
MARKETS
Anglo American Platinum continues to optimise
and reconfigure its portfolio. Once complete, Platinum
will have a best in class operating footprint at the
Mogalakwena and Amandelbult mines in South Africa
and Unki in Zimbabwe, alongside its joint venture
interests in Bafokeng-Rasimone, the Mototolo
mine and Modikwa mine in South Africa. Also in
South Africa, Platinum owns smelting and refining
operations which treat concentrates, not only from
its wholly owned mines, but also from joint venture
partners and third parties.
FINANCIAL AND OPERATING OVERVIEW
Underlying EBITDA decreased by 26% to $532 million
(2015: $718 million). Lower sales volumes of platinum,
palladium, rhodium and minor metals, weakening dollar
metal prices and the effects of inflation were partially offset
by a weaker South African rand and cost improvements.
Unit costs decreased by 12% to $1,330 per ounce, owing
primarily to the softer rand and cost improvements.
Average platinum market price ($/oz)
Average palladium market price ($/oz)
Average rhodium market price ($/oz)
Average gold market price ($/oz)
US$ realised basket price – Pt ($/Pt oz)
Rand realised basket price – Pt (R/Pt oz)
2016
989
615
681
1,248
1,753
25,649
2015
1,051
691
932
1,160
1,905
24,203
The average platinum price decreased by 6% in US dollar
terms, even though the rand basket price increased by
6%. Average palladium and rhodium dollar prices also
decreased, notwithstanding their strong price rally during
the year. Global supply of platinum group metals (PGMs)
was little changed, despite a modest reduction in sales
by South African producers. Although the rate of PGM
recovery from recycled autocatalysts increased towards
the end of the year, there was only limited growth in PGM
supplies from the secondary recycling sector.
Platinum demand declined by 1%, with a 15% decrease in
demand from the jewellery sector largely offset by a 10%
increase in purchases for industrial applications. Demand
for platinum in the automotive sector increased by 2%,
supported by the introduction of Euro 6b emissions
regulations in September 2015, and consequent higher
catalyst loadings. Strong sales growth in the European car
market saw an increase in the number of diesel cars being
manufactured, though diesel’s share of the new car market
decreased slightly. The platinum market remained in deficit
in 2016.
In contrast, palladium offtake increased by 2%, with strong
growth in the predominantly petrol-engined Chinese car
market supporting automotive demand, which increased by
3% to 7.8 million ounces. Despite continued net liquidation
of palladium investments, the palladium market remained in
deficit in 2016, contributing to a rally in the price of the metal
as the year progressed.
For more information, refer to the Marketplace review section
See pages 06-08
50
Anglo American plc Annual Report 2016 OPERATING PERFORMANCE
Total platinum production (metal in concentrate) increased
by 2% to 2,382,000 ounces (2015: 2,337,000 ounces).
Production increases at Mogalakwena, Amandelbult,
Unki, Union and independently managed operations were
partly offset by lower output from Rustenburg and Bokoni.
Putting Twickenham onto care and maintenance removed
approximately 10,000 ounces of unprofitable platinum,
while a contractual agreement with a third party for
concentrate ended in 2015, which led to a reduction in
purchase of concentrate of 11,000 ounces compared
with 2015.
Mogalakwena mine increased production by 5% to
412,000 ounces (2015: 392,000 ounces), including
31,000 ounces (2015: 24,000 ounces) processed at the
Baobab concentrator. Mogalakwena had a strong mining
performance, with an 8% increase in tonnes milled.
At Amandelbult mine, despite a loss of 20,000 ounces
following a fatal incident in which two employees lost their
lives, and the subsequent Section 54 safety stoppage,
production increased by 7%, reaching 467,000 ounces
(2015: 437,000 ounces). The majority of the increase came
from a continued strong performance at the opencast area,
which produced 41,000 ounces.
Production from Unki mine in Zimbabwe increased by
12%(1) to 75,000 ounces (2015: 66,000 ounces), driven
mainly by an improvement in recovered grade through
better mining reef cut, which reduced waste mining,
resulting in more higher grade ore being delivered to
the concentrator. As a result, the 4E built-up head grade
increased to 3.46g/t from 3.22g/t.
Total production from Rustenburg mine, including the
Western Limb Tailings Retreatment plant, decreased by 4%
to 460,000 ounces (2015: 478,000 ounces)(2). Lower output
was attributable to four fatal incidents, Section 54 safety
stoppages and other incidents, as well as other operational
challenges. The sale of the Rustenburg operations was
completed on 1 November 2016; from this date, Rustenburg
production is being treated as a purchase of concentrate
rather than own mined ounces.
Union mine increased platinum production by 7% to
151,000 ounces (2015: 141,000 ounces). This was
the mine’s best performance since 2013, following
implementation of the optimised mine plan that was
completed in June 2016, which resulted in a significant
reduction in labour.
Platinum production from independently managed
operations, inclusive of both mined and purchased output,
increased by 2% to 785,000 ounces (2015: 768,000
ounces). All mines showed year-on-year improvements,
with the exception of Bokoni, where production decreased
by 21% owing to the closures of two shafts in the fourth
quarter of 2015, which removed 26,000 ounces of
unprofitable platinum.
Refined platinum production decreased by 5% to 2,335,000
ounces (2015: 2,459,000 ounces), mainly as a result of the
run-out at Waterval in September 2016, which had the effect
of reducing refined production by 65,000 ounces.
(1) Production ounces
are shown rounded
to the nearest
thousand ounces,
12% improvement
calculated on
unrounded amounts.
(2)
Includes purchase of
concentrate following
sale of Rustenburg in
November 2016. Prior
year restated to
exclude third party
production from
Platinum Mile which
was not sold as part
of the Rustenburg
transaction.
Platinum sales volumes decreased by 2% to 2,416,000
platinum ounces (2015: 2,471,000 ounces), reflecting the
decrease in refined platinum production. Sales were higher
than refined production and were supplemented by a
drawdown in refined inventory.
OPERATIONAL OUTLOOK
Platinum production guidance (metal in concentrate) is
2.35-2.4 million ounces for 2017 (previously 2.4 million-
2.5 million ounces), largely driven by an increase in purchase
of concentrate from third parties. Year-on-year production
from own-managed mines is expected to remain flat at
around 960,000 ounces.
51
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT COPPER
COPPER
Hennie
Faul
CEO –
Copper
Duncan
Wanblad
CEO –
Base Metals
In Chile, we have interests in two major copper operations: a 50.1% interest in the
Los Bronces mine, which we manage and operate, and a 44% share in the Collahuasi
mine; we also manage and operate the El Soldado mine and Chagres smelter
(50.1% interest in both). In Peru, we have an 81.9% interest in the Quellaveco project.
CHILE
HIGHLIGHTS
LOS BRONCES CONFLUENCIA PLANT OPERATING TIME(1)
1
3
14
2
1 Collahuasi
2 Los Bronces
3 El Soldado
4 Chagres
KEY
Mining operations
Smelter
The main SAG mill at the concentrator and grinding plant at Collahuasi, which achieved a record
production of copper concentrate in 2016.
52
95%
– amongst best performing
in the industry
RECORD COLLAHUASI CONCENTRATE PRODUCTION
(ATTRIBUTABLE)
220,800 tonnes
11% DECREASE IN UNIT COSTS◊
$1.37/lb
OPERATING MODEL CONTINUES TO BE ROLLED OUT
AT LOS BRONCES
The Anglo American Operating Model has now been in place at the
Los Bronces plant for a full year, delivering improvements in planning
and work management, reliability and plant performance. The
Operating Model went live at the mine at the end of 2016 and is expected
to support capital productivity, improve asset management and mine
planning, with a resultant improvement in planning and lower costs.
CASH IMPROVEMENT PROGRAMME
As part of the Group’s continued focus on cash, 2016 saw the Copper
business launch a programme to further improve cash generation in
the low price environment, and rebuild a culture of cost awareness in
the business. As a result, cash generation increased by more than
$200 million compared with 2015, despite an 11% fall in the average
LME copper price, through cost-reduction efforts at the operations
and corporate office, including capital expenditure prioritisation and
optimising working capital.
FINANCIAL AND OPERATING OVERVIEW
Underlying EBITDA decreased by 4% to $903 million, driven by a
decrease in the average LME copper price and an 18% decline in
sales volumes (reflecting in part the sale of Anglo American Norte
in September 2015), partly offset by a significant reduction in
cash costs. Results benefited from cost-reduction initiatives and
productivity improvements across all operations, as well as from
the implementation, at the start of 2016, of an optimised mine plan
at El Soldado. At 31 December 2016, 113,204 tonnes of copper
were provisionally priced at 251 c/lb. Provisional pricing of copper
sales resulted in an underlying EBITDA gain of $144 million
(2015: loss of $366 million), bringing the realised copper price
to 225 c/lb for the period, 1% lower than in 2015.
(1) Excludes impact of strikes and illegal industrial action by contractor unions.
Anglo American plc Annual Report 2016 Key performance indicators
Copper
Prior year
Los Bronces
Prior year
Collahuasi(3)
Prior year
Other operations
Prior year
Projects and corporate
Prior year
Production
volume
(kt)
Sales
volume
(kt)(1)
Realised
price
(c/lb)
C1 Unit
cost◊
(c/lb)(2)
Revenue◊
($m)
Underlying
EBITDA◊
($m)
Underlying
EBITDA
margin
Underlying
EBIT◊
($m)
Capex◊
($m)
ROCE◊
577
709
307
402
223
200
47
107
–
–
578
706
308
408
223
198
47
100
–
–
225
228
–
–
–
–
–
–
–
–
137
154
156
148
111
137
–
–
–
–
3,066
3,539
1,386
1,852
1,068
971
612
716
–
–
29%
27%
24%
34%
53%
39%
14%
8%
903
942
326
622
569
381
83
55
(75)
(116)
261
228
(49)
240
342
167
43
(63)
(75)
(116)
563
659
241
228
144
109
178
322
–
–
6%
3%
–
–
–
–
–
–
–
–
(1) Excludes 62 kt third-party sales.
(2) C1 unit cost including by-product credits.
(3) 44% share of Collahuasi production, sales and financials.
MARKETS
Average market prices (c/lb)
Average realised prices (c/lb)
2016
221
225
2015
249
228
The average LME copper price was 11% lower at 221 c/lb.
Although the average price was lower than in 2015, prices
started 2015 at higher levels and were subsequently
impacted by bearish fund positioning, influenced by negative
macro-economic sentiment. This precipitated sharp price
falls towards the end of 2015, and into January 2016. Prices
were relatively stable during the year, before rising strongly in
the latter stages. Sentiment towards the metal showed signs
of improvement as China’s economy displayed evidence of
stability, leading to increased investment flows into copper.
Key copper-consuming sectors in China contributed to the
improved offtake, including stronger construction and
infrastructure activity, such as power grid investment.
For more information, refer to the Marketplace review section
See pages 06-08
OPERATING PERFORMANCE
The Los Bronces operation faced a number of challenges
during the year. Production decreased by 24% to 307,200
tonnes (2015: 401,700 tonnes), driven by expected
significantly lower grades (2016: 0.67% vs. 2015: 0.92%).
The mine returned to processing lower average grades than
in 2015, when it had prioritised the processing of higher
grade areas in order to offset the impact of water shortages.
In 2016, in contrast, a series of unusual weather events
resulted in the operations having to cope with excess water.
Snowfall late in 2015, and its subsequent melting, caused
dewatering problems in the pit, while significant snowfall in
2016 (when more than 10 metres was recorded, 30% higher
than average) interrupted ore extraction, particularly from
the mine’s higher altitude and higher grade areas, which
affected the ability to feed high grade ore to the plants.
In addition, a seven-day strike affected production in
September, and there were disruptions in November and
December owing to illegal industrial action by contractor
unions. In spite of the production challenges, unit costs were
only 5% higher than in 2015, at 156 c/lb (2015: 148 c/lb),
as cost-reduction initiatives across all areas of the operation
partly compensated for the lower output.
Record concentrate production was achieved at Collahuasi;
Anglo American’s attributable production increased by
11% to 222,900 tonnes (2015: 200,300 tonnes). Strong,
sustained plant performance, following rectification work
undertaken in 2015, was supported by higher grades
(2016: 1.22% vs. 2015: 1.15%). This was offset by reduced
cathode production following the closure of the higher cost
oxide plant at the end of 2015. Unit costs decreased by
19% to 111 c/lb (2015: 137 c/lb), benefiting from the higher
production as well as from an ongoing focus on reducing
costs at the operation.
Production at El Soldado increased by 31% to 47,000 tonnes
(2015: 36,000 tonnes) as a result of improved throughput
and higher grades. Unit costs declined by 19% to 184 c/lb
(2015: 228 c/lb), reflecting the benefits of both the higher
production and the implementation of the optimised mine
plan from the start of the year. In July 2016, the unionised
workforce at El Soldado went on a 13-day strike before
agreement was reached with the company on a new
remuneration offer. Management continued to optimise
the mine plan following changes made to sequencing in
response to low prices during 2016. The redesigned mine
plan for El Soldado is yet to receive permitting approval and
therefore we decided, in February 2017, to temporarily
suspend mining operations, pending appeal to the regulator
and/or amendments being made to the mine plan. Work
continues with Sernageomin (Chile’s National Geology and
Mining Service) on securing appropriate licences for this
revised mine plan.
OPERATIONAL OUTLOOK
Production in 2017 is expected to be in line with that in 2016.
Higher throughput at Collahuasi is expected to be offset by
lower grades. At Los Bronces, recovery from the weather-
and strike-related stoppages in 2016 is likely to be affected
by increasing ore hardness, thereby constraining plant
performance. Production guidance for 2017 remains
unchanged at 570,000-600,000 tonnes.
In the next two years it will be necessary to replace the
stator motors on each of the two ball mills on the key
Line 3 at Collahuasi (responsible for around 60% of plant
throughput). This work is planned for 2018 and 2019;
however, this may be brought forward for operational
reasons (estimated impact of each change on attributable
production of 20,000-25,000 tonnes).
53
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT NICKEL, NIOBIUM AND PHOSPHATES
NICKEL, NIOBIUM
AND PHOSPHATES
Ruben
Fernandes
CEO –
Anglo
American
Brazil
Duncan
Wanblad
CEO –
Base Metals
Our Nickel business is well placed to serve the global stainless steel industry, which
depends on nickel and drives demand for it. Our assets are in Brazil, with two ferronickel
production sites: Barro Alto and Codemin, in the state of Goiás. The sale of our niobium
and phosphates business, also located in Brazil, was completed in September 2016.
BRAZIL
HIGHLIGHTS
1
2
3
4
NICKEL
1 Barro Alto
2 Codemin
NIOBIUM AND PHOSPHATES
3 Boa Vista
4 Chapadão
FOLLOWING THE SUCCESSFUL REBUILD OF THE
BARRO ALTO FURNACES, WHICH ARE NOW PRODUCING
AT CLOSE TO NAMEPLATE CAPACITY, THE NICKEL
BUSINESS ACHIEVED A PRODUCTION RECORD IN 2016
44,500 tonnes
DECREASE IN UNIT COSTS◊
41% since 2012
NET DISPOSAL PROCEEDS RECEIVED FOR SALE OF NIOBIUM
AND PHOSPHATES BUSINESS – COMPLETED IN Q3 2016
$1.5 billion
OPERATING COSTS EXPECTED TO CONTINUE
TO FALL AT BARRO ALTO
Unit costs at Barro Alto are forecast to be 352 c/lb in 2017, with
additional operational improvements expected to reduce them
further, to around 330 c/lb in 2020 – placing the asset firmly within
the lower half of the industry cost curve.
SCOPE TO FURTHER IMPROVE PRODUCTION
A number of minor plant and mine improvements, including
upgrading the plant and debottlenecking, have the scope to
increase production by 10% at Barro Alto. These improvements
can be implemented for minimal capital expenditure, and could
bring total annual nickel production to around 48,000 tonnes
from 2020.
Following the successful rebuild of Barro Alto’s two furnaces, Nickel’s output in 2016 increased by
almost 50% over the previous year to 44,500 tonnes, with the furnaces now producing at close to
nameplate capacity.
54
Anglo American plc Annual Report 2016 Key performance indicators
Nickel segment
Prior period
Production
volume
(t)
44,500
30,300
Sales
volume
(t)
44,900
32,000
Price
(c/lb)
431
498
Unit cost◊
(c/lb)(1)
Revenue◊
($m)
350
431
426
146
Underlying
EBITDA◊
($m)(2)
Underlying
EBITDA
margin
Underlying
EBIT◊
($m)(2)
57
(3)
13%
(2)%
(15)
(22)
Capex◊
($m)
62
26
ROCE◊
(1)%
(1)%
(1) C1 cash costs (c/lb).
(2) Nickel segment includes $10 million projects and corporate costs (2015: $12 million).
Niobium and Phosphates(1)
Prior year
Niobium
Prior year
Phosphates
Prior year
Production
volume
(kt)
–
–
4.7
6.3
864
1,111
Sales
volume
(kt)
–
–
4.6
5.1
973
1,060
Price
($/t)
–
–
–
–
354
479
Unit cost◊
(c/lb)
Revenue◊
($m)
Underlying
EBITDA◊
($m)(2)
Underlying
EBITDA
margin
Underlying
EBIT◊
($m)(2)
Capex◊
($m)
–
–
–
–
–
–
495
544
137
111
358
433
118
146
41
40
80
111
24%
27%
30%
36%
22%
26%
79
119
21
33
61
91
26
50
–
26
26
24
ROCE◊
19%
14%
6%
6%
50%
30%
(1) Metrics relating to 2016 include results up to the date of disposal, 30 September 2016. Prior year metrics include results for the full year to 31 December 2015.
(2) Niobium and Phosphates also include $3 million and $5 million of projects and corporate costs for year to date September 2016 and full year 2015, respectively.
FINANCIAL AND OPERATING OVERVIEW
MARKETS
The sale of the niobium and phosphates business
to China Molybdenum Co Ltd. was completed on
30 September 2016.
Average market price(1) (c/lb)
Average realised price(2) (c/lb)
2016
436
431
2015
536
498
Nickel
Nickel’s underlying EBITDA was $57 million, reflecting
lower cash costs and higher volumes following the
successful rebuild of Barro Alto’s furnaces, with the
operation reaching nameplate capacity in the third quarter
of 2016, as well as the favourable impact of the weaker
Brazilian real. These benefits were partly offset by a decline
in the average nickel price for the year, cost inflation and
lower energy surplus sales. Barro Alto’s operating results
were capitalised until October 2015, when the project began
commercial production.
Nickel unit costs decreased by 19% to 350 c/lb
(2015: 431 c/lb), mainly attributable to increased production
volumes from Barro Alto, favourable exchange rates, lower
energy costs and consumables, partially offset by inflation.
Niobium
Underlying EBITDA was flat year-on-year at $41 million
(2015: $40 million), with higher sales volumes from
Boa Vista Fresh Rock (BVFR) and lower cash costs
offsetting lower prices and the impact of the sale of the
business. Underlying EBITDA from BVFR was capitalised
during January and February 2016, with commercial
production being achieved in March 2016.
Phosphates
Underlying EBITDA of $80 million decreased by 28%
(2015: $111 million), driven primarily by the sale of the
business, as well as lower sales pricing and inflation, partially
offset by a reduction in operating costs.
(1) The average market price is the LME nickel price, from which ferronickel pricing is
derived. Ferronickel is traded based on discounts or premiums to the LME price,
depending on market conditions, supplier products and consumer preferences.
(2) Differences between market prices and realised prices are largely due to variances
between the LME and ferronickel price.
For more information, refer to the Marketplace review section
See pages 06-08
Nickel
The average LME nickel cash settlement price decreased by
19% to 436 c/lb (2015: 536 c/lb).
Concerns about global economic growth put significant
downward pressure on metal prices, particularly through
the second half of 2015 and the first quarter of 2016. Despite
these concerns, nickel demand improved strongly during
the year, while supply contracted for the second consecutive
year, resulting in a market deficit. Demand, which had grown
by 1.2% in 2015, increased by 8.3% in 2016, supported by
strong growth in global stainless steel production, which rose
by 5.3% (2015: 0.2%). With Chinese nickel pig iron (NPI)
production declining, price-led cutbacks at other nickel
producers and lower availability of nickel-bearing stainless
steel scrap, the nickel market tightened, while a shortage of
nickel-iron units (ferronickel, NPI and stainless steel scrap)
led to ferronickel, which had traded at a discount to the LME
price, starting to command a premium to the LME price.
Niobium
Worldwide demand for ferroniobium decreased in 2016.
Demand from the key markets of China and North America
was particularly muted at the beginning of the year,
attributable to overcapacity in steel production, and the
effect of the weaker oil and gas sector.
Phosphates
The average MAP CFR Brazil price was $354/tonne, 26%
lower than for the equivalent period in 2015 ($479/tonne),
as a result of increased global supply and weaker than
expected demand in the major markets – the US, China and
India. In Brazil, demand for phosphate fertilisers from January
to September 2016 was around 10.2 million tonnes, a 6.5%
increase. This strong demand was driven by favourable
weather conditions, lower fertiliser prices, an attractive barter
ratio, the weaker Brazilian real (which supported farmers’
earnings) and increased availability of funding to farmers.
55
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT NICKEL, NIOBIUM AND PHOSPHATES
NICKEL, NIOBIUM AND PHOSPHATES continued
OPERATING PERFORMANCE
OPERATIONAL OUTLOOK
Nickel
Production guidance for 2017 is approximately 45,000
tonnes (previously 42,000-45,000 tonnes).
Nickel
Nickel output increased by 47% to 44,500 tonnes
(2015: 30,300 tonnes) following the successful rebuild of
the Barro Alto furnaces, which are now producing at close
to nameplate capacity. Codemin’s production of metal was
in line with the previous year at approximately 9,000 tonnes.
Niobium
At the point of disposal, production was in line with the
prior year at 4,700 tonnes (Q3 2015: 4,700 tonnes;
FY 2015: 6,300 tonnes). This was despite two shutdowns;
the first in the first quarter to reduce stock levels and
facilitate site maintenance and work on residue disposal;
and the second, a planned stoppage in May in order to
implement the downstream metallurgy project. Following
the project’s implementation, plant performance was strong,
with an all-time production record achieved in July.
Phosphates
At the time of disposal in the third quarter, fertiliser
production was 0.9 million tonnes (Q3 2015: 0.8 million
tonnes; FY 2015: 1.1 million tonnes), with the increase being
attributable to strong granulation plant performance at both
sites and favourable operational conditions, which allowed
two separate planned maintenance stoppages (scheduled
for January and March 2016) to be combined. Phosphoric
acid production was also boosted as a result of increased
plant stability and higher equipment availability at both sites.
Dicalcium phosphate production was higher because of
improved plant performance (principally lower idle time at
Cubatão and a reduction in time spent on tank maintenance
at Catalão), as well as higher phosphoric acid availability.
56
Anglo American plc Annual Report 2016 STRATEGIC REPORT IRON ORE AND MANGANESE
IRON ORE AND
MANGANESE
Themba
Mkhwanazi
CEO –
Kumba
Iron Ore
Ruben
Fernandes
CEO –
Anglo
American
Brazil
Seamus
French
CEO –
Bulk
commodities
and other
minerals
Anglo American’s iron ore operations provide customers with niche, high iron
content ore, a large percentage of which is direct-charge product for blast furnaces.
In South Africa, we have a majority share (c. 70%) in Kumba Iron Ore, while in Brazil
we have developed the integrated Minas-Rio operation. In manganese, we have a
40% shareholding in Samancor, with operations based in South Africa and Australia.
SOUTH AFRICA
HIGHLIGHTS
33% INCREASE IN KUMBA’S UNDERLYING EBITDA◊
$1,347 million
13% DECREASE IN KUMBA’S UNIT COSTS◊
$27/tonne
76% INCREASE IN PRODUCTION AT MINAS-RIO
16.1 Mt (wet basis)
STRATEGIC FOCUS
• The reconfiguration of Sishen’s open pit has led to a lower cost
design, allowing the mine to continue to operate profitably, should
the iron ore price deteriorate in the future.
• Minas-Rio continued its ramp-up and ceased capitalising its
operating results from January 2017. After the Step 3 licences
have been secured, the operation is expected to be in a position to
produce at its nameplate capacity of 26.5 Mtpa (wet basis).
3
1
2
14
1 Sishen
2 Kolomela
3 Samancor Manganese
– Hotazel
4 Samancor Manganese
– Metalloys
KEY
Mining operations
Other
BRAZIL
1 Minas-Rio
2 Ferroport
(50% ownership)
AUSTRALIA
1
12
1
1 Samancor’s Groote Eylandt
Mining Company (GEMCO)
2 Samancor’s Tasmanian Electro
Metallurgical Company (TEMCO)
12
At Sishen, ore stockpiles are controlled by four stacker/reclaimers. Mining operations have been
substantially reconfigured to reduce waste and to make the overall operation more resilient to
future deteriorations in the iron ore price.
57
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT IRON ORE AND MANGANESE
IRON ORE AND MANGANESE continued
Key performance indicators
Iron Ore and Manganese
Prior year
Kumba Iron Ore
Prior year
Iron Ore Brazil
Prior year
Samancor(4)
Prior year
Projects and corporate
Prior year
(1)
Iron Ore Brazil production is Mt (wet basis).
Production
volume
(Mt)(1)
Sales
volume
(Mt)
Price
($/t)(2)
Unit cost◊
($/t)(3)
Revenue◊
($m)
Underlying
EBITDA◊
($m)
Underlying
EBITDA
margin
Underlying
EBIT◊
($m)
–
–
41.5
44.9
16.1
9.2
3.3
3.3
–
–
–
–
42.5
47.8
16.2
8.5
3.4
3.3
–
–
–
–
64
53
54
41
–
–
–
–
–
–
27
31
28
60
–
–
–
–
3,426
3,390
2,801
2,876
–
–
625
514
–
–
1,536
1,026
1,347
1,011
(6)
(20)
258
104
(63)
(69)
45%
30%
48%
35%
–
–
41%
20%
–
–
1,275
671
1,135
739
(6)
(21)
209
22
(63)
(69)
Capex◊
($m)
269
1,422
160
523
109
899
–
–
–
–
ROCE◊
12%
5%
51%
26%
(1)%
(1)%
59%
4%
–
–
(2) Prices for Kumba Iron Ore are the average realised export basket price (FOB Saldanha). Prices for Iron Ore Brazil are the average realised export basket price (FOB Açu) (wet basis).
(3) Unit costs for Kumba Iron Ore are on an FOB dry basis. Unit costs for Iron Ore Brazil are on an FOB wet basis.
(4) Production, sales and financials include ore and alloy.
FINANCIAL AND OPERATING OVERVIEW
Kumba
Underlying EBITDA increased by 33% to $1,347 million
(2015: $1,011 million), mainly due to a 21% increase in the
average realised FOB export iron ore price from $53/tonne
to $64/tonne, partially offset by lower sales volumes.
Lump- and ore-quality benefits resulted in the average
realised iron ore price of $64/tonne being higher than the
average iron ore benchmark price of $58/tonne. Unit costs
decreased by 13% to $27/tonne (2015: $31/tonne), driven
by the pit reconfiguration at Sishen to a lower cost shell,
which included restructuring the operation, and the benefit
of the weaker South African rand. The pit reconfiguration
resulted in lower volumes, partially offset by productivity
gains in mining and processing operations. The average
CFR break-even price achieved was $29/tonne in 2016.
Sales volumes decreased by 11% to 42.5 Mt (2015: 47.8 Mt),
reflecting the 10% decline in production volumes at Sishen.
Total finished product stock reduced to 3.5 Mt (2015: 4.7 Mt),
in line with the optimum level of around 3 Mt.
Iron Ore Brazil
Iron Ore Brazil’s underlying EBITDA loss was $6 million
(2015: $20 million loss). Minas-Rio continued to capitalise
its operating results in 2016, as the asset remained in the
ramp-up phase throughout the year. Iron Ore Brazil’s
capitalised operating EBITDA amounted to $269 million
(2015: $239 million loss), reflecting higher total sales
volumes and an improvement in realised iron ore prices, as
well as lower unit costs. Minas-Rio’s average FOB realised
price in 2016 was $54 per wet metric tonne (equivalent to
$59 per dry metric tonne). Operating results ceased to be
capitalised from January 2017.
Samancor
Underlying EBITDA increased by $154 million to
$258 million (2015: $104 million), driven by a recovery
in manganese ore prices, a 6% increase in ore sales, and
lower costs partly attributable to the restructuring of
the South African manganese operations.
The restructuring of the South African manganese
operations was completed in the first quarter of the year.
This reduced the operating cost base and increased
production flexibility in response to the sharp decline in
the manganese index ore price in 2015, which carried
through into the first half of 2016. During the second six
months, however, the price staged a dramatic recovery
from its lows.
MARKETS
Iron ore
Average market price
(IODEX 62% Fe CFR China – $/tonne)
Average market price
(MB 66% Fe Concentrate CFR – $/tonne)
Average realised price
(Kumba export – $/tonne)
(FOB Saldanha)(1)
Average realised price
(Minas-Rio – $/tonne) (FOB wet basis)(2)
2016
2015
58
69
64
54
56
67
53
41
(1) Kumba’s outperformance over the Platts 62% Fe CFR China index is primarily
(2)
representative of the superior iron (Fe) content and the relatively high proportion
(approximately 64%) of lump in the overall product portfolio.
Iron Ore Brazil produces a higher grade product than the Platts 62% Fe indices,
with pricing reflecting the increased Fe content and lower gangue. Platts 62%
is referred to for comparison purposes only.
58
Anglo American plc Annual Report 2016 Mining activities at Thabazimbi ceased on 30 September
2015, and processing activities on 31 March 2016. Closure
of the mine has proceeded according to plan. Sishen Iron
Ore Company Proprietary Limited, a subsidiary of Kumba,
and ArcelorMittal South Africa Limited (AMSA) have signed
an agreement for the transfer of the Thabazimbi mine,
including all remaining assets and liabilities, to AMSA, which
will become effective once all the conditions precedent have
been met.
The Dingleton project is substantially complete, with only a
small number of households still to be relocated.
Iron Ore Brazil
Iron ore production from Minas-Rio(1) increased by 76%
to 16.1 Mt (2015: 9.2 Mt), as the operation continues its
ramp-up. There has been an improved operational
performance since July 2016, when a licence was granted
to access the Step 2 area.
Samancor
Manganese ore production was broadly in line with the
prior year at 3.1 Mt (attributable basis). Production from the
Australian operations was 2% lower owing to certain ore
feed constraints. This was offset by a 5% increase from the
South African operations following the drawdown of the
Wessels concentrate stockpiles in response to higher
market prices.
Production of manganese alloys decreased by 35% to
137,800 tonnes (attributable basis). This was due to power
shortages in Tasmania, which resulted in a five month
suspension of production at two of the four furnaces. The
furnaces were subsequently brought back on line, with
a return to full production rates during September. In
South Africa, manganese alloy production declined by
46% following the decision in May 2015 to temporarily
close three of the four furnaces there.
Iron ore prices fared better than in 2015, but with
significant volatility through the year. The IODEX 62%
Fe CFR China spot price increased by 4% to an average of
$58/tonne, trading in a yearly range of $40-$84/tonne. The
improvement in downstream demand in China, combined
with steel capacity closures as part of the country’s
supply-side reforms and environmental improvement drive,
supported both steel and iron ore prices. This positive
demand environment and improved mill margins have
driven an increase in Chinese crude steel production, while
the progressive withdrawal of marginal domestic iron ore
supply has boosted demand for seaborne iron ore materials.
Rallying metallurgical coal prices have also been supportive
of demand for high grade ores, with quality price premiums
increasing through most of the second half of 2016.
For more information, refer to the Marketplace review section
See pages 06-08
Manganese
Following a 57% reduction in the index ore price during
2015, the index ore price increased by 341% during 2016,
closing at $9.01/dmtu (44% Mn CIF China). The price
recovery was driven by demand from China, where strong
government-led infrastructure spending has resulted
in higher steel prices.
OPERATING PERFORMANCE
Kumba
Sishen’s production decreased by 10% to 28.4 Mt
(2015: 31.4 Mt), consistent with the mine’s lower-cost
pit configuration. Waste mined reduced to 137.1 Mt
(2015: 222.2 Mt), in line with lower production. Run rates
for the year were affected by the restructuring; higher levels
of rainfall and safety stoppages in the first six months also
had an adverse impact on production. Following successful
completion of the restructuring, the second half of the
year showed a considerable improvement as benefits
attributable to improved mining productivity, as well as
access to low strip ratio ore and higher plant yields, started
to come through.
Implementation of the mining work management element
of the Operating Model at Sishen resulted in significant
improvements in the amount of ore and waste mined.
Work management for the reconfigured mining set-up is
now under way.
Kolomela mine produced a record 12.7 Mt, 6% more
than the 12.1 Mt produced in 2015, mainly owing to
debottlenecking and optimisation of the plant. Waste
mining increased by 10% to 50.2 Mt, in line with higher
production levels.
At Kolomela, implementation of the Operating Model in
the plant area has seen a marked improvement in work
execution, with scheduled work completion now in excess
of 95%. Screening-tonnes throughput improved by 18%
during the go-live phase, and a further 18% during the
stabilisation phase. The plant’s process stability has also
improved significantly.
(1)
Iron Ore Brazil
production is on a
wet basis, unless
otherwise stated.
59
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT IRON ORE AND MANGANESE
IRON ORE AND MANGANESE continued
Trucks transporting iron ore from the Minas-Rio mine to the nearby beneficiation plant, both located in the state of Minas Gerais, Brazil. The mine continued its
ramp-up during 2016, and is expected to reach nameplate capacity of 26.5 Mtpa after the Step 3 licences are secured, expected to be in late 2018.
OPERATIONAL OUTLOOK
Kumba
Production guidance for Sishen is 27-28 Mt for 2017, with
a waste movement target of 150-160 Mt. The restructuring
is expected to contribute to annual cost savings for 2017.
In the medium term, the mine will continue to explore
opportunities to fill any spare plant capacity through the use
of low grade stockpiles. Further improvements in equipment
efficiencies are expected over the medium term.
At Kolomela, annual production is expected to be 13-14 Mt
for 2017. Waste removal is expected to increase to around
50-55 Mt in support of the increased annual output.
Kumba has a target unit cost of c. $30/tonne. Full-year
total sales volume guidance for 2017 is 40-42 Mt.
Iron Ore Brazil
Iron Ore Brazil continues to focus on operational stability
and on obtaining the Step 3 licences required for the
operation to access the full range of run-of-mine grades
and reach its nameplate capacity of 26.5 Mt (wet basis).
Approval of the Step 2 licences, which had been expected
in the first half of 2016, was provisionally granted in July
2016, with final approval in October 2016. The Step 2 area
is expected to yield c. 45 million saleable tonnes (wet basis)
of ore, most of which is anticipated to be mined by the
time the licences for Step 3 (which had originally been
expected in early 2018, and are now forecast for late
2018) are secured.
As a result of these licensing delays, production guidance
for 2017 has been lowered to 16-18 Mt (previously
19-21 Mt), and for 2018 to 15-18 Mt (previously 22-24 Mt),
subject to the timing of the Step 3 licences approval. After
the Step 3 licences have been secured, the operation is
expected to be in a position to ramp-up to produce at its
nameplate capacity rate of 26.5 Mt per year.
In 2017, unit costs are expected to be approximately
$27/tonne (wet basis, at 2016 average FX rate).
Samancor
Australian manganese ore production guidance of
2.1 Mwmt remains unchanged, albeit with an increased
proportion of Premium Concentrate ore (PCO2) in the
product mix. The PCO2 fines product has a manganese
content of approximately 40%, which leads to both grade
and product-type discounts when referenced to the high
grade 44% manganese lump ore index.
South Africa Manganese ore production will remain
configured for an optimised production rate of 2.9 Mwmt pa
(100% basis), although the business will continue to act
opportunistically when market fundamentals are supportive.
LEGAL
Residual mining rights
On 12 October 2016, South Africa’s Department of Mineral
Resources (DMR) granted the residual 21.4% undivided
share of the mining right for the Sishen mine to Sishen Iron
Ore Company Proprietary Limited (SIOC). As a result of the
grant of the residual 21.4% undivided share, SIOC is now the
sole and exclusive holder of the right to mine iron ore and
quartzite at the Sishen mine. This residual mining right will
be incorporated into the 78.6% Sishen mining right that
SIOC successfully converted in 2009.
Tax matters
On 3 February 2017, the South African Revenue Services
and Sishen Iron Ore Company Proprietary Limited agreed
on a R2.5 billion (approximately $185 million) settlement
of a tax matter relating to the period covering 2006 to 2015
inclusive. The Group had previously provided for R1.5 billion
and an additional R1.0 billion was provided for in 2016.
60
Anglo American plc Annual Report 2016 STRATEGIC REPORT COAL
COAL
Seamus
French
CEO –
Bulk
commodities
and other
minerals
KEY
(TC) Thermal coal
(MC) Metallurgical coal
Our coal portfolio is geographically diverse, with metallurgical coal assets in Australia,
and thermal coal assets in South Africa and Colombia, which mine products attuned to
the individual requirements of our diversified customer base. We are the world’s third
largest exporter of metallurgical coal.
AUSTRALIA(1)
HIGHLIGHTS
57% INCREASE IN UNDERLYING EBITDA◊
$1,646 million
7% REDUCTION IN UNIT COSTS◊ (US$ TERMS) AT
AUSTRALIAN OPERATIONS – BACK TO LOWEST LEVEL
SINCE 2006, IN LOCAL CURRENCY TERMS
$51/tonne
9% INCREASE IN PRODUCTION AT SOUTH AFRICAN
EXPORT MINES
24.6 Mt
STRATEGIC FOCUS
• The Grosvenor metallurgical coal mine in Queensland, Australia,
produced its first longwall coal in May 2016, seven months ahead
of schedule and more than $100 million under its total capital budget.
• The disposal of two assets in Queensland, Australia was completed
in the year; a 70% interest in the Foxleigh metallurgical coal mine
and the sale of a 100% interest in the Callide thermal coal mine. In
October, mining activities ceased at the Drayton thermal coal mine
in New South Wales, Australia.
1
5
2
4
3
1 Moranbah North (MC)
2 Grosvenor (MC)
3 Dawson (MC/TC)
4 Capcoal (MC/TC)
5 Jellinbah (MC/TC)
SOUTH AFRICA
9
1 Goedehoop (TC)
2 Greenside (TC)
3 Kleinkopje (TC)
4 Landau (TC)
5 Zibulo (TC)
6 Mafube (TC)
7 Kriel (TC)
8 New Denmark (TC)
9 New Vaal (TC)
10 Isibonelo (TC)
11 Richards Bay Coal Terminal
6
1
4
5
2
10
3
7
8
KEY
Export market
Export market / Domestic market
Domestic market
Port
COLOMBIA
11
1
1 Cerrejón (TC)
(1) Excludes Callide and Foxleigh disposals.
The longwall at Grosvenor metallurgical coal mine. It was commissioned in May 2016, seven
months ahead of schedule and substantially below its capital budget.
61
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT COAL
COAL continued
Key performance indicators
Coal
Prior year
Australia and Canada
Prior year
South Africa
Prior year
Colombia
Prior year
Projects and corporate
Prior year
Production
volume
(Mt)(1)
Sales
volume
(Mt)(2)
Price
($/t)(3)
Unit cost◊
($/t)(4)
Revenue◊
($m)
Underlying
EBITDA◊
($m)
Underlying
EBITDA
margin
Underlying
EBIT◊
($m)
Capex◊
($m)
94.8
94.9
30.4
33.5
53.8
50.3
10.7
11.1
–
–
94.7
96.8
30.3
34.0
53.6
51.6
10.8
11.2
–
–
–
–
112
90
60
55
56
55
–
–
–
–
51
55
34
39
28
31
–
–
5,263
4,888
2,547
2,374
2,109
1,893
607
621
–
–
1,646
1,046
996
586
473
345
235
168
(58)
(53)
31%
21%
39%
25%
22%
18%
39%
27%
–
–
1,112
457
661
190
366
230
143
90
(58)
(53)
613
941
523
837
90
104
–
–
–
–
ROCE◊
29%
9%
30%
6%
41%
19%
17%
11%
–
–
(1) Production volumes are saleable tonnes.
(2) South African sales volumes exclude non-equity traded sales volumes of 6.1 Mt (2015: 3.4 Mt).
(3) Australia is the weighted average metallurgical coal sales price achieved. South Africa is the weighted average export thermal coal price achieved.
(4) FOB cost per saleable tonne, excluding royalties. Australia and Canada excludes study costs and Callide. South Africa unit cost is for the export operations.
FINANCIAL AND OPERATING OVERVIEW
Australia and Canada
Underlying EBITDA increased by 70% to $996 million,
reflecting a 24% increase in the metallurgical coal realised
price, and cost reductions across the business. Underlying
EBITDA further benefited from an increase in the proportion
of hard coking coal (HCC) production to 65% of total export
production (2015: 60%). Although total production declined
following a number of divestments, unit costs decreased by
7% in US dollar terms (7% in local currency) following the
implementation of significant cost-reduction initiatives,
particularly at the open cut operations, and a corporate
restructure. Local currency (Australian dollar) unit costs
were the lowest since 2006.
Excluding the impact of divestments, total coal production
was 4% lower than in 2015. The decrease was attributable
to a reduction in export thermal production at Drayton,
where mining activities ceased in October, following the
New South Wales Planning Assessment Commission
decision not to support approval of the Drayton South
project. Excluding the divestment of Foxleigh (completed
on 29 August 2016), metallurgical coal production was in
line with the prior year.
The divestment of Callide was completed on
31 October 2016.
Grosvenor produced its first longwall coal in May 2016,
seven months ahead of schedule and more than
$100 million under its total capital budget. While all
equipment has been fully commissioned, ramp-up to
normal production is currently being hampered by
challenging geological conditions.
South Africa
Underlying EBITDA increased by 37% to $473 million.
This was mainly attributable to a 9% increase in the
export thermal coal price, notwithstanding 4% lower export
sales volumes as a result of planned destocking in 2015
(which was not repeated in 2016), facilitated by accessing
additional rail and port capacity. Despite continued
inflationary pressure in South Africa, unit costs reduced
by 13% to $34/tonne owing to the weaker rand and a
2% reduction in on-mine rand unit costs. On-mine local
currency costs have now reduced in line with those reported
in 2013, as a result of the business’s cost-saving and
productivity initiatives.
Production increased by 7%, with a 9% increase from
the Export mines following implementation of productivity
improvement initiatives, and a 7% increase at the Eskom-
tied mines, due largely to the recommissioning of the third
dragline at New Vaal following a maintenance shutdown.
Colombia
Underlying EBITDA increased by 40% to $235 million,
attributable mainly to stronger prices and lower costs
following planned lower production to remove the
highest cost capacity, and by the sustained benefits of
significant cost-reduction programmes implemented
in 2015.
MARKETS
Metallurgical coal
Average market price for premium
low volatility hard coking coal ($/tonne)(1)
Average market price for premium
low volatility PCI ($/tonne)(1)
Average realised price for premium
low volatility hard coking coal ($/tonne)
Average realised price for PCI ($/tonne)
2016
114
88
119
77
2015
102
84
94
77
(1) Represents the quarterly average benchmark for premium low-volume hard
coking coal and PCI.
62
Anglo American plc Annual Report 2016 Metallurgical coal prices started to recover in the first six
months, in a balanced market. In the second half, China’s
imposition of safety, environmental and working time
controls on its domestic mines, along with supply disruptions
arising from geological difficulties encountered at several
mines in Australia, caused significant market tightness,
resulting in a sharp increase in both spot and contract prices.
The spot metallurgical coal price averaged $199/tonne
(TSI Premium HCC FOB Australia East Coast Port $/tonne)
in the second half, 134% higher than in the first six months,
with the premium for high grade material increasing owing
to tightness in the premium HCC market. Supply controls on
domestic production in China were relaxed towards the end
of the year, while exports from the US slowly increased in the
second half as some mines there came out of bankruptcy
protection. Australian supply, however, remained broadly
stable throughout the year, with producers taking a cautious
view on capital investment.
Thermal coal
Average market price
($/t, FOB Australia)(1)
Average market price
($/t, FOB South Africa)(1)
Average market price
($/t, FOB Colombia)(1)
Average realised price –
Export Australia ($/tonne, FOB)
Average realised price –
Export South Africa ($/tonne, FOB)
Average realised price –
Domestic South Africa ($/tonne)
Average realised price –
Colombia ($/tonne, FOB)
2016
2015
66
64
58
55
60
17
56
59
57
52
55
55
19
55
(1) Thermal coal price and realised price will differ according to timing and
quality differences.
Chinese domestic supply rationalisation led to rises in the
domestic thermal coal price, thereby incentivising imports.
Consequently, Chinese import demand increased in the
second half of the year, lifting global thermal coal prices. In
the Pacific, the globalCOAL Newcastle 6,000 kcal/kg FOB
Australia index increased by 12% to $66/tonne. This uplift
in demand and subsequent increase in price helped pull up
both the South African (API4) and Colombian (API10)
indices by 12%. On the supply side, supply from Australia
and Indonesia decreased slightly, while Russian exports
into the Pacific were marginally higher on the back
of increased Chinese import demand.
For more information, refer to the Marketplace review section
See pages 06-08
OPERATING PERFORMANCE
Australia and Canada
Excluding the impact of divestments, production from
the Australian mines decreased by 4% owing to the
cessation of mining activities at Drayton (thermal coal).
Production from the remaining operations was flat
year-on-year as geological issues at Capcoal’s Grasstree
operation, and a planned reduction at Capcoal’s open cut,
which moved to a five-day operation, were offset by the
ramp-up of Grosvenor, productivity improvements at
Dawson and Jellinbah, as well as another record year
at Moranbah.
Excluding the divestment of Foxleigh, Australian export
metallurgical coal production was in line with 2015. HCC
production increased by 2%, owing to the ramp-up of
Grosvenor (benchmark HCC producer), productivity gains
and a change in mix to higher value metallurgical coal
production at Dawson.
South Africa
Total production from the export operations increased by
9% to 24.6 million tonnes following the implementation of
various productivity improvement initiatives at all managed
sites, the introduction of enhanced shift systems at
Goedehoop and Zibulo, and plant innovations at Kleinkopje
and Goedehoop that have delivered incremental saleable
production from previously discarded material.
Export sales at 19.1 Mt were the second highest ever
recorded, albeit 4% below 2015, when prior year sales
volumes benefited from a planned 1 Mt drawdown
of inventory.
Eskom mine production increased by 7%, with New Vaal’s
third dragline back in production following maintenance
in the second half of 2015, and an improved performance
at Kriel’s underground operations.
Colombia
Anglo American’s attributable output from its 33.3%
shareholding in Cerrejón decreased by 4% to 10.7 Mt,
following heavy rainfall in May and June, and ongoing
planned reductions to remove the highest-cost capacity.
OPERATIONAL OUTLOOK
Australia and Canada
Metallurgical coal production in 2017 is expected to be
19-21 Mt. This is below previous guidance owing to the
divestment of Foxleigh, the restructuring of Dawson and
Capcoal open cut to lower cost, lower volume operations,
and current geological issues at Grosvenor.
Export thermal coal
In 2017, export production guidance from South Africa
and Colombia has increased to 29-31 Mt (previously
28-30 Mt).
63
Strategic reportAnglo American plc Annual Report 2016
STRATEGIC REPORT CORPORATE AND OTHER
CORPORATE AND OTHER
Key performance indicators
Segment
Prior year
Other Mining and Industrial
Prior year
Exploration
Prior year
Corporate activities and unallocated costs
Prior year
Revenue◊
($m)
Underlying
EBITDA◊
($m)
Underlying
EBIT◊
($m)
Capex◊
($m)
4
925
–
921
–
–
4
4
(123)
(11)
(2)
110
(107)
(152)
(14)
31
(150)
(64)
(2)
64
(107)
(154)
(41)
26
14
16
–
3
–
–
14
13
FINANCIAL AND OPERATING OVERVIEW
Corporate and Other reported an underlying EBITDA
loss of $123 million (2015: $11 million loss).
Other Mining and Industrial
Underlying EBITDA from Other Mining and Industrial fell
from a contribution of $110 million to a loss of $2 million
following the disposal of Anglo American’s interest in the
Lafarge Tarmac joint venture in July 2015.
Exploration
Exploration expenditure decreased to $107 million
(2015: $152 million), reflecting general reductions across
all commodities. The decreases were mainly attributable
to an overall reduction in drilling activities.
Corporate activities and unallocated costs
Underlying EBITDA amounted to a $14 million loss
(2015: $31 million gain), driven primarily by a year-on-year
loss of $62 million that was recognised in the Group’s
self-insurance entity, reflecting lower premium income
and higher net claims and settlements during 2016.
This was offset to some extent by an 11% decrease
in corporate costs ($57 million), of which $56 million
represented a foreign exchange gain compared with
2015. The reduction in corporate costs was mitigated
by a 10% decrease in the recharge and allocation of
corporate costs to business units of $40 million, reflecting
the lower corporate cost base.
64
Anglo American plc Annual Report 2016 GOVERNANCE CHAIRMAN’S INTRODUCTION
GOVERNANCE
Sir John Parker
Chairman
We continually work to maintain and develop
the framework for good governance.
CHAIRMAN’S INTRODUCTION
As I mention in my Statement on pages 4-5 of this Report,
the rapid deepening of the commodity crisis in the last
few months of 2015 and at the start of 2016 necessitated
an urgent but measured response from the Company. The
Board established a committee of non-executive directors
to meet regularly with our chief executive and management
to approve our strategic approach to the crisis. This
committee ensured that we achieved fast decision-making,
and good alignment and cohesion between the Board and
management, especially in the first six weeks of the year.
BOARD COMPOSITION
As a result of the resignations of Ray O’Rourke and Judy
Dlamini in July and August 2016 respectively, the size of
the Board was reduced to 10 directors, but given the need
to tighten control of costs and to approach any search
processes in a considered and appropriate way, we delayed
commencing the recruitment of additional non-executives
until later in the year. We are now nearing the end of those
processes and the new appointments to the Board will
ensure that we maintain a minimum of 25% women on the
Board and ethnic diversity in our broad mix of attributes.
We have now appointed a new finance director following
René Médori’s decision to retire at the end of 2017 after
12 years in post. Although the process for appointing new
directors is led by the Nomination Committee, other Board
members are given the opportunity to meet candidates
and recommend or otherwise their appointment. The
work carried out by the Committee in 2016 is described
on page 79.
BOARD VISITS TO OPERATIONS
In order that directors have a good understanding of
the business and have the opportunity to interact with
employees from a range of backgrounds and seniority, we
encourage them to visit the Group’s operations. In addition
to the site visits (described on page 75) and the Board and
committee meetings, the non-executives interact with
management throughout the year. This is helpful to them to
understand the culture and morale of employees, and to the
employees themselves to learn more about the role of the
directors and how they contribute to the Group’s success.
BOARD EVALUATION
At least every three years the Board and its committees
are evaluated by an external third party who interviews
the directors and senior management to form an objective
opinion on the performance of the Board and its members.
Every board and every individual can benefit and improve
from the receipt of constructive feedback and this Board
and its directors are no exception. The areas highlighted
for attention, and the actions we took to address the points
raised in the 2015 external review, are described on page 77.
An internal review has been carried out for 2016.
COMMITTEE GOVERNANCE
Starting on page 78, each of the Board committee
chairmen presents a report on the activities of their
committees during 2016. Each of these committees fulfils
a vital role in safeguarding the effective governance of the
Group and in ensuring that matters of material importance
are fully considered and debated. The committee chairmen
report to subsequent Board meetings on their deliberations,
highlighting any matters that the Board as a whole should be
aware of or which need further consideration. This helps to
ensure that subjects raised at a committee meeting which
may have a bearing on another committee’s responsibilities
are brought to everyone’s attention.
This year we are presenting our remuneration policy to
shareholders for approval, together with our remuneration
report which is the subject of an advisory only vote. Details
of payments received by Board members under the existing
policy, and the proposed new policy, are provided in the
report of the Remuneration Committee on pages 84-109.
COMPLIANCE WITH THE UK CORPORATE
GOVERNANCE CODE
I am pleased that in 2016 your Company has complied in
full with the UK Corporate Governance Code and I hope
you find this report useful and informative.
Sir John Parker
Chairman
65
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE DIRECTORS
DIRECTORS
CHAIRMAN
Sir John Parker
GBE, FREng, DSc (Eng), ScD (Hon),
DSc (Hon), DUniv (Hon), FRINA
FINANCE DIRECTOR
René Médori
Doctorate in Economics
74, joined the Board as a non-executive director on 9 July
2009 and became chairman on 1 August 2009. Sir John
is also chairman of the Nomination Committee and is a
member of the Sustainability Committee. He is recognised
as a highly experienced and independent chairman and
brings a wealth of leadership experience across a range
of industries in many countries, including in South Africa.
He is chairman of Pennon Group PLC, and a non-executive
director of Carnival Corporation and Airbus Group. Sir John
is a Visiting Fellow of the University of Oxford and was the
President of the Royal Academy of Engineering from 2011
to 2014. Sir John was previously chairman of National Grid
plc, deputy chairman of DP World, senior non-executive
director and chair of the Court of the Bank of England, joint
chair of Mondi and chair of BVT and P&O plc.
59, joined the Board on 1 June 2005 and became finance
director on 1 September 2005. René will step down from
the Board and as finance director at the conclusion of
the AGM in April 2017. He is a member of the GMC and
chairman of the CorpCo and the Investment Committee
(InvestCo). René brings significant financial and commercial
expertise from capital-intensive businesses, supplying
products to the oil refining, steel and mining industries,
and experience in international finance in the UK, Europe
and the US.
He is a non-executive director of Anglo American Platinum
Limited, De Beers and Petrofac Limited. René is a
former finance director of The BOC Group plc and was
a non-executive director of SSE plc (formerly Scottish
and Southern Energy plc).
CHIEF EXECUTIVE
TECHNICAL DIRECTOR
Mark Cutifani
BE (Mining-Hons), FAusIMM,
CEngFIMMM, DBA (Hon), DoL (Hon)
Tony O’Neill
MBA, BASc (Eng)
58, was appointed as a director and chief executive on
3 April 2013. Mark is chairman of the Group Management
Committee (GMC) and a member of the Corporate
Committee (CorpCo) and the Sustainability Committee.
He has 40 years’ experience of the mining industry across
a wide range of geographies and commodities.
Mark is a non-executive director of Anglo American
Platinum Limited and chairman of Anglo American
South Africa and De Beers. He was previously CEO of
AngloGold Ashanti Limited. Before joining AngloGold
Ashanti, Mark was the COO for Vale’s global nickel business.
Prior to this he held senior executive positions with the
Normandy Group, Sons of Gwalia, Western Mining
Corporation, Kalgoorlie Consolidated Gold Mines and
CRA (Rio Tinto).
In 2016, Mark was awarded an honorary doctorate by the
Laurentian University in Canada.
59, was appointed to the Board as technical director on
22 July 2015. Tony joined the Group in 2013 and has
responsibility for the Technical and Sustainability function.
He is chairman of the Operational Committee (OpCo) and
is a member of the CorpCo, InvestCo and the Sustainability
Committee. He is also a non-executive director of De Beers
and Anglo American Platinum Limited.
Tony joined AngloGold Ashanti in July 2008 as Executive
Vice President – Business and Technical Development,
and served as joint acting CEO during 2013. His 36-year
career in the mining industry has spanned iron ore, copper,
nickel and gold, and includes his roles as Operations
Executive at Newcrest Mining and as the head of the Gold
Business at Western Mining Corporation. Tony is a mining
engineer with an MBA from the University of Melbourne.
66
Anglo American plc Annual Report 2016 SENIOR INDEPENDENT DIRECTOR
Sir Philip Hampton
MA, ACA, MBA
Mphu Ramatlapeng
MD, MHSc
63, joined the Board on 9 November 2009 and has served
as the senior independent director since April 2014. He is
chairman of the Remuneration Committee and a member
of the Audit and Nomination Committees. Sir Philip is
chairman of GlaxoSmithKline and brings to Anglo American
significant financial, strategic and boardroom experience
across a number of industries.
His previous appointments include chairman of The Royal
Bank of Scotland and J Sainsbury plc, finance director of
Lloyds TSB Group plc, BT Group plc, BG Group plc, British
Gas plc and British Steel plc, executive director of Lazards,
and non-executive director of RMC Group plc and
Belgacom SA.
64, was appointed to the Board on 8 July 2013 and is a
member of the Sustainability Committee. Mphu is a highly
experienced leader who brings to Anglo American a broad
range of global health expertise at board level across both
the public and private sectors.
Mphu is the executive vice president of the HIV/AIDS and
Tuberculosis programmes for the Clinton Health Access
Initiative and also the vice chair of the Global Fund To Fight
AIDS, Tuberculosis and Malaria. She served as Minister of
Health and Social Welfare of Lesotho between 2007 and
2012. In this role, she championed Lesotho’s significant
achievements in reducing the transmission of HIV from
mother to child. Across her career, she has been a leading
advocate for women in business, including serving as
founding board member of Women in Business in Lesotho.
NON-EXECUTIVE DIRECTORS
Byron Grote
PhD Quantitative Analysis
Jim Rutherford
BSc (Econ), MA (Econ)
68, was appointed to the Board on 19 April 2013. He is
chairman of the Audit Committee and a member of the
Nomination and Remuneration Committees. Byron
contributes broad business, financial and board experience
in numerous geographies.
Byron is vice chairman of the supervisory board of Akzo
Nobel and a non-executive director of Standard Chartered
PLC and Tesco PLC. He is a member of the European Audit
Committee Leadership Network and an emeritus member
of the Cornell University Johnson Advisory Council. Byron
has extensive management experience across the oil and
gas industry. He served on the BP plc board from 2000
until 2013 and was BP’s chief financial officer during much
of that period. He was previously a non-executive director
of Unilever NV and Unilever PLC.
57, joined the Board on 4 November 2013 and is a member
of the Audit and Sustainability Committees. Jim has
extensive experience in investment management and
investment banking, and brings to the Board considerable
financial insight from the perspective of the capital markets
and a deep understanding of the mining industry.
In 2016, Jim was appointed as chairman of Dalradian
Resources Inc., having served as a non-executive director
since 2015, and as chairman of the Queen’s University
Belfast Foundation Board. Between 1997 and 2013, he
was a senior vice president of Capital International Investors,
a division of the Capital Group, and had responsibility for
investments in the mining and metals industry. Prior to
joining Capital Group, Jim was an investment analyst
covering the South American mining and metals industry
for HSBC James Capel in New York.
67
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE DIRECTORS
NON-EXECUTIVE DIRECTORS continued
Anne Stevens
BSc, PhD
Jack Thompson
BSc, PhD
68, joined the Board on 14 May 2012 and is a member
of the Audit, Nomination and Remuneration Committees.
Anne brings a wealth of experience and wide-ranging
commercial acumen from a number of global industries.
She has experience gained across North, Central and
South America.
66, joined the Board on 16 November 2009. Jack is
chairman of the Sustainability Committee and a member
of the Remuneration Committee. He brings experience
gained at all levels of the mining industry in North and
South America and has received wide recognition as
a mining executive.
Anne is a non-executive director of GKN plc, Lockheed
Martin Corporation and XL Catlin. She served as chairman
and CEO of SA IT Services from 2011 until her retirement
in December 2014. From 2006 to 2009, Anne was chairman
and CEO of Carpenter Technology Corporation. Prior to
this, she was COO for the Americas at Ford Motor Company
until 2006, the culmination of her 16-year career with the
company. Her early career was spent at Exxon Corporation,
where she held roles in engineering, product development,
and sales and marketing.
Jack is a non-executive director of Tidewater Inc. He
was previously chairman and CEO of Homestake Mining
Company, vice chairman of Barrick Gold Corporation,
and has served on the boards of Centerra Gold Inc.,
Century Aluminum Company, Molycorp Inc., Phelps
Dodge Corporation, Rinker Group, and Stillwater Mining.
In addition, the following non-executive directors
served during the year:
Ray O’Rourke stepped down from the Board on
25 July 2016.
Judy Dlamini stepped down from the Board on
30 August 2016.
68
Anglo American plc Annual Report 2016 GOVERNANCE EXECUTIVE MANAGEMENT
EXECUTIVE MANAGEMENT
GROUP MANAGEMENT COMMITTEE MEMBERS
Mark Cutifani
See page 66 for biographical details.
Seamus French
B Eng (Chemical)
René Médori
See page 66 for biographical details.
Tony O’Neill
See page 66 for biographical details.
Didier Charreton
MSc
53, Group director – people and organisation since
1 December 2015. Didier has held a number of senior HR
roles across his more than 25-year career. From 2007
until 2014 he was chief human resources officer for Baker
Hughes, the US-based oilfield services company. Prior to
2007, Didier was HR director at Coats plc in the UK, and
before that held a number of HR roles at Schlumberger,
based in the US, Argentina, Venezuela and France.
Bruce Cleaver
BSc, LLB, LLM
54, is CEO of Bulk commodities and other minerals,
with responsibility for the Group’s coal and iron ore
businesses. Seamus joined the Group in 2007 and was
CEO of Metallurgical Coal between 2009 and 2013, and
CEO of Coal until 2015. Prior to his career at Anglo
American, Seamus joined WMC Resources in Australia
in 1994 in a strategic planning and business development
role, and progressed to various operational management
roles, gaining extensive experience in the gold and nickel
businesses before being appointed executive general
manager of the copper-uranium division. Seamus joined
BHP Billiton as global vice president, business excellence,
following its takeover of WMC in 2005.
Chris Griffith
B Eng (Mining) Hons, Pr Eng
52, CEO of Anglo American Platinum since 1 September
2012. Chris was previously CEO of Kumba Iron Ore
from 2008 to 2012. Prior to this, he was Anglo American
Platinum’s head of operations for joint ventures. Chris
has been with the Group for over 25 years, joining
Anglo American Platinum where he progressed from
shift supervisor to one of the youngest general managers
in the company at that time.
Norman Mbazima
FCCA, FZICA
51, was appointed CEO of De Beers on 1 July 2016. Bruce
has served as Group director – strategy and business
development at Anglo American, and was previously
executive head of strategy and corporate affairs for
De Beers, having joined the company in 2005. Before
joining De Beers, he was a partner at Webber Wentzel, the
largest law firm in Africa, specialising in commercial matters.
58, deputy chairman of Anglo American South Africa
since 1 June 2015. From 2012 to 2016 he served as
CEO of Kumba Iron Ore. Norman joined Anglo American
in 2001 at Konkola Copper Mines plc and was subsequently
appointed global CFO of Coal. He became finance director
of Anglo American Platinum in 2006 and later stepped in
as joint acting CEO. Norman was CEO of Scaw Metals from
2008 and later CEO of Thermal Coal from 2009 to 2012.
69
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE EXECUTIVE MANAGEMENT
GROUP MANAGEMENT COMMITTEE continued
Anik Michaud
LL.L (Law)
Peter Whitcutt
BCom (Hons), CA (SA), MBA
49, Group director – corporate relations since 3 June 2015.
Her remit includes corporate communication, international
and government relations, social performance and
engagement, and the office of the chief executive.
Anik joined Anglo American in 2008 as Group head of
corporate communication. Prior to that, she was director
of public affairs for Rio Tinto Alcan, after 10 years with
the Alcan group. Anik began her career as the political
attaché to the Minister of Finance for Quebec.
51, CEO of Marketing since January 2016. Peter joined
the Group in 1990 within the corporate finance division.
He worked on the merger of Minorco with Anglo American,
the listing of Anglo American in 1999, and the subsequent
unwinding of the cross-holding with De Beers. Peter was
appointed Group head of finance in 2003, CFO of Base
Metals in 2008 and served as Group director – strategy,
business development and marketing from 2013 to 2015.
He is also a non-executive director of De Beers.
Duncan Wanblad
BSc (Eng) Mech, GDE
(Eng Management)
Stephen Pearce
BBus (Acc), FCA, GIA, MAICD
50, CEO of Base Metals and Group director – strategy
and business development since July 2016. Between
2009 and 2013, Duncan held the position of Group
director, Other Mining and Industrial. He was appointed
joint interim CEO of Anglo American Platinum in 2007,
having joined the board in 2004, before taking over as
CEO of Anglo American’s Copper operations in 2008.
Duncan began his career at Johannesburg Consolidated
Investment Company Limited in 1990.
52, Stephen joined Anglo American as finance director
designate on 30 January 2017. He will join the Board as
finance director on 24 April 2017, subject to shareholder
approval at the AGM. Stephen has more than 16 years of
public company director experience and 30 years’
experience in the mining, oil and gas, and utilities industries.
Before joining Anglo American, Stephen served as CFO and
an executive director of Fortescue Metals Group from 2010
to 2016. Prior to that, he held the positions of managing
director and CEO of Southern Cross Electrical Engineering
Ltd and was CFO of Alinta Ltd. Until January 2017, he served
as a non-executive director of Cedar Woods Properties Ltd.
Philippe Mellier stepped down from the GMC on 1 July
2016, following his resignation as CEO of De Beers.
70
Anglo American plc Annual Report 2016 GOVERNANCE THE BOARD IN 2016
THE BOARD IN 2016
CORPORATE GOVERNANCE COMPLIANCE
The Board supports the principles and provisions of the
UK Corporate Governance Code (the Code) issued by
the Financial Reporting Council (FRC). The Company
has complied throughout the year with the Code, which is
available on the FRC’s website (www.frc.org.uk). Details
of how the Code has been applied are detailed below.
Throughout 2016, the Board monitored business
performance against that strategy, paying particular attention
to the effects it had on employees and other stakeholders.
The external evaluation gave the Board an opportunity to
receive an objective assessment of its performance and
effectiveness at a time when, more than ever, its role was
crucial to the Company and its long term viability. The results
of the evaluation are described on page 77.
THE ROLE OF THE BOARD
The Board is collectively responsible for the governance
of the Company and this role is particularly important
when the Company finds itself under stress and operating
in difficult economic conditions. At times such as this,
shareholders and other stakeholders expect the Board
to respond effectively and appropriately and to take the
actions necessary to ensure and safeguard the Company’s
long term success.
As noted in the Chairman’s introduction on page 65, the
Board established a committee to revise and refine the
Company’s strategic response. This was presented to, and
agreed by, the Board as a whole at its meeting in February
2016. The agreed strategy was outlined in the 2015 Annual
Report and its progress to date is described elsewhere in
this document.
As always, the Board was supported in meeting its
commitments by a number of committees to which it
delegates certain of its responsibilities. Some of those
committees were established at specific times to allow
closer attention and analysis of key aspects of the
Company’s business, such as the committee described
above, or to finalise matters already discussed in detail by
the entire Board. Other committees are more permanent
in nature and are required to ensure the Company
correctly applies the principles of the Code, and the roles,
membership and activities during the year of these are
summarised on pages 78-109. Some decisions are
sufficiently material that they can only be made by the
Board as a whole. The schedule of ‘Matters Reserved for
the Anglo American plc Board’, and the committees’ terms
of reference, explain which matters are delegated and
which are retained for Board approval, and these
documents can be found online.
For more information, visit
www.angloamerican.com/aboutus/ourapproach
Governance structure
The Board
Provides leadership to the Group and
is responsible for its long-term success.
Group Management Committee
(GMC)
Principal executive committee.
Responsible for formulating
strategy, setting targets/budgets
and managing the Group’s
portfolio.
For more information see
‘GMC Rules’ on the Group’s
website.
Corporate Committee
(CorpCo)
Reviews corporate and ethical
policies and processes, and
financial performance and
budgets at business unit level.
Operational Committee
(OpCo)
Responsible for driving
operational best practices
across the Group and the
setting of technical standards.
Investment Committee
(InvestCo)
Responsible for making
recommendations to the GMC
on capital investment proposals.
Audit Committee
Oversight of financial reporting, audit,
internal control and risk management.
See page 80 for more details.
Nomination Committee
Responsible for Board composition,
appointment of directors and senior
management and succession planning.
See page 79 for more details.
Remuneration Committee
Determines the remuneration of
executive directors, the chairman and
senior management and oversees
remuneration policy for all employees.
See page 84 for more details.
Sustainability Committee
Oversees management of
sustainability issues, including
safety, health, environment,
social and government relations.
See page 78 for more details.
Board committees
Executive committees
71
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE THE BOARD IN 2016
BOARD COMPOSITION
The Code requires that there is a clear division of
responsibilities at the head of the Company between
the running of the Board (one of the chairman’s key
responsibilities) and the executive responsibility for the
running of the Company’s business (the responsibility
of the chief executive, Mark Cutifani). The chairman
(Sir John Parker) is also responsible for leadership of the
Board and ensuring its effectiveness on all aspects of its
role. The Code also recommends that there is a senior
independent director to provide a sounding board for the
chairman and to serve as an intermediary for the other
directors when necessary. The senior independent director
(Sir Philip Hampton) is available to shareholders if they
have concerns when communications through the normal
channels have failed to resolve the matter or when such
contact is inappropriate.
In addition to the roles outlined above, the Board currently
comprises a further two executive directors and five
additional independent non-executive directors, making
a total of 10 directors.
In 2016, two non-executive directors resigned, and one
of these resignations (that of Judy Dlamini at the end of
August) resulted in the Board’s composition falling below
the Davies Report target of 25% female membership.
Recruitment processes have been under way since late
2016 resulting in the nomination of an additional female
director for shareholders to vote on at the AGM in April.
This appointment will ensure that the Board returns to
having at least 25% female membership and retains
two ethnically diverse directors. A separate process is
targeting the recruitment of a non-executive director
with project management and large construction skills
alongside significant mining experience to further
strengthen our Board.
In respect of other measures of diversity, the Board has
directors from Australia, France, Ireland, Lesotho, the UK,
and the USA, with a broad range of professional experience
as set out in the table below.
In 2017, René Médori will retire from the Board and as
finance director. Stephen Pearce is proposed for election
at the AGM in April to succeed him. Stephen joined
Anglo American as finance director designate and as a
member of the GMC on 30 January 2017. His biography
appears on page 70.
Following Sir John Parker’s decision to step down as
chairman during the course of 2017, Sir Philip Hampton
is leading the Nomination Committee’s process to identify
a successor to the chairmanship. Sir John will continue to
chair the Board until a successor is appointed.
Board experience and diversity
Professional experience
Health,
safety,
welfare
•
•
•
•
•
Broad based
international
business
experience
Previous
NED
experience
Previous
chief
executive
Economics
and global
economy
Experience
as an
investor
•
•
•
•
•
•
•
•(2)
•
•
•
•
•
•
•(3)
•(4)
•
•
•
•
•
•
Directors
Country
Mining
Engineering
Large
project
management
Construction
in mining/
oil and gas
Finance
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Sir John Parker
UK
Mark Cutifani*
René Médori*
Byron Grote
Australia
France
USA/UK
Sir Philip Hampton
UK
Tony O’Neill*
Australia
Mphu Ramatlapeng
Lesotho
Jim Rutherford
UK
Anne Stevens
Jack Thompson
USA
USA(5)
•(1)
•
•
•
•
•
•
•
•
(1) Non-executive director – British Coal Corporation
(2) Non-executive director – Petrofac Limited; SSE plc
(3) Government minister
(4) COO – South America – Ford
(5) Born in Cuba, naturalised US citizen
* Also Group Management Committee members
72
Anglo American plc Annual Report 2016 BOARD DISCUSSIONS
The rolling agenda of matters discussed by the Board is
described and explained below. The Board is scheduled to
meet at least six times a year but meets more often should
circumstances warrant this. In addition, a one and a half day
strategy session is held, during which strategy formulated by
management is debated, stress-tested, modified if
necessary, and finally approved by the Board. Each of
the Group’s business unit heads presents to the Board in
some depth once a year on key aspects of the business,
including: safety and environment; performance; and
risk management.
AREAS COVERED
COMMENTS
Fatal incidents, Total
Recordable Case
Frequency Rate, health
and medical incidents
Environmental incidents,
energy and climate change,
water availability and
rehabilitation
Social incidents and
performance, government,
media and investor relations
The chief executive reports at each Board meeting on Group safety
performance and this topic is always the first item on the agenda. The
causes of fatal incidents and those causing injury are examined in detail
by the Sustainability Committee and the findings discussed by the Board
as a whole. Management performance in reducing such incidents and to
improve occupational health is reviewed.
Material environmental incidents are reported on, together with efforts
made to reduce energy and natural resource consumption, and to generally
reduce the impact of the Group’s operations on the environment.
Community complaints about environmental matters, and any health and
safety issues are reported. Investor and media relations updates are given.
Organisational restructure,
key appointments and
resignations, business
integrity and Code of
Conduct
Progress on organisational restructuring and changes in headcount are
monitored. Targets for areas such as diversity are agreed and reported on.
The Code of Conduct is reviewed and approved and progress of the roll-out
across the business is discussed. The Board is updated on business integrity
training being undertaken across the Group.
Operational performance
by each business unit
and progress of key projects
A report on each business unit is received and each business unit head
presents in detail on its operations, strategy and risks once a year. The
Board also visit one of the Group’s operations: in 2016 the Board visited
the Element Six operation in Oxfordshire.
Board discussions
TOPIC AND LINK
TO STRATEGY
Safety and Health
Environment
Socio-political
People
Operations
Financial
Economic outlook
and commodity prices
Key financial measures,
liquidity and balance
sheet strength, cost
improvements
Macro-economic
environment and
commodity price outlook
Strategy
Disposals, three-year plan,
progress on critical tasks
Board governance
Reports from committees,
legislative and regulatory
compliance
Progress against the annual budget is monitored and discussed. Liquidity,
balance sheet strength and debt are reviewed and, if any corrective actions
are necessary, these are agreed.
The Board receives briefings from internal teams and external advisers
on trends in relevant areas and likely scenarios for global economic growth.
Commodity prices, and the effect of these on the Group, are noted and
taken into account for strategy and planning purposes.
As well as having a dedicated strategy meeting each year, the Board
reviews progress against the Group’s agreed strategy at each meeting
and considers if any changes to that strategy are needed. There are
annual presentations on exploration and innovation.
Each of the committee chairs report on recent meetings and any
developments which need the attention of the Board as a whole. Reports
are received on the Group’s compliance with relevant legislation and
regulation, and any actions needed to respond to recent developments.
The Board receives biannual updates on material litigation across the Group.
Matters which generally assist the effective functioning of the Board and
Group as a whole are considered and actions agreed.
For more information on our strategy and how we measure our performance through our pillars of value see pages 10-11.
73
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE THE BOARD IN 2016
BOARD AND COMMITTEE MEETINGS 2016 – FREQUENCY AND ATTENDANCE OF MEMBERS
The table below shows the attendance of directors at meetings of the Board and committees during the year. Attendance is
expressed as the number of meetings attended out of the number eligible to be attended.
Sir John Parker
Mark Cutifani
René Médori
Judy Dlamini(1)
Byron Grote(2)
Sir Philip Hampton
Tony O’Neill
Ray O’Rourke(3)
Mphu Ramatlapeng
Jim Rutherford
Anne Stevens(4)
Jack Thompson
Independent
n/a
No
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Board
6/6
6/6
6/6
4/4
6/6
6/6
6/6
4/4
6/6
6/6
6/6
6/6
Audit
–
–
–
3/3
4/4
3/4
–
–
–
4/4
4/4
–
Sustainability
4/4
4/4
–
–
–
–
4/4
1/3
4/4
4/4
–
4/4
Remuneration
–
–
–
2/3
4/4
4/4
–
3/3
–
–
1/1
4/4
Nomination
6/6
–
–
–
1/1
6/6
–
4/4
–
–
6/6
–
(1) Resigned 30 August 2016.
(2) Appointed to the Nomination Committee on 21 October 2016.
(3) Resigned 25 July 2016.
(4) Appointed to the Remuneration Committee on 21 October 2016.
BOARD INFORMATION AND SUPPORT
All directors have full and timely access to the information
required to discharge their responsibilities fully and
effectively. They have access to the advice and services
of the company secretary, other members of the Group’s
management and staff, and external advisers. Directors
may take independent professional advice in the
furtherance of their duties, at the Company’s expense.
Where a director is unable to attend a Board or committee
meeting, he or she is provided with all relevant papers and
information relating to that meeting and is able to discuss
issues arising with the respective chairman and other
Board and committee members.
74
Anglo American plc Annual Report 2016 BOARD VISITS TO OPERATIONS
Both the Board and the business as a whole benefit from
the directors visiting the Group’s operations. As well as
gaining a better understanding of the various operations
the Group undertakes, the directors have the opportunity
to meet and talk to employees at those operations and
understand more about the issues of importance to them.
During 2016, the Board visited the Element Six operation at
Harwell in the UK, part of the De Beers Group of
Companies. In addition, several non-executive directors,
including members of the Sustainability Committee, visited
the following operations in South Africa during the year: the
Venetia diamond mine; the Bafokeng-Rasimone Styldrift
platinum mine; and the Platinum Precious Metals Refinery.
Images
Top left:
Element Six head of
applications – cutting and
grinding Wayne Leahy
explains aspects of
the company’s
precision testing.
Top right and bottom left:
Element Six principal
research scientist
Richard Bodkin during
a demonstration in
the Customer
Experience area.
Middle:
Richard Bodkin and
Element Six executive
director, innovation
Siobhan Duffy during
a presentation to
Board members.
Bottom right:
In Element Six’s
Press Hall, non-executive
directors and Base
Metals CEO Duncan
Wanblad with Siobhan
Duffy, research fellow
Ray Spits and senior
research scientist
Serena Bonetti.
75
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE THE BOARD IN 2016
BOARD EVALUATION
INVESTOR RELATIONS
In accordance with the Code, Independent Board Evaluation
(IBE), an external consultancy with no other connection to
the Company, conducted an external evaluation exercise
at the end of 2015, the results of which are shown on the
following page. A comprehensive brief was provided to
IBE, together with supporting materials, prior to their
attending Board and committee meetings. Detailed
interviews were conducted with each of the directors,
certain senior executives and representatives of the Group’s
auditor, Deloitte. Feedback was provided to the chairman
and the committee chairs and a report on the chairman was
presented to the senior independent director. Overall, the
Board was considered to be generally effective and well
balanced, with some areas for improvement, including
induction and risk management. The chairman conducted
one-to-one interviews with each of the non-executive
directors following the evaluation.
At the end of 2016, Board and committee members
completed an online, questionnaire-based, internal
evaluation of performance. The results of this evaluation
will be reported in the 2017 Annual Report.
The Company maintains an active engagement with its key
financial audiences, including institutional shareholders and
buy and sell-side analysts, as well as potential shareholders.
The investor relations department manages the interaction
with these audiences and regular presentations take place
at the time of the interim and final results, as well as during
the rest of the year. An active programme of communication
with potential shareholders is also maintained. Any
significant concerns raised by a shareholder in relation to
the Company and its affairs are communicated to the Board.
The Board is briefed on a regular basis by the investor
relations department and analysts’ reports are circulated
to the directors. Feedback from meetings held between
executive management or the investor relations
department, and institutional shareholders, is also
communicated to the Board.
During the year there were regular presentations to, and
meetings with, institutional investors in the UK, South Africa,
continental Europe and North America to communicate
the strategy and performance of Anglo American, and an
investor visit to the Jwaneng diamond mine in Botswana.
Executive directors and key executives, including business
unit heads, host such presentations, which include seminars
for investors and analysts and one-on-one meetings.
Throughout the year, executive management also presents
at industry conferences that are mainly organised by
investment banks for their institutional investor base.
The Company’s website provides the latest news and
historical financial information, details about forthcoming
events for shareholders and analysts, and other information
regarding Anglo American.
76
Anglo American plc Annual Report 2016 2015/16 BOARD AND BOARD COMMITTEE EVALUATION – ACTION PLAN
BOARD AND COMMITTEE ACTIVITIES
AREAS IDENTIFIED FOR ACTION
FOLLOW-UP ACTIONS IN 2016
Risk management processes should be reviewed to
incorporate best practices from other sectors, including involving
the Board in stress testing the combination of key risks, as per the
preparation of the viability statement.
The use of more external input to strategy discussions
as a way of sense-checking the data the Board is given and
challenging assumptions should be considered.
The Audit and Sustainability Committees reviewed their
respective risk management systems and recommended
improvements to the Board.
The Board received external briefings on the macro-economic
environment and on external perceptions of the Group’s strategy
from its advisers. The views expressed were debated with the
presenters, further considered by the Board and informed
and influenced the decisions which were taken subsequently.
Tracking of strategy execution was needed for the
cost reduction programme and disposals plan by allocating
accountability for the individual programmes, tracking key
milestones, and reviewing progress regularly at Board meetings.
Tracking of cost-reduction targets and disposals was a regular
agenda item for the Board in 2016, with designated executives
attending to update the Board on progress of each workstream.
This process will continue for the life of the items.
Contact between Board and business unit employees
should further improve, including the scheduling of ‘deep dives’ on
key issues at Sustainability Committee, Audit Committee and
Board meetings.
Board, Sustainability Committee and Audit Committee meetings
are attended by employees from around the business, and Board
members are invited to visit Group operations and are encouraged
to meet with employees without management being present. The
Board as a whole visit one operation each year, and these visits
provide an opportunity for the Board to meet and interact with
local management and other employees, both in meetings and at
Board dinners. Additional meetings and visits outside of those
scheduled are arranged if the directors think it would be useful to
meet either specific individuals or employees in general.
Communication of decisions to management and employees,
especially those adversely affected by the cost reduction and
disposals programme could be improved.
The Group director – people and organisation briefed the Board on
messaging and communication processes and messaging was
kept under review to ensure that it was appropriate and respectful.
Director induction and onboarding could be enhanced,
especially for new Board members who have not previously
served on the board of a UK listed company. All Board members
should have an individual, tailored induction plan.
Review the Board skills matrix to ensure that the Board’s
composition is appropriate and identify any skills gaps.
The Board and committee paper format should be used
more widely to help with the effective management of meetings
and decision making.
Information flows from the Remuneration and Nomination
Committees to the Board could be further improved with
directors who do not serve on those committees receiving more
information about their work.
For new directors, the chairman and company secretary will
work together to improve the tailored induction plan and monitor
progress more frequently with the director concerned, adjusting
the programme itself, and future programmes, to reflect any
lessons learned.
The skills matrix is used to identify areas in which aggregate
Board experience could be improved and is used as part of the
recruitment process for new Board members and non-executive
succession planning.
Without being overly prescriptive, standard templates are used
to help authors and presenters structure their papers and
presentations in a way that is helpful for the audience. This helps
ensure that time allocated to individual items is used efficiently,
and that the meeting focuses on the key areas for discussion or
decision making.
The non-executive directors’ sessions (held after each Board
meeting) are used to share confidential information and directors
are encouraged to raise any queries with the relevant chairmen.
All committee minutes are circulated to directors unless it is not
appropriate to do so.
77
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE SUSTAINABILITY COMMITTEE
February
• business unit sustainability report: Iron Ore Brazil
• tailings storage facilities and water retaining dams –
stewardship and crisis management
• permitting compliance – mitigating risks.
June
• providing a safe and healthy work environment –
employee exposure to dust
• geo-political developments, with a particular focus on
Brazil and South Africa
• International Council on Mining and Metals (ICMM)
benchmarking report – comparing safety performance
and trends across the industry
• key legislative developments in the sustainability area.
July
• tailings dams contractor management and governance
• business unit sustainability reports: Kumba Iron Ore
and Coal
• Social Way assessment results – an update on the Group’s
performance on managing the social impacts of mining
• safety and sustainable development benchmarking –
comparing performance and global trends across
the industry.
October
• business unit sustainability report: Base Metals
• safety and sustainable development performance –
implementation of the integrated operating model
• water – strategies for managing water usage.
SUSTAINABILITY COMMITTEE
Jack Thompson
Chairman, Sustainability Committee
COMPOSITION
• Jack Thompson – Chairman
• Mark Cutifani
• Tony O’Neill
• Ray O’Rourke (resigned 25 July 2016)
• Sir John Parker
• Mphu Ramatlapeng
• Jim Rutherford
ROLE AND RESPONSIBILITIES
The Committee oversees, on behalf of the Board, material
management policies, processes, and strategies designed
to manage safety, health, environment, socio-political and
people risks, to achieve compliance with sustainable
development responsibilities and commitments and
strive for an industry leadership position on sustainability.
The Committee is responsible for reviewing the causes
of any fatal or significant sustainability incidents and
ensuring learnings are shared across the Group.
The Committee’s terms of reference are available to
view online.
For more information, visit
www.angloamerican.com/aboutus/ourapproach
COMMITTEE DISCUSSIONS IN 2016
The Committee met four times in 2016. At each meeting,
the Committee reviews a detailed quarterly report covering
the Group’s performance across a range of sustainability
areas including: safety; occupational health; political and
regulatory risk; and environmental and social performance.
Significant social, safety, health and environmental
incidents are reviewed at each meeting, as are the results
from operational risk reviews. In 2016, 11 members of the
workforce lost their lives at Group operations. Preliminary
observations from each of these fatal incidents were
reported to the next Committee meeting following their
occurrence, noting the factors surrounding the incidents,
mitigating steps being taken and the process for formal
investigation. Following completion of independent
investigations, findings are presented to the Committee.
In addition to the Committee’s standing agenda items, the
following matters were discussed during 2016:
78
Anglo American plc Annual Report 2016 GOVERNANCE NOMINATION COMMITTEE
NOMINATION COMMITTEE
Sir John Parker
Chairman, Nomination Committee
June
• the shortlist of candidates to succeed René Médori as
COMPOSITION
• Sir John Parker – Chairman
• Sir Philip Hampton
• Ray O’Rourke (resigned 25 July 2016)
• Anne Stevens
• Byron Grote (appointed 21 October 2016)
ROLE AND RESPONSIBILITIES
• Agreeing a skills and experience matrix for all directors
(with the approval of the Board) to identify any skills gaps
to address when recruiting new directors.
• With the assistance of external search consultants,
identifying and reviewing in detail potential candidates
available in the market and agreeing a ‘longlist’ of
candidates for each directorship. Following further
discussion and research, deciding upon a shortlist of
candidates for interview. Committee members interview
the shortlisted candidates and make a recommendation
to the Board.
• Making recommendations as to the composition of the
Board and its committees and the balance between the
executive directors and non-executive directors in order
to maintain a diverse Board with the appropriate mix of
skills, experience, independence and knowledge.
• Ensuring that the HR function of the Group regularly
reviews and updates the succession plans for the directors
and senior managers. These are presented to the Board
by the chief executive (in the absence of other executive
directors) and discussed.
The Committee’s terms of reference are available to
view online.
For more information, visit
www.angloamerican.com/aboutus/ourapproach
COMMITTEE DISCUSSIONS IN 2016
The Committee met six times during 2016, discussing
the following matters:
February
• the composition of the Board and its committees,
the leadership needs of the organisation and
succession planning.
April
• succession planning for executive directors
• action plan to address the issues raised by the 2015
Board evaluation.
finance director
• senior management changes and succession planning.
July
• progress on the recruitment process for the appointment
of the new finance director
• committee membership following Ray O’Rourke’s decision
to step down as a non-executive director.
October
• succession planning for non-executive directors
following Judy Dlamini’s decision to step down as a
non-executive director
• recommendations to appoint new members to the
Nomination and Remuneration Committees
• noting that Stephen Pearce had accepted an offer for
the role of finance director.
December
• finalised the role profiles for two non-executive
director roles with external consultants
• update on succession planning for non-executive
directors.
PROCESS USED IN RELATION TO BOARD
APPOINTMENTS
The Board is committed to ensuring that it remains diverse
in terms of gender and ethnicity. This includes targets of at
least 25% of the directors being female and at least one (and
preferably more) person of colour. At the date of this report,
the Board’s gender diversity target is not currently met, as a
result of the resignation of Judy Dlamini in August 2016.
Search processes for new non-executive directors aim to
address this while securing the best possible candidates
for the Board, regardless of gender. Spencer Stuart
(South Africa) and Heidrick & Struggles are retained by
the Committee to assist with these search processes. Both
consultancies have worked for the Group in recruiting for
senior appointments and were chosen for having the best
understanding of the Board’s requirements given the markets
in which the most suitable candidates are likely to be found.
Shortlisted candidates are generally interviewed by all
members of the Committee and, where practical, other
directors prior to Board approval.
79
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE AUDIT COMMITTEE
AUDIT COMMITTEE
Byron Grote
Chairman, Audit Committee
COMPOSITION
• Byron Grote – Chairman
• Judy Dlamini (resigned 30 August 2016)
• Sir Philip Hampton
• Jim Rutherford
• Anne Stevens
ROLE AND RESPONSIBILITIES
• Monitoring the integrity of the annual and interim
financial statements
• Making recommendations to the Board concerning the
adoption of the annual and interim financial statements
• Overseeing the Group’s relations with the external auditor
• Reviewing and monitoring the effectiveness of the Group’s
risk management and internal control mechanisms
• Approving the terms of reference of the internal audit
function
• Approving the internal audit plan and reviewing regular
reports from the head of internal audit on effectiveness
of the internal control system
• Receiving reports from management on the Principal
Risks of the Group. Details of the principal risks are
contained on pages 42-45
• Overseeing implementation of the Group’s Code of
Conduct.
The Committee’s terms of reference are available to
view online.
For more information, visit
www.angloamerican.com/aboutus/ourapproach
FAIR, BALANCED AND UNDERSTANDABLE
A key requirement of our financial statements is for the
report to be fair, balanced and understandable. The Audit
Committee and the Board are satisfied that the Annual
Report and Accounts meet this requirement, as appropriate
weight has been given to both positive and negative
developments in the year.
In justifying this statement, the Audit Committee has
considered the robust process which operates in creating
the Annual Report and Accounts including:
• clear guidance and instruction is provided to all
contributors
• revisions to regulatory requirements are provided to
contributors and monitored on an ongoing basis
• reviewing the use and disclosure of Alternative
Performance Measures, taking into account guidance
from the European Securities and Markets Authority and
the Financial Reporting Council’s comments on the use of
adjusted measures in its Annual Review of Corporate
Reporting 2015/2016
• early-warning meetings are conducted between business
unit management and the auditor in advance of the
year-end reporting process
• a thorough process of review, evaluation and verification
of the inputs from business units is undertaken to ensure
accuracy and consistency
• external advisers provide advice to management and the
Audit Committee on best practice with regard to creation
of the Annual Report and Accounts
• a meeting of the Audit Committee was held in February
2017 to review and approve the draft 2016 Annual Report
and Accounts in advance of the final sign-off by the Board.
This review included the critical accounting judgements
explained in Note 1 to the Consolidated financial
statements, pages 120-122
• the Audit Committee considered the conclusions of the
external auditor over the key audit risks that contributed
to their audit opinion, specifically impairments, taxation,
special items and remeasurements and corporate
asset transactions.
COMMITTEE DISCUSSIONS IN 2016
Throughout the course of 2016, the Audit Committee
paid particular attention to the evolving commodity price
risk and management’s actions to mitigate the effects of
the risk. Discussion included the actions to maintain
sufficient liquidity and the disposal programme. In addition,
the implications of the weaker price environment on
asset valuations was subject to detailed review.
The Audit Committee held four meetings in 2016.
The specific items covered in each meeting included
the following:
80
Anglo American plc Annual Report 2016 February
• significant accounting issues and the impairments
reported in February 2016. The Committee reviewed
the assumptions and rationale for the impairments
• the results of the external audit work
• the going concern statement and the underlying
assumptions upon which the statement was made
• the viability statement including the risk scenarios, the
basis for modelling the scenarios, results of the analysis,
conclusions and the wording of the statement
• tax matters, including the status of tax audits in South
Africa and an overview of the global tax landscape, to
consider the implications for the Group’s tax reporting
requirements
July
• the significant accounting issues for the half-year report,
including a review of impairment indicators
• the going concern assessment, including the underlying
assumptions, risks and mitigating actions to support
the assessment
• a report on tax matters, including an update on tax audits
in South Africa and tax strategy to address the changing
global tax environment and challenges due to the Group’s
transformation programme
• a report from Deloitte on their interim review and a
preliminary planning paper on the 2016 audit
• the interim financial statements and draft press release
• the schedule of approved non-audit services provided
• the press release for the 2015 financial results and the
by the auditor for the half year
2015 Annual Report content
• the Ore Reserves and Mineral Resources report, focusing
on areas of material change and satisfying itself that the
procedures for estimating and reporting Ore Reserves and
Mineral Resources remain effective
• review of non-audit services provided by the auditor
during 2015
• report on completion of the 2015 internal audit plan,
the results of internal audit work and the Group’s
whistleblowing arrangements.
April
• an update on tax audit in South Africa
• management’s assessment of the auditor independence
and effectiveness in delivery of the 2015 audit
• an update on implementation of the new Code of Conduct
• the interim internal audit report, reviewing progress with
the 2016 plan and relevant issues associated with the
disposal programme
• the principal risks following a reassessment of the Group’s
risk profile
• a report on the Group’s insurance arrangements, including
results of the renewal negotiations.
November
• the significant accounting and financial reporting
matters for the 2016 year end, including impairment
and impairment reversal reviews in addition to the
accounting treatment for assets disposed during the
second half of 2016
• reviewed and approved the plan to roll-out the new
• an update on tax matters
Code of Conduct. The discussion included governance
structures over implementation of the Code
• an update on implementation of the programme
that mitigates risk of bribery and corruption including
assessment of risks associated with the disposal
programme
• a report on compliance activities associated with the
• approved the external audit plan and fee for 2016
• an update on the Marketing business compliance
programme
• reviewed and approved changes to the policy on external
auditor independence to reflect changes in regulations
and the plan for the process to select a new auditor in 2020
Marketing business, including trading activities, following
an external assessment of the compliance programme
in Marketing
• reviewed an update on the Group’s principal risks and the
preparation work for completing the viability statement to
be included in the 2016 Annual Report
• a report on the management of cyber risk, including
emerging cyber threats and developments in the
priorities to mitigate this risk
• a report analysing the Group’s pension assets
and liabilities, including the impact of the Group’s
restructuring programme
• a review of executive management expenses for 2015
and the control environment associated with executive
travel and expenses.
• reviewed and approved the internal audit plan for 2017,
noting the alignment of audit work to key risks in the Group
• received a report from Deloitte on the effectiveness of risk
management and internal audit work, noting the
recommendations and management response
• reviewed the terms of reference of the Audit Committee,
noting no changes were required.
The Audit Committee report is set out over the page.
81
GovernanceAnglo American plc Annual Report 2016
GOVERNANCE AUDIT COMMITTEE REPORT
AUDIT COMMITTEE REPORT
ENSURING INDEPENDENCE OF THE
EXTERNAL AUDITOR
Anglo American’s policy on auditor’s independence is
consistent with the ethical standards published by the
Audit Practices Board.
A key factor that may impair an auditor’s independence is
a lack of control over non-audit services provided by the
external auditor. The external auditor’s independence is
deemed to be impaired if the auditor provides a service that:
• results in the auditor acting as a manager or employee
of the Group
• puts the auditor in the role of advocate for the Group
• creates a mutuality of interest between the auditor 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 – this includes the
undertaking of internal audit services
• prior approval by the Audit Committee chairman of
non-audit services where the cost of the proposed service
is likely to exceed $50,000.
Anglo American’s policy on the provision of non-audit
services is regularly reviewed and has been updated to reflect
new regulations that became effective on 1 January 2017.
The definition of prohibited non-audit services corresponds
with the European Commission’s recommendations on the
auditor’s independence and with the Ethical Standards
issued by the Audit Practices Board in the UK.
Non-audit work is only undertaken where there is
commercial sense in using the auditor without jeopardising
audit independence. Non-audit fees represented 49% of
the 2016 audit fee.
Other safeguards
• The external auditor is required to adhere to a rotation
policy based on best practice and professional standards
in the UK. The standard period for rotation of the audit
engagement partner is five years and for any key audit
partner, seven years. The audit engagement partner was
appointed in 2015, and will rotate off at the end of the
2019 audit in accordance with this requirement
• Any partner designated as a key audit partner 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 auditor is required to assess periodically
whether in their professional judgement they are
independent of the Group
• The Audit Committee ensures that the scope of the auditor’s
work is sufficient and that the auditor is fairly remunerated
• The Audit Committee has primary responsibility for making
recommendations to the Board on the appointment,
re-appointment and removal of the external auditor
• The Audit Committee has the authority to engage
independent counsel and other advisers as they determine
necessary to resolve issues on the auditor’s independence
• An annual assessment is undertaken of the auditor’s
effectiveness through a structured questionnaire and
input from all business units and Group functions covering
all aspects of the audit process.
Audit tender
Anglo American will undertake, at the latest, a tender
and rotation of the audit appointment at the time of the
rotation of the lead engagement partner which is due
after completion of the 2019 audit. Deloitte has been the
auditor since 1999.
Anglo American confirms compliance during the year
with the provisions of the Competition and Markets
Authority Order on mandatory tendering and audit
committee responsibilities.
Conclusions of the Audit Committee for 2016
The Audit Committee has satisfied itself that the external
auditor’s independence was not impaired.
The Audit Committee held meetings with the external
auditor without the presence of management on two
occasions, and the chairman of the Audit Committee held
regular meetings with the lead audit engagement partner
during the year.
Consideration given to the appointment of the
external auditor
The Audit Committee’s assessment of the external
auditor’s performance and independence underpins its
recommendation to the Board to propose to shareholders
the re-appointment of Deloitte LLP as auditor until the
conclusion of the AGM in 2018. Resolutions to authorise the
Board to re-appoint and determine the remuneration of
Deloitte LLP will be proposed at the AGM on 24 April 2017.
Risk management
Risk management is the responsibility of the Board and is
integral to the achievement of our objectives. The Board
establishes the system of risk management, setting risk
appetite and maintaining the system of internal control to
manage risk within the Group. The Group’s system of risk
management and internal control are monitored by the
Audit Committee under delegation from the Board.
The system of risk management is designed to ensure
awareness of risks that threaten the achievement of
objectives. The controls that mitigate those risks are
identified so that assurance can be provided on the
effectiveness of those controls and a determination can
be made as to whether the risk is operating within the
Group’s risk appetite. We seek to embed a culture of
risk awareness into the development of our strategic
and operational objectives.
The process for identification and assessment of the
principal risks combines a top-down and bottom-up
approach. At the operations level, a process to identify
all risks that prevent the achievement of objectives is
undertaken. Detailed analysis of the material risks at
each location is performed to ensure management
understanding of the risk and controls that reduce likelihood
of occurrence and impact should the risk materialise. These
operational risk profiles contribute to the assessment of
risks at the business unit level. Executive management at
each business unit assess risks that threaten achievement
82
Anglo American plc Annual Report 2016 of the business unit objectives and the status of controls,
or actions, that mitigate those risks. At the Group level, risks
are identified through assessment of global factors affecting
the industry and the Group specifically, as well as the risks
arising from the business unit assessments. Materiality
of risk is determined through assessment of the various
impacts that may arise and likelihood of occurrence. An
exception relates to those risks deemed catastrophic in
nature, where the focus of assessment is on impact and
status of internal controls, given the very low likelihood of
occurrence. When considering the impact of any risk, we
assess financial, safety, environmental, legal or regulatory,
social and reputational consequences.
The robust process of identifying and evaluating the
principal risks is ongoing and was in place during 2016.
Regular reports on the status of risks and controls are
presented to executive management teams throughout the
year. The Audit Committee reviews reports on the overall
Anglo American risk profile on two occasions during the
year and conducts in-depth reviews of specific risks during
its meetings over the course of the year. Each principal
risk is assigned to either the Board or the relevant Board
committees to oversee executive management actions
in response to that risk. The Audit Committee reviews that
oversight process on an annual basis.
Details of the principal risks are provided on pages 42-45.
Risk appetite
We define risk appetite as ‘the nature and extent of risk
that Anglo American is willing to accept in relation to the
pursuit of its objectives’. Each principal risk is assessed as
to whether it is operating within the limit of appetite for the
Group based on review of the external factors influencing
that risk, the status of management actions to mitigate or
control the risk and the potential impact should the risk
materialise. For risks operating beyond the limit of appetite,
a change in strategy may be required. For risks operating
within, but approaching the limit of, appetite, specific
management actions may be required to ensure the risk
remains within the limit of appetite.
Risk management and the system of internal control
Controls either reduce the likelihood or impact of any risk
once it has occurred and the identification of material
controls – i.e. those controls that have the most influence
in mitigating a risk – is an important input for audit planning.
The system of internal control operates on a traditional
‘three lines of defence’ approach, with operating
management implementing and monitoring controls
on a day-to-day basis, and business unit or functional
management providing a second line of defence through
regular and frequent oversight of operating management’s
implementation of controls. A centrally managed internal
audit department provides the third line of defence by
reviewing design and operating effectiveness of the
internal control environment, which includes the work
performed by the first and second lines of defence
management teams. Internal audit operated in all of the
Group’s managed businesses in 2016, reporting its work
to executive management and the Audit Committee on a
regular basis. The internal audit department’s mandate
and annual audit coverage plans were approved by the
Audit Committee.
The scope of internal audit work covers the broad
spectrum of risk that the Group is exposed to. The audit
of controls associated with major operating/technical
risks is undertaken in conjunction with relevant experts
from the Technical and Sustainability function, the results
of which were shared with the Sustainability Committee
and Audit Committee.
In determining its opinion that the internal control
environment was effective during 2016, the Audit
Committee considered the following factors:
• the results of internal audit work, including the response
of management to completion of actions arising from
audit work
• the output of risk management work
• the output of external audit work and other
assurance providers
• issues identified by management or reported through
whistleblowing arrangements, and the results of
investigations into allegations of breaches of our
values and business principles.
Reviewing the effectiveness of the system
of risk management and internal control
The Board, through the Audit Committee, fulfils its
responsibility in reviewing the effectiveness of the system
of risk management and internal control through review of
reports submitted over the course of the year covering the
risk management process, adequacy of the internal control
environment, consideration of risk appetite, in-depth
reviews of specific risks and the results of external audit
work. The Sustainability Committee also reviews technical
and safety risks in detail and reports its findings to the Board.
Whistleblowing programme
The Group has a whistleblowing facility operating in all
its managed operations and a Group-wide stakeholder
complaints and grievance procedure (see the 2016
Sustainability Report for more details). The whistleblowing
programme, which is monitored by the Audit Committee,
is designed to enable employees, customers, suppliers,
managers or other stakeholders to raise concerns on a
confidential basis where conduct is deemed to be contrary
to our values.
During 2016, 413 (2015: 388) reports were received via
the global ‘Speak Up’ facility, covering a broad spectrum
of concerns, including:
• ethical
• criminal
• supplier relationships
• health and safety
• HR issues.
Reports received were anonymous to Anglo American.
All received the appropriate attention and, where necessary,
action was taken to address issues. A governance process
is in place to ensure all reports are acted upon in a timely
manner and actions completed where necessary.
83
GovernanceAnglo American plc Annual Report 2016
DIRECTORS’
REMUNERATION
REPORT
Sir Philip Hampton
Chairman, Remuneration Committee
The role of the Company’s Remuneration
Committee is to ensure that the remuneration
arrangements for executive directors offer
every encouragement for them to deliver
our strategy and create stakeholder value
in a sustainable manner.
1. INTRODUCTORY LETTER
Dear Shareholder,
The role of the Company’s Remuneration Committee
(Committee) is to ensure that the remuneration
arrangements for executive directors and other members
of the Group Management Committee (GMC) offer them
every encouragement to deliver our strategy and create
stakeholder value in a sustainable and responsible manner.
It is also our task to ensure that the remuneration received
by the executive directors is proportionate to the levels of
performance achieved and the returns received by you as
shareholders. As a Committee, we therefore have to give full
consideration to the Company’s strategy, its performance,
your interests and the interests of the wider communities
we affect. This is particularly pertinent in light of the volatility
faced by the Company and by the mining industry more
generally in recent years.
Pay for performance
As reported by the chief executive in his introduction to
this year’s Annual Report, the actions taken across the
business to drive free cash flow and further refine the
portfolio enabled the Company to strengthen its financial
position and foundations for the future. With the continued
sharp focus on operational costs and volume growth, the
business delivered $1.5 billion of in-year incremental cost
and volume improvements, driving a 25% increase in
underlying EBITDA and an increase in EBITDA margin
of five percentage points to 26%. Underlying earnings per
share (EPS) was $1.72/share. Net debt has been reduced
to $8.5 billion from $12.9 billion at the end of 2015, primarily
driven by a $3.5 billion increase in attributable free cash
flow. ROCE was 11%.
84
The performance of the business, up to and during
2016, is reflected in the long and short term remuneration
received by the executive directors. Specifically:
• The executive directors’ salaries were frozen in 2016,
to recognise the challenges faced by the Company at
the beginning of the year. The Committee has decided to
increase the executive directors’ salaries in 2017 by 2%.
This increase is felt to be appropriate in the light of the
directors’ contribution to the Company’s improved
financial position over 2016, and is consistent with the
increase awarded to the general UK employee population.
• Strong operational improvements, supported by
favourable bulks prices and foreign exchange (FX) rates
and a recovery in De Beers’ sales volumes have supported
the material outperformance on EPS targets. However,
without the tailwind from changes in prices and FX rates,
EPS would have still been above the maximum vesting
target, reflecting management’s strong delivery in the year.
Combined with strong personal performance, this resulted
in higher annual bonus outcomes than in 2015. Safety
performance during the year led to an overall modifier
of (0.5)%, which incorporates the maximum deduction
in respect of the very disappointing increase in fatalities
in 2016. This led to overall bonus outcomes of between
84.7% and 87.5% of maximum opportunity. The
Committee has carefully reviewed the bonus outcomes
and is satisfied that they are appropriate. A full explanation
can be found on page 99.
• The Long Term Incentive Plan (LTIP) awards granted
in 2014 will not vest, as neither the three-year Total
Shareholder Return (TSR) nor the ROCE targets
were met.
2017 remuneration policy
The remuneration policy disclosed in section 2 of this
report has been revised during the year and will be put
to shareholders for approval at the 2017 AGM, in line with
normal timescales. In preparing the policy, the Committee
was mindful of the complexities of setting remuneration
against the backdrop of volatility in the mining sector. The
Committee also took into consideration the feedback
received from some shareholders in advance of the 2016
AGM, as well as the relatively low level of support received
for the 2015 remuneration report in comparison to
previous years. In particular, we were determined to address
investors’ concerns about the potential windfall gains
for executive directors arising as a result of the volatility
of the Company’s share price and the mining industry
more generally.
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 While we believe that the fundamental structure of the
remuneration package is appropriate, we have made a
number of changes to the previous remuneration policy
which are primarily designed to address the issue of
volatility, while also directly addressing the concerns raised
by shareholders in relation to the 2016 grant levels:
• Continue the use of EPS as a KPI for short term incentives,
as the Committee considers it to be appropriate in
measuring annual business performance. However, the
measure will be split into two; half of the award will be
measured on actual results versus the original budget, and
the other half will be measured excluding the impact of
quoted commodity price and exchange rate fluctuations.
The Committee considers that this change will help
smooth volatility and result in outcomes which provide
a better balance between items within management’s
control and those outside it. This is explained further on
page 90
• The performance conditions to be applied to LTIP awards
from 2017 onwards will incorporate a greater emphasis
(70%) on TSR, recognising two challenges of identifying
financial targets. First, the mining sector is subject to
significant earnings volatility driven by uncontrollable
factors. Secondly, while driving controllable performance,
there is a need to continue to align management rewards
with shareholder returns to a greater extent. The remaining
30% of LTIP awards from 2017 will be subject to a
balanced scorecard of financial and strategic measures.
Further details can be found on page 106
• Reduce the maximum annual LTIP opportunity for
the chief executive from 350% to 300% of basic salary,
bringing it into line with the other executive directors
and moderating the value that may be received from
future LTIP awards
• Introduce a cap on the value that can be received
from LTIP awards, both past and future. The maximum
combined value that can vest in relation to the 2014,
2015 and 2016 LTIP awards is limited to the sum of the
total face value of the 2014-2016 awards at grant, with
any value above that level being forfeit before the start of
the two-year holding period. For the chief executive, this
limit is £13.1 million. From 2017 onwards, the value of
LTIP awards at the time of vesting, using the share price
at the time, will be limited to twice the face value of the
award at grant; in exceptional circumstances amounts
earned above twice the face value of the award may
be deferred at the discretion of the Committee. Further
details can be found on pages 91 and 107.
The Committee undertook a thorough and detailed
consultation with our major shareholders in relation to
these changes. Views as to specific remuneration items
are inevitably diverse, particularly given the global
spread of our shareholder base and the sometimes
different perspectives of, for example, UK and South
African shareholders. However, we are confident that
we have created a remuneration policy that balances
the needs and expectations of management and
shareholders, is fair and robust, links directly to the
Company’s strategy and gives the Committee greater
ability to deal with volatility.
Executive director changes
Stephen Pearce joined the Company in January 2017,
and will be proposed for election to the Board as finance
director at the 2017 AGM.
As previously disclosed, his remuneration package
comprises:
• Annual base salary of £775,000
• Annual bonus and LTIP participation consistent with
the Company’s remuneration policy
• Compensation for incentives forfeited from his previous
employer, including a performance-related cash bonus
of up to £300,000 payable in 2017, and 382,235
performance-related share awards granted in three
tranches vesting over 2017, 2018 and 2019
• Other benefits including pension, medical insurance
and relocation from Australia to the UK.
Full details will be included in the 2017 remuneration
report. René Médori will step down from his current
position as finance director at the 2017 AGM, and will
continue to work for the Company until the end of 2017,
when he will retire, to provide continuation in the transition
and focus on specific projects.
Report layout
Finally, the Committee has taken the opportunity to
make some changes to the layout and design of both the
policy and the implementation reports, including adding
an ‘At a Glance’ section directly after this letter. We hope
these changes make the Company’s remuneration
strategy and outcomes more easily digestible.
I very much hope you will support our proposed
remuneration policy at the 2017 AGM.
Sir Philip Hampton
Chairman, Remuneration Committee
85
Anglo American plc Annual Report 2016Governance
REMUNERATION AT A GLANCE
POLICY
The remuneration policy as described in the Chairman’s letter
is set out below. Each component of remuneration is designed
to reward the accomplishment of aspects of the Company’s
strategy. For more information on the pillars of value, refer
to page 34.
OUR REMUNERATION POLICY
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LINK TO STRATEGY
KEY FEATURES
SALARY
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BONUS –
DEFERRED
SHARES
LTIP
Recruitment and retention
of high-calibre executives
• Reviewed annually by the Committee
• Increases based on Company performance, individual
performance, levels of increase for the broader UK
population and inflation
Rewards delivery of
strategic priorities and
financial success
• Maximum bonus award of 210% of salary
• Outcome based on EPS and individual/strategic
objectives subject to a safety modifier
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Encourages sustained
performance in line with
shareholder interests
• 40% of bonus is paid in cash
• 60% of bonus is deferred into shares
• Two-thirds of shares deferred will vest after three
years, with the remaining deferred shares vesting
after a further two years
• Unvested deferred shares are subject to malus
and clawback
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Encourages long term
shareholder return and
accomplishment of
longer term strategic
objectives
• Shares granted with a face value of 300% of salary
• Shares vest after a three-year performance period
and released after a further two-year holding period
• Vesting based on TSR performance and achievement
against a balanced scorecard of financial and strategic
measures, and subject to malus and clawback
Executive directors are expected to build up and hold a percentage of their salary in shares (300% for the chief executive, 200% for other executive directors).
KEY PERFORMANCE METRICS FROM 2017
Metrics
EPS (bonus)◊
Safety modifiers (bonus)
TSR (LTIP)
ROCE (LTIP)◊
Attributable free cash flow
(LTIP)◊
CO2 emissions (LTIP)
Inhalable hazards (LTIP)
86
Pillars of value
Rationale
Financial
Safety and Health
Financial
Financial
Financial
Environment
Safety and Health
• EPS links reward to delivery of in-year underlying equity returns to shareholders
• Employee health and safety is a top priority and core value for the Company
• Creates a direct link between executive pay and shareholder value
• Measure is split between comparison against sector index (Euromoney Global Mining Index)
and comparison against local peers (constituents of FTSE 100 index)
• ROCE promotes disciplined capital allocation by linking reward to investment return
• Attributable free cash flow incentivises cash generation for use either as incremental capital
investment, for capital returns to shareholders, or debt reduction
• The Company is committed to reducing CO2 emissions by 22% by 2020
• Prevention of occupational disease is an ongoing commitment for the Company
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016
REMUNERATION AT A GLANCE
2016 PAY OUTCOMES
UNDERLYING EPS◊
THREE-YEAR SHAREHOLDER RETURN
DRIVING VALUE ROCE◊
$1.72/share
(12)%
7%
$1.72/share 2016
$0.64/share
2015
2016
2015
(12)%
(71)%
2016
2015
7%
4%
2016 PAY OUTCOMES £’000
MARK CUTIFANI
2016
2015
£1,675
£1,671
RENE MEDORI
2016
2015
£1,094
£1,110
TONY O’NEILL
£2,317
£966
£820
£1,430
£583
£394
2016
£1,060
£1,441
2015
£472
£284
Fixed
Bonus paid
LTIP paid
• Fixed pay comprises salary, benefits and pension
• Bonus figures include deferred shares
• Tony O’Neill’s 2015 figures reflect the period between his appointment to the Board and 31 December 2015
2016 ANNUAL BONUS OUTCOME
EPS – 50% of overall opportunity
• The Company’s underlying EPS for the year was $1.72/share.
• This is above the target for maximum vesting of $0.50/share.
• As a result, 100% of the EPS component of the annual bonus will pay out
(50% of overall opportunity).
Personal KRAs – 40% of overall opportunity
• Each executive director had a set of personal objectives for the year.
• The vesting for each executive director is as follows:
Mark Cutifani: 95% (38.0% of overall opportunity)
René Médori: 88% (35.2% of overall opportunity)
Tony O’Neill: 94% (37.6% of overall opportunity)
A modifier of (0.5)% of overall opportunity is applied to reflect safety target outcomes in 2016 (out of a possible range of (10)% to +10%).
The overall vesting level for the annual bonus award is 87.5% of maximum for Mark Cutifani (84.7% and 87.1% for René Médori and
Tony O’Neill, respectively).
2014 LTIP VESTING
TSR vesting – 50% of overall opportunity
• The Company’s TSR performance for the performance period was (12)%.
• This is below both the sector index and FTSE 100 median performance.
• As a result, 0% of the TSR component of the 2014 LTIP will vest.
Driving Value ROCE vesting – 50% of overall opportunity
• The Company’s Driving Value ROCE for 2016 was 7%.
• This is below the threshold performance for vesting of 12%.
• As a result, 0% of the Driving Value ROCE component of the 2014 LTIP
The overall vesting level for the 2014 LTIP award is 0%.
will vest.
87
Anglo American plc Annual Report 2016Governance
GOVERNANCE REMUNERATION COMMITTEE
REMUNERATION COMMITTEE
COMPOSITION
• Sir Philip Hampton – Chairman
• Judy Dlamini (resigned 30 August 2016)
• Byron Grote
• Ray O’Rourke (resigned 25 July 2016)
• Anne Stevens (appointed 21 October 2016)
• Jack Thompson
April
• confirmed the vesting of 2013 BSP and LTIP awards
and the granting of 2016 BSP and LTIP awards
• agreed to a high-level timetable for the design and
consultation of the 2017 remuneration policy
• discussed investor feedback on executive remuneration
prior to the vote on the Directors’ remuneration report
ROLE AND RESPONSIBILITIES
• reviewed corporate governance issues arising since
• Establishing and developing the Group’s general policy
on executive and senior management remuneration
• Determining specific remuneration packages for
the chairman, executive directors and members of
the GMC for review and approval by the Board
• Designing the Company’s share incentive schemes.
The Committee’s terms of reference are available to
view online.
For more information, visit
www.angloamerican.com/aboutus/ourapproach
the previous meeting.
June
• agreed initial proposals and timelines relating to the
2017 policy
• reviewed corporate governance issues arising since
the previous meeting.
December
• reviewed directors’ salaries, taking into account
the general salary review for the broader employee
population
COMMITTEE DISCUSSIONS IN 2016
on the 2017 remuneration policy
The Committee held four meetings in 2016:
• approved the operation of the Share Incentive Plan (SIP)
• discussed the progress of the consultation of shareholders
free shares for 2017
• approved changing the timing of the 2017 LTIP awards to
after the 2017 AGM
• reviewed and updated its terms of reference
• reviewed corporate governance issues arising since the
previous meeting.
The Directors’ remuneration report is set out opposite.
February
• reviewed executive director personal key performance
indicators for 2016, and Group financial and safety targets
to ensure alignment with Group strategy
• discussed the executive directors’ performance in 2015
to adjudicate on bonus outcomes
• reviewed executive directors’ shareholdings in the
Company prior to 2016 share awards being made
• reviewed the forecast vesting of 2013 Bonus Share Plan
(BSP) and LTIP awards
• reviewed the proposed performance targets for the 2016
LTIP award
• reviewed the 2015 Directors’ remuneration report ahead
of publication
• reviewed corporate governance issues arising in the
previous quarter.
88
Anglo American plc Annual Report 2016 2. DIRECTORS’ REMUNERATION POLICY
2.1 Future policy table
The Company’s remuneration policy, as set out in the
2013 Annual Report and Accounts, received approval
from shareholders at the AGM held on 24 April 2014.
The Company intended that this policy should apply until
the Company’s 2017 AGM.
As required, the Company will put the new remuneration
policy, as set out on the following pages, to shareholders
for a binding vote at the AGM on 24 April 2017. The intention
is that the revised policy, if approved, will apply until the
Company’s 2020 AGM.
The table below sets out the key components of executive
directors’ pay packages, including the rationale for use and
practical operation considerations.
Figure 1: Key aspects of the remuneration policy for executive directors
Basic salary
Purpose
To recruit and retain high-calibre executives.
Maximum opportunity
Maximum increase of 5% of salary per annum.
Operation
Basic salary levels are reviewed annually by the
Committee, taking account of Company performance,
individual performance, levels of increase for the broader
UK population and inflation.
Reference may also be made to median levels
within relevant FTSE 50 and natural resources
companies. Alternative peer groups may be
considered as appropriate.
The Committee also considers the impact of any basic
salary increase on the total remuneration package.
Increases awarded each year will be set out in the
statement of implementation of policy.
Assessment of performance
Individual performance is considered for context when
considering any salary increases awarded.
Discretion
There may be occasions when the Committee needs
to recognise, for example, development in role, change
in responsibility and/or specific retention issues.
External factors such as sustained high inflation may
also be a consideration.
In these circumstances, the Committee may offer a higher
annual increase, the rationale for which will be explained
to shareholders in the relevant remuneration report.
89
Anglo American plc Annual Report 2016Governance
Figure 1: Key aspects of the remuneration policy for executive directors
Annual bonus
Purpose
To encourage and reward delivery of the Company’s
strategic priorities.
To help ensure, through the share-based elements, that
any resulting performance is sustained over the longer
term in line with shareholder interests.
Operation
Each year, executive directors participate in the annual
bonus, which rewards EPS, individual performance
targets and improvements in safety over the full year.
Part of the award is deferred into Bonus Shares under
the Company’s BSP.
The EPS measure has been chosen as it continues to
link reward to the delivery of earnings and returns to
shareholders. The EPS targets are set each year to
ensure they are demanding yet realistic. Consideration
is given to internal budgets and price expectations
for the year, as well as prior performance and
external expectations.
The individual objectives measure was chosen to
provide a balance and reflect management’s underlying
activity towards delivering the Company’s strategy
regardless of price or other volatility. The individual
objectives are based on the Company’s strategic priorities
for the year and will be fully disclosed in the relevant
remuneration report.
Form and timing of payment
• 40%: cash award at end of year
• 40%: Bonus Shares vesting three years after
end of bonus year
• 20%: Bonus Shares vesting five years after
end of bonus year.
Dividends are paid on Bonus Shares.
Malus and clawback
The Committee is able to reduce any unvested Bonus
Share awards, or future awards in the event of a material
misstatement in the Company’s results, misconduct or a
material failing in risk management processes that has
given, or is likely to give, rise to significant and lasting
value destruction for the Company.
Maximum opportunity
210% of salary.
Assessment of performance
At least 50% – EPS. The final performance measurement
will be 50% based on actual prices and FX rates, and 50%
based on fixed prices and FX rates.
Up to 50% – scorecard of measures based on individual
objectives linked to the Company’s strategic priorities
and safety.
A modifier to the above is applied depending on the extent
to which safety targets are met.
Where relevant, targets will be disclosed retrospectively
as they are considered to be commercially sensitive.
Outcome at threshold
EPS: 25% of award portion.
Discretion
Under the BSP Rules, the Company has the standard
discretion to take appropriate action in the event of
unforeseen events which affect the Bonus Shares
(for example, on a variation in share capital) and to settle
the Bonus Shares in cash (for example, on a termination).
Should circumstances change such that EPS is no longer
considered to be the most appropriate financial measure,
the Committee retains the discretion to replace EPS with
one or more alternative financial measures. Full details of
any such change would be given in the relevant
remuneration report.
Changes from policy agreed at the 2014 AGM
A change to the measurement of targets is proposed.
Currently, assessment of performance against financial
targets set as part of the annual bonus is at actual prices and
FX rates only. It is proposed that, from 2017 onwards, 50%
of the payout be based on performance at actual prices and
FX rates, and 50% on performance adjusted to fixed prices
and FX rates. The Committee believes that this approach will
help smooth potential volatility and also make annual bonus
payouts a fairer reflection of underlying performance.
90
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 Figure 1: Key aspects of the remuneration policy for executive directors
Long Term
Incentive Plan
(LTIP)
Purpose
To encourage and reward the generation of long term
sustainable shareholder returns and the delivery of
financial/strategic priorities.
Operation
The Committee makes an annual conditional award of
shares to each executive director.
The TSR measures have been selected to reflect the extent
to which value is being delivered to shareholders, and the
balanced scorecard to reflect the Company’s financial and
strategic priorities.
Each year, the Committee reviews the performance
targets prior to grant. The relative TSR targets are set so
that only a quarter of the relevant portion of the award is
payable for index/median performance, while maximum
vesting requires exceptional relative performance.
The balanced scorecard will be based on a small number
of measurable financial and/or strategic performance
indicators. The measures may vary each year to reflect the
Company’s financial and/or strategic priorities and will be
set out in the statement of implementation in the year of
grant to the extent that they are not commercially sensitive.
Dividend equivalents are paid on any shares that vest.
In order to mitigate potential excessive gains brought about
by the volatile nature of the mining industry, the value that
can be delivered on an award vesting will be limited to twice
the face value of the award on grant. Any gains above this
level will be forfeit before the start of the two-year holding
period or, in exceptional circumstances and at the
Committee’s discretion, deferred for a further period.
Performance period
Three years.
Additional holding period
Two years.
Malus and clawback
The Committee is able to reduce any unvested awards,
vested awards subject to a holding period or future grants
in the event of a material misstatement in the Company’s
results, misconduct or a material failing in risk management
processes that has given, or is likely to give, rise to
significant and lasting value destruction for the Company.
Pension
Purpose
To offer market-competitive levels of pension provision.
Operation
Executive directors participate in defined contribution
pension arrangements.
Maximum opportunity
300% of salary.
The value that can be received in the year of vesting will
be limited to twice the face value of the award at grant,
with any value above that level being forfeit or, in exceptional
circumstances and at the Committee’s discretion, deferred
for a further period.
Performance measures
70%: TSR relative to sector index and leading UK-listed
comparator companies.
30%: Balanced scorecard of key performance indicators,
linking to the Company’s KPIs.
Vesting at threshold
TSR: 25% of award portion.
Balanced scorecard: 25% of award portion.
Discretion
The Committee does not intend to make adjustments to the
method by which it measures LTIP performance conditions
(see page 106). However, it reserves the discretion to make
adjustments to outcomes in very exceptional circumstances,
whether related to internal or external factors (for example,
on a sequestration of assets). Shareholders would be given
details of any exercise of this discretion in the relevant
remuneration report.
Under the LTIP Rules, the Company also has the standard
discretion to take appropriate action in the event of
unforeseen events during an award cycle (for example, on
a variation in share capital) and to settle the awards in cash
(for example, on a termination).
The Committee may, in exceptional circumstances, allow
the value delivered in the year of vesting to be above the limit
described under ‘Operation’ and ‘Maximum opportunity’.
Should this discretion be applied, consideration would be
given to deferring any gains above the normal limit for an
extended time period. In addition, the Committee would take
account of the Company’s overall financial performance, the
magnitude of commodity and share price movements and
overall remuneration outcomes in recent years. The exercise
of any such discretion would be fully explained in the relevant
remuneration report.
Changes from policy agreed at the 2014 AGM
Reduction in maximum opportunity for the chief executive
officer from 350% to 300% of salary.
Changes to the performance measures and a limit on the
value that can be delivered from future awards are proposed.
The performance measures set out above will replace the
previous measures (50% TSR and 50% ROCE).
result of HMRC limits (either annual allowance or lifetime
allowance) to be treated as if paid to an unregistered
unfunded retirement benefit scheme (a UURBS).
Executive directors may request a pension allowance to
be paid in place of defined contribution arrangements.
Executive directors have the option for contributions which
may not be paid to a UK-registered pension scheme as a
Maximum opportunity
30% of basic salary.
91
Anglo American plc Annual Report 2016Governance
Figure 1: Key aspects of the remuneration policy for executive directors
SAYE/SIP
Purpose
As UK employees, UK-based executive directors are
eligible to participate in the Company's Save As You
Earn (SAYE) scheme and SIP.
Operation
The plans are registered with HMRC and do not have
performance conditions.
Other benefits
Purpose
To provide market-competitive benefits.
Maximum opportunity
Capped at 10% of salary.
Discretion
The Committee reserves the discretion to exceed the
ongoing maximum level for certain situation-specific
benefits, such as relocation. Full details of the exercise
of any such discretion will be provided to shareholders
in the following remuneration report.
Changes from policy agreed at 2014 AGM
Clarification that directors’ liability insurance is included
in the list of benefits.
Operation
The Company provides the following ongoing benefits:
• 28 days’ leave and encashment of any accumulated
leave in excess of 20 days
• car-related benefits
• medical insurance
• death and disability insurance
• directors’ liability insurance
• limited personal taxation and financial advice
• club membership
• other ancillary benefits, including attendance at
relevant public events.
In addition, the Company pays additional benefits
when specific business circumstances require it,
including costs and allowances related to relocation
and international assignments.
The Company reimburses all necessary and reasonable
business expenses.
Figure 2: Recruitment and promotion arrangements
Purpose
To secure the appointment and promotion of
high-calibre executives.
Operation
The remuneration arrangements for a newly recruited
or promoted executive director will reflect the
remuneration policy in place for executive directors at
the time of the appointment. The arrangements will
therefore comprise basic salary, annual bonus, LTIP
awards, benefits, pension and SAYE/SIP on the bases
set out above.
The initial basic salary level for a newly recruited or
promoted executive director will be set to reflect the
individual’s experience, salary levels within the Company
and market levels. Where basic salary is set below the
level that might be expected, given the executive’s
relative inexperience, and the executive then develops
successfully into the role, the Committee has the
discretion to give a salary increase in the year(s) after
appointment above the standard maximum level of 5%.
For external appointments, the Committee may also
offer additional cash and/or share-based elements
(including in-flight LTIPs) to replace any remuneration
forfeited, when it considers this to be in the best interests
of the Company and its shareholders. The terms of any
share-based elements offered will reflect the nature, time
horizons and performance requirements of remuneration
forfeited and will have equivalent performance conditions
attached. Shareholders will be informed of any such
payments at the time of appointment. If necessary, the
Company can go outside of existing plans as currently
permitted under the Listing Rules.
Pensions for new hires will be set at a level commensurate
with the wider workforce, and will be no greater than 25%
of salary.
For internal appointments, any commitments made
before appointment and not relating to appointment are
allowed to pay out according to their terms. For external
and internal appointments, the Committee may agree
that the Company will meet certain relocation expenses
as appropriate.
Changes from policy agreed at 2014 AGM
Limit introduced on pension levels for new hires.
92
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 2.2 Supplementary information
2.2.1 Shareholding targets
Within five years of appointment, executive directors are
expected to hold Company shares with a value of three
times basic salary in respect of the chief executive and two
times basic salary in respect of other executive directors.
The Committee takes into consideration achievement
against these targets when making grants under the
Company’s various incentive plans.
2.2.2 Policy in rest of company
The remuneration arrangements for the executive directors
outlined in Figure 1 are consistent with those for other
executives serving on the GMC, although opportunity
levels vary. The majority of our employees are located in
South Africa and South America, and the remuneration
arrangements of these employees are aligned to local
market practices and levels.
Figure 3: Key aspects of the remuneration policy for non-executive directors
Chairman –
Fees
Chairman –
Benefits
Purpose
To attract and retain a high-
calibre chairman by offering a
market-competitive fee level.
Maximum increase
Equivalent to annual increase
of 5% of fee level.
Purpose
To provide market-competitive
benefits.
Maximum benefits
£35,000.
Non-executive
directors –
Fees
Purpose
To attract and retain high-calibre
non-executive directors by
offering market-competitive fees.
Maximum increase for each
type of fee
Equivalent to annual increase
of 5% of fee level.
Operation
The chairman is paid a single fee for all of his responsibilities. The level of this fee is
reviewed every two to three years by the Committee and chief executive, with reference
to UK market levels (FTSE 50 companies), and a recommendation is then made to the
Board (in the absence of the chairman).
Fees are paid in cash, with the flexibility to forgo all or part of the net fees to acquire
shares in the Company.
Operation
The chairman is provided with medical insurance and reasonable use of a car and driver.
Reasonable and necessary expenses are reimbursed.
Changes from policy agreed at the 2014 AGM
Maximum benefits increased from £30,000 to £35,000 to allow for expected changes
to UK tax rates on car and fuel benefits through to 2020.
Operation
The non-executives are paid a basic fee. The chairmen of the main Board committees
and the senior independent director are paid an additional fee to reflect their extra
responsibilities. These fee levels are reviewed every few years by the chairman and
executive directors, with reference to UK market levels (FTSE 50 companies), and a
recommendation is then made to the Board.
Fees are paid in cash with the flexibility to forgo all or part of the net fees to acquire
shares in the Company.
Reasonable and necessary expenses are reimbursed.
Other fees/
payments
Purpose
To have the flexibility to provide
additional fees/benefits if
required. This may include the
introduction of committee
membership fees.
Maximum additional/
committee fee
£30,000.
Operation
The Company has the discretion to pay an additional fee, up to the equivalent of the
committee chairmanship fee (currently £30,000), to a non-executive director should
the Company require significant additional time commitment in exceptional or
unforeseen circumstances.
Base fees have not been increased since 2010. It is therefore the Board’s intention to
review fee levels and structures during 2017 with a view to determining any necessary
changes. Such changes may include, for example, the introduction of committee
membership fees.
Changes from policy agreed at the 2014 AGM
Additional flexibility is proposed to be incorporated to allow for the possible introduction
of committee membership fees.
93
Anglo American plc Annual Report 2016Governance
2.3 Indicative total remuneration levels
Figure 4 illustrates how the total pay opportunities
for the chief executive, the finance director and
the technical director vary under three different
performance scenarios:
Figure 4: Indicative executive director total remuneration at different levels of performance
10.0
8.0
6.0
4.0
2.0
0
£8.3m
)
m
£
(
y
a
p
£6.0m
l
a
t
o
t
e
v
i
t
a
c
d
n
i
I
£1.7m
£5.3m
£5.2m
£3.8m
£3.7m
£1.1m
£1.1m
Above
Target
Performance Level
Chief executive
Below
Above
Target
Performance Level
Finance director
Below
Above
Target
Performance Level
Technical director
Below
2017 basic salary, benefits and pension
Annual bonus (cash and Bonus Shares)
LTIP
Note:
Pay element
Fixed
Annual bonus
Above
Target
Below
2017 basic salary, benefits and pension
2017 basic salary, benefits and pension
2017 basic salary, benefits and pension
100% of maximum bonus opportunity
(60% deferred into shares)
65% of maximum bonus opportunity
(60% deferred into shares)
None
LTIP
100% of maximum LTIP opportunity
65% of maximum LTIP opportunity
None
• Estimates of £36,000, £49,000 and £36,000 have been used for ongoing non-pension benefits for the chief executive, finance director and technical director respectively.
• Share price movement and dividend accrual have been excluded from all figures.
• Participation in the SAYE and SIP has been excluded, given the relative size of the opportunity levels.
• Charts have not been included for the non-executive directors as their fees are fixed and do not vary with performance.
• Finance director figures relate to René Médori, who will step down as finance director at the 2017 AGM. Full year figures are shown for illustrative purposes.
94
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016
2.4 Policy on termination and change in control
2.4.1 Executive directors
Figure 5 sets out the Company’s policy on termination. This
policy is consistent with provisions relating to termination of
employment in the executive directors’ service agreements
and with provisions in the incentive plan rules.
Figure 6 sets out key provisions relating to change of control,
where there is no termination. There are no provisions for
enhanced payments in the event of a change of control of
the Company.
2.4.2 Non-executive directors
All non-executive directors have letters of appointment
with the Company for an initial period of three years, subject
to annual re-appointment at the AGM. The chairman’s
appointment may be terminated by the Company with six
months’ notice. The appointment letters for the chairman
and non-executive directors provide that no compensation
is payable on termination, other than any accrued fees
and expenses.
Figure 5: Principles of determining payments for loss of office
Notice periods
Notice periods do not exceed 12 months.
Upon appointment the Committee can agree an extended Company notice period for the first year following appointment.
‘Good Leaver’
Voluntary resignation
Circumstances
of departure of
executive
directors
Typical reasons include retirement, redundancy,
death, ill health, injury, disability or as defined by
the Committee.
Where departure is on mutually agreed terms, the
Committee may treat the departing executive as a
‘Good Leaver’ in terms of one or more elements of
remuneration. The Committee uses this discretion
judiciously and shareholders will be notified of any
exercise as soon as reasonable.
Salary and
benefits for
notice period
Salary and benefits continue to be paid to the date of
termination of employment, including any notice period
and/or garden leave period.
The Company may terminate employment with immediate
effect and, in lieu of the unexpired portion of any notice
period, make a series of monthly payments based on salary
and benefits (or make a lump sum payment based on salary
only). Any monthly payments will be reduced to take account
of any salary received from alternative employment.
Bonus accrued
prior to
termination
A time pro rated bonus award may be made by the
Company, with the Committee’s approval, and will
be paid wholly in cash.
Unvested
Bonus Shares
Normal circumstances
Bonus Shares are released in full on the normal
release date (i.e. awards will not be released early).
Exceptional circumstances
(e.g. death or other compassionate grounds).
Bonus Shares are released in full, and eligible for
immediate release.
‘Bad Leaver’
Typically
termination
for cause.
Immediate
termination with
no notice period.
No accrued
bonus is payable.
Salary and benefits continue to be
paid to the date of termination of
employment, including any notice
period and/or garden leave period.
The Company may terminate
employment with immediate effect
and, in lieu of the unexpired portion of
any notice period, make a series of
monthly payments based on salary and
benefits (or make a lump sum payment
based on salary only). Any monthly
payments will be reduced to take
account of any amounts received from
alternative employment.
No accrued bonus is payable.
Forfeit.
Forfeit.
95
Anglo American plc Annual Report 2016Governance
Figure 5: Principles of determining payments for loss of office
‘Good Leaver’
Voluntary resignation
Five-year Bonus
Shares during
final two years
of vesting period
Normal circumstances
Released in full to the employee at the end of the
five-year period.
Exceptional circumstances
(e.g. death or other compassionate grounds).
Bonus Shares are released in full, and eligible for
immediate release.
If an employee resigns to join a
competitor (as defined by the
Committee) during the final two
years of the five-year vesting period
then the Bonus Shares will be forfeit.
Outside of these circumstances, Bonus
Shares are released to the employee
at the end of the five-year period.
‘Bad Leaver’
Forfeit.
Unvested LTIP
awards
Normal circumstances
LTIP awards will vest subject to the performance condition
at the end of the normal performance period and, if
applicable, released at the end of the holding period.
Forfeit.
Forfeit.
All awards are time pro rated.
Exceptional circumstances
(e.g. death or other compassionate grounds).
LTIP awards may be released on departure, subject to
assessment of the performance conditions at that time.
All awards are time pro rated.
Vested LTIP
awards subject
to a holding
period
Normal circumstances
Vested LTIP awards that are subject only to a holding
period are released in full to the employee at the end
of the holding period.
Exceptional circumstances
(e.g. death or other compassionate grounds).
Vested LTIP awards subject to a holding period may be
released on departure.
There is no standard policy in respect of the treatment
of any restricted share awards to executive directors.
Terms are set on a case-by-case basis.
Outstanding shares and/or options under the Company’s
SIP and SAYE vest in accordance with the relevant
HMRC requirements.
Limited disbursements (for example, legal costs, relocation
costs, untaken holiday).
None.
Malus and clawback provisions in the relevant incentive plan rules apply.
Forfeit.
If an employee resigns to join a
competitor (as defined by the
Committee), then even those vested
LTIP awards that remain subject only
to the holding period will be forfeit.
Outside of these circumstances, such
awards are released to the employee
at the end of the holding period.
Generally forfeit.
Forfeit.
According to HMRC rules.
According to
HMRC rules.
None.
Unvested
Restricted
Shares
SAYE and SIP
Other
Malus and
clawback
96
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 Figure 6: Policy on change in control
Incentive plan
provisions
relating to
change of
control (without
termination)
Bonus Shares
The Bonus Shares awarded under the BSP will be released.
LTIP awards
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.
Vested LTIP awards subject to holding period
LTIP awards will be released.
2.6 Payments under previous policies
The Committee reserves the right to make any
remuneration payments and payments for loss of office,
notwithstanding that they are not in line with the policy set
out above, where the terms of the payment were agreed
(i) under a previous policy, in which case the provisions of
that policy shall continue to apply until such payments have
been made; (ii) before the policy or the relevant legislation
came into effect; or (iii) at a time when the relevant individual
was not a director of the Company and, in the opinion of the
Committee, the payment was not in consideration for the
individual becoming a director of the Company. For these
purposes, ‘payments’ includes the satisfaction of awards of
variable remuneration and, in relation to awards of shares,
the terms of the payment which are agreed at the time the
award is granted.
2.7 Changes from previous policy
The chairman’s letter, beginning on page 84, describes
the main changes that the Committee has made to the
remuneration policy that was approved at the 2014 AGM.
These changes are also described in the relevant section
of the policy table.
2.5 Development of directors’ remuneration policy
In developing and reviewing the Company’s remuneration
policy for executive directors and other senior executives,
the Committee is receptive to the views of shareholders and
sensitive to the relationship between the arrangements for
executive directors and those for other employee groups.
Specifically:
• in 2016-17, in developing the revised remuneration
policy, the Committee chairman undertook a consultation
with major shareholders, incorporating feedback as
appropriate. In particular, the Committee has responded
to concerns raised in relation to the possibility of windfall
gains from the 2016 LTIP awards by introducing a cap
on the value that can be received from these awards on
vesting. The Committee also listens to and takes into
consideration investor views and comments throughout
the year
• each year the Committee also reviews in detail how
the arrangements for the executive directors compare
to those for other members of the GMC to ensure an
appropriate relationship and to support career
development and succession.
Given the geographic spread of the Company’s workforce,
the Committee does not consider that consulting with
employees on the remuneration policy for directors
is a sensible use of resources. Many of the Company’s
UK-based employees are shareholders, through the
SAYE and SIP schemes, and they, like other shareholders,
are able to express their views on directors’ remuneration
at each general meeting.
97
Anglo American plc Annual Report 2016Governance
3. ANNUAL REPORT ON REMUNERATION
The information set out in this section (which constitutes the
Implementation Report) has been subject to external audit.
3.1 Executive director remuneration in 2016
Figure 7 sets out the remuneration paid to the executive
directors during 2016.
Figure 7: Single total figure of remuneration for executive directors
Total basic
salary
£’000
Section
3.1.1
1,261
1,261
804
804
788
352
Annual
bonus – cash
and Bonus
Shares
£’000
Section
3.1.3
2,317
966
1,430
583
1,441
284
Benefits
in kind
£’000
Section
3.1.2
36
32
49
65
36
14
LTIP
award
vesting
£’000
Section
3.1.4
–
820
–
394
–
–
Pension
£’000
Section
3.1.5
378
378
241
241
236
106
Other(1)
£’000
Total
2016
£’000
Total
2015
£’000
3,996
2,529
2,504
5
5
5
5
3
3
3,462
2,092
759
Executive directors
Mark Cutifani
Mark Cutifani (2015)
René Médori
René Médori (2015)
Tony O’Neill
Tony O’Neill (2015)(2)
(1)
(2)
‘Other’ comprises free and matching shares awarded under the SIP. 2015 figures have been updated to include free and matching shares awarded in 2015.
In Tony O’Neill’s case, 2015 figures reflect the period between his appointment to the Board, on 23 July 2015, and 31 December 2015.
3.1.1 Basic salaries for 2016
Figure 8 sets out the basic salaries for 2016, which were frozen at 2015 levels.
3.1.2 Benefits in kind for 2016
Benefits for executive directors with a value over £5,000 are set out in
Figure 9. The executive directors also receive club membership, death and
disability insurance, directors’ liability insurance, medical insurance and other
ancillary benefits.
Figure 9: Benefits in kind for 2016
Mark Cutifani
René Médori
Tony O’Neill
Car-related benefits
29,420
28,700
28,370
Tax advice
250
13,545
585
Figure 8: Basic salaries for 2016
(all amounts in ’000)
MARK CUTIFANI
(2015: £1,261)
£1,261
RENE MEDORI
(2015: £804)
£804
TONY O’NEILL
(2015: £352)(1)
£788
(1) For the period between appointment and year-end.
98
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016
Figure 10: Annual bonus outcomes for 2016
(cash and Bonus Shares)
(all amounts in ’000)
MARK CUTIFANI
(2015: £966)
£2,317
RENE MEDORI
(2015: £583)
£1,430
TONY O’NEILL
(2015: £284)(1)
£1,441
(1) For the period between appointment and year-end.
Figure 11: Safety performance modifier
Safety target
Modifier range
2016 modifier
Fatal injury frequency
rate (FIFR)
Up to 7.5%
deduction
Total recordable case
frequency rate (TRCFR)
Up to 5.0%
uplift
Level 4/5 environmental
incidents
Up to 2.5%
deduction
Operational Risk
Management (ORM)
implementation
Net modifier
Up to 5.0%
uplift
(7.5)%
5.0%
(0.0)%
2.0%
(0.5)%
3.1.3 Annual bonus outcomes for 2016
Figure 10 shows the annual bonus outcomes for 2016.
Figure 12 summarises the individual objectives for the
2016 annual bonus for Mark Cutifani, René Médori and
Tony O’Neill, performance achieved and the resulting
outcomes.
The Committee reviewed the annual EPS targets set at
the beginning of 2016 and, in light of the severity of the
falls in commodity prices, the negative price outlook at
the start of 2016 and the launch of the Company’s cash
improvement programme, decided to set threshold
performance expectations at $0.00/share with maximum
vesting at $0.50/share. 25% vesting would take place with
performance at threshold. While stretching at the time, a
progressive recovery in commodity prices since the middle
of the year, coupled with strong delivery on cost and volume
improvements and cash generation from management
actions, meant that the earnings element of the annual
bonus has been fully achieved.
If performance had been measured excluding FX and price
movements in line with the methodology introduced for
2017 bonuses, and normalising for one-off tax adjustments,
EPS would have been above the maximum vesting target at
$0.53/share, reflecting the strong delivery of management
in the year.
The executives’ individual objectives were set at the start
of the year and reflect the Company’s strategic priorities for
the year. Each category contained between one and five
specific objectives, incorporating a combination of
quantitative and qualitative metrics. At the end of the
year, the Committee made a detailed assessment of
performance against each objective, leading to the
evaluations shown in Figure 12.
Assessment of Group safety performance in 2016 operated
through both additive and deductive component measures.
Figure 11 sets out the outcome in each category, resulting in
a net modifier of (0.5)%. The very disappointing increase in
fatalities in 2016 led to the maximum possible FIFR
deduction being applied.
99
Anglo American plc Annual Report 2016Governance
Figure 12: Annual bonus performance assessment for 2016
50% of each executive director’s bonus outcome was dependent on an EPS target, which has been met in full, and a safety modifier of between
(10)% and 10%, which has resulted in a deduction of (0.5)%. Refer to page 99 for more detail on these outcomes. 40% of the executive directors’
bonus outcomes related to a set of individual objectives for the year. The achievement and outcomes of these objectives are set out below.
Mark Cutifani
Objectives
Strategic development (12%)
• Actions to reduce net debt below $10.0 billion
• Progress asset disposal programme and
portfolio upgrade
Business improvement (12%)
• Deliver operational improvements and cost savings:
– $1.0 billion cash improvement versus budget
– Projects ramp-up
– Identify a further $1.0 billion to be delivered
in 2017
People (8%)
• Continue to build expertise of GMC and within
functional teams
• Implement next phase of the Organisational Model
Endowment and stewardship (8%)
• Continue effective engagement with stakeholders
• Progress options on project portfolio
Overall individual performance
René Médori
Objectives
Strategic development (20%)
• Actions to reduce net debt below $10.0 billion
• Progress asset disposal programme and
portfolio upgrade
• Maintain liquidity and optimise debt levels
Business improvement (8%)
• Implement capital allocation strategy
• Progress critical legal matters to resolution
• Define and implement suitable corporate
structure
People (8%)
• Implement new structures per Functional Model
• Build finance team to support business
Achievement
Outcome
• Completed disposal of the niobium and phosphates business in Brazil, Rustenburg
12.0%
platinum operations and 9.7% interest in Exxaro Resources Ltd, realising
$1.8 billion in proceeds.
• Maintained strict value thresholds on disposals, leading to retention of Moranbah
and Grosvenor coal assets in Australia and nickel assets in Brazil.
• Continued to upgrade portfolio.
• Exceeded $1.0 billion cash improvement plan primarily through the delivery
of $1.5 billion cost and volume improvements.
• Increased Cu equivalent production by 2% compared with 2015, driven by project
ramp-ups and improving productivity.
• Identified 75% of 2017 $1.0 billion cost and volume improvement target with
implementation under way.
• Continued roll-out of Anglo American’s Operating Model at various operations
in 2016.
• Continued strengthening of GMC.
• Implemented next phase of the Organisational Model.
• Progressed skills development and retention in critical roles.
• Continued positive constructive relationships with host country governments.
• Increased stakeholder engagement, articulating strategy and delivery of
Company’s targets.
• Developed strategy for future project opportunities including Quellaveco.
Achievement
12.0%
6.8%
7.2%
38.0%
Outcome
• Reduced net debt by $4.4 billion from $12.9 billion, driven by $2.6 billion of cashflow
18.8%
and $1.8 billion in disposal proceeds.
• Decreased gross debt by 27%, including successful $1.8 billion bond buyback
programme realising $0.2 billion in net debt and interest savings, 85% of which
realised in 2016.
• Liquidity levels maintained (31 December 2016: $15.8 billion).
• Managed divestments, including sale of the niobium and phosphates business in
Brazil, Rustenburg platinum operations, 9.7% interest in Exxaro Resources Ltd,
Callide and Foxleigh operations.
• Maintained strict value threshold on disposals, leading to retention of Moranbah
and Grosvenor coal assets in Australia and nickel assets in Brazil.
• Increased discipline in capital management and project prioritisation with total capital
6.8%
expenditure (excludes capitalised operating cash flow) reducing by $1.5 billion.
• Litigation proceedings between Kumba Iron Ore and South African Revenue
Service resolved. Agreement reached on other legal matters.
• Continued to optimise corporate structures, reducing the number of
operating jurisdictions.
• Appointed key finance leaders.
• Continued progress on implementation of the Functional Model in finance.
5.6%
Investor Relations (4%)
• Increased investor engagement with focus on strategy and disposal programme.
4.0%
Overall individual performance
100
35.2%
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 Figure 12: Annual bonus performance assessment for 2016
Tony O’Neill
Objectives
Safety and Environment (6%)
• Design and implement critical controls intervention
• Review Group’s tailings dam emplacement
strategies and operating integrity
Achievement
• Continued strengthening of critical controls delivering a 24% decrease in the
TRCFR compared with 2015.
• Reduction in Level 3-5 environmental incidents, down 33% versus 2015, as well
as focusing on tailings dam emplacement controls.
• Reduced Group’s impact on the environment with decreases in energy and
water consumption and GHG emissions.
Outcome
5.2%
Business improvement (24%)
• Drive operational improvements and cost savings:
– $1.0 billion cash improvement versus budget
– Optimise capital expenditure and working capital
People (4%)
• Design and implement functional model in the
• Exceeded $1.0 billion cash improvement plan primarily through the delivery of
24%
$1.5 billion cost and volume improvements.
• Increased discipline in capital expenditure and project prioritisation, delivering
$600 million reduction versus original plan.
• Renegotiated a number of supplier contracts, improving commercial terms.
• Progressed implementation of the Functional Model in the Technical and
3.2%
Sustainability function.
Technical and Sustainability function
• Appointed key leaders within the function.
• Continue to attract and retain necessary skills
and expertise
Endowment projects and R&D (6%)
• Develop future project strategies
• Progress technology and innovation initiatives
across portfolio
• Progressed options and alternative approaches for the development of new
5.2%
projects including Quellaveco.
• Continued focus on innovation and technology to extract value from endowments
through Open Forums, the FutureSmart™ and SmartPath processes to enable
rapid development and implementation of innovative projects.
• Advanced Concentrate the Mine™ approach across Platinum and Copper with
phase 1 trials of Coarse Particle Flotation under way at Los Bronces copper mine
in Chile.
Overall individual performance
37.6%
Critical tasks are identified in each of the performance categories at the start of the year. These form the basis of measurement, but are
overlaid with an assessment of executive performance in the round in the relevant category. The assessment for 2016 took place against
a backdrop of significant and successful restructuring and transformation, cost saving, production growth, efficiency improvements and
improved stakeholder relationships.
The personal performance outcomes set out above, combined with maximum EPS achievement and the safety modifier of (0.5)%, have
generated overall bonus outcomes of 87.5%, 84.7% and 87.1%. When applied to the maximum bonus of 210% of salary, these performance
outcomes translate into bonuses of £2,316,573, £1,430,383 and £1,441,239 for the chief executive, finance director and technical director
respectively.
40% of the total bonus is payable in cash, with 60% deferred into Bonus Shares. Two-thirds of the Bonus Shares will vest after three years,
subject to continued employment; the remaining third will vest after five years.
101
Anglo American plc Annual Report 2016Governance
Figure 13: LTIP performance assessment for 2016
Measure
Euromoney Global
Mining Index TSR
(25% of total award)
FTSE 100
constituents TSR
(25% of total award)
Driving Value ROCE
(50% of total award)
Threshold
performance
(25% vesting)
3%
(index TSR)
13%
(median TSR)
Stretch
performance
(100% vesting)
21%
(index TSR
+ 6% p.a.)
50%
(upper quartile
TSR)
Actual
performance
(12%)
Vesting
outcome
0%
(12%)
0%
12%
16%
7%
Total outcome (% of total award)
Mark Cutifani (£’000) (maximum opportunity: 350% of salary)
René Médori (£’000) (maximum opportunity: 300% of salary)
Tony O’Neill (£’000) (maximum opportunity: 300% of salary)
0%
0%
0
0
0
Figure 14: Pension for 2016
DC contribution
(£’000)
Cash allowance
(£’000)
UURBS
contribution
(£’000)
NIC paid by
Company
(£’000)
Total
(£’000)
Mark Cutifani
René Médori
Tony O’Neill
17
0
0
317
0
208
0
241
0
44
0
28
378
241
236
3.1.4 LTIP award vesting
In 2014, Mark Cutifani, René Médori and Tony O’Neill
received LTIP grants of 285,733, 156,222 and 153,071
conditional shares respectively, with vesting subject to:
(a) the Company’s TSR performance relative to:
(i) the Euromoney Global Mining Index; and
(ii) FTSE 100 constituents over the three-year period
to 31 December 2016; and
(b) Driving Value ROCE to 31 December 2016.
Figure 13 sets out further details of the measures and the
Company’s performance against each, resulting in an overall
vesting level of zero.
The LTIP amounts shown in last year’s report in respect of
the LTIPs granted in 2013 were calculated on an ‘expected’
basis with an assumed share price of £4.73. The actual
share price at vesting was £5.08, leading to the following
increases in value:
Mark Cutifani – estimated value £778,000;
actual value £820,000 (increase of £42,000).
René Médori – estimated value £373,000;
actual value £394,000 (increase of £21,000).
3.1.5 Pension
The pension contribution amounts in Figure 14 should
be read in conjunction with the following information:
• The amounts stated for Mark Cutifani and Tony O’Neill
for 2016 include a cash allowance of £317,000
(2015: £297,000) and £208,000 (2015: £93,000),
respectively
• The total amount of pension contributions treated
as having been paid into the UURBS for 2016 were
£241,000 for René Médori (2015: £241,000)
• Contributions treated as being paid into the UURBS
earn a return equivalent to the Company’s pre-tax sterling
nominal cost of debt, capped at a rate determined by the
Remuneration Committee. The total return earned in
2016 was £90,000 for René Médori (2015: £73,000)
• As at 31 December 2016, the total balance due to
executive directors in relation to the UURBS was
£1,976,000 for René Médori (2015: £1,644,000).
Retirement benefits can only be drawn from the
UURBS if a member has attained age 55 and has
left Group service.
102
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 3.1.6 External directorships
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 only one such appointment.
In the year, in addition to his basic salary, René Médori
retained fees amounting to £82,000 in respect of one
external directorship.
3.2 Other director remuneration in 2016
3.2.1 Non-executive director remuneration
Figure 15 sets out the remuneration paid to the
non-executive directors of the Company in 2016.
Fees shown include any additional fees paid in
respect of chairmanships of committees or other
roles such as senior independent director.
Figure 15: Single total figure of remuneration for non-executive directors
Non-executive directors
Sir John Parker(1)
Judy Dlamini (2)
Byron Grote(3)
Sir Philip Hampton
Ray O’Rourke(4)
Mphu Ramatlapeng
Jim Rutherford
Anne Stevens(5)
Jack Thompson
Total fees
2016
£’000
Benefits in
kind 2016
£’000
Total
2016
£’000
Total fees
2015
£’000
Benefits in
kind 2015
£’000
Total
2015
£’000
700
53
110
140
45
80
80
80
110
29
–
–
–
–
–
–
–
–
729
53
110
140
45
80
80
80
700
80
110
140
80
80
80
80
110
110
24
–
–
–
–
–
–
–
–
724
80
110
140
80
80
80
80
110
(1) Sir John Parker has elected to waive his Nomination Committee chairman fees. Benefits with a value over £5,000 comprise car-related benefits and medical insurance.
(2) Judy Dlamini resigned from the Board with effect from 30 August 2016.
(3) Byron Grote became a member of the Nomination Committee on 21 October 2016.
(4) Ray O’Rourke resigned from the Board with effect from 25 July 2016.
(5) Anne Stevens became a member of the Remuneration Committee on 21 October 2016.
3.2.2 Payments for past directors
In addition to retirement benefits, the Company continues
to provide seven former executive directors with private
medical insurance arrangements. The annual cost to
the Company is minimal. The Committee continues to
meet these longstanding commitments but no new
commitments have been made recently or will be made
in future. There were no other payments to past directors
during 2016.
103
Anglo American plc Annual Report 2016Governance
3.3 Scheme interests granted during 2016
The information in this section has been subject to
external audit.
Figure 16 summarises the longer term, conditional share
awards granted to executive directors during 2016.
Receipt of these awards is dependent on the Company’s
performance over 2016-18 and to the maximum vesting
value imposed by the Committee, as detailed below.
The value of Bonus Shares awarded to directors in respect
of 2016 is included in the annual performance bonus figures,
set out in Figure 10. They are also included in Figure 17.
3.4 Total interests in shares
Figure 17 summarises the total interests of the directors
in shares of Anglo American plc as at 31 December 2016.
These include beneficial and conditional interests, and
shareholdings of their connected persons.
As already disclosed, Mark Cutifani is expected to hold
interests in shares to a value of three times basic salary
(built up over five years) and René Médori and Tony O’Neill
to a value of two times salary. At the date of preparation of
this report, Mark Cutifani, René Médori and Tony O’Neill
have net shareholdings (including Bonus Shares) equal
to 430%, 587%, and 310% of basic salary, respectively.
Figure 16: Summary of conditional share awards and options granted in 2016
Performance
period end
Director
Basis of award
Number of
shares awarded
Face value
at grant(1)
31/12/2018
Mark Cutifani
350% of salary
993,810
£4,412,516
René Médori
300% of salary
543,360
£2,412,518
Tony O’Neill
300% of salary
532,398
£2,363,847
Type of award
LTIP share
awards
Performance
measure
TSR vs.
Sector Index
(25%)
Vesting schedule
25% for TSR
equal to the Index;
100% for the Index
+6% pa or above
TSR vs.
FTSE 100
constituents
(25%)
25% for TSR
equal to median;
100% for 80th
percentile or above
ROCE (50%) 25% for 5%;
100% for 15%
(1) The face value of each award has been calculated using the share price at time of grant (£4.44 for the LTIP awards). As receipt of these awards is conditional on performance, the actual value of these awards
may be nil. In addition, the maximum value that may be received in the year of vesting of the awards granted in 2014, 2015 and 2016 is limited for each executive director to the combined face value of the 2014,
2015 and 2016 awards. Any value over this level will be forfeit. Vesting outcomes will be disclosed in the 2018 remuneration report.
104
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 Figure 17: Shares in Anglo American plc at 31 December 2016
Directors
Mark Cutifani
René Médori(1)
Tony O’Neill
Sir John Parker
Byron Grote(2)
Sir Philip Hampton
Mphu Ramatlapeng
Jim Rutherford
Anne Stevens
Jack Thompson(2)
Former directors(3)
Judy Dlamini
Ray O’Rourke(2)
Conditional
(no performance
conditions)
Conditional
(with performance
conditions)
Beneficial
Conditional
(no performance conditions)
Total
BSP
Bonus Shares
257,550
165,779
148,053
–
–
–
–
–
–
–
–
–
174,814
210,498
46,708
62,696
26,000
19,258
4,738
21,335
2,122
14,950
6,712
76,965
LTIP
SAYE/SIP
Other
1,641,818
897,654
880,469
7,385
9,410
4,155
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,081,567
1,283,341
1,079,385
62,696
26,000
19,258
4,738
21,335
2,122
14,950
6,712
76,965
(1) René Médori’s beneficial interests in 138,990 shares held at the date of this report arise as a result of his wife’s interests in shares.
(2)
Included in the interests of Messrs Grote, O’Rourke and Thompson are unsponsored ADRs representing 0.5 ordinary shares of $0.54945 each.
Interests are shown as at date of resignation.
(3)
Differences from 31 December 2016 to 20 February 2017
Mark Cutifani’s and René Médori’s interests increased by 44 shares each from 31 December 2016 to 20 February 2017, as a result of the
acquisition of shares under the SIP. Their total holdings therefore increased to 2,081,611 and 1,283,385 respectively.
105
Anglo American plc Annual Report 2016Governance
3.5 Statement of implementation of policy in 2017
The Company’s policy on executive director remuneration
for 2017 is summarised in the policy statements in Figure 1.
Figure 18 summarises how that policy will be implemented
in 2017. It is the Company’s intention that the fees for
non-executive directors will remain at their 2016 levels for
the first half of 2017, following which they will be reviewed.
The EPS performance range for 2017 is considered by
the Board to be commercially sensitive, although it will
be disclosed in the 2017 remuneration report.
As set out on page 91, changes to the previous LTIP
performance targets are proposed to apply from 2017;
vesting of 70% of the 2017 award will be subject to the
achievement of TSR conditions, and the remaining 30%
to a balanced scorecard of financial and strategic measures.
For the 2017 balanced scorecard, ROCE (10%) has been
selected to maintain focus on disciplined capital allocation.
An attributable free cash flow target (10%) is being
introduced as a new measure. This links management’s
remuneration outcomes directly to the Company’s goal
of reducing net debt through cash generation, thereby
maintaining the Group’s net debt/EBITDA ratio below 1.5.
The remaining 10% of the balanced scorecard for
2017 will be based on emissions reduction (5%) and
occupational disease prevention (5%), directly reflecting
two pillars of value. Following the overwhelming
shareholder support for the ‘Aiming for A’ resolution
at the 2016 AGM, the Committee strongly believes that
management’s incentives should be linked to achievement
of the Company’s public commitment to reducing CO2
emissions by 22% by 2020, as measured against the
business as usual case. Linking the remaining 5% of the
2017 LTIP award to a 10% reduction in inhalable hazards by
the end of 2019 (as measured against a certified industrial
hygienist approved baseline) reflects the Group’s ongoing
commitment to the prevention of occupational disease.
The three-year cumulative attributable free cash flow
target within the LTIP is also considered by the Board
to be commercially sensitive; disclosing it would enable
competitors to derive information as to our detailed business
plan. The actual targets, along with the outcomes, will be
disclosed in the 2019 remuneration report. The definition
of attributable free cash flow can be found on page 189.
Further details of the individual performance targets for
2017 will be included in the 2017 remuneration report.
Figure 18: Summary of key remuneration aspects in 2017
Element
Performance measure 1,
weighting and component detail
Performance measure 2,
weighting and component detail
Basic salary –
–
Annual
bonus
EPS (50%)
Half on performance at
outturn prices and FX and
half on performance at
budgeted prices and FX
Long Term
Incentive
Plan (LTIP)
TSR (70%)
TSR vs. Euromoney Global
Mining Index (47%)
25% for TSR equal to Index
100% for Index +6% pa
or above
TSR vs. FTSE 100 (23%)
25% for TSR equal to median
100% for 80th percentile
or above
Individual objectives and safety modifier
(50%)
Personal and strategic objectives supporting
the Company’s delivery on projects, business
improvement, capital allocation, commercial
activities, employee development and
stakeholder engagement, subject to the
application of a safety modifier
Balanced Scorecard (30%)
ROCE (10%)
25% for 10%
100% for 20%
Cumulative attributable free cash flow (10%)
CO2 emissions (5%)
25% for 20% reduction by end of 2019
100% for 22% reduction by end of 2019
Inhalable hazards (5%)
25% for 6% reduction by end of 2019
100% for 10% reduction by end of 2019
Director
Level
Mark Cutifani
£1,285,934 (2% increase)
René Médori
£820,256 (2% increase)
Tony O’Neill
£803,709 (2% increase)
Stephen Pearce £775,000 (full year)
Mark Cutifani
210% of salary
René Médori
210% of salary
Tony O’Neill
210% of salary
Stephen Pearce 210% of salary (full year)
Mark Cutifani
300% of salary
René Médori
nil
Stephen Pearce 300% of salary
Tony O’Neill
300% of salary
106
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 3.5.1 Outstanding LTIP awards
The previous LTIP structure, in the context of the volatile
nature of the mining industry, brought with it the potential
for windfall gains where awards were granted at a relatively
low share price.
The Committee has therefore imposed a limit on the value
that can be delivered on vesting for recent awards. The
delivered value for the awards granted in 2014, 2015 and
2016 will be limited to 100% of the total face value (number
of shares granted multiplied by share price on grant) of the
awards granted over these three years. Any value over and
above this limit will be forfeit.
3.6 Remuneration disclosures
3.6.1 Eight-year remuneration and returns
Figure 19 shows the Company’s TSR performance against
the performance of the FTSE 100 Index from 1 January
2009 to 31 December 2016. The FTSE 100 Index was
chosen as being a broad equity market index which
includes companies of a comparable size and complexity
to Anglo American.
TSR is calculated in US dollars, and assumes all dividends
are reinvested. 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.
Figure 20 shows the total remuneration earned by the
incumbent chief executive over the same eight-year period,
along with the proportion of maximum opportunity earned
in relation to each type of incentive. The total amounts are
based on the same methodology as for Figure 7.
For the period 2010 to 2011, the TSR performance of the
Company, and the remuneration received by Cynthia Carroll
as chief executive, demonstrates that this was a period of
strong operational performance and high commodity
prices. These led to a doubling of profits and almost a
doubling of underlying EPS in 2010.
Cynthia Carroll’s remuneration levels in 2011 also reflect
record profits and strong EPS performance for the year
in addition to the increase in value of the LTIP awards that
vested at the end of 2011 – when granted, the Company’s
share price was £12.61; the share price at vesting
was £26.00.
The vesting levels of long term incentives from 2012
have been much lower, reflecting, in part, the impact of
the severe decline in commodity prices on earnings and
the returns delivered to shareholders.
Mark Cutifani’s remuneration levels in 2013 and 2014
are not reflective of his underlying remuneration, given
that he received a compensatory share award in 2013
and compensation for tax on relocation benefits in
2014. The impact of longer term incentives was only
realised in 2015 as a consequence of the vesting of the
2013 LTIP award.
Figure 19: Eight-year TSR performance
t
n
e
m
t
s
e
v
n
i
0
0
1
$
l
a
c
i
t
e
h
t
o
p
y
h
a
f
o
e
u
a
V
l
300
250
200
150
100
50
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Datastream Return Index
Figure 20: Chief executive’s remuneration
Financial year ending
Cynthia Carroll
31 December
2009
31 December
2010
31 December
2011
31 December
2012
31 December
2013
31 December
2014
31 December
2015
31 December
2016
Total remuneration (single figure, £’000)
4,379
4,235
3,203
1,462
Annual bonus (% of maximum)
LTIP (% of maximum)
BSP Enhancement Shares (% of maximum)
Mark Cutifani
Total remuneration (single figure, £’000)
Annual bonus (% of maximum)
LTIP (% of maximum)
99%
61%
0%
–
–
–
8,113
94%
96%
88%
50%
0%
100%
–
–
–
–
–
–
35%
50%
0%
–
–
–
67%
28%
0%
–
–
–
–
–
–
–
–
–
–
–
–
5,305
3,725
3,462
3,996
65%
60%
36.5%
87.5%
–
–
50%
–
107
Anglo American plc Annual Report 2016Governance
3.6.2 Change in the chief executive’s remuneration
in 2016 relative to London employees
Figure 21 sets out the chief executive’s basic salary,
benefits and annual bonus amounts for 2016 and the
year-on-year change. We show the average change in each
element for London employees below GMC level, which is
considered to be the most relevant employee comparator
group given the Group-wide nature of roles performed at
Head Office.
3.6.3 Distribution statement for 2016
Figure 22 sets out the total expenditure on employee
reward over 2016, compared to profit generated by
the Company and the dividends received by investors.
Underlying earnings are shown, as this is one of the
Company’s key measures of performance, while
employee numbers help put the payroll costs of
employees into context.
Figure 21: Change in chief executive’s remuneration compared to UK employees
Chief executive
London employees(1)
£’000
% change
Average
% change
Salary
1,261
0
2.3
Benefits
36
12
3.0
(1) Benefits for London employees comprise pension and car allowances (where applicable), these being the most material.
Figure 22: Distribution statement for 2016
Distribution statement
Underlying earnings(1)
(Total Group)
Dividends payable for year (total)
Payroll costs for all employees
Employee numbers
(1) Please see page 188 for details on how underlying earnings are calculated.
Figure 23: Response to 2016 AGM shareholder voting
$m
% change
$m
% change
$m
% change
’000
% change
2016
2,210
167
0
(100)
3,738
(16)
80
(12)
Bonus
2,317
140
42.5
2015
827
(62.7)
398
(63.2)
4,474
(11.8)
91
(4.2)
For
Against
Abstain
Company response to issues raised
Number of votes
504,101,574
(58%)
358,945,876
(42%)
102,126,177
The Committee is mindful of the
concerns expressed by a number of
shareholders in relation to executive
remuneration in 2015, particularly
around LTIP awards granted in
March 2016. Setting executive
remuneration in a volatile industry,
such as mining, can be challenging
and the Committee has actively
engaged with shareholders in order
to refine the revised policy to ensure
that it is both appropriate and
motivational.
Vote
Advisory vote
on 2015
implementation
report
108
GOVERNANCE DIRECTORS’ REMUNERATION REPORTAnglo American plc Annual Report 2016 3.7 Remuneration committee in 2016
3.7.1 Membership
The Committee comprised the non-executive
directors shown on the right on 31 December 2016.
3.7.2 External advisers to the Committee
Figure 24 details the external advisers to the Committee
and the fees paid for services provided during 2016.
The fees are charged in accordance with the terms and
conditions set out in each relevant engagement letter.
PwC is a signatory to, and adheres to, the Code of Conduct
for Remuneration Consultants (which can be found at
www.remunerationconsultantsgroup.com). In addition,
the Committee chairman has regular direct dialogue with
advisers. For these reasons, the Committee considers
that the advice it receives is independent.
3.7.3 Remuneration report voting results
The Committee considered the results of the shareholders’
vote on the 2015 remuneration report (Figure 23).
Feedback from investors at the time of the 2016 AGM,
and more generally, has helped shape revisions to the
remuneration policy for 2017 onwards.
Figure 24: External advisers and fees
Advisers
Pricewaterhouse
Coopers LLP
(PwC)
Perelamon
Deloitte LLP
(Deloitte)
Appointed by the Company, with
the agreement of the Committee,
to support and advise on the
Company’s incentive arrangements,
in addition to the provision of specialist
valuation services and market
remuneration data.
Appointed by the Company, with
the agreement of the Committee,
to support and advise on the
Company’s incentive arrangements.
In its capacity as Group auditor,
Deloitte undertakes an audit of
sections 3 and 4 of the remuneration
report annually. However, it provides
no advice to the Committee.
Sir Philip Hampton
Byron Grote
Anne Stevens
Jack Thompson
Other services provided
to the Company
Investment advice, actuarial and
audit work for various pension
schemes; advice on internal audit
projects; taxation, payroll and
executive compensation advice.
Executive compensation and
reward advice.
Fees for Committee
assistance
£108,000
£7,000
n/a
Note: Certain overseas operations within the Group are also provided with audit-related services from Deloitte’s and PwC’s worldwide member firms.
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 Philip Hampton
Chairman, Remuneration Committee
20 February 2017
109
Anglo American plc Annual Report 2016Governance
GOVERNANCE STATEMENT OF DIRECTORS’ RESPONSIBILITIES
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 to prepare the Group financial statements in
accordance with International Financial Reporting
Standards (IFRS), as adopted by the European Union and
Article 4 of the IAS regulation, and have elected to prepare
the parent company financial statements in accordance with
Financial Reporting Standard 101 ‘Reduced Disclosure
Framework’. The directors must not approve the accounts
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of the profit or loss of
the Company for that period.
In preparing the parent company financial statements,
the directors are required to:
• select suitable accounting policies and then apply them
consistently
• make judgements and accounting estimates that are
reasonable and prudent
• state whether Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ has been followed, subject to any
material departures disclosed and explained in the
financial statements
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
In preparing the Group financial statements, IAS 1
requires that directors:
• properly select and apply accounting policies
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information
• provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity’s financial
position and financial performance
• make an assessment of the Company’s ability to continue
as a going concern.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions, disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006. 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 UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT
for the year ended 31 December 2016
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
(c) the Annual Report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the Company’s performance, business model
and strategy.
(b) the strategic report includes a fair review of the
By order of the Board
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
Mark Cutifani
Chief Executive
20 February 2017
René Médori
Finance Director
110
Anglo American plc Annual Report 2016 FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
CONTENTS
Independent auditor’s report to the members of Anglo American plc
112
Primary statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the financial statements
1
Critical accounting judgements and key sources
of estimation uncertainty
Changes in accounting policies and disclosures
2
Notes to the Consolidated income statement
3
4
5
6
7
8
9
10 Dividends
Segmental information
Operating profit/(loss) from subsidiaries and joint operations
Underlying EBIT and underlying earnings by segment
Special items and remeasurements
Net finance (costs)/income
Income tax expense
Earnings per share
Intangible assets
Notes to the Consolidated balance sheet
11
12 Property, plant and equipment
13
14
15
16
17
18
19 Derivatives
20 Provisions for liabilities and charges
21 Deferred tax
Investments in associates and joint ventures
Financial asset investments
Inventories
Trade and other receivables
Trade and other payables
Financial instruments
Cash flow statement, net debt and related notes
22 Capital expenditure
23 Net debt
24 Borrowings
25 Commitments
Employee remuneration
26 Employee numbers and costs
27 Retirement benefits
28 Share-based payments
Group structure and transactions
29 Assets and liabilities held for sale
30 Disposals of subsidiaries, joint ventures and mining operations
31 Non-controlling interests
Additional disclosures
32 Called-up share capital and consolidated equity analysis
33 Auditor’s remuneration
34 Contingent liabilities
35 Related party transactions
36 Events occurring after end of year
37 Group companies
38
39 Accounting policies
40 Related undertakings of the Group
Financial risk management
Financial statements of the Parent Company
Summary by business operation
Key financial data
Exchange rates and commodity prices
i
F
n
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116
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127
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130
131
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133
134
134
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136
136
136
136
137
139
140
141
142
143
144
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147
148
151
152
153
154
155
156
157
157
158
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159
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179
180
Anglo American plc Annual Report 2016
111
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ANGLO AMERICAN PLC
Opinion on financial statements of Anglo American plc
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s
and of the Parent Company’s affairs as at 31 December 2016 and of the
Group’s profit and the Parent Company’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the
European Union;
• the Parent Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice,
including FRS 101 ‘Reduced Disclosure Framework’; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
The financial statements that we have audited comprise:
• the Consolidated Income Statement;
• the Consolidated Statement of Comprehensive Income;
• the Consolidated Balance Sheet;
• the Consolidated Cash Flow Statement;
• the Consolidated Statement of Changes in Equity;
• the Accounting Policies;
• the related notes 1 to 40; and
• the Balance Sheet of the Parent Company and related information.
The financial reporting framework that has been applied in the preparation of
the Group financial statements is applicable law and IFRSs as adopted by the
European Union. The financial reporting framework that has been applied in the
preparation of the Parent Company financial statements is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice), including FRS 101 ‘Reduced Disclosure Framework’.
Going concern and the directors’ assessment of the principal
risks that would threaten the solvency or liquidity of the Group
As required by the Listing Rules we have reviewed the directors’ statement
regarding the appropriateness of the going concern basis of accounting
contained within note 39 to the financial statements and the directors’
statement on the longer-term viability of the Group contained within the
strategic report on page 40.
We are required to state whether we have anything material to add or draw
attention to in relation to:
• the directors’ confirmation on page 40 that they have carried out a robust
assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or liquidity;
• the disclosures on pages 41 to 45 that describe those risks and explain how
they are being managed or mitigated;
• the directors’ statement in note 39 to the financial statements about whether
they considered it appropriate to adopt the going concern basis of accounting
in preparing them and their identification of any material uncertainties to the
Group’s ability to continue to do so over a period of at least twelve months
from the date of approval of the financial statements; and
• the directors’ explanation on page 40 as to how they have assessed the
prospects of the Group, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.
We confirm that we have nothing material to add or draw attention to in
respect of these matters.
We agreed with the directors’ adoption of the going concern basis of
accounting and we did not identify any such material uncertainties. However,
because not all future events or conditions can be predicted, this statement is
not a guarantee as to the Group’s ability to continue as a going concern.
Independence
We are required to comply with the Financial Reporting Council’s Ethical
Standards for Auditors.
We confirm that we are independent of the Group and we have fulfilled our
other ethical responsibilities in accordance with those standards. We also
confirm we have not provided any of the prohibited non-audit services
referred to in those standards.
112
Anglo American plc Annual Report 2016
Our assessment of risks of material misstatement
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team. These risks are consistent with those identified last year.
Risk description
How the scope of our audit responded to the risk
Key observations
Impairment (notes 1 and 6)
As a consequence of continued volatility in
commodity prices and foreign exchange rates, the
assessment of the recoverable amount of operating
assets and development projects remains a key
judgement.
This includes the coal operations in Australia (where
a pre-tax impairment of $1.2 billion has been
recorded) as well as other specific assets including
the Sishen mine operations and the Minas-Rio
project where impairments had previously been
recorded.
Corporate asset transactions (notes 29 and 30)
The appropriate accounting treatment of corporate
asset disposals which have completed during 2016
is a key area of audit focus specifically in respect of
assessing the point at which control is transferred
from the seller to the buyer and the calculation of any
profit or loss on disposal and assessing the potential
accounting implications of ongoing transactions.
In 2016 this includes specifically the sale of the
Niobium and Phosphates businesses (pre-tax gain
on disposal of $460 million), the Rustenburg
operation (pre-tax loss on disposal of $121 million)
and certain coal assets in Australia (combined net
gain on disposal of $606 million).
Taxation (notes 1, 8 and 21)
The assessment of the Group’s taxation exposures
across all jurisdictions is a key area of judgement
particularly with respect to transfer pricing
arrangements and the appropriateness of the
recognition of tax provisions and deferred
taxation assets.
Special items and remeasurements (note 6)
The assessment of the appropriateness of items
disclosed within ‘special items and remeasurements’
is a key judgement because of their impact upon
the reporting of the underlying financial performance
achieved by the Group.
We challenged management’s assessment as to whether
indicators of impairment or impairment reversal exist for assets
including the coal operations in Australia, the Sishen mine
operations and the Minas-Rio project. Where such indicators
were identified we obtained copies of the valuation models used
to determine the value in use or fair value less costs of disposal
of the relevant asset.
We challenged the assumptions made by management in
relation to these models, including the discount rate used, the
short-term and long-term commodity prices, capital expenditure
and operating cost forecasts and the expected production
profiles, by comparison to recent analyst forecast commodity
price data, reference to third party documentation where
available, utilisation of Deloitte valuation specialists, review of
Ore Reserves and Mineral Resources reports, consultation with
operational management and consideration of sensitivity
analyses.
We assessed whether the assumptions had been determined
and applied on a consistent basis across the Group.
For the sales completed in the year, we reviewed the sales and
purchase agreements to assess whether control had passed to
the buyer prior to 31 December 2016 and to recalculate any
profit or loss on disposal.
For those assets where sales agreements are underway but
not completed, we considered whether the criteria of
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations had been met and in particular whether the sale
could be considered highly probable.
We found that the assumptions
used were reasonable and had
been determined and applied
on a consistent basis across the
Group. No additional
impairments or impairment
reversals were identified from
the work performed.
We found that the impairments
recorded at the coal operations
in Australia were primarily due
to reduced forecast long-term
commodity prices, but this effect
was partially offset by forecast
exchange rate movements and
targeted reductions in forecast
operating costs. In the second
half of the year, the impact of
encountering challenging
geological conditions has been
offset by increased spot prices.
We are satisfied that the asset
disposals that completed in 2016
have been accounted for
correctly, with appropriate
disclosures properly made.
For all other planned asset sales
we are satisfied that the criteria
have not been met for them to be
disclosed as held for sale in
accordance with IFRS 5.
We reviewed all potential taxation exposures within the Group
and, through discussions with the Group’s taxation department,
the tax specialists within the audit team and review of relevant
documentation, we assessed the appropriateness of the
provisions raised.
We considered, in the context of our tax specialists’ prior
experience of similar issues and the legal advice received by the
Group, the Group‘s transfer pricing arrangements to confirm that
they are reasonable and the Group’s deferred taxation assets
and liabilities to confirm they are appropriate.
We are satisfied that the
provisions raised in respect of
the Group’s potential taxation
exposures are appropriate and
that deferred tax assets are
properly recognised.
In the context of our review of the overall income statement and
with reference to the recently published guidance from the
European Securities and Market Authority (ESMA) we considered
and challenged each item disclosed within ‘special items and
remeasurements’ as defined in note 6 to the financial statements.
We determined whether such categorisation is appropriate and
consistent with the Group’s stated policy and past practice for
recognition of such items, and whether, taken as a whole, the
income statement is fair and balanced in its presentation.
We are satisfied that all items
included within ‘special items and
remeasurements’ display no
indication of management bias in
the categorisation and that where
relevant the categorisation was
consistent with prior practice.
We consider that the related
disclosures are also appropriate.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Anglo American plc Annual Report 2016
113
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ANGLO AMERICAN PLC
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the part of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006;
• the information given in the Strategic Report and the Directors’ Report for
the financial year for which the financial statements are prepared is
consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company and its
environment obtained in the course of the audit, we have not identified any
material misstatements in the Strategic Report and the Directors’ Report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
• we have not received all the information and explanations we require for our
audit; or
• adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from branches not
visited by us; or
• the Parent Company financial statements are not in agreement with the
accounting records and returns.
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of directors’ remuneration have not been made or the part
of the Directors’ Remuneration Report to be audited is not in agreement with
the accounting records and returns.
We have nothing to report arising from these matters.
Corporate Governance Statement
Under the Listing Rules we are also required to review part of the Corporate
Governance Statement relating to the company’s compliance with certain
provisions of the UK Corporate Governance Code.
We have nothing to report arising from our review.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we are required
to report to you if, in our opinion, information in the Annual Report is:
• materially inconsistent with the information in the audited financial
statements; or
• apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or
• otherwise misleading.
In particular, we are required to consider whether we have identified any
inconsistencies between our knowledge acquired during the audit and the
directors’ statement that they consider the Annual Report is fair, balanced and
understandable and whether the Annual Report appropriately discloses those
matters that we communicated to the Audit Committee which we consider
should have been disclosed.
We confirm that we have not identified any such inconsistencies or
misleading statements.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use
materiality both in planning the scope of our audit work and in evaluating the
results of our work.
Based on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
Group materiality
$200 million (2015: $200 million)
Basis for
determining
materiality
Rationale for the
benchmark applied
We have considered both asset and profit bases in the
determination of materiality. $200 million equates to
0.8% (2015: 0.9 %) of net assets and 6.3%
(2015: 4.7%) of normalised three year pre-tax profit
before special items and remeasurements.
The use of a combination of bases is a change to our
approach in 2015 when materiality was based solely on
the normalised three-year pre-tax profit before special
items and remeasurements.
Given the current volatility in commodity prices and the
cyclical nature of the mining industry, we believe that
widening our assessment to incorporate balance sheet
metrics in addition to normalised pre-tax profit before
special items and remeasurements is a more
appropriate approach as it reflects the capital invested,
the changes in production, the volume of commodities
sold and the scale of the Group’s operations.
We agreed with the Audit Committee that we would report to the Committee
all known profit impacting audit differences in excess of $10 million
(2015: $10 million), as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the
overall presentation of the financial statements.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Group and its
environment, including internal control, and assessing the risks of material
misstatement.
All business units were subject to a full scope audit with the exception of
Niobium and Phosphates (which was disposed of in 2016) and Manganese
where specific audit procedures were performed. The work performed by the
component audit teams at each business unit is guided by the Group audit
team and is executed at levels of materiality applicable to each individual
entity which were lower than Group materiality and ranged from $90 million
to $110 million (2015: $80 million to $110 million).
The Senior Statutory Auditor and/or a senior member of the Group audit team
visits the principal location of each significant business unit at least once
every year and key operational assets on a rotating basis.
Group revenue
Full audit scope
Specified audit procedures
Underlying EBIT
Full audit scope
Specified audit procedures
Net assets
Full audit scope
Specified audit procedures
%
95
5
%
92
8
%
98
2
114
Anglo American plc Annual Report 2016
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is to
audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). We
also comply with International Standard on Quality Control 1 (UK and Ireland).
Our audit methodology and tools aim to ensure that our quality control
procedures are effective, understood and applied. Our quality controls and
systems include our dedicated professional standards review team and
independent partner reviews.
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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 auditor’s 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.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused
by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the Group’s and the Parent Company’s
circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the Annual Report to
identify material inconsistencies with the audited financial statements and
to identify any information that is apparently materially incorrect based on,
or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.
Kari Hale (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
20 February 2017
Anglo American plc Annual Report 2016
115
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION PRIMARY STATEMENTS
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2016
US$ million
Revenue
Operating costs
Operating profit/(loss)
Non-operating special items
Share of net income/(loss)from associates and
joint ventures
Profit/(loss) before net finance (costs)/income
and tax
Note
3
3, 4
6
3, 13
Investment income
Interest expense
Other net financing (losses)/gains
Net finance (costs)/income
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the financial year
Attributable to:
Non-controlling interests
Equity shareholders of the Company
Earnings per share (US$)
Basic
Diluted
7
8
31
9
9
Before special
items and
remeasurements
21,378
(18,047)
3,331
–
Special items and
remeasurements
(note 6)
–
(1,665)
(1,665)
1,203
2016
Total
21,378
(19,712)
1,666
1,203
Before special
items and
remeasurements
20,455
(18,417)
2,038
–
Special items and
remeasurements
(note 6)
–
(6,150)
(6,150)
(1,278)
2015
Total
20,455
(24,567)
(4,112)
(1,278)
7
278
48
(269)
(221)
271
3,602
186
(490)
95
(209)
3,393
(742)
2,651
441
2,210
(455)
120
(45)
(389)
(314)
(769)
44
(725)
(109)
(616)
3,147
306
(535)
(294)
(523)
2,624
(698)
1,926
332
1,594
1.72
1.70
(0.48)
(0.47)
1.24
1.23
2,086
172
(489)
(141)
(458)
1,628
(435)
1,193
366
827
0.64
0.64
(7,697)
–
(54)
669
615
(7,082)
47
(7,035)
(584)
(6,451)
(5,611)
172
(543)
528
157
(5,454)
(388)
(5,842)
(218)
(5,624)
(5.00)
(5.00)
(4.36)
(4.36)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
US$ million
Profit/(loss) for the financial year
Other comprehensive (expense)/income
Items that will not be reclassified to the income statement (net of tax)(1)
Remeasurement of net retirement benefit obligation
Net items that will not be reclassified to the income statement
Items that have been or may subsequently be reclassified to the income statement (net of tax)(1)
Net exchange differences:
Net gain/(loss) (including associates and joint ventures)
Cumulative (gain)/loss transferred to the income statement on disposal of foreign operations
Revaluation of available for sale investments:
Net revaluation gain/(loss)
Cumulative revaluation gain transferred to the income statement on disposal
Impairment losses transferred to the income statement
Revaluation of cash flow hedges:
Net gain
Transferred to the income statement
Net items that have been or may subsequently be reclassified to the income statement
Other comprehensive income/(expense) for the financial year (net of tax)
Total comprehensive income/(expense) for the financial year (net of tax)
Attributable to:
Non-controlling interests
Equity shareholders of the Company
(1) Tax amounts are shown in note 8c.
2016
1,926
2015
(5,842)
(179)
(179)
260
260
1,150
(50)
(4,185)
101
122
(151)
–
–
(11)
1,060
881
2,807
514
2,293
(203)
–
52
9
–
(4,226)
(3,966)
(9,808)
(877)
(8,931)
116
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION PRIMARY STATEMENTS
CONSOLIDATED BALANCE SHEET
as at 31 December 2016
US$ million
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Environmental rehabilitation trusts
Investments in associates and joint ventures
Financial asset investments
Trade and other receivables
Deferred tax assets
Derivative financial assets
Other non-current assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Derivative financial assets
Cash and cash equivalents
Total current assets
Assets classified as held for sale
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Short term borrowings
Provisions for liabilities and charges
Current tax liabilities
Derivative financial liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Medium and long term borrowings
Retirement benefit obligations
Deferred tax liabilities
Derivative financial liabilities
Provisions for liabilities and charges
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
Own shares
Other reserves
Retained earnings
Equity attributable to equity shareholders of the Company
Non-controlling interests
Total equity
Note
2016
2015
11
12
20
13
14
16
21
19
15
16
19
23a
29
17
23a, 24
20
19
17
23a, 24
27
21
19
20
29
32
31
3,217
28,719
353
1,974
835
812
1,013
484
293
37,700
3,727
2,232
330
109
6,051
12,449
–
50,149
(3,384)
(1,806)
(621)
(442)
(272)
(6,525)
(116)
(11,363)
(778)
(3,520)
(1,603)
(1,919)
(19,299)
–
(25,824)
24,325
772
4,358
(6,090)
(10,000)
29,976
19,016
5,309
24,325
3,394
29,621
290
1,817
846
539
914
460
335
38,216
4,051
1,983
152
689
6,895
13,770
27
52,013
(2,753)
(1,649)
(620)
(340)
(477)
(5,839)
(26)
(16,318)
(667)
(3,253)
(1,986)
(2,565)
(24,815)
(17)
(30,671)
21,342
772
4,358
(6,051)
(10,811)
28,301
16,569
4,773
21,342
The financial statements of Anglo American plc, registered number 03564138, were approved by the Board of directors on 20 February 2017 and signed on its
behalf by:
Mark Cutifani
Chief Executive
René Médori
Finance Director
Anglo American plc Annual Report 2016
117
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION PRIMARY STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2016
US$ million
Cash flows from operating activities
Profit/(loss) before tax
Net finance costs/(income) including financing special items and remeasurements
Share of net (income)/loss from associates and joint ventures
Non-operating special items
Operating profit/(loss)
Operating special items and remeasurements
Cash element of special items
Depreciation and amortisation
Share-based payment charges
Decrease in provisions
Decrease/(increase) in inventories
(Increase)/decrease in operating receivables
Increase/(decrease) in operating payables
Other adjustments
Cash flows from operations
Dividends from associates and joint ventures
Dividends from financial asset investments
Income tax paid
Net cash inflows from operating activities
Cash flows from investing activities
Expenditure on property, plant and equipment
Cash flows from derivatives related to capital expenditure
Proceeds from disposal of property, plant and equipment
Investments in associates and joint ventures
Purchase of financial asset investments
Net redemption of/(investment in) financial asset investment loans and receivables
Interest received and other investment income
Proceeds from disposal of subsidiaries and joint operations, net of cash and cash equivalents disposed
Proceeds from disposal of joint ventures
Proceeds from disposal of interests in available for sale investments
Return of capital and repayments of capitalised loans by associates and joint ventures
Other investing activities
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Cash flows from derivatives related to financing activities
Dividends paid to Company shareholders
Dividends paid to non-controlling interests
Proceeds from issuance of bonds
Proceeds from other borrowings
Repayments of bonds and borrowings
Proceeds from issue of shares to non-controlling interests
Proceeds from sale of shares under employee share schemes
Purchase of shares by Group companies for employee share schemes
Other financing activities
Net cash used in financing activities
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
Note
2016
2015
2,624
523
(278)
(1,203)
1,666
1,665
(144)
2,138
174
(139)
301
(365)
455
87
5,838
167
5
(611)
5,399
(2,418)
(22)
23
(51)
(3)
61
77
1,535
–
230
62
(19)
(525)
(747)
(414)
–
(15)
–
694
(5,213)
38
8
(117)
(14)
(5,780)
(906)
6,889
(906)
61
6,044
(5,454)
(157)
221
1,278
(4,112)
6,150
(118)
2,381
151
(239)
(84)
187
(78)
2
4,240
324
9
(596)
3,977
(4,053)
(200)
30
(80)
(1)
(216)
101
189
1,556
–
67
(7)
(2,614)
(810)
(170)
(1,078)
(242)
2,159
1,160
(1,987)
46
11
(42)
6
(947)
416
6,747
416
(274)
6,889
6
4
6
3
13
22
22
22
13
14
14
30
13
23b
10
31
23b
23b
118
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION PRIMARY STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
US$ million
At 1 January 2015
Total comprehensive expense
Dividends payable
Issue of shares to non-controlling interests
Equity settled share-based payment schemes
Other
At 31 December 2015
Total comprehensive income
Dividends payable
Issue of shares to non-controlling interests
Equity settled share-based payment schemes
Tax recognised directly in equity(3)
At 31 December 2016
(1)
Includes share capital and share premium.
Total share
capital(1)
5,130
–
–
–
–
–
5,130
–
–
–
–
–
5,130
Own
shares(2)
(6,359)
–
–
–
308
–
(6,051)
–
–
–
(39)
–
(6,090)
Retained
earnings
34,851
(5,383)
(1,078)
–
(112)
23
28,301
1,419
–
–
146
110
29,976
Cumulative
translation
adjustment
reserve
(8,343)
(3,404)
–
–
–
–
(11,747)
896
–
–
–
–
(10,851)
Fair value and
other reserves
(note 32)
1,138
(144)
–
–
(41)
(17)
936
(22)
–
–
(63)
–
851
Total equity
attributable
to equity
shareholders
of the
Company
26,417
(8,931)
(1,078)
–
155
6
16,569
2,293
–
–
44
110
19,016
Non-
controlling
interests
5,760
(877)
(189)
46
33
–
4,773
514
(40)
38
24
–
5,309
Total equity
32,177
(9,808)
(1,267)
46
188
6
21,342
2,807
(40)
38
68
110
24,325
(2) Own shares comprise shares of Anglo American plc held by the Company (treasury shares), its subsidiaries and employee benefit trusts.
(3) See note 8d for further details.
Dividends
Proposed ordinary dividend per share (US cents)
Proposed ordinary dividend (US$ million)
Ordinary dividends payable during the year per share (US cents)
Ordinary dividends payable during the year (US$ million)
Note
10
10
10
10
2016
–
–
–
–
2015
–
–
85
1,078
Anglo American plc Annual Report 2016
119
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
NOTES TO THE FINANCIAL STATEMENTS
1. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES
OF ESTIMATION 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 impairment and
impairment reversals of assets, taxation, contingent liabilities, joint
arrangements, estimation of Ore Reserves, assessment of fair value,
restoration, rehabilitation and environmental costs, retirement benefits and
deferred stripping. The use of inaccurate assumptions in assessments made
for any of these judgements and estimates could result in a significant impact
on financial results.
Critical accounting judgements
Impairment and impairment reversals of assets
Mining operations are large, complex assets requiring significant technical
and financial resources to operate. Their value may be sensitive to a range
of characteristics unique to each asset and key sources of estimation
uncertainty include Ore Reserve estimates and cash flow projections.
In performing the impairment reviews, the Group assesses the recoverable
amount of its operating assets principally with reference to fair value less
costs of disposal, assessed using discounted cash flow models. These models
are subject to estimation uncertainty and there is judgement in determining
the assumptions that are considered to be reasonable and consistent with
those that would be applied by market participants as outlined below.
The Group assesses at each reporting date whether there are any indicators
that its assets and cash generating units (CGUs) may be impaired. Operating
and economic assumptions, which could affect the valuation of assets using
discounted cash flows, are updated regularly as part of the Group’s planning
and forecasting processes. Judgement is therefore required to determine
whether the updates represent significant changes in the service potential of
an asset or CGU, and are therefore indicators of impairment or impairment
reversal. The judgement also takes into account the Group’s long-term
economic forecasts, market consensus and sensitivity analysis of the
discounted cash flow models used to value the Group’s assets.
Assets (other than goodwill) that have been previously impaired must be
assessed for indicators of both impairment and impairment reversal. Such
assets are, by definition, carried on the balance sheet at a value close to
their recoverable amount at the last assessment. Therefore in principle any
change to operational plans or assumptions, economic parameters, or the
passage of time, could result in further impairment or impairment reversal
if an indicator is identified. Significant operating assets that the Group has
previously impaired include Minas-Rio and Sishen (Iron Ore and Manganese);
Moranbah-Grosvenor, Capcoal, Dawson and Isibonelo (Coal); Barro Alto
(Nickel) and El Soldado (Copper). These assets have a combined carrying value
of $9.0 billion within property, plant and equipment as at 31 December 2016.
In addition, in making assessments for impairment, management necessarily
applies its judgement in allocating assets, including goodwill, that do not
generate independent cash flows to appropriate CGUs.
Subsequent changes to the CGU allocation, to the timing of cash flows or to
the assumptions used to determine the cash flows could impact the carrying
value of the respective assets.
See note 6 for the Group’s impairment and impairment reversals disclosures.
Taxation
The Group’s tax affairs are governed by complex domestic tax legislations,
international tax treaties between countries and the interpretation of both by
tax authorities and courts. Given the many uncertainties that could arise from
these factors, judgement is often required in determining the tax that is due.
Where management is aware of potential uncertainties that are judged more
likely than not to result in a liability for additional tax, a provision is made for
management’s best estimate of the liability, determined with reference to
similar transactions and, in some cases, reports from independent experts.
See note 8 for the Group’s income tax expense disclosures.
120
Anglo American plc Annual Report 2016
In addition, the recognition and measurement of deferred tax requires the
application of judgement in assessing the amount, timing and probability
of future taxable profits and repatriation of retained earnings. These factors
affect the determination of the appropriate rates of tax to apply and the
recoverability of deferred tax assets. These judgements are influenced,
inter alia, by factors such as estimates of future production, commodity
lines, operating costs, future capital expenditure and dividend policies.
See note 21 for the Group’s deferred tax disclosures. Further details of the
Group’s tax accounting policy are described in note 39c.
Contingent liabilities
On an ongoing basis the Group is a party to various legal disputes, the
outcomes of which cannot be assessed with a high degree of certainty.
Management applies its judgement in determining whether or not to record a
provision or contingent liability. A provision is recognised where, based on the
Group’s legal views and, in some cases, independent advice, it is considered
probable that an outflow of resources will be required to settle a present
obligation that can be measured reliably. A contingent liability is a potential
future outflow of cash, or other resources, where the likelihood of payment is
less than probable but more than remote. Disclosure of contingent liabilities
is made in note 34, including quantification of the potential future outflow of
resources, unless the amount cannot be reliably estimated.
Joint arrangements
Joint arrangements are classified as joint operations or joint ventures
according to the rights and obligations of the parties, as described in
note 39k. Judgement is required in determining this classification through
an evaluation of the facts and circumstances arising from each individual
arrangement. When a joint arrangement has been structured through
a separate vehicle, consideration has been given to the legal form of the
separate vehicle, the terms of the contractual arrangement and, when
relevant, other facts and circumstances. When the activities of an
arrangement are primarily designed for the provision of output to the parties
and, the parties are substantially the only source of cash flows contributing to
the continuity of the operations of the arrangement, this indicates that the
parties to the arrangement have rights to the assets and obligations for the
liabilities. Certain joint arrangements that are structured through separate
vehicles including Collahuasi, Debswana and Namdeb are accounted for as
joint operations. These arrangements are primarily designed for the provision
of output to the parties sharing joint control, indicating that the parties have
rights to substantially all the economic benefits of the assets. The liabilities of
the arrangements are in substance satisfied by cash flows received from the
parties; this dependence indicates that the parties effectively have obligations
for the liabilities. It is primarily these facts and circumstances that give rise to
the classification as joint operations.
Key sources of estimation uncertainty
Ore Reserves
When determining Ore Reserves, which may be used to calculate useful
economic lives of assets and depreciation on the Group’s mining properties,
assumptions that were valid at the time of estimation may change when new
information becomes available. In addition, the calculation of the unit of
production rate of amortisation could be impacted to the extent that actual
production in the future is different from current forecast production.
Any changes in estimate could affect prospective depreciation rates and
asset carrying values and, as a result, the determination of Ore Reserves is
considered a key source of estimation uncertainty.
Factors which could impact useful economic lives of assets and Ore Reserve
estimates include:
• the grade of Ore Reserves varying significantly from time to time
• differences between actual commodity prices and commodity price
assumptions used in the estimation of Ore Reserves
• renewal of mining licences
• unforeseen operational issues at mine sites
• adverse changes in capital, operating, mining, processing and reclamation
costs, discount rates and foreign exchange rates used to determine
Ore Reserves.
For further information refer to the unaudited Ore Reserves and Mineral
Resources Report 2016.
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
1. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY continued
Assessment of fair value
The assessment of fair value is principally used in accounting for business
combinations, impairment testing and the valuation of certain financial assets
and liabilities.
The fair value of an asset or liability is the price that would be received to
sell the asset, or paid to transfer a liability in an orderly transaction between
market participants. Fair value is determined based on observable market
data, discounted cash flow models (and other valuation techniques),
contractual agreements and other assumptions considered to be reasonable
and consistent with those that would be applied by a market participant.
The estimation of the fair value of identifiable assets and liabilities is
subjective and the use of different valuation assumptions could have
a significant impact on financial results.
Fair value of financial instruments
Certain of the Group’s financial instruments, principally derivatives, are
required to be measured on the balance sheet at fair value. Where a quoted
market price for an identical instrument is not available, a valuation model is
used to estimate the fair value based on the net present value of the expected
cash flows under the contract. Valuation assumptions are usually based on
observable market data (for example forward foreign exchange rate, interest
rate or commodity price curves) where available.
Cash flow projections for business combinations and impairment testing
Expected future cash flows used in discounted cash flow models are
inherently uncertain and could materially change over time. They are
significantly affected by a number of factors including Ore Reserves and
Mineral Resources, together with economic factors such as commodity
prices, exchange rates, discount rates and estimates of production costs
and future capital expenditure.
Cash flow projections are based on financial budgets and Life of Mine Plans
or, for non-mine assets, an equivalent appropriate long-term forecast,
incorporating key assumptions as detailed below:
• Ore Reserves and Mineral Resources
Ore Reserves and, where considered appropriate, Mineral Resources are
incorporated in projected cash flows, based on Ore Reserves and Mineral
Resource statements and exploration and evaluation work undertaken by
appropriately qualified persons. Mineral Resources are included where
management has a high degree of confidence in their economic extraction,
despite additional evaluation still being required prior to meeting the
required confidence to convert to Ore Reserves.
• Commodity and product prices
Commodity and product prices are based on latest internal forecasts,
benchmarked with external sources of information, to ensure they are within
the range of available analyst forecasts. In estimating the forecast cash
flows, management also takes into account the expected realised price from
existing contractual arrangements.
• Foreign exchange rates
Foreign exchange rates are based on latest internal forecasts, benchmarked
with external sources of information for relevant countries of operation.
Foreign exchange rates are kept constant (on a real basis) from 2022 onwards.
• Discount rates
Cash flow projections used in fair value less costs of disposal impairment
models are discounted based on a real post-tax discount rate, assessed
annually, of 6.5% (2015: 6.5%). Adjustments to the rate are made for any
risks that are not reflected in the underlying cash flows, including the risk
profile of the individual asset and country risk.
• Operating costs, capital expenditure and other operating factors
Operating costs and capital expenditure are based on financial budgets
covering a five year period. Cash flow projections beyond five years are
based on Life of Mine Plans or non-mine production plans, as applicable,
and internal management forecasts. Cost assumptions incorporate
management experience and expectations, as well as the nature and
location of the operation and the risks associated therewith. Underlying
input cost assumptions are consistent with related output price
assumptions. Other operating factors, such as the timelines of granting
licences and permits are based on management’s best estimate of the
outcome of uncertain future events at the balance sheet date.
Where an asset has potential for future development through capital
investment, to which a market participant would attribute value, and the
costs and economic benefits can be estimated reliably, this development
is included in the cash flows (with appropriate risk adjustments).
Restoration, rehabilitation and environmental costs
Costs for restoration of site damage, rehabilitation and environmental costs
are estimated using either the work of external consultants or internal
experts. The amount recognised as a provision represents management’s
best estimate of the consideration required to complete the restoration and
rehabilitation activity, the application of the relevant regulatory framework
and timing of expenditure. These estimates are inherently uncertain and
could materially change over time. To the extent that the actual future costs
differ from these estimates, adjustments will be recorded and the amount
provided could be impacted.
See note 20 for the Group’s environmental restoration and decommissioning
provisions disclosures.
Retirement benefits
The expected costs of providing pensions and post employment benefits
under defined benefit arrangements relating to employee service during the
period are determined based on financial and actuarial assumptions.
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 affect the amounts
recognised in the financial statements.
See note 27 for the Group’s retirement benefits disclosures.
Deferred stripping
In certain mining operations, rock or soil overlying a mineral deposit, known
as overburden, and other waste materials must be removed to access the
orebody. The process of removing overburden and other mine waste
materials is referred to as stripping.
The Group defers stripping costs onto the balance sheet where they are
considered to improve access to ore in future periods. Where the amount to
be capitalised cannot be specifically identified it is determined based on the
volume of waste extracted compared with expected volume for the identified
component of the orebody. This determination is dependent on an individual
mine’s design and Life of Mine Plan and therefore changes to the design or
Life of Mine Plan will result in changes to these estimates. Identification of
the components of a mine’s orebody is made by reference to the Life of Mine
Plan. The assessment depends on a range of factors including each mine’s
specific operational features and materiality.
Further details of the Group’s deferred stripping accounting policy are
described in note 39h and the amounts capitalised are presented within
‘Mining properties and leases’ in note 12.
Changes in estimates
Due to the nature of Platinum in-process inventories being contained in weirs,
pipes and other vessels, physical counts only take place annually, except in
the Precious Metal Refinery which take place once every five years (the latest
being in 2016). Consequently, the Platinum business runs a theoretical metal
inventory system based on inputs, the results of previous physical counts and
outputs. Once the results of the physical count are finalised, the variance
between the theoretical count and actual count is investigated and recorded
as a change in estimate. During 2016, the change in estimate following the
annual physical count has had the effect of increasing the value of inventory
by $38 million (2015: increase of $181 million), resulting in the recognition of
a post-tax gain of $27 million (2015: gain of $130 million).
Anglo American plc Annual Report 2016
121
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
IFRS 9 Financial Instruments
IFRS 9 was issued in July 2014 and becomes effective for accounting periods
beginning on or after 1 January 2018, which will be the date the Group
transitions to IFRS 9. The new standard is applicable to financial assets and
financial liabilities, and covers the classification, measurement, impairment
and derecognition of financial assets and financial liabilities together with a
new hedge accounting model.
During the year the Group has undertaken an accounting impact analysis of
the new standard based on the nature of the financial instruments it holds and
the way in which they are used. The indicative impacts of adopting IFRS 9 on
the Group are as follows:
• Classification and measurement: IFRS 9 establishes a principles-based
approach to determining whether a financial asset should be measured at
amortised cost or fair value, based on the cash flow characteristics of the
asset and the business model in which the asset is held. The Group
anticipates that the classification and measurement basis for its financial
assets will be largely unchanged under this model.
• Impairment: Based on the Group’s initial assessment, the introduction of an
‘expected credit loss’ model for the assessment of impairment of financial
assets held at amortised cost is not expected to have a material impact on
the Group’s results, given the low exposure to counterparty default risk as
a result of the credit risk management processes that are in place.
• Hedge accounting: The adoption of the new standard would not materially
change the amounts recognised in relation to existing hedging arrangements
but could provide scope to apply hedge accounting to a broader range of
transactions in the future. The Group is currently assessing whether to take
the accounting policy choice, permitted under the IFRS 9 transition
requirements, to continue to account for all hedges under IAS 39 Financial
Instruments: Recognition and Measurement.
IFRS 16 Leases
IFRS 16 was published in January 2016 and will be effective for the Group
from 1 January 2019, replacing IAS 17 Leases subject to EU endorsement.
The principal impact of IFRS 16 will be to change the accounting treatment by
lessees of leases currently classified as operating leases. Lease agreements
will give rise to the recognition by the lessee of an asset, representing the
right to use the leased item, and a related liability for future lease payments.
Lease costs will be recognised in the income statement in the form of
depreciation of the right-of-use asset over the lease term, and finance
charges representing the unwind of the discount on the lease liability. Certain
exemptions from recognising leases on the balance sheet are available for
leases with terms of 12 months or less or where the underlying asset is of
low value.
The Group has begun its impact assessment on the new standard. The most
significant impact on the Group financial statements is expected to be on the
balance sheet, as a consequence of the recognition of right-of-use assets and
lease liabilities in relation to arrangements currently accounted for as
operating leases.
Other issued standards and amendments that are not yet effective are not
expected to have a significant impact on the financial statements.
2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The accounting policies applied are consistent with those adopted and disclosed
in the Group financial statements for the year ended 31 December 2015, except
for changes arising from the adoption of the following new accounting
pronouncements which became effective in the current reporting period:
• Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions
of Interests in Joint Operations.
• Amendments to IAS 1 Presentation of Financial Statements:
Disclosure Initiative.
• Annual Improvements to IFRSs 2012-2014 cycle.
The adoption of these new accounting pronouncements has not had a
significant impact on the accounting policies, methods of computation or
presentation applied by the Group.
The Group has not early adopted any other amendment, standard or
interpretation that has been issued but is not yet effective. It is expected that
where applicable, these standards and amendments will be adopted on each
respective effective date.
New IFRS accounting standards, amendments and
interpretations not yet adopted
The following new IFRS accounting standards in issue but not yet effective
are expected to have a significant impact on the Group:
IFRS 15 Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and subsequent amendments, Clarifications
to IFRS 15, were issued in April 2016. IFRS 15, as amended, is effective for
accounting periods beginning on or after 1 January 2018, although the April
2016 amendments have not yet been endorsed by the EU. For the Group,
transition to IFRS 15 will take place on 1 January 2018.
The core principle of IFRS 15 is that revenue should be recognised in a
manner that depicts the pattern of the transfer of goods and services to
customers. The amount recognised should reflect the amount to which the
entity expects to be entitled in exchange for those goods and services. The
standard requires entities to apportion revenue earned from contracts to
individual promises, or performance obligations, on a relative standalone
selling price basis, based on a five-step model.
During 2016 the Group has undertaken an accounting impact analysis based
on a review of the contractual terms of its principal revenue streams, and
internal accounting guidance has been developed. Work is underway to
collect the information required to calculate the impact of restating the
31 December 2016 balance sheet and 2017 income statement on adoption
of the new standard, and to embed the collection of such new data into
existing systems and processes.
The indicative impacts of implementing IFRS 15 on the Group results are
as follows:
• Under IFRS 15 the revenue recognition model will change from one based
on the transfer of risk and reward of ownership to the transfer of control of
ownership. The Group’s revenue is predominantly derived from commodity
sales, where the point of recognition is dependent on the contract sales
terms, known as the International Commercial terms (Incoterms). As the
transfer of risks and rewards generally coincides with the transfer of control
at a point in time for the Incoterms as part of the Group’s commodity sales
arrangements, the timing and amount of revenue recognised for the sale of
commodities is unlikely to be materially affected for the majority of sales.
• IFRS 15 introduces the concept of performance obligations that are defined
as a ‘distinct’ promised good or service. For the Incoterms Cost, Insurance
and Freight (CIF) and Cost and Freight (CFR) the seller must contract for
and pay the costs and freight necessary to bring the goods to the named
port of destination. Consequently, the freight service on export commodity
contracts with CIF/CFR Incoterms represents a separate performance
obligation as defined under the new standard. This means that, where
material, a portion of the revenue earned under these contracts,
representing the obligation to perform the freight service, will be deferred
and recognised over time as this obligation is fulfilled, along with the
associated costs. Based upon the preliminary assessment performed, the
impact of this change on the amount of revenue and profit recorded in a year
is not expected to be material.
122
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
3. SEGMENTAL INFORMATION
The Group’s segments are aligned to those business units that are evaluated regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance.
The Kumba Iron Ore, Iron Ore Brazil and Samancor business units have been aggregated as the ‘Iron Ore and Manganese’ segment on the basis of the ultimate
product produced (ferrous metals). The ‘Corporate and other’ segment includes unallocated corporate costs, exploration costs and the Other Mining and
Industrial business unit, the majority of whose remaining operations were disposed of in the year ended 31 December 2015. Exploration costs represent the
cost of the Group’s exploration activities across all segments.
Segments predominantly derive revenue as follows – De Beers: rough and polished diamonds; Platinum: platinum group metals; Copper: copper; Nickel:
nickel; Niobium and Phosphates: niobium and phosphates; Iron Ore and Manganese: iron ore, manganese ore and alloys; Coal: metallurgical coal and thermal
coal. See note 39a for the Group’s accounting policy on revenue recognition.
Niobium and Phosphates was sold on 30 September 2016 (see note 30).
During the year, Anglo American Platinum Limited has identified certain computational errors affecting its results reported in prior periods, the impact of
which is considered material to Anglo American Platinum Limited but is not material to the Group. Consequently, the affected prior period results have been
restated in the individual financial statements of Anglo American Platinum Limited but have been corrected in the current year in the Group financial
statements. Had the Group results been restated, underlying EBIT and underlying EBITDA for the year ended 31 December 2016 would be higher by
$77 million (2015: underlying EBIT lower by $21 million and underlying EBITDA lower by $10 million).
The segment results are stated after elimination of inter-segment transactions and include an allocation of corporate costs.
The disclosures in this note include certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including
definitions, please refer to page 188.
Segment results
US$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates
Iron Ore and Manganese
Coal
Corporate and other
Reconciliation to Consolidated income statement:
Less: associates and joint ventures
Include: operating special items and remeasurements
Revenue/Operating profit/(loss)
US$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates
Iron Ore and Manganese
Coal
Corporate and other
Less: associates and joint ventures
Depreciation and amortisation/underlying EBITDA from subsidiaries and joint operations
Underlying EBITDA is reconciled to underlying EBIT and to ‘Profit/(loss) before net finance (costs)/income and tax’:
US$ million
Underlying EBITDA
Depreciation and amortisation: subsidiaries and joint operations
Depreciation and amortisation: associates and joint ventures
Underlying EBIT
Operating special items and remeasurements
Non-operating special items
Associates’ and joint ventures’ net special items and remeasurements
Share of associates’ and joint ventures’ net finance costs, tax and non-controlling interests
Profit/(loss) before net finance (costs)/income and tax
2016
6,068
4,394
3,066
426
495
3,426
5,263
4
23,142
(1,764)
–
21,378
Revenue
2015
4,671
4,900
3,539
146
544
3,390
4,888
925
23,003
(2,548)
–
20,455
Underlying EBIT
2016
1,019
185
261
(15)
79
1,275
1,112
(150)
3,766
(435)
(1,665)
1,666
2015
571
263
228
(22)
119
671
457
(64)
2,223
(185)
(6,150)
(4,112)
Depreciation and amortisation
Underlying EBITDA
2016
387
347
642
72
39
261
534
27
2,309
(171)
2,138
2015
419
455
714
19
27
355
589
53
2,631
(250)
2,381
2016
1,406
532
903
57
118
1,536
1,646
(123)
6,075
(606)
5,469
2016
6,075
(2,138)
(171)
3,766
(1,665)
1,203
7
(164)
3,147
2015
990
718
942
(3)
146
1,026
1,046
(11)
4,854
(435)
4,419
2015
4,854
(2,381)
(250)
2,223
(6,150)
(1,278)
(269)
(137)
(5,611)
Anglo American plc Annual Report 2016
123
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
3. SEGMENTAL INFORMATION continued
Associates’ and joint ventures’ results by segment
US$ million
De Beers
Platinum
Iron Ore and Manganese
Coal
Corporate and other
Share of net income/(loss) from associates and joint ventures
Share of net income/(loss)
2016
2
(9)
133
157
(5)
278
2015
(6)
(42)
(264)
40
51
(221)
Revenue
Underlying EBIT
Depreciation and amortisation
Underlying EBITDA
US$ million
De Beers
Platinum
Iron Ore and Manganese
Coal
Corporate and other
2016
73
156
625
910
–
1,764
2015
89
187
514
877
881
2,548
2016
3
(8)
209
236
(5)
435
2015
(9)
(33)
22
142
63
185
2016
3
16
49
103
–
171
2015
3
28
82
91
46
250
2016
6
8
258
339
(5)
606
The reconciliation of associates’ and joint ventures’ underlying EBIT to ‘Share of net income/(loss) from associates and joint ventures’ is as follows:
US$ million
Associates’ and joint ventures’ underlying EBIT
Net finance costs
Income tax expense
Non-controlling interests
Share of net income from associates and joint ventures (before special items and remeasurements)
Special items and remeasurements
Special items and remeasurements tax
Share of net income/(loss) from associates and joint ventures
2016
435
(44)
(123)
3
271
1
6
278
2015
(6)
(5)
104
233
109
435
2015
185
(40)
(100)
3
48
(226)
(43)
(221)
Other non-cash expenses/(income)
In addition to depreciation and amortisation, other non-cash expenses/(income) include equity settled share-based payment charges and amounts in respect
of provisions, excluding amounts recorded within special items. Significant other non-cash expenses/(income) included within underlying EBIT are as follows:
US$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates
Iron Ore and Manganese
Coal
Corporate and other
2016
83
70
82
15
3
65
113
77
508
2015
(1)
30
69
(10)
24
62
125
72
371
Capital employed by segment
Capital employed is the principal measure of segment assets and liabilities reported to the Group Management Committee. Capital employed is defined as net
assets excluding net debt and financial asset investments.
Capital employed
Attributable capital employed(1)
US$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates
Iron Ore and Manganese
Coal
Corporate and other
Capital employed
Reconciliation to Consolidated balance sheet:
Net debt
Debit valuation adjustment attributable to derivatives hedging net debt(2)
Financial asset investments
Net assets
2016
7,481
3,796
4,189
2,003
–
6,435
3,420
(335)
26,989
2015
7,402
3,726
4,176
1,968
834
5,756
3,978
(71)
27,769
2016
8,725
4,457
6,073
2,003
–
7,472
3,509
(335)
31,904
(8,487)
73
835
24,325
2015
8,642
4,392
6,332
1,968
834
6,666
4,079
(71)
32,842
(12,901)
555
846
21,342
(1) Attributable capital employed is capital employed attributable to equity shareholders of the Company, and therefore excludes the portion of capital employed attributable to non-controlling
interests in operations where the Group has control but does not hold 100% of the equity. Joint operations, associates and joint ventures are included in their proportionate interest and in line
with appropriate accounting treatment.
(2) See note 18 for details of the debit valuation adjustment.
124
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
3. SEGMENTAL INFORMATION continued
Product analysis
Group revenue by product
US$ million
Diamonds
Platinum
Palladium
Rhodium
Copper
Nickel
Niobium
Phosphates
Iron ore
Manganese ore and alloys
Metallurgical coal
Thermal coal
Heavy building materials
Other
Geographical analysis
Group revenue by destination
The Group’s geographical analysis of segment revenue, allocated based on the country in which the customer is located, is as follows:
US$ million
South Africa
Other Africa
Brazil
Chile
Other South America
North America
Australia
China
India
Japan
Other Asia
United Kingdom (Anglo American plc’s country of domicile)
Other Europe
Non-current assets by location
US$ million
South Africa
Botswana
Other Africa
Brazil
Chile
Other South America
North America
Australia and Asia
United Kingdom (Anglo American plc's country of domicile)
Other Europe
Non-current assets by location
Unallocated assets
Total non-current assets
Intangible assets and
property, plant and equipment
2016
9,554
4,266
1,019
5,674
6,089
1,106
784
2,078
1,263
103
31,936
2015
8,714
4,247
938
6,361
6,481
955
688
3,237
1,278
116
33,015
2016
6,064
2,498
967
215
2,946
694
137
358
2,611
625
2,243
3,024
–
760
23,142
2016
1,630
1,604
679
481
12
572
164
4,784
2,756
2,131
3,813
1,341
3,175
23,142
2015
4,660
2,720
1,159
309
3,495
450
111
433
2,610
514
1,832
3,068
921
721
23,003
2015
1,764
982
745
500
12
855
214
4,662
2,421
2,325
3,199
2,220
3,104
23,003
(1)
Total non-current assets
2015
9,449
4,247
943
6,455
6,481
1,846
690
3,568
1,320
137
35,136
3,080
38,216
2016
10,488
4,266
1,025
5,804
6,089
1,915
787
2,451
1,321
125
34,271
3,429
37,700
(1) Total non-current assets by location primarily comprise Intangible assets, Property, plant and equipment, Environmental rehabilitation trusts and Investments in associates and joint ventures.
Anglo American plc Annual Report 2016
125
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
4. OPERATING PROFIT/(LOSS) FROM SUBSIDIARIES AND JOINT OPERATIONS
US$ million
Revenue
Cost of sales
Operating special items (note 6)
Gross profit/(loss)
Selling and distribution costs
Administrative expenses
Net other operating costs
Operating profit/(loss)
Operating profit/(loss) is stated after charging:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Rentals under operating leases
Research and development expenditure
Employee costs (note 26)
Provisional pricing adjustment(2)
Royalties(3)
Exploration expenditure
Evaluation expenditure
2016
21,378
(15,400)
(1,632)
4,346
(1,249)
(1,220)
(211)
1,666
2015
20,455
(15,507)
(5,972)
(1,024)
(1,464)
(1,476)(1)
(148)(1)
(4,112)
(2,096)
(42)
(67)
(63)
(3,336)
893
(377)
(107)
(105)
(2,337)
(44)
(123)
(83)
(3,955)
(578)
(264)
(154)
(145)
(1) Certain balances have been reclassified between administrative expenses and net other operating costs better to reflect the nature of the expense.
(2) Provisionally priced adjustments to sales contracts resulted in a total (realised and unrealised) gain in revenue of $904 million (2015: $610 million loss in revenue). Of this, $21 million relates to
realised gains (2015: $79 million realised losses) for sales outstanding at 31 December 2015 that were settled in 2016, $584 million relates to realised gains (2015: $390 million realised losses)
for sales entered into and settled in 2016, and $299 million relates to unrealised gains (2015: $141 million unrealised losses) for sales outstanding at 31 December 2016. In addition, provisionally
priced purchase contracts resulted in operating losses of $11 million (2015: gains of $32 million).
(3) Excludes those royalties which meet the definition of income tax on profit and accordingly have been accounted for as taxes.
Exploration and evaluation expenditure
See note 39j for the Group’s accounting policy on exploration and evaluation expenditure.
The Group’s analysis of exploration and evaluation expenditure recognised in the Consolidated income statement is as follows:
US$ million
By commodity/product
Diamonds
Platinum group metals
Copper
Nickel
Niobium
Phosphates
Iron ore
Metallurgical coal
Thermal coal
Central exploration activities
Exploration expenditure(1)
Evaluation expenditure(2)
2016
29
6
32
7
–
–
10
1
1
21
107
2015
34
7
41
9
–
4
13
7
4
35
154
2016
19
2
45
3
–
1
13
11
11
–
105
2015
29
6
69
4
1
1
11
14
10
–
145
(1) Exploration for Mineral Resources other than that occurring at existing operations and projects.
(2) Evaluation of Mineral Resources relating to projects in the conceptual or pre-feasibility stage or further evaluation of Mineral Resources at existing operations.
126
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
5. UNDERLYING EBIT AND UNDERLYING EARNINGS BY SEGMENT
The disclosures in this note include certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including
definitions, please refer to page 188.
The following table analyses underlying EBIT (including the Group’s attributable share of associates’ and joint ventures’ underlying EBIT) by segment and
reconciles it to underlying earnings by segment.
US$ million
De Beers
Platinum(1)
Copper
Nickel
Niobium and Phosphates(2)
Iron Ore and Manganese
Coal
Corporate and other
US$ million
De Beers
Platinum(1)
Copper
Nickel
Niobium and Phosphates(2)
Iron Ore and Manganese
Coal
Corporate and other
Underlying
EBIT
Operating
special items and
remeasurements
EBIT after
special items and
remeasurements
Net finance costs
and income tax
expense
Non-controlling
interests
Underlying
earnings
2016
1,019
185
261
(15)
79
1,275
1,112
(150)
3,766
111
20
200
(2)
–
(40)
1,370
5
1,664
908
165
61
(13)
79
1,315
(258)
(155)
2,102
(242)
(101)
(9)
(42)
(1)
(304)
(183)
(236)
(1,118)
(110)
(19)
102
–
–
(405)
(16)
10
(438)
667
65
354
(57)
78
566
913
(376)
2,210
2015
Underlying
EBIT
Operating
special items and
remeasurements
EBIT after
special items and
remeasurements
Net finance costs
and income tax
expense
Non-controlling
interests
Underlying
earnings
571
263
228
(22)
119
671
457
(64)
2,223
709
788
282
2
(1)
3,314
1,235
47
6,376
(138)
(525)
(54)
(24)
120
(2,643)
(778)
(111)
(4,153)
(274)
(56)
(120)
3
(71)
(323)
(158)
(34)
(1,033)
(39)
(39)
(41)
–
–
(250)
(7)
13
(363)
258
168
67
(19)
48
98
292
(85)
827
(1) Anglo American Platinum Limited has restated its results to correct certain computational errors affecting results reported in prior periods. These errors are not considered material to the
Group and consequently they have been corrected in the current year in the Group financial statements. See note 3 for further details.
(2) Niobium and Phosphates was sold on 30 September 2016 (see note 30).
Anglo American plc Annual Report 2016
127
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
6. SPECIAL ITEMS AND REMEASUREMENTS
Special Items
Special items are those items of financial performance that, due to their size and nature, the Group believes should be separately disclosed on the face of the
income statement. These items, along with related tax and non-controlling interest, are excluded from underlying earnings, which is an Alternative Performance
Measure (APM). For more information on the APMs used by the Group, including definitions, please refer to page 188.
• Operating special items are those that relate to the operating performance of the Group and principally include impairment charges and restructuring costs.
• Non-operating special items are those that relate to changes in the Group’s asset portfolio. This category principally includes profits and losses on disposal
of businesses and investments or closure of operations, adjustments relating to business combinations, and adjustments relating to former operations of the
Group, such as changes in the measurement of deferred consideration receivable or provisions recognised on disposal or closure of operations in prior
periods. This category also includes charges relating to Black Economic Empowerment (BEE) transactions.
• Financing special items are those that relate to financing activities and include realised gains and losses on early repayment of borrowings, and the
unwinding of the discount on material provisions previously recognised as special items.
Remeasurements
Remeasurements are items that are excluded from underlying earnings in order to reverse timing differences in the recognition of gains and losses in the
income statement in relation to transactions that, whilst economically linked, are subject to different accounting measurement or recognition criteria.
Remeasurements include mark-to-market movements on derivatives that are economic hedges of transactions not yet recorded in the financial statements,
in order to ensure that the overall economic impact of such transactions is reflected within the Group’s underlying earnings in the period in which they occur.
When the underlying transaction is recorded in the income statement, the realised gains or losses are reversed from remeasurements and are recorded in
underlying earnings. If the underlying transaction is recorded in the balance sheet, for example capital expenditure, the realised amount remains in
remeasurements on settlement of the derivative.
• Operating remeasurements include unrealised gains and losses on derivatives relating to revenue, operating profit or capital expenditure transactions. They
also include the fair value gain or loss, and its subsequent reversal through depreciation and amortisation, arising on revaluation of a previously held equity
interest in a business combination.
• Financing remeasurements include unrealised gains and losses on financial assets and liabilities that represent economic hedges, including accounting
hedges, related to financing arrangements.
• Tax remeasurements include foreign exchange impacts 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.
US$ million
Impairments
Restructuring costs
Operating special items
Operating remeasurements
Operating special items and remeasurements
Disposals of businesses and investments
Adjustments relating to business combinations
Charges relating to BEE transactions
Adjustments relating to former operations
Non-operating special items
Financing special items and remeasurements
Special items and remeasurements before tax and non-controlling interests
One-off tax charges
Tax remeasurements
Total special items and remeasurements excluding associates and joint ventures
Share of associates’ and joint ventures’ special items and remeasurements(1)
Total special items and remeasurements
Before tax
(1,512)
(120)
(1,632)
(33)
(1,665)
1,157
121
(63)
(12)
1,203
(314)
(776)
–
–
(776)
Non-
controlling
interests
60
13
73
(9)
64
9
(15)
16
–
10
–
74
35
–
109
Tax
98
17
115
17
132
(84)
(24)
11
15
(82)
(4)
46
(76)
74
44
2016
2015
Net
(1,354)
(90)
(1,444)
(25)
(1,469)
1,082
82
(36)
3
1,131
(318)
(656)
(41)
74
(623)
7
(616)
Net
(4,894)
(106)
(5,000)
(125)
(5,125)
(997)
–
(15)
(51)
(1,063)
668
(5,520)
(770)
108
(6,182)
(269)
(6,451)
(1) Relates to the Coal and Iron Ore and Manganese segments (2015: Iron Ore and Manganese, Coal and Platinum segments).
Operating special items
Impairments
Coal
Moranbah North and Grosvenor are adjacent longwall metallurgical coal operations in Queensland, Australia, sharing infrastructure and processing facilities.
The two operations are assessed for impairment as a single cash generating unit (CGU).
In the first half of 2016 the Group’s expectations for long-term metallurgical coal prices were revised downward. Consequently, an impairment of $1,248 million
($1,248 million after tax) against the value of the operations was reported in the Group’s 2016 interim results, based on a recoverable amount of $1.6 billion at
30 June 2016. The valuation was based on the fair value less costs of disposal of the CGU, measured using discounted cash flow projections (see note 1).
The valuation is sensitive to changes in assumptions about future metallurgical coal prices, which are subject to a high level of estimation uncertainty. For
example, a $5/tonne change in the long-term price forecast for hard coking coal, with all other valuation assumptions remaining the same, would change the
valuation by $0.2 billion. The valuation also incorporates assumptions about future production at Grosvenor, which is still ramping up and has encountered
challenging geological conditions in the latter part of 2016. Changes in these assumptions could result in further impairments or impairment reversals.
Other coal impairments of $64 million ($46 million after tax) relate to assets in Coal South Africa that are no longer expected to provide future economic
benefits due to changes in the Life of Mine Plans across the export portfolio during the year.
El Soldado
An impairment charge of $200 million ($120 million after tax) has been recorded in relation to El Soldado (Copper) which is no longer expected to provide
future economic benefits as a result of licensing uncertainty following changes made to sequencing in response to low prices during 2016.
128
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
6. SPECIAL ITEMS AND REMEASUREMENTS continued
Minas-Rio
The Minas-Rio iron ore project (Minas-Rio) (Iron Ore and Manganese) in Brazil was acquired in two separate transactions in 2007 and 2008. Prior to
2016, impairment charges totalling $11.3 billion (before tax) were recorded against the carrying value of Minas-Rio. The valuation was reassessed as at
31 December 2016 and the recoverable amount was considered to be in line with the carrying value of $4.3 billion. The valuation remains sensitive to
economic and operational factors that provide both upside and downside risk, including price and the scheduling of required permits and licences. For
example, a $5/tonne change in the long-term price forecast for iron ore, with all other valuation assumptions remaining the same, would change the valuation
by $0.7 billion.
Sishen
The Sishen iron ore mine is located in the Northern Cape Province in South Africa. In the year ended 31 December 2015 the operation was impaired by
$514 million based on a recoverable amount of $1.3 billion. The valuation was reassessed as at 31 December 2016 and the recoverable amount was
considered to be in line with the carrying value of $1.4 billion. The valuation remains sensitive to economic and operational assumptions, particularly price.
For example, a $5/tonne change in the long-term price forecast for iron ore, with all other valuation assumptions remaining the same, would change the
valuation by $0.3 billion.
Restructuring costs
Restructuring costs of $120 million (before tax) relate to organisational changes as part of the Driving Value programme. The programme has incurred costs
between 2014 and 2016 and constitutes a single strategic restructuring to effect permanent change to the Group’s organisational structure. Restructuring
costs in 2015 were $148 million ($106 million after tax and non-controlling interests).
2015
In 2015 operating special items principally related to impairments of Minas-Rio, Coal assets, Platinum assets, Snap Lake, Sishen and El Soldado. Total pre-tax
impairments were $5,824 million ($4,894 million after tax and non-controlling interests).
Operating remeasurements
Operating remeasurements reflect a net loss of $33 million ($25 million after tax and non-controlling interests) which principally relates to a $101 million
depreciation and amortisation charge arising due to the fair value uplift on the Group’s pre-existing 45% shareholding in De Beers, which was required on
acquisition of a controlling stake, and gains on derivatives of $68 million mostly related to economic hedges of capital expenditure in Iron Ore Brazil.
In 2015 operating remeasurements reflected a net loss before tax of $178 million ($125 million after tax and non-controlling interests).
Non-operating special items
Disposals of businesses and investments
The gain on disposal of $1,157 million principally comprises net gains on disposal of subsidiaries and joint operations of $977 million, which relate to the
disposals of Callide (gain of $564 million), Niobium and Phosphates (gain of $460 million), Rustenburg (loss of $121 million), Foxleigh (gain of $42 million)
and Morupule (gain of $32 million). Further details of disposals are provided in note 30.
In addition, a net gain of $180 million ($145 million after tax) realised on disposal of the Group’s 9.7% interest in Exxaro Resources Limited (Exxaro) on
1 December 2016 for net proceeds of $215 million.
Adjustments relating to business combinations
Contingent liabilities that were required to be recognised at fair value on acquisition of De Beers in 2012, have been derecognised as the legal proceedings
in respect of these matters have been closed. This has resulted in a pre-tax gain of $121 million ($82 million after tax and non-controlling interests).
Charges relating to BEE transactions
Charges relating to BEE transactions of $63 million ($36 million after tax and non-controlling interests) include a charge of $24 million relating to the
repurchase by De Beers of shares in Ponahalo Holdings Limited awarded to certain employees and their dependants as part of DBCM’s 2006 empowerment
transaction, and a charge of $39 million relating to the Kumba Envision Trust, which was Kumba’s broad based employee share scheme provided solely for the
benefit of non-managerial Historically Disadvantaged South African employees who did not participate in other Kumba share schemes.
Adjustments relating to former operations
The net loss of $12 million includes amounts contributed to the Q(h)ubeka Trust pursuant to the agreement reached in March 2016 by Anglo American South
Africa (AASA) and AngloGold Ashanti which resolved fully and finally 4,400 stand-alone silicosis claims. The settlement was reached without admission of
liability by AASA or AngloGold Ashanti.
2015
Non-operating special items in 2015 principally relate to the write-down to fair value of Rustenburg, the loss on disposal of Anglo American Norte S.A. and the
loss on disposal of interests in Tarmac businesses. The total charge was $1,278 million ($1,063 million after tax and non-controlling interests).
Financing special items and remeasurements
Financing special items and remeasurements reflect a net loss of $314 million (2015: net gain of $615 million) and $318 million after tax and non-controlling
interests (2015: net gain of $668 million after tax and non-controlling interests).
Financing special items and remeasurements principally comprise a net fair value loss of $389 million on derivatives hedging net debt and a net gain of
$120 million resulting from the bond buybacks completed in the year. Of the fair value losses on derivatives, a loss of $482 million relates to the reduction
in the debit valuation adjustment on derivatives hedging net debt. This adjustment is incorporated into the valuation of these derivatives to reflect the impact
on the fair value of Anglo American’s own credit quality. The loss principally reflects the reduction in Anglo American’s observed credit spreads since
31 December 2015.
Tax associated with special items and remeasurements
Total tax relating to subsidiaries and joint operations amounts to a credit of $44 million (2015: credit of $47 million).
This includes one-off tax charges of $76 million (2015: charges of $829 million), tax credits on special items and remeasurements of $46 million (2015: credits
of $769 million) and tax remeasurement credits of $74 million (2015: credits of $107 million).
Of the total tax credit of $44 million, $129 million relates to a current tax charge (2015: charge of $55 million) and $173 million relates to a deferred tax credit
(2015: credit of $102 million).
Anglo American plc Annual Report 2016
129
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
7. NET FINANCE (COSTS)/INCOME
See note 39b for the Group’s accounting policy on borrowing costs.
Net finance (costs)/income are presented net of hedges for respective interest bearing and foreign currency borrowings. The weighted average capitalisation
rate applied to qualifying capital expenditure was 3.20% (2015: 2.90%).
US$ million
Investment income
Interest income from cash and cash equivalents
Interest income from associates and joint ventures
Other interest income
Net interest income on defined benefit arrangements
Dividend income from financial asset investments
Less: interest income capitalised
Total investment income(1)
Interest expense
Interest and other finance expense
Net interest cost on defined benefit arrangements
Unwinding of discount relating to provisions and other liabilities
Less: interest expense capitalised
Total interest expense(1)
Other net financing gains/(losses)
Net foreign exchange gains/(losses)
Other net fair value gains
Total other net financing gains/(losses)
Net finance costs before special items and remeasurements
Special items and remeasurements (note 6)
Net finance (costs)/income
2016
2015
78
50
43
20
5
196
(10)
186
(711)
(44)
(111)
(866)
376
(490)
84
11
95
(209)
(314)
(523)
92
39
30
12
9
182
(10)
172
(706)
(54)
(96)
(856)
367
(489)
(180)
39
(141)
(458)
615
157
(1)
Interest income recognised at amortised cost is $131 million (2015: $136 million) and interest expense recognised at amortised cost is $237 million (2015: $247 million).
130
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
8. INCOME TAX EXPENSE
See note 39c for the Group’s accounting policy on tax.
The disclosures in this note include certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including
definitions, please refer to page 188.
a) Analysis of charge for the year
US$ million
United Kingdom tax
South Africa tax
Other overseas tax
Prior year adjustments
Current tax(1)
Deferred tax
Income tax expense before special items and remeasurements
Special items and remeasurements tax (note 6)
Income tax expense
2016
26
433
101
(176)
384
358
742
(44)
698
2015
(11)
214
338
(58)
483
(48)
435
(47)
388
(1)
Includes royalties which meet the definition of income tax and are in addition to royalties recorded in operating costs.
b) Factors affecting tax charge for the year
The effective tax rate for the year of 26.6% (2015: (7.1%)) is higher (2015: lower) than the applicable weighted average statutory rate of corporation tax in the
United Kingdom of 20% (2015: 20.25%). The reconciling items, excluding the impact of associates and joint ventures, are:
US$ million
Profit/(loss) before tax
Less: share of net (income)/loss from associates and joint ventures
Profit/(loss) before tax (excluding associates and joint ventures)
Tax on profit/(loss) (excluding associates and joint ventures) calculated at United Kingdom corporation tax rate of 20%
(2015: 20.25%)
Tax effects of:
Items non-taxable/deductible for tax purposes
Exploration expenditure
Non-(taxable)/deductible net foreign exchange (gains)/losses
Non-taxable net interest income
Other non-deductible expenses
Other non-taxable income
Temporary difference adjustments
Current year losses not recognised
Recognition of losses not previously recognised
Utilisation of losses not previously recognised
Write-off of losses previously recognised
Adjustment in deferred tax due to change in tax rate
Other temporary differences
Special items and remeasurements(2)
Other adjustments
Dividend withholding taxes
Effect of differences between local and United Kingdom tax rates
Prior year adjustments to current tax(1)
Other adjustments
Income tax expense
2016
2,624
(278)
2,346
469
2015
(5,454)
221
(5,233)
(1,060)
9
(17)
(13)
38
(11)
91
(15)
(70)
1
(9)
345(1)
15
15
(29)
144
(92)
12
(18)
(13)
29
(2)
13
111
1,333
(118)
56
(176)
7
698
52
46
(58)
1
388
(1)
Included within other temporary differences is an amount of $306 million in respect of enhanced tax depreciation in Chile. This is partially offset by an amount included within prior year
adjustments of $200 million.
(2) The special items and remeasurements reconciling item of $111 million (2015: $1,333 million) relates to the net tax impact of total special items and remeasurements before tax calculated at the
United Kingdom corporation tax rate less the associated tax recorded against these items, one-off tax charges and tax remeasurements. See note 6 for further details of the tax amounts
included within special items and remeasurements.
IAS 1 requires income from associates and joint ventures to be presented net of tax on the face of the income statement. Associates’ and joint ventures’ tax
is therefore excluded from the Group’s income tax expense. Associates’ and joint ventures’ tax included within ‘Share of net income/(loss) from associates
and joint ventures’ for the year ended 31 December 2016 is a charge of $117 million (2015: charge of $143 million). Excluding special items and
remeasurements this becomes a charge of $123 million (2015: charge of $100 million).
The underlying effective tax rate was 24.6% for the year ended 31 December 2016. This is lower than the equivalent underlying effective tax rate of 31.0% for
the year ended 31 December 2015. The decreased rate in 2016 was due to a benefit received in relation to the reassessment of withholding tax provisions, and
the utilisation of losses and other tax attributes not previously recognised, partially offset by the impact of enhanced tax depreciation and other prior year
adjustments. In future periods it is expected that the underlying effective tax rate will remain above the United Kingdom statutory tax rate.
Anglo American plc Annual Report 2016
131
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
8. INCOME TAX EXPENSE continued
Calculation of effective tax rate (statutory basis)
Adjusted for:
Operating special items
Operating remeasurements
Non-operating special items
Financing special items and remeasurements
One-off tax charges
Tax remeasurements
Share of associates' and joint ventures' special items and remeasurements
Associates' and joint ventures' tax and non-controlling interests
Calculation of underlying effective tax rate
The underlying effective tax rate is favourably/(unfavourably) affected by the following significant items:
Reassessment of withholding tax provisions primarily in respect of Chile
Enhanced tax depreciation in Chile
Utilisation of tax losses and similar tax attributes not previously recognised primarily in Australia
Other items including prior year adjustments
Underlying effective tax rate excluding the above significant items
Profit
before tax
US$ million
2,624
Tax (charge)/
credit
US$ million
(698)
2016
Effective
tax rate
26.6%
1,632
33
(1,203)
314
–
–
(7)
120
3,513
(115)
(17)
82
4
76
(74)
–
(123)
(865)
24.6%
4.7%
(2.5)%
3.9%
(0.7)%
30.0%
c) Tax amounts included in other comprehensive income
An analysis of tax by individual item presented in the Consolidated statement of comprehensive income is presented below:
US$ million
Tax credit/(charge) on items recognised directly in equity that will not be reclassified to the income statement
Remeasurement of net retirement benefit obligation
2016
2015
35
(30)
Tax (charge)/credit on items recognised directly in equity that may subsequently be reclassified to the income statement
Net exchange differences on translation of foreign operations
Net (gain)/loss on revaluation of available for sale investments
Net gain on cash flow hedges
Tax credit/(charge) on items transferred from equity
Transferred to income statement: disposal of available for sale investments
Transferred to income statement: cash flow hedges
–
(25)
–
10
35
(2)
33
35
33
(5)
33
–
–
–
d) Tax amounts recognised directly in equity
Deferred tax of $110 million has been credited directly to equity in 2016 in relation to the disposal of a 25.4% interest in Anglo American Sur S.A. in 2012 as
a consequence of the reassessment of withholding tax provisions in Chile (2015: nil).
9. EARNINGS PER SHARE
The disclosures in this note include certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including
definitions, please refer to page 188.
US$
Earnings per share
Basic
Diluted
Headline earnings per share
Basic
Diluted
Underlying earnings per share
Basic
Diluted
2016
2015
1.24
1.23
1.47
1.46
1.72
1.70
(4.36)
(4.36)
0.29
0.29
0.64
0.64
Basic and diluted earnings per share are shown based on headline earnings, a Johannesburg Stock Exchange (JSE) defined performance measure,
and underlying earnings.
Basic and diluted number of ordinary shares outstanding represent the weighted average for the year. The average number of ordinary shares in issue
excludes shares held by employee benefit trusts and Anglo American plc shares held by Group companies.
132
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED INCOME STATEMENT
9. EARNINGS PER SHARE continued
The calculation of basic and diluted earnings per share is based on the following data:
Earnings/(loss) (US$ million)
Basic and diluted earnings/(loss)
Number of shares (million)
Basic number of ordinary shares outstanding
Effect of dilutive potential ordinary shares:
Share options and awards
Diluted number of ordinary shares outstanding
Profit/(loss) attributable
to equity shareholders of
the Company
Headline earnings
Underlying earnings
2016
2015
2016
1,594
(5,624)
1,896
2015
369
2016
2,210
2015
827
1,288
1,289
1,288
1,289
1,288
1,289
12
1,300
–
1,289
12
1,300
3
1,292
12
1,300
3
1,292
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.
In the year ended 31 December 2016, there were 274,815 share options which were potentially dilutive but not included in the calculation of diluted earnings
because they were anti-dilutive.
In the year ended 31 December 2015, the Group disclosed a basic loss per share and consequently all 12,855,264 potential ordinary shares were anti-dilutive
and excluded from the calculation of diluted earnings per share. 8,996,586 potential shares were excluded from the calculation of diluted headline earnings per
share and diluted underlying earnings per share as they were anti-dilutive.
The calculation of basic and diluted earnings per share, based on headline and underlying earnings, uses the following earnings data:
US$ million
Profit/(loss) for the financial year attributable to equity shareholders of the Company
Operating special items net of tax and non-controlling interests
Non-operating special items net of tax and non-controlling interests
Headline earnings for the financial year
Operating special items(1)
Operating remeasurements
Non-operating special items(2)
Financing special items and remeasurements
One-off tax charges
Special items and remeasurements tax
Non-controlling interests on special items and remeasurements
Underlying earnings for the financial year
2016
1,594
1,378
(1,076)
1,896
102
33
(77)
314
76
(96)
(38)
2,210
2015
(5,624)
4,997
996
369
299
178
97
(615)
829
(217)
(113)
827
(1)
Includes restructuring costs.
(2) Principally relates to BEE transactions (De Beers and Kumba Envision Trust) (2015: Kumba Envision Trust) and adjustments related to a previous business combination (De Beers).
10. DIVIDENDS
No dividends were paid during the year (2015: $1,078 million).
No final dividend is proposed in respect of the financial year ended 31 December 2016 (2015: nil).
Dividends payable are as follows:
US$ million
Final ordinary dividend for 2015 – Nil per ordinary share (2014: 53 US cents per ordinary share)
Interim ordinary dividend for 2016 – Nil per ordinary share (2015: 32 US cents per ordinary share)
The employee benefit trust has waived the right to receive dividends on the shares it holds (see note 32).
2016
–
–
–
2015
680
398
1,078
Anglo American plc Annual Report 2016
133
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
11. INTANGIBLE ASSETS
See notes 39d, 39e and 39i for the Group’s accounting policies on intangible assets.
US$ million
Net book value
At 1 January
Additions
Amortisation charge for the year
Impairments(2)
Disposals(3)
Remeasurements
Currency movements
At 31 December
Cost
Accumulated amortisation
2016
2015
Brands,
contracts
and other
intangibles(1)
1,224
12
(61)
–
(2)
–
30
1,203
1,521
(318)
Goodwill
Total
2,170
–
–
–
(224)
17
51
2,014
2,014
–
3,394
12
(61)
–
(226)
17
81
3,217
3,535
(318)
Brands,
contracts
and other
intangibles(1)
1,359
10
(64)
–
–
–
(81)
1,224
1,481
(257)
Goodwill
Total
2,553
–
–
(93)
–
–
(290)
2,170
2,170
–
3,912
10
(64)
(93)
–
–
(371)
3,394
3,651
(257)
(1)
Includes brands, contracts and other intangibles of $1,172 million (2015: $1,185 million) relating to De Beers, principally comprising assets that were recognised at fair value on acquisition
of a controlling interest in De Beers in August 2012. Of these, $517 million (2015: $517 million) have indefinite useful lives.
(2) 2015 includes goodwill impairment of $52 million allocated to Snap Lake (De Beers) and $41 million allocated to Rustenburg (Platinum).
(3) Relates to the disposal of the Niobium business (see note 30).
Impairment tests for goodwill
See note 39f for the Group’s accounting policy on impairment of goodwill.
Goodwill is allocated for impairment testing purposes to cash generating units (CGUs) or groups of CGUs which reflect how it is monitored for internal
management purposes. This allocation largely represents the Group’s segments. The allocation of goodwill to CGUs or groups of CGUs is as follows:
US$ million
De Beers
Platinum
Copper
Coal South Africa
Other
2016
1,604
189
124
88
9
2,014
2015
1,553
189
124
88
216
2,170
For the purposes of goodwill impairment testing, the recoverable amount of each of the CGUs or group of CGUs has been determined based on a fair value
less costs of disposal basis. The key assumptions used in determining fair value less costs of disposal are set out in note 1. Management believes that any
reasonably possible change in a key assumption on which the recoverable amounts are based would not cause the carrying amounts to exceed their
recoverable amounts.
12. PROPERTY, PLANT AND EQUIPMENT
See notes 39g to 39j for the Group’s accounting policies on property, plant and equipment.
US$ million
Net book value
At 1 January
Additions
Depreciation charge
for the year(2)
Net impairments and
losses on assets
transferred to held
for sale
Disposal of assets
Disposal of businesses
and transferred to held
for sale(4)
Reclassifications
Currency movements
At 31 December
Cost
Accumulated
depreciation
Mining
properties
and leases
Land and
buildings(1)
Plant and
equipment
Capital works
in progress
2016
Total
Mining
properties
and leases
Land and
buildings(1)
Plant and
equipment
Capital works
in progress
2015
Total
8,973
285
2,771
6
8,930
27
8,947
2,350
29,621
2,668
13,018
568
3,067
25
11,115
160
11,275
3,846
38,475
4,599
(829)
(166)
(1,233)
–
(2,228)
(921)
(150)
(1,421)
–
(2,492)
(444)
(2)
(251)
(5)
(740)
(33)
(62)
(6)
(1,497)
(46)
(2,104)
–
(166)
(5)
(1,018)
(18)
(2,699)
(5)
(5,987)(3)
(28)
(62)
1,094
605
9,620
22,655
(278)
463
142
2,682
4,395
(562)
2,072
353
8,814
20,153
(155)
(3,629)
158
7,603
13,297
(1,057)
–
1,258
28,719
60,500
(63)
714
(2,239)
8,973
21,859
(9)
380
(371)
2,771
4,199
(294)
1,602
(1,196)
8,930
19,321
(60)
(2,696)
(714)
8,947
14,520
(426)
–
(4,520)
29,621
59,899
(13,035)
(1,713)
(11,339)
(5,694)
(31,781)
(12,886)
(1,428)
(10,391)
(5,573)
(30,278)
(1) Net book value principally comprises freehold land and buildings.
(2)
Includes $2,096 million (2015: $2,337 million) of depreciation within operating profit, $85 million (2015: $82 million) of depreciation arising due to the fair value uplift on the pre-existing 45%
shareholding in De Beers which has been included within operating remeasurements (see note 6), and $47 million (2015: $73 million) of pre-commercial production depreciation which has
been capitalised.
(3) 2015 includes $684 million for the write-down of Rustenburg, which was recorded in non-operating special items. For information on the significant impairments recorded in the year see note 6.
(4) 2016 includes $79 million for the disposal of Callide, $782 million for the disposal of Niobium and Phosphates businesses and $173 million for the disposal of Rustenburg (see note 30).
2015 includes $412 million for the transfer and subsequent disposal of Anglo American Norte (see note 30).
Included in additions is $366 million (2015: $357 million) of net interest expense incurred on borrowings funding the construction of qualifying assets which
has been capitalised during the year.
134
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
13. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
See note 39k for the Group’s accounting policy on associates and joint arrangements, which includes joint ventures.
Details of principal associates and joint ventures are set out in note 37.
US$ million
At 1 January
Share of net income/(loss) from associates and joint ventures
Dividends received
Investment in equity and capitalised loans
Return of capital and repayment of loans
Reclassification
Impairments and losses on assets transferred to held for sale
Transferred to assets held for sale
Other movements
Currency movements
At 31 December
Associates
1,374
148
(139)
34
(58)
–
(19)
–
–
31
1,371
Joint
ventures
443
130
(28)
17
(4)
–
–
–
36
9
603
2016
Total
1,817
278
(167)
51
(62)
–
(19)
–
36
40
1,974
Associates
2,681
14
(81)
77
(67)
(812)(1)
(271)(2)
–
–
(167)
1,374
Joint
ventures
1,695
(235)
(243)
3
–
812(1)
(71)
(1,547)
45
(16)
443
2015
Total
4,376
(221)
(324)
80
(67)
–
(342)
(1,547)
45
(183)
1,817
(1) 2015 reclassification relates to the Group's interest in Samancor (Iron Ore and Manganese). Samancor has been accounted for as a joint venture since March 2015, following amendments to the
agreement that governs the Group's interests in Samancor which resulted in the Group acquiring joint control over the business (previously accounted for as an associate).
(2) 2015 includes $93 million relating to the impairment of the Group’s interest in Bokoni and $178 million for the Group’s interest in Bafokeng-Rasimone Platinum Mine.
The Group’s total investments in associates and joint ventures comprise:
US$ million
Equity
Loans(1)
Associates
1,266
105
1,371
Joint
ventures
435
168
603
2016
Total
1,701
273
1,974
Associates
1,233
141
1,374
Joint
ventures
294
149
443
2015
Total
1,527
290
1,817
(1) The Group’s total investments in associates and joint ventures include long-term loans which in substance form part of the Group’s net investment. These loans are not repayable in the
foreseeable future.
None of the Group’s associates or joint ventures are considered to be individually material to the Group, and therefore the Group’s share of the financial
information of associates and joint ventures is disclosed on an aggregated basis.
US$ million
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets as at 31 December 2016
Net assets as at 31 December 2015
US$ million
Revenue
Share of net income/(loss) from associates and joint ventures
Total comprehensive income/(expense)
Associates
1,070
148
148
Joint
ventures
694
130
130
2016
Total
1,764
278
278
Segmental information is provided in aggregate for associates and joint ventures in the table below.
US$ million
De Beers
Platinum
Iron Ore and Manganese
Coal
Corporate and other
Associates
1,474
422
(221)
(304)
1,371
1,374
Associates
1,208
14
14
Joint
ventures
925
528
(388)
(462)
603
443
Joint
ventures
1,340
(235)
(235)
Total
2,399
950
(609)
(766)
1,974
1,817
2015
Total
2,548
(221)
(221)
Aggregate investment
2016
50
289
559
1,055
21
1,974
2015
44
251
391
1,096
35
1,817
Anglo American plc Annual Report 2016
135
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
14. FINANCIAL ASSET INVESTMENTS
See notes 39l and 39m for the Group’s accounting policies on financial asset investments.
US$ million
At 1 January
Additions
Interest receivable
Net loans (repaid)/granted
Impairments
Movements in fair value
Disposals
Currency movements
At 31 December
(1)
(2)
Includes $119 million relating to the impairment of loans to Atlatsa and Atlatsa Holdings.
Includes $218 million relating to the disposal of Exxaro (see note 6).
15. INVENTORIES
See note 39q for the Group’s accounting policy on inventories.
US$ million
Raw materials and consumables
Work in progress
Finished products
Loans and
receivables
662
–
47
(61)
(16)
–
(27)
96
701
Available
for sale
investments
184
3
–
–
–
147
(233)(2)
33
134
2016
Total
846
3
47
(61)
(16)
147
(260)
129
835
Loans and
receivables
761
–
43
216
(130)(1)
(7)
–
(221)
662
Available
for sale
investments
505
1
–
–
–
(236)
–
(86)
184
2015
Total
1,266
1
43
216
(130)
(243)
–
(307)
846
2016
882
1,220
1,625
3,727
2015
952
1,076
2,023
4,051
The cost of inventories recognised as an expense and included in cost of sales amounted to $14,006 million (2015: $13,945 million).
Inventories held at net realisable value amounted to $641 million (2015: $1,048 million).
The write-down of inventories (net of revaluation of provisionally priced purchases) amounted to $96 million (2015: $121 million).
16. TRADE AND OTHER RECEIVABLES
Trade receivables do not incur any interest, are principally short term in nature and are measured at their nominal value (with the exception of receivables
relating to provisionally priced sales, as set out in the revenue recognition accounting policy, see note 39a), net of appropriate provision for estimated
irrecoverable amounts. Such provisions are raised based on an assessment of debtor ageing, past experience or known customer circumstances.
US$ million
Trade receivables
Tax receivables
Prepayments and accrued income
Other receivables
Due within
one year
1,570
316
154
192
2,232
Due after
one year
158
294
37
323
812
2016
Total
1,728
610
191
515
3,044
Due within
one year
1,355
271
105
252
1,983
Due after
one year
135
238
23
143
539
2015
Total
1,490
509
128
395
2,522
Of the year end trade receivables balance, $29 million (2015: $55 million) were past due at 31 December, stated after an associated impairment provision
of $13 million (2015: $18 million). The overdue debtor ageing profile is typical of the industry in which certain of the Group’s businesses operate. Given this,
the use of payment security instruments (including letters of credit from acceptable financial institutions), and the nature of the related counterparties, these
amounts are considered recoverable. The historical level of customer default is minimal and as a result the credit quality of year end trade receivables is
considered to be high.
17. TRADE AND OTHER PAYABLES
Trade payables are not interest bearing and are measured at their nominal value (with the exception of payables relating to provisionally priced commodity
purchases which are marked to market using the appropriate forward price) until settled.
US$ million
Trade payables
Accruals
Deferred income(1)
Tax and social security
Other payables(2)
(1)
(2)
Includes nil (2015: $26 million) deferred income recorded within non-current liabilities.
Includes $116 million (2015: nil) other payables within non-current liabilities.
136
Anglo American plc Annual Report 2016
2016
1,700
815
166
54
765
3,500
2015
1,610
741
46
71
311
2,779
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
18. FINANCIAL INSTRUMENTS
See notes 39l, 39m and 39n for the Group’s accounting policies on financial asset investments, impairment of financial assets, derivative financial instruments
and hedge accounting.
The carrying amounts of financial assets and liabilities are as shown below. Where the carrying amount of a financial asset or liability does not approximate
its fair value, this is also disclosed.
For financial assets and liabilities which are traded on an active market, such as listed investments or listed debt instruments, fair value is determined by
reference to market value. For non-traded financial assets and liabilities, fair value is calculated using discounted cash flows, considered to be reasonable and
consistent with those that would be used by a market participant, and based on observable market data where available, unless carrying value is considered to
approximate fair value.
All derivatives that have been designated into hedge relationships have been separately disclosed.
US$ million
Financial assets
Trade and other receivables(1)
Derivative financial assets
Cash and cash equivalents
Financial asset investments
Financial liabilities
Trade and other payables(1)
Derivative financial liabilities
Borrowings(2)
Net financial (liabilities)/assets
US$ million
Financial assets
Trade and other receivables(1)
Derivative financial assets
Cash and cash equivalents
Financial asset investments
Financial liabilities
Trade and other payables(1)
Derivative financial liabilities
Borrowings(2)
Net financial (liabilities)/assets
At fair value
through profit
and loss
Loans and
receivables
Available
for sale
Designated
into hedges
Financial
liabilities at
amortised cost
1,090
110
–
–
1,200
(591)
(1,865)
–
(2,456)
(1,256)
1,199
–
6,051
701
7,951
–
–
–
–
7,951
–
–
–
134
134
–
–
–
–
134
–
483
–
–
483
–
(10)
(12,337)
(12,347)
(11,864)
–
–
–
–
–
(2,689)
–
(832)
(3,521)
(3,521)
At fair value
through profit
and loss
Loans and
receivables
Available
for sale
Designated
into hedges
Financial
liabilities at
amortised cost
632
672
–
–
1,304
(225)
(2,439)
–
(2,664)
(1,360)
1,253
–
6,895
662
8,810
–
–
–
–
8,810
–
–
–
184
184
–
–
–
–
184
–
477
–
–
477
–
(24)
(14,800)
(14,824)
(14,347)
–
–
–
–
–
(2,437)
–
(3,167)
(5,604)
(5,604)
2016
Total
2,289
593
6,051
835
9,768
(3,280)
(1,875)
(13,169)
(18,324)
(8,556)
2015
Total
1,885
1,149
6,895
846
10,775
(2,662)
(2,463)
(17,967)
(23,092)
(12,317)
(1) Trade and other receivables exclude prepayments and tax receivables. Trade and other payables exclude tax and social security and deferred income.
(2) Borrowings designated in fair value hedges represent listed debt which is held at amortised cost, adjusted for the fair value of the hedged interest rate risk. The fair value of these borrowings is
$12,405 million (2015: $10,898 million), which is measured using quoted indicative broker prices and consequently categorised as level 2 in the fair value hierarchy. The carrying value of the
remaining borrowings at amortised cost of $832 million, principally comprising bank borrowings, is considered to approximate the fair value. At 31 December 2015 the fair value of borrowings at
amortised cost of $3,167 million, principally comprising bank borrowings, was $2,463 million. The difference between the carrying value and the fair value primarily reflected the debit valuation
adjustment of Anglo American’s own credit quality based on observed credit spreads at 31 December 2015.
Anglo American plc Annual Report 2016
137
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
18. FINANCIAL INSTRUMENTS continued
Fair value hierarchy
An analysis of financial assets and liabilities carried at fair value is set out below:
US$ million
Financial assets
At fair value through profit and loss
Provisionally priced trade receivables
Other receivables
Derivatives hedging net debt
Other derivatives
Designated into hedges
Derivatives hedging net debt
Available for sale investments
Financial asset investments
Financial liabilities
At fair value through profit and loss
Provisionally priced trade payables
Other payables
Derivatives hedging net debt
Other derivatives
Designated into hedges
Derivatives hedging net debt
Other derivatives
Debit valuation adjustment to derivative
liabilities(4)
Net assets/(liabilities) carried at fair value
Level 1(1)
Level 2(2)
Level 3(3)
Level 1(1)
Level 2(2)
Level 3(3)
2016
Total
877
213
10
100
483
–
–
–
9
–
562
–
628
18
477
134
1,817
162
171
–
1,685
(466)
(125)
(1,852)
(86)
(10)
–
–
–
–
–
–
–
–
(125)
145
73
(2,466)
(649)
–
–
171
(225)
–
(2,207)
(63)
(17)
(7)
386
(2,133)
(448)
–
213
–
–
–
57
270
–
(125)
–
–
–
–
–
–
–
6
–
877
–
10
94
483
77
83
–
1,464
–
–
–
(21)
–
–
–
(21)
62
(466)
–
(1,852)
(65)
(10)
–
73
(2,320)
(856)
2015
Total
562
70
645
27
477
184
1,965
(225)
–
(2,943)
(63)
(17)
(7)
567
(2,688)
(723)
–
70
17
–
–
22
109
–
–
(736)
–
–
–
181
(555)
(446)
(1) Valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes listed equity shares.
(2)
(3)
Instruments in this category are valued using valuation techniques where all of the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data.
Instruments in this category have been valued using a valuation technique where at least one input (which could have a significant effect on the instrument’s valuation) is not based on
observable market data. Where inputs can be observed from market data without undue cost and effort, the observed input is used. Otherwise, management determines a reasonable estimate
for the input. This category includes deferred contingent consideration.
(4) The debit valuation adjustment is recorded to reflect in the fair value of financial liabilities the effect of Anglo American’s own credit quality based on observed credit spreads. This adjustment
is calculated in total for each counterparty based on the net expected exposure. In many cases this includes exposures on a number of different types of derivative instruments. Consequently
the impact of this adjustment has been presented as a separate item within the analysis of derivatives above. Based on an allocation weighted by exposure to each category of instrument,
$73 million (2015: $555 million) is attributable to derivatives hedging net debt and nil (2015: $12 million) relates to other derivatives.
Financial assets and liabilities included within level 3 primarily consist of contingent proceeds and receivables relating to disposals and unlisted equity
investments.
The movements in the fair value of the level 3 financial assets and liabilities are shown as follows:
US$ million
At 1 January
Net (loss)/profit recorded in the income statement(1)
Net profit/(loss) recorded in the statement of comprehensive income
Additions
Settlement
Currency movements
At 31 December
(1) This is principally recorded in special items and remeasurements.
2016
109
(3)
31
131
–
2
270
Assets
2015
207
(75)
(15)
–
–
(8)
109
2016
(555)
39
–
(136)
526
1
(125)
Liabilities
2015
(499)
(90)
–
–
34
–
(555)
For the level 3 financial assets and liabilities, changing certain estimated inputs to reasonably possible alternative assumptions does not change the fair value
significantly.
138
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
19. DERIVATIVES
See note 39n for the Group’s accounting policy on derivatives.
The fair values of derivatives are separately recorded on the Consolidated balance sheet within ‘Derivative financial assets’ and ‘Derivative financial liabilities’.
Derivatives are classified as current or non-current depending on the contracted maturity of the derivative.
The Group utilises derivative instruments to manage certain market risk exposures. The Group does not use derivative financial instruments for speculative
purposes, however it may choose not to designate certain derivatives as hedges for accounting purposes. Such derivatives are classified as ‘Held for trading’
and fair value movements are recorded in the Consolidated income statement.
The use of derivative instruments is subject to limits and the positions are regularly monitored and reported to senior management.
Cash flow hedges
In certain cases the Group classifies its forward foreign currency contracts, which hedge 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 Consolidated income statement (or hedged balance sheet item).
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 Group’s policy) have been
designated as fair value hedges. The carrying value of the hedged debt is adjusted at each balance sheet date to reflect the impact on its fair value of changes
in market interest rates. Changes in the fair value of the hedged debt are offset against fair value changes in the interest rate swap and recognised in the
Consolidated income statement as financing remeasurements.
Held for trading
The Group may choose not to designate certain derivatives as hedges. This may occur where the Group is economically hedged but IAS 39 hedge accounting
cannot be achieved or where gains and losses on both the derivative and hedged item naturally offset in the Consolidated income statement, as is the case for
certain cross currency swaps of non-US dollar debt. Fair value changes on these derivatives are recognised in the Consolidated income statement as
remeasurements or within underlying earnings in accordance with the policy set out in note 6.
The fair value of the Group’s open derivative positions at 31 December (excluding normal purchase and sale contracts held off balance sheet), recorded within
‘Derivative financial assets’ and ‘Derivative financial liabilities’, is as follows:
US$ million
Derivatives hedging net debt
Fair value hedge(1)
Interest rate swaps
Held for trading
Forward foreign currency contracts
Cross currency swaps
Debit valuation adjustment to derivative
liabilities(2)
Other derivatives(3)
Total derivatives
Asset
9
10
–
–
19
90
109
2016
Liability
–
(9)
(178)
1
(186)
(86)
(272)
Asset
23
628
14
–
665
24
689
Current
2015
Liability
Asset
2016
Liability
Non-current
2015
Liability
Asset
–
474
(10)
454
(18)
(10)
(430)
19
(421)
(56)
(477)
–
–
–
474
10
484
–
(1,665)
72
(1,603)
–
(1,603)
–
3
–
457
3
460
–
(2,502)
536
(1,984)
(2)
(1,986)
(1) Recognised in the Consolidated income statement is a loss on fair value hedged items of $98 million (2015: $143 million), offset by a gain on fair value hedging instruments of $106 million
(2015: $146 million).
(2) Relates to cross currency swaps (see note 18).
(3) Other derivatives primarily relate to forward foreign currency contracts hedging capital expenditure, forward commodity contracts and other commodity contracts that are accounted for as
‘Held for trading’.
These marked to market valuations are not predictive of the future value of the hedged position, nor of the future impact on the profit of the Group.
The valuations represent the cost of closing all hedge contracts at 31 December, at market prices and rates available at the time.
The Group is exposed in varying degrees to a variety of financial instrument related risks. For more information about these risks and the ways in which the
Group manages them see notes 24 and 38.
Anglo American plc Annual Report 2016
139
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
20. PROVISIONS FOR LIABILITIES AND CHARGES
See note 39r for the Group’s accounting policy on environmental restoration and decommissioning obligations.
US$ million
At 1 January 2016
Charged to the income statement
Capitalised
Unwinding of discount
Amounts applied
Unused amounts reversed
Disposal of business
Currency movements
At 31 December 2016
Current
Non-current
Environmental
restoration Decommissioning
Employee
benefits
Onerous
contracts
(1,049)
(147)
(10)
(63)
43
16
94
(92)
(1,208)
(114)
(1,094)
(543)
–
(22)
(33)
1
41
56
(38)
(538)
(10)
(528)
(325)
(209)
(3)
(2)
163
10
34
(18)
(350)
(316)
(34)
(572)
(49)
–
(45)
54
17
525
(17)
(87)
(18)
(69)
Other
(696)
(223)
(38)
(10)
210
173
255
(28)
(357)
(163)
(194)
Total
(3,185)
(628)
(73)
(153)
471
257
964
(193)
(2,540)
(621)
(1,919)
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, based on management’s best estimate of the legal
and constructive obligations incurred. Changes in legislation could result in changes in provisions recognised. It is anticipated that the majority of 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 the majority of
these costs will be incurred over a period in excess of 20 years.
The pre-tax, real discount rates that have been used in calculating the environmental restoration and decommissioning liabilities as at 31 December 2016 and
31 December 2015, in the principal currencies in which these liabilities are denominated, are as follows: US dollar: 2.1%; South African rand: 4%; Australian
dollar: 3%; Chilean peso: 3%; and Brazilian real: 6%.
Employee benefits
Provision is made for statutory or contractual employee entitlements including long service leave, annual leave, sickness pay and similar obligations. It is
anticipated that these costs will be incurred when employees choose to take their benefits.
Onerous contracts
Provision is made for the present value of certain long-term contracts where the unavoidable cost of meeting the Group’s obligations is expected to exceed the
benefits to be received. It is anticipated that these costs will be incurred over a period of up to nine years.
Other
Other provisions primarily relate to restructuring costs, indemnities, legal and other claims. It is anticipated that the majority of these costs will be incurred over
a period of up to five years.
Environmental rehabilitation trusts
The Group makes contributions to controlled funds that were established to meet the cost of some of its restoration and environmental rehabilitation liabilities,
primarily in South Africa. The funds comprise the following investments:
US$ million
Equity
Bonds
Cash
2016
135
153
65
353
2015
115
121
54
290
These assets are primarily denominated in South African rand. Cash is held in short term fixed deposits or earns interest at floating inter-bank rates. Bonds
earn interest at a weighted average fixed rate of 8.0% (2015: 8.1%) for an average period of three years (2015: four years). Equity investments are recorded at
fair value through profit and loss and bonds are recorded at amortised cost.
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 provisions stated above.
140
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED BALANCE SHEET
21. DEFERRED TAX
See note 39c for the Group’s accounting policy on tax.
The movement in net deferred tax liabilities during the year is as follows:
US$ million
At 1 January
(Charged)/credited to the income statement(1)
Credited to the statement of comprehensive income
Credited directly to equity
Disposal of business
Currency movements
At 31 December
Comprising:
Deferred tax assets
Deferred tax liabilities
2016
(2,339)
(185)
43
110
38
(174)
(2,507)
1,013
(3,520)
2015
(3,147)
150
33
–
(72)
697
(2,339)
914
(3,253)
(1) This includes one-off tax charges of nil (2015: charge of $788 million relating to the write-off of deferred tax), a credit of $74 million (2015: credit of $107 million) relating to deferred tax
remeasurements and a credit of $99 million (2015: credit of $783 million) relating to deferred tax on special items (see note 6).
The amount of deferred tax recognised in the Consolidated balance sheet is as follows:
US$ million
Deferred tax assets
Tax losses
Post employment benefits
Share-based payments
Enhanced tax depreciation
Other temporary differences(1)
Deferred tax liabilities
Capital allowances in excess of depreciation
Fair value adjustments
Tax losses
Derivatives
Provisions
Withholding tax
Other temporary differences(2)
2016
596
31
15
128
243
1,013
(2,642)
(775)
27
–
324
(237)
(217)
(3,520)
2015
534
31
10
121
218
914
(2,080)
(689)
24
2
278
(510)
(278)
(3,253)
(1) The deferred tax asset on other temporary differences of $243 million arises primarily as a result of currency movements in deferred tax in US dollar functional currency entities whose tax
computations are generated based on local currency financial information. This is partially offset by an amount related to capital allowances in excess of depreciation.
(2) The deferred tax liability on other temporary differences of $217 million arises primarily in relation to deferred stripping costs, partially offset by an amount related to post-employment benefits.
The amount of deferred tax (charged)/credited to the Consolidated income statement is as follows:
US$ million
Capital allowances in excess of depreciation
Fair value adjustments
Tax losses
Derivatives
Provisions
Withholding tax
Other temporary differences
2016
(384)
(25)
(48)
(24)
22
163
111
(185)
The Group has the following balances in respect of which no deferred tax asset has been recognised:
US$ million
Expiry date
Greater than one year, less than five years
Greater than five years
No expiry date
Tax
losses –
revenue
Tax
losses –
capital
Other
temporary
differences
575
–
2,784
3,359
–
–
1,051
1,051
–
3,186
3,363
6,549
2016
Total
575
3,186
7,198
10,959
Tax
losses –
revenue
334
239
5,580
6,153
Tax
losses –
capital
Other
temporary
differences
–
–
806
806
–
3,398
1,547
4,945
2015
123
(243)
(54)
87
(163)
58
342
150
2015
Total
334
3,637
7,933
11,904
No deferred tax has been recognised in respect of temporary differences associated with investments in subsidiaries, branches, associates and interests in
joint arrangements 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 such investments in subsidiaries, branches,
associates and interests in joint arrangements is represented by the contribution of those investments to the Group’s retained earnings and amounted to
$17,804 million (2015: $15,103 million).
Anglo American plc Annual Report 2016
141
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
CASH FLOW STATEMENT, NET DEBT AND RELATED NOTES
22. CAPITAL EXPENDITURE
The disclosures in this note include certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including
definitions, please refer to page 188.
Capital expenditure by segment
US$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates(1)
Iron Ore and Manganese
Coal
Corporate and other
Capital expenditure(2)
Reconciliation to Consolidated cash flow statement:
Cash flows from derivatives related to capital expenditure
Proceeds from disposal of property, plant and equipment
Direct funding for capital expenditure received from non-controlling interests
Expenditure on property, plant and equipment
2016
526
314
563
62
26
269
613
14
2,387
(22)
23
30
2,418
2015
697
366
659
26
50
1,422
941
16
4,177
(200)
30
46
4,053
(1) Niobium and Phosphates was sold on 30 September 2016 (see note 30).
(2) Capital expenditure includes capitalised operating cash flows generated by operations that have not yet reached commercial production. Nickel includes net capitalised operating cash inflows
of nil (2015: net inflows of $180 million) relating to Barro Alto, which reached commercial production in October 2015. Niobium and Phosphates includes net capitalised operating cash inflows
of $32 million (2015: net inflows of $10 million) relating to Boa Vista Fresh Rock, which reached commercial production in March 2016. Iron Ore and Manganese includes net capitalised
operating cash inflows of $108 million (2015: net outflows of $338 million) relating to Minas-Rio.
Capital expenditure by category
US$ million
Expansionary(1)
Stay-in-business
Stripping and development
Proceeds from disposal of property, plant and equipment
2016
817
1,042
551
(23)
2,387
2015
2,083
1,384
740
(30)
4,177
(1) The expansionary category includes the cash flows from derivatives related to capital expenditure and is net of direct funding for capital expenditure received from non-controlling interests.
142
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
CASH FLOW STATEMENT, NET DEBT AND RELATED NOTES
23. NET DEBT
See note 39o for the Group’s accounting policy on cash and debt.
The disclosures in this note include certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including
definitions, please refer to page 188.
a) Reconciliation to the Consolidated balance sheet
US$ million
Balance sheet
Balance sheet – disposal groups
Bank overdrafts
Net cash/(debt) classifications
b) Movement in net debt
US$ million
At 1 January 2015
Cash flow
Reclassifications
Movement in fair value
Other non-cash movements
Currency movements
At 31 December 2015
Cash flow
Reclassifications
Movement in fair value
Other non-cash movements
Currency movements
At 31 December 2016
Cash and cash equivalents
Short term borrowings
2016
6,051
–
(7)
6,044
2015
6,895
9
(15)
6,889
2016
(1,806)
–
7
(1,799)
2015
(1,649)
–
15
(1,634)
Medium and
long term borrowings
2016
(11,363)
2015
(16,318)
–
–
–
–
(11,363)
(16,318)
Cash
and cash
equivalents
6,747
416
–
–
–
(274)
6,889
(906)
–
–
–
61
6,044
Short term
borrowings
Medium and
long term
borrowings
Net debt
excluding
derivatives
(1,617)
1,404
(1,616)
(9)
(2)
206
(1,634)
1,834
(1,977)
19
(12)
(29)
(1,799)
(16,917)
(2,736)
1,616
151
(45)
1,613
(16,318)
2,685
1,977
79
59
155
(11,363)
(11,787)
(916)
–
142
(47)
1,545
(11,063)
3,613
–
98
47
187
(7,118)
Derivatives
hedging
net debt(1)
(1,084)
170
–
(924)
–
–
(1,838)
414
–
55
–
–
(1,369)
Net debt
including
derivatives
(12,871)
(746)
–
(782)
(47)
1,545
(12,901)
4,027
–
153
47
187
(8,487)
(1) Derivatives hedging net debt represents the mark-to-market valuation of such derivatives before taking into account the effect of debit valuation adjustments which reduce the valuation of
derivative liabilities hedging net debt by $73 million (2015: $555 million). Further details on this adjustment are provided in note 18.
c) Net (debt)/cash by segment
The Group’s policy is to hold the majority of its cash and borrowings at the corporate centre. Business units may from time to time raise borrowings in
connection with specific capital projects, and subsidiaries with non-controlling interests have borrowings which are without recourse to the Group. Other than
the impact of South African exchange controls (see 23d below), there are no significant restrictions over the Group’s ability to access these cash balances or
repay these borrowings. Net (debt)/cash by segment is stated after elimination of inter-segment balances.
US$ million
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates(1)
Iron Ore and Manganese
Coal
Corporate and other
Net debt including derivatives
2016
(112)
83
1,354
63
–
(83)
572
(10,364)
(8,487)
2015
(109)
(176)
820
(138)
123
(2,370)
260
(11,311)
(12,901)
(1) Niobium and Phosphates was sold on 30 September 2016 (see note 30).
d) South Africa net cash/(debt)
The Group operates in South Africa where the existence of exchange controls may restrict the use of certain cash balances. The Group therefore monitors
the cash and debt associated with these operations separately. These restrictions are not expected to have a material effect on the Group’s ability to meet its
ongoing obligations. Below is a breakdown of net cash/(debt) in South Africa.
US$ million
Cash and cash equivalents
Short term borrowings
Medium and long term borrowings
Net cash/(debt) excluding derivatives
Derivatives hedging net debt
Net cash/(debt) including derivatives
2016
2,749
(61)
(1,130)
1,558
–
1,558
2015
1,419
(49)
(1,471)
(101)
(4)
(105)
Anglo American plc Annual Report 2016
143
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
CASH FLOW STATEMENT, NET DEBT AND RELATED NOTES
24. BORROWINGS
See note 39o for the Group’s accounting policy on bank borrowings.
The Group accesses borrowings mostly in capital markets through bonds issued under the Euro Medium Term Note (EMTN) programme, the
South African Domestic Medium Term Note (DMTN) programme, the Australian Medium Term Note (AMTN) programme and through accessing the
US bond markets. The Group uses interest rate and cross currency swaps to ensure that the majority of the Group’s borrowings are floating rate US dollar
denominated.
In March 2016, the Group completed a bond buyback transaction consisting of Euro, Sterling and US dollar denominated bonds with maturities from
December 2016 to September 2018. The Group used $1.7 billion of cash to retire $1.83 billion of contractual repayment obligations (including derivatives
hedging the bonds).
An analysis of borrowings, as presented on the Consolidated balance sheet, is set out below:
Short term
borrowings
Medium and
long term
borrowings
Total
borrowings
2016
Contractual
repayment at
hedged rates
Short term
borrowings
Medium and
long term
borrowings
Total
borrowings
2015
Contractual
repayment at
hedged rates
US$ million
Secured
Bank loans and overdrafts(1)
Obligations under finance leases
Unsecured
Bank loans and overdrafts
Bonds issued under EMTN programme
4.375% €581m bond due December 2016(2)
1.75% €594m bond due November 2017(3)
1.75% €538m bond due April 2018(3)
6.875% £267m bond due May 2018(3)
2.5% €482m bond due September 2018(3)
1.028% JPY10,000m bond due December 2018
2.75% €750m bond due June 2019
1.5% €600m bond due April 2020
2.875% €600m bond due November 2020
2.5% €750m bond due April 2021
3.5% €750m bond due March 2022
3.25% €750m bond due April 2023
US bonds
LIBOR+0.95% $500m bond due April 2016
2.625% $452m bond due April 2017(3)
2.625% $635m bond due September 2017(3)
9.375% $750m bond due April 2019
3.625% $850m bond due May 2020
4.45% $500m bond due September 2020
4.125% $500m bond due April 2021
4.125% $600m bond due September 2022
4.875% $650m bond due May 2025
Bonds issued under AMTN programme
5.75% AUD500m bond due November 2018
Bonds issued under DMTN programme
JIBAR+0.5% R200m bond due March 2016
JIBAR+1.38% R600m bond due March 2017
9.27% R1,400m bond due March 2019
9.49% R650m bond due April 2021
JIBAR+1.47% R400m bond due April 2021
Other loans
Total borrowings
13
8
21
12
–
633
–
–
–
–
–
–
–
–
–
–
–
453
633
–
–
–
–
–
–
–
48
53
101
457
–
–
574
348
521
86
823
638
669
830
884
857
–
–
–
781
841
515
504
586
640
371
61
61
122
469
–
633
574
348
521
86
823
638
669
830
884
857
–
453
633
781
841
515
504
586
640
371
61
61
122
469
–
799
741
529
616
97
941
659
807
977
992
1,033
–
452
635
750
850
500
500
600
650
470
9
7
16
270
839
–
–
–
–
–
–
–
–
–
–
–
500
–
–
–
–
–
–
–
–
–
10
53
63
19
60
79
19
60
79
1,961
2,231
2,979
–
995
829
644
841
83
854
651
688
849
908
868
–
602
744
795
842
522
508
588
644
379
839
995
829
644
841
83
854
651
688
849
908
868
500
602
744
795
842
522
508
588
644
379
1,122
1,211
1,033
793
959
97
941
659
807
977
992
1,033
500
600
750
750
850
500
500
600
650
470
13
39
91
42
26
279
20,263
20,342
–
44
–
–
–
10
1,785
1,806
–
–
102
48
29
158
11,262
11,363
–
44
102
48
29
168
13,047
13,169
–
44
102
47
29
168
14,457
14,579
13
–
–
–
–
11
1,633
1,649
–
39
87
40
26
268
16,255
16,318
13
39
87
40
26
279
17,888
17,967
(1) Assets with a book value of $123 million (2015: $91 million) have been pledged as security, of which $92 million (2015: $40 million) are property, plant and equipment, $31 million
(2015: $49 million) are financial assets and nil (2015: $2 million) are inventories. Related to these assets are borrowings of $61 million (2015: $19 million).
In March 2016, €169 million of outstanding value was repaid as part of the bond buyback transaction, the remaining €581 million was repaid on maturity.
(2)
(3) Outstanding value of bond shown subsequent to bond buyback transaction completed in March 2016.
144
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
CASH FLOW STATEMENT, NET DEBT AND RELATED NOTES
24. BORROWINGS continued
Liquidity risk
The Group ensures that there are sufficient committed loan facilities (including refinancing, where necessary) in order to meet short term business
requirements, after taking into account cash flows from operations and its holding of cash and cash equivalents, as well as any Group distribution restrictions
that exist. In addition, certain projects may be financed by means of limited recourse project finance, if appropriate.
The expected undiscounted cash flows of the Group’s net debt related and other financial liabilities, by remaining contractual maturity, based on conditions
existing at the balance sheet date are as follows:
US$ million
Amount due for repayment within one year
Greater than one year, less than two years
Greater than two years, less than three years
Greater than three years, less than four years
Greater than four years, less than five years
Greater than five years
Total due for repayment after more than one year
Total
US$ million
Amount due for repayment within one year
Greater than one year, less than two years
Greater than two years, less than three years
Greater than three years, less than four years
Greater than four years, less than five years
Greater than five years
Total due for repayment after more than one year
Total
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 three years
Greater than three years, less than four years
Greater than four years, less than five years
Net debt related financial liabilities
Expected
future interest
payments
Derivatives
hedging
net debt
(466)
(460)
(350)
(268)
(153)
(252)
(1,483)
(1,949)
(150)
(556)
(121)
(180)
(166)
(374)
(1,397)
(1,547)
Borrowings
(1,801)
(1,895)
(1,686)
(3,090)
(1,460)
(2,900)
(11,031)
(12,832)
Net debt related financial liabilities
Expected
future interest
payments
Derivatives
hedging
net debt
(702)
(657)
(587)
(424)
(286)
(459)
(2,413)
(3,115)
(232)
(113)
(544)
(43)
(101)
(420)
(1,221)
(1,453)
Borrowings
(1,631)
(2,617)
(3,067)
(1,871)
(3,508)
(4,853)
(15,916)
(17,547)
2016
Total
(5,581)
(2,942)
(2,157)
(3,538)
(1,779)
(3,830)
(14,246)
(19,827)
2015
Total
(5,227)
(3,387)
(4,198)
(2,338)
(3,895)
(5,732)
(19,550)
(24,777)
Other
financial
liabilities
(3,164)
(31)
–
–
–
(304)
(335)
(3,499)
Other
financial
liabilities
(2,662)
–
–
–
–
–
–
(2,662)
2016
2015
660
1,446
1,175
6,203
223
9,707
683
32
1,110
192
5,862
7,879
(1) Includes undrawn South African rand facilities equivalent to $0.5 billion (2015: $0.5 billion) in respect of facilities with a 364 day maturity which roll automatically on a daily basis, unless notice
is served.
In January 2017, the Group retired the $1.05 billion Club facility which was entered into in 2016 in the context of the bond buyback transaction. This facility was
undrawn at 31 December 2016 and is included in the table above within ‘greater than one year, less than two years’.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders
and benefits for other stakeholders and, with cognisance of forecast future market conditions and structuring, to maintain an optimal capital structure to
enable the business to operate effectively.
In order to manage the short and long term capital structure, the Group has a number of options including raising and refinancing debt, adjusting returns to
equity shareholders, managing the allocation of capital and divesting non-core assets to reduce debt.
The Group monitors capital using various financial metrics including the ratio of net debt to total capital (gearing). Net debt is calculated as total borrowings
less cash and cash equivalents (including derivatives which provide an economic hedge of net debt). Total capital is calculated as ‘Net assets’ (as shown in the
Consolidated balance sheet) excluding net debt. Total capital and gearing are as follows:
US$ million
Net assets
Net debt including related derivatives (note 23)
Total capital
Gearing
2016
24,325
8,487
32,812
25.9%
2015
21,342
12,901
34,243
37.7%
Gearing has decreased from 37.7% at 31 December 2015 to 25.9% at 31 December 2016 as net debt has decreased, offset by a decrease in total capital. Net
debt decreased from $12.9 billion to $8.5 billion during the year, driven by operating cash inflows and proceeds from asset disposals.
Anglo American plc Annual Report 2016
145
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
CASH FLOW STATEMENT, NET DEBT AND RELATED NOTES
24. BORROWINGS continued
Market risk
Market risk is the risk that financial instrument fair values and related cash flows will fluctuate due to changes in market prices. The Group manages interest
rate risks and foreign exchange risks on borrowings and cash with the use of cross currency swaps and interest rate swaps in order to ensure that the majority
of borrowings are floating rate US dollar denominated. The Group does not hedge foreign exchange exposures on rand denominated borrowings in South
Africa. For more information regarding the Group’s financial risk management see note 38.
The table below reflects the exposure of the Group’s net debt to currency and interest rate risk.
US$ million
US dollar
Euro
South African rand
Brazilian real
Australian dollar
Sterling
Other
Impact of interest derivatives
Total
US$ million
US dollar
Euro
South African rand
Brazilian real
Australian dollar
Sterling
Other
Impact of interest derivatives
Total
Cash
and cash
equivalents
4,844
5
894
96
74
18
113
–
6,044
Cash
and cash
equivalents
6,239
6
116
238
148
18
124
–
6,889
Floating
rate
borrowings
Fixed
rate
borrowings
(168)
–
(594)
–
–
–
–
(12,337)
(13,099)
(4,992)
(6,429)
(160)
–
(371)
(348)
(100)
12,337
(63)
Floating
rate
borrowings
Fixed
rate
borrowings
(1,197)
–
(966)
(793)
–
–
(17)
(14,800)
(17,773)
(5,400)
(8,322)
(136)
–
(379)
(644)
(98)
14,800
(179)
Derivatives
hedging
net debt
(1,369)
–
–
–
–
–
–
–
(1,369)
Derivatives
hedging
net debt
(1,835)
–
(3)
–
–
–
–
–
(1,838)
Impact of
currency
derivatives
(7,234)
6,429
–
–
371
348
86
–
–
Impact of
currency
derivatives
(10,221)
8,322
–
793
379
644
83
–
–
2016
Total
(8,919)
5
140
96
74
18
99
–
(8,487)
2015
Total
(12,414)
6
(989)
238
148
18
92
–
(12,901)
25. COMMITMENTS
See note 39x for the Group’s accounting policy on leases.
A commitment is a contractual obligation to make a payment in the future which is not provided for in the balance sheet. The Group also has purchase
obligations relating to take or pay agreements which are legally binding and enforceable.
Capital commitments for subsidiaries and joint operations relating to the acquisition of property, plant and equipment are $1,317 million (2015: $1,168 million),
of which 45% (2015: 82%) relate to expenditure to be incurred within the next year.
The Group’s outstanding commitments relating to take or pay agreements are $14,398 million (2015: $14,928 million), of which 9% (2015: 8%) relate to
expenditure to be incurred within the next year.
At 31 December the Group’s total future minimum lease payments under non-cancellable operating leases are as follows:
US$ million
Within one year
Greater than one year, less than two years
Greater than two years, less than five years
Greater than five years
Operating leases relate principally to land and buildings, vehicles and mining equipment.
2016
92
50
48
22
212
2015
92
75
72
24
263
146
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
EMPLOYEE REMUNERATION
26. EMPLOYEE NUMBERS AND COSTS
The average number of employees, excluding contractors and associates’ and joint ventures’ employees, and including a proportionate share of employees
within joint operations by segment, was:
Thousand
De Beers
Platinum
Copper
Nickel
Niobium and Phosphates(1)
Iron Ore and Manganese
Coal
Corporate and other
2016
9
45
4
2
2
7
10
1
80
2015
11
48
5
2
2
10
11
2
91
(1) Niobium and Phosphates was sold on 30 September 2016 (see note 30).
The average number of employees, excluding contractors and associates’ and joint ventures’ employees, and including a proportionate share of employees
within joint operations, by principal location of employment was:
Thousand
South Africa
Other Africa
South America
North America
Australia and Asia
Europe
Payroll costs in respect of the employees included in the tables above were:
US$ million
Wages and salaries
Social security costs
Post employment benefits(1)
Share-based payments (note 28)
Total payroll costs
Reconciliation:
Less: employee costs capitalised
Less: employee costs included within special items
Employee costs included in operating costs
2016
61
4
9
1
3
2
80
2016
3,107
110
285
236
3,738
(258)
(144)
3,336
2015
69
4
10
2
4
2
91
2015
3,798
135
332
209
4,474
(319)
(200)
3,955
(1)
Includes contributions to defined contribution pension and medical plans, current and past service costs related to defined benefit pension and medical plans and other benefits provided
to certain employees during retirement (see note 27).
Key management
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly
or indirectly, including any director (executive and non-executive) of the Group. Key management comprises members of the Board and the Group
Management Committee.
Compensation for key management was as follows:
US$ million
Salaries and short term employee benefits
Social security costs
Termination benefits
Post employment benefits
Share-based payments
2016
19
3
5
3
17
47
2015
22
4
2
3
13
44
Disclosure of directors’ emoluments, pension entitlements, share options and long term incentive plan awards required by the Companies Act 2006 and those
specified for audit by Regulation 11 and Schedule 8 of the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 are
included in the Remuneration report.
Anglo American plc Annual Report 2016
147
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
EMPLOYEE REMUNERATION
27. RETIREMENT BENEFITS
See note 39t for the Group’s accounting policy on retirement benefits.
The Group operates a number of defined contribution and defined benefit pension plans. It also operates post employment medical plans, principally
in South Africa.
Defined contribution plans
The defined contribution pension and medical cost represents the actual contributions payable by the Group to the various 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 plans (net of amounts
capitalised and special items) was $180 million (2015: $221 million) and for defined contribution medical plans (net of amounts capitalised) was $64 million
(2015: $73 million).
Defined benefit pension plans and post employment medical plans
The Group operates defined benefit pension and medical plans across a number of regions. The most significant plans are in South Africa and the
United Kingdom.
A summary of the movements in the net pension plan assets and retirement benefit obligations on the Consolidated balance sheet is as follows:
US$ million
Net liability recognised at 1 January
Net income statement charge
Remeasurement of net defined benefit obligation
Employer contributions to funded pension plans
Benefits paid to unfunded plans
Disposal of business
Other
Currency movements
Net liability recognised at 31 December
Amounts recognised as:
Defined benefit pension plans in surplus(1)
Retirement benefit obligation – pension plans
Retirement benefit obligation – medical plans
(1)
Included in ‘Other non-current assets’ on the Consolidated balance sheet.
2016
(361)
(42)
(214)
105
39
(2)
(3)
(30)
(508)
270
(377)
(401)
(508)
2015
(889)
(60)
290
118
24
41
12
103
(361)
306
(330)
(337)
(361)
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 in the relevant jurisdiction. The unfunded liabilities are principally in relation
to termination indemnity plans in Chile.
The post employment medical plans provide health benefits to retired employees and certain dependants. Eligibility for cover is dependent upon certain
criteria. The majority of these plans are unfunded and are principally in South Africa.
Independent qualified actuaries carry out full valuations at least every three years using the projected unit credit method. The actuaries have updated the
valuations to 31 December 2016. Assumptions are set after consultation with the qualified actuaries. While management believes the assumptions used are
appropriate, a change in the assumptions used would impact the Group’s other comprehensive income.
Characteristics and risks of plans
The defined benefit plans are exposed to risks such as longevity, investment risk, inflation risk, interest rate risk and foreign exchange risk.
The weighted average duration of the South African plans is 11 years (2015: 11 years), United Kingdom plans is 19 years (2015: 18 years) and plans in other
regions is 14 years (2015: 14 years). This represents the average period over which future benefit payments are expected to be made.
Employer contributions are made in accordance with the terms of each plan and may vary from year to year. Employer contributions made to funded plans
in the year ended 31 December 2016 were $105 million (2015: $118 million). In addition $39 million (2015: $24 million) of benefits were paid to unfunded plans
and $21 million (2015: $23 million) of benefits were paid in relation to post employment medical plans. The Group expects to contribute $108 million to its
pension plans and $25 million to its post employment medical plans in 2017.
The responsibility for the governance of the funded retirement benefit plans, including investment and funding decisions, lies with the Trustees of each scheme.
South Africa
The pension plans in South Africa are in surplus, with the asset recognised on the Consolidated balance sheet restricted to the amount in the Employer Surplus
Account, being plan assets less plan liabilities less any contingency reserves as recommended by the funds’ actuaries.
The Employer Surplus Account is the amount that the Group is entitled to by way of refund. All pension plans in South Africa are closed to new members and
the majority of plans are closed to future benefit accrual. As the plans are in surplus no employer contributions are currently being made.
The Group’s provision of anti-retroviral therapy to HIV positive staff does not significantly impact the post employment medical plan liability.
United Kingdom
The Group operates funded pension plans in the United Kingdom. These plans are closed to new members and to the future accrual of benefits.
Certain assets held by the main plans in the United Kingdom are structured to closely match the characteristics of the liabilities through a variety of
investment strategies, including the use of interest rate hedging and inflation hedging to manage interest rate risk and inflation rate risk, respectively.
The Group is committed to make payments to certain United Kingdom pension plans under deficit funding plans agreed with the respective Trustees. Where
the present value of the agreed funding payments exceeds the liability in respect of the plans as measured under IFRS, and would therefore, when paid, give
rise to a surplus as measured under IFRS, a provision is recognised for any part of that surplus that would not be recoverable. Any resulting surplus has been
assessed to be fully recoverable and as such no provision has been recognised.
148
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
EMPLOYEE REMUNERATION
27. RETIREMENT BENEFITS continued
Other
Other pension and post employment medical plans primarily comprise obligations in Chile where legislation requires employers to provide for a termination
indemnity, entitling employees to a cash payment made on the termination of an employment contract. The features of this provision meet the definition of a
post employment benefit obligation and consequently an unfunded liability is recognised on the Consolidated balance sheet. Other plans are in Brazil, Canada
and mainland Europe and consist of funded and unfunded pension plans and unfunded medical aid plans. These plans are not considered to be significant
to the Group.
Actuarial assumptions
The principal assumptions used to determine the actuarial present value of benefit obligations and pension charges and credits are detailed below (shown as
weighted averages):
Defined benefit pension plans
Average discount rate for plan liabilities
Average rate of inflation
Average rate of increase of pensions in payment
Post employment medical plans
Average discount rate for plan liabilities
Average rate of inflation
Expected average increase in healthcare costs
South
Africa
United
Kingdom
9.5%
7.0%
7.0%
9.4%
7.0%
8.8%
2.6%
3.3%
3.3%
2.6%
3.3%
7.8%
2016
Other
5.5%
3.3%
3.0%
6.9%
5.2%
8.0%
South
Africa
United
Kingdom
10.3%
7.9%
7.9%
10.3%
7.9%
9.6%
3.9%
3.1%
3.1%
3.9%
3.1%
7.8%
2015
Other
6.8%
3.6%
3.2%
9.1%
6.9%
9.1%
Mortality assumptions are determined based on standard mortality tables with adjustments, as appropriate, to reflect experience of conditions locally. In
South Africa, the PA90 tables are used. The main plans in the United Kingdom use either CMI tables or Club Vita models with plan specific adjustments based
on mortality investigations. The mortality tables used imply that a male or female aged 60 at the balance sheet date has the following future life expectancy
(shown as weighted averages):
Years
South Africa
United Kingdom
Other
2016
19.9
28.1
21.9
Male
2015
19.8
28.2
22.8
2016
24.7
29.8
26.0
Female
2015
24.5
30.0
27.2
The table below summarises the expected life expectancy from the age of 60 for a male or female aged 45 at the balance sheet date. When viewed together
with the respective life expectancy at age 60 in the table above this indicates the anticipated improvement in life expectancy (shown as weighted averages):
Years
South Africa
United Kingdom
Other
2016
19.9
29.9
23.9
Male
2015
19.8
29.6
25.1
2016
24.7
32.2
27.9
Female
2015
24.5
32.0
29.3
Sensitivity analysis
Significant actuarial assumptions for the determination of pension and medical plan liabilities are the discount rate, inflation rate and mortality. The sensitivity
analysis below has been provided by local actuaries on an approximate basis based on changes in the assumptions occurring at the end of the year, assuming
that all other assumptions are held constant and the effect of interrelationships is excluded. The effect on plan liabilities is as follows:
US$ million
Discount rate – 0.5% decrease
Inflation rate – pension plans – 0.5% increase
Inflation rate – medical plans – 0.5% increase
Life expectancy – increase by 1 year
Income statement
The amounts recognised in the Consolidated income statement are as follows:
US$ million
Charge to operating costs
Net (credit)/charge to net finance costs(1)
Total net charge to the income statement
(1)
Includes interest expense on surplus restriction of $16 million (2015: $13 million).
South
Africa
United
Kingdom
(62)
(41)
(19)
(58)
(403)
(166)
–
(163)
Other
(17)
(11)
(4)
(3)
Post
employment
medical
plans
4
32
36
Pension
plans
14
(8)
6
2016
Total
18
24
42
Post
employment
medical
plans
4
33
37
Pension
plans
14
9
23
2016
Total
(482)
(218)
(23)
(224)
2015
Total
18
42
60
Anglo American plc Annual Report 2016
149
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
EMPLOYEE REMUNERATION
27. RETIREMENT BENEFITS continued
Comprehensive income
The pre-tax amounts recognised in the Consolidated statement of comprehensive income are as follows:
US$ million
Return on plan assets, excluding interest income
Actuarial (losses)/gains on plan liabilities(1)
Movement in surplus restriction
Remeasurement of net defined benefit obligation(2)
Post
employment
medical
plans
–
(10)
–
(10)
Pension
plans
627
(858)
27
(204)
2016
Total
627
(868)
27
(214)
Post
employment
medical
plans
–
23
–
23
Pension
plans
(125)
401
(9)
267
2015
Total
(125)
424
(9)
290
(1) Comprises (losses)/gains from changes in financial and demographic assumptions as well as experience on plan liabilities.
(2) The tax amounts arising on remeasurement of net defined benefit obligations are disclosed in note 8c.
Pension plan assets and liabilities by geography
The split of the present value of funded and unfunded obligations in defined benefit pension plans and the fair value of pension assets at 31 December is
as follows:
US$ million
Equity
Corporate bonds
Government bonds
Cash
Other
Fair value of pension plan assets(1)
Active members
Deferred members
Pensioners
Present value of funded obligations
Present value of unfunded obligations(2)
Net surplus/(deficit) in pension plans
Surplus restriction
Recognised retirement benefit
assets/(liabilities)
Amounts in the Consolidated balance sheet
Defined benefit pension plans in surplus
Retirement benefit obligation – pension plans
South
Africa
400
267
510
54
–
1,231
(6)
(11)
(929)
(946)
–
285
(161)
124
124
–
124
United
Kingdom
402
1,561
1,699
15
207
3,884
(198)
(1,550)
(2,179)
(3,927)
–
(43)
–
2016
Total
808
1,859
2,242
71
211
5,191
(220)
(1,567)
(3,174)
(4,961)
(176)
54
(161)
Other
6
31
33
2
4
76
(16)
(6)
(66)
(88)
(176)
(188)
–
(43)
(188)
(107)
146
(189)
(43)
–
(188)
(188)
270
(377)
(107)
South
Africa
354
247
459
66
–
1,126
(7)
(12)
(827)
(846)
–
280
(156)
124
124
–
124
United
Kingdom
857
1,356
1,378
51
199
3,841
(179)
(1,401)
(2,242)
(3,822)
–
19
–
19
182
(163)
19
2015
Total
1,220
1,636
1,872
118
205
5,051
(203)
(1,418)
(3,136)
(4,757)
(161)
133
(157)
(24)
306
(330)
(24)
Other
9
33
35
1
6
84
(17)
(5)
(67)
(89)
(161)
(166)
(1)
(167)
–
(167)
(167)
(1) The fair value of assets is used to determine the funding level of the plans. The fair value of the assets of the funded plans was sufficient to cover 105% (2015: 106%) of the benefits that
had accrued to members after allowing for expected increases in future earnings and pensions.
Includes $166 million (2015: $151 million) relating to active members.
(2)
All investments have been fair valued based on quoted market prices.
Movement analysis
The changes in the fair value of plan assets are as follows:
US$ million
At 1 January
Effects of settlements
Interest income(1)
Return on plan assets, excluding interest income(1)
Contributions paid by employer to funded pension plans
Benefits paid(2)
Disposal of business
Other
Currency movements
At 31 December
(1) The actual return on assets in respect of pension plans was $884 million (2015: $135 million).
(2)
Includes $6 million (2015: $10 million) of benefits paid to defined contribution plans.
Post
employment
medical
plans
13
–
1
–
–
(1)
–
–
–
13
Pension
plans
5,051
(25)
257
627
105
(230)
(2)
4
(596)
5,191
2016
Total
5,064
(25)
258
627
105
(231)
(2)
4
(596)
5,204
Post
employment
medical
plans
14
–
1
–
–
(1)
–
–
(1)
13
Pension
plans
5,627
(6)
260
(125)
118
(243)
–
5
(585)
5,051
2015
Total
5,641
(6)
261
(125)
118
(244)
–
5
(586)
5,064
150
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
EMPLOYEE REMUNERATION
27. RETIREMENT BENEFITS continued
The changes in the present value of defined benefit obligations are as follows:
US$ million
At 1 January
Current service costs
Effects of settlements
Interest costs
Actuarial (losses)/gains arising from changing financial assumptions
Actuarial gains arising from changing demographic assumptions
Actuarial gains/(losses) arising from experience adjustment
Benefits paid
Disposal of business
Other
Currency movements
At 31 December
Post
employment
medical
plans
(350)
(4)
–
(33)
(8)
1
(3)
22
–
(3)
(36)
(414)
Pension
plans
(4,918)
(14)
25
(233)
(917)
49
10
248
–
(4)
617
(5,137)
2016
Total
(5,268)
(18)
25
(266)
(925)
50
7
270
–
(7)
581
(5,551)
Post
employment
medical
plans
(472)
(4)
–
(34)
18
–
5
23
–
–
114
(350)
Pension
plans
(5,876)
(21)
6
(256)
221
40
140
257
41
(5)
535
(4,918)
2015
Total
(6,348)
(25)
6
(290)
239
40
145
280
41
(5)
649
(5,268)
28. SHARE-BASED PAYMENTS
See note 39u for the Group’s accounting policy on share-based payments.
During the year ended 31 December 2016 the Group had share-based payment arrangements with employees relating to shares of the Company, the details
of which are described in the Remuneration report. All of these Company schemes, as well as any non-cyclical awards, are equity settled either by award of
ordinary shares (BSP, LTIP, SIP and Non-cyclical) or award of options to acquire ordinary shares (SAYE).
The total share-based payment charge relating to Anglo American plc shares for the year is split as follows:
US$ million
BSP
LTIP
Other schemes
Share-based payment charge relating to Anglo American plc shares(1)
2016
100
49
12
161
2015
88
42
5
135
(1)
In addition, there are equity settled share-based payment charges of $43 million (2015: $47 million) relating to Kumba Iron Ore Limited shares, $28 million (2015: $26 million) relating to
Anglo American Platinum Limited shares and $2 million (2015: nil) of other equity settled share-based payment charges. Certain business units also operate cash settled employee
share-based payment schemes. These schemes had a charge of $2 million (2015: $1 million).
Schemes settled by award of ordinary shares
The fair value of ordinary shares under the BSP, LTIP and LTIP-ROCE, being the more material schemes, was calculated using the Black Scholes model. The
fair value of shares awarded under the LTIP-TSR scheme was calculated using the Monte Carlo model.
The awards were granted on 04/03/16 (2015: 03/03/15) with a share price of £5.92 (2015: £12.05). These awards have a contractual life of three years and
are conditional on three years continuous employment. The LTIP-ROCE and LTIP-TSR awards are conditional on a Group ROCE target and market based
performance conditions, respectively, being achieved. The following assumptions were used in the valuation of the awards: expected volatility of 50%
(2015: 35%) based on historic volatility over the last five years; risk free interest rate of 0.5% (2015: 0.9%) based on the yield on zero-coupon UK government
bonds with a term similar to the expected life of the award; expected departures rate of 5% pa (2015: 5% pa); and a dividend yield of nil (2015: 2.1%).
The awards granted during the year under these assumptions are summarised below:
BSP
LTIP
LTIP-ROCE
LTIP-TSR
2016
Fair value at
date of grant
(weighted
average)(£)
5.92
5.92
5.92
4.12
2015
Fair value at
date of grant
(weighted
average)(£)
12.05
12.05
12.05
5.30
Number of
instruments⁽¹⁾
5,560,276
2,792,470
827,674
827,674
Number of
instruments⁽¹⁾
11,369,105
6,997,155
2,213,836
2,213,836
(1) The number of instruments used in the fair value models may differ from the total number of instruments awarded in the year due to awards made subsequent to the fair value calculations.
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.
The charges arising in respect of the other Anglo American plc employee share schemes that the Group operated during the year are not considered material.
Anglo American plc Annual Report 2016
151
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
GROUP STRUCTURE AND TRANSACTIONS
28. SHARE-BASED PAYMENTS continued
The movements in the number of shares for the more significant share-based payment arrangements are as follows:
Bonus Share Plan(1)
Ordinary shares of 5486/91 US cents may be awarded under the terms of this scheme for no consideration.
Number of awards
Outstanding at 1 January
Conditionally awarded in year
Vested in year
Forfeited or expired in year
Outstanding at 31 December
(1) Further information in respect of the BSP, including performance conditions, is shown in the Remuneration report.
Long Term Incentive Plan(1)
Ordinary shares of 5486/91 US cents may be awarded under the terms of this scheme for no consideration.
Number of awards
Outstanding at 1 January
Conditionally awarded in year
Vested in year
Forfeited or expired in year
Outstanding at 31 December
2015
2016
12,104,010
12,623,762
5,560,276
11,369,105
(4,413,116) (2,937,812)
(2,196,826) (2,102,712)
17,382,925 12,623,762
2015
2016
6,131,998
8,558,889
4,447,817
11,424,827
(1,800,261) (1,313,835)
(707,091)
(1,371,677)
8,558,889
16,811,778
(1) The early vesting of share awards is permitted at the discretion of the Company upon, inter alia, termination of employment, ill health or death. 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.
29. ASSETS AND LIABILITIES HELD FOR SALE
Assets classified as held for sale as at 31 December 2015 of $27 million and associated liabilities of $17 million principally relate to the Kimberley Mines
(De Beers) in South Africa. The sale transaction was announced on 1 December 2015 and subsequently completed on 18 January 2016.
152
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
GROUP STRUCTURE AND TRANSACTIONS
30. DISPOSALS OF SUBSIDIARIES, JOINT VENTURES AND MINING OPERATIONS
US$ million
Intangible assets
Property, plant and equipment
Investments in joint ventures
Other non-current assets
Current assets
Current liabilities
Non-current liabilities
Net (liabilities)/assets disposed
Consideration
Cash and cash equivalents disposed
Retained liabilities and net costs of disposal
Transaction costs and other adjustments
Adjustments for non-cash items
Net cash (outflow)/inflow
Loss on transfer to held for sale
Cumulative translation gain/(loss) recycled from reserves
Net gain/(loss) on disposal(1)
(1)
Included in non-operating special items (see note 6).
2016
2015
Callide
mine
–
79
–
2
91
(98)
(545)
(471)
Niobium and
Phosphates
businesses
226
782
–
54
358
(91)
(283)
1,046
Rustenburg
mine
–
173
–
–
10
(93)
(53)
37
–
(8)
(29)
–
16
(21)
–
122
564
1,675
(144)
–
(46)
12
1,497
–
(123)
460
160
–
(230)
(14)
79
(5)
–
–
(121)
Foxleigh
mine
–
–
–
–
54
(18)
(24)
12
46
(19)
(43)
–
23
7
–
51
42
Total
–
412
1,539
73
316
(119)
(114)
2,107
1,824
(82)
–
25
(12)
1,755
(100)
(101)
(459)
2016
Callide mine
On 31 October 2016, the Group completed the sale of Callide thermal coal mine in Queensland, Australia (Coal) resulting in a net cash outflow of $21 million.
As a consequence of the disposal, the Group has derecognised a provision for onerous coal supply contracts of $525 million. A pre-tax gain on disposal of
$564 million (post-tax $564 million) has been recorded within non-operating special items (see note 6).
Niobium and Phosphates businesses
On 30 September 2016, the Group completed the sale of the Niobium and Phosphates businesses. The Phosphates business consists of a mine, beneficiation
plant, two chemical complexes and two further mineral deposits. The Niobium business consists of one mine and three processing facilities, two non-
operating mines, two further mineral deposits and sales and marketing operations in the United Kingdom and Singapore.
The total consideration comprised $1,500 million plus working capital and other adjustments of $175 million. A pre-tax gain on disposal of $460 million
(post-tax $356 million) has been recorded within non-operating special items (see note 6).
Rustenburg mine
On 1 November 2016, Anglo American Platinum completed the sale of the Rustenburg mine (Platinum) which comprises the Bathopele, Siphumelele
(including Khomanani), and Thembelani (including Khuseleka) mining operations, two concentrating plants, an on-site chrome recovery plant, the Western
Limb Tailings Retreatment Plant, associated surface infrastructure and related assets and liabilities.
The consideration comprises cash of R1.5 billion ($110 million) and deferred contingent consideration amounting to 35% of the business’s distributable free
cash flow for six to eight years subject to a minimum nominal amount of R3.0 billion ($220 million). In addition, Anglo American Platinum must provide shortfall
funding of up to R267 million ($20 million) per annum from the closing of the transaction to 31 December 2018 if Rustenburg generates negative free cash
flows during this period. As part of the transaction, Platinum also assumed a liability to pay $210 million for in-process inventories from Rustenburg held at the
date of disposal over a four-month period from completion. A pre-tax loss on disposal of $121 million (post-tax $66 million) has been recorded within
non-operating special items (see note 6).
Foxleigh mine
On 29 August 2016, the Group completed the sale of its 70% interest in the Foxleigh metallurgical coal mine in Queensland, Australia (Coal) resulting in a net
cash inflow of $7 million.
A pre-tax gain on disposal of $42 million (post-tax $42 million) has been recorded within non-operating special items (see note 6).
Other
In addition, the Group received deferred consideration of $39 million in respect of disposals recognised in previous periods (Corporate and other), net cash
inflows of $21 million on disposal of the Morupule mine in Botswana (De Beers) and net cash outflows of $3 million on other transactions, resulting in proceeds
from disposal of subsidiaries and joint operations, net of cash disposed, of $1,535 million.
2015
Disposals in 2015 principally comprised the sale of the Group’s 50% ownership interest in Lafarge Tarmac (Corporate and other) and the sale of
Anglo American Norte S.A. (AA Norte) (Copper).
Anglo American plc Annual Report 2016
153
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
GROUP STRUCTURE AND TRANSACTIONS
31. NON-CONTROLLING INTERESTS
Non-controlling interests that are material to the Group relate to the following subsidiaries:
• Kumba Iron Ore Limited (Kumba Iron Ore), which is a company incorporated in South Africa and listed on the JSE. Its principal mining operations are the
Sishen and Kolomela iron ore mines which are located in South Africa. Non-controlling interests hold an effective 46.8% (2015: 46.3%) interest in the
operations of Kumba Iron Ore, comprising the 30.3% interest held by other shareholders in Kumba Iron Ore and the 23.7% (2015: 23.0%) of Kumba Iron
Ore’s principal operating subsidiary, Sishen Iron Ore Company Proprietary Limited, that is held by shareholders outside the Group.
• Anglo American Sur S.A. (Anglo American Sur), which is a company incorporated in Chile. Its principal operations are the Los Bronces and El Soldado
copper mines and the Chagres smelting plant, which are located in Chile. Non-controlling interests hold a 49.9% interest in Anglo American Sur.
US$ million
Profit/(loss) attributable to non-controlling
interests
Equity attributable to non-controlling interests
Dividends paid to non-controlling interests
Kumba
Iron Ore
Anglo
American Sur
351
1,214
–
(162)
1,946
–
Other(1)
143
2,149
(15)
2016
Total
332
5,309
(15)
Kumba
Iron Ore
Anglo
American Sur
52
731
(131)
(55)
2,130
(62)
Other(1)
(215)
1,912
(49)
2015
Total
(218)
4,773
(242)
(1) Other consists of individually immaterial non-controlling interests.
Summarised financial information on a 100% basis and before inter-company eliminations for Kumba Iron Ore and Anglo American Sur is as follows:
US$ million
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Revenue
Profit/(loss) for the financial year(1)
Total comprehensive income/(expense)
Net cash inflow from operating activities
(1) Stated after special items (see note 6).
There were no material changes in ownership interests in subsidiaries in 2016 or 2015.
2016
2015
Kumba
Iron Ore
2,473
1,709
(432)
(1,079)
2,671
Anglo
American Sur
4,122
1,188
(379)
(1,035)
3,896
2,801
775
1,024
933
1,676
(324)
(336)
529
Kumba
Iron Ore
2,205
931
(320)
(1,189)
1,627
Anglo
American Sur
4,419
751
(271)
(627)
4,272
2,876
43
(566)
1,119
2,080
(102)
(108)
599
154
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
32. CALLED-UP SHARE CAPITAL AND CONSOLIDATED EQUITY ANALYSIS
Called-up share capital
Called-up, allotted and fully paid:
5% cumulative preference shares of £1 each
Ordinary shares of 5486/91 US cents each:
At 1 January and 31 December
Number of shares
US$ million
Number of shares
US$ million
2016
2015
50,000
–
50,000
–
1,405,465,332
772
1,405,465,332
772
No ordinary shares were allotted to non-executive directors in 2016 or 2015.
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 and carrying value of called-up, allotted and fully paid ordinary shares as at 31 December 2016 was 1,402,242,532 and $770 million
(2015: 1,401,861,508 and $770 million).
At general meetings, every member who is present in person has one vote on a show of hands and, on a poll, every member who is present in person or by
proxy has one vote for every ordinary share held.
In the event of winding up, the holders of the cumulative preference shares will be entitled to the repayment of a sum equal to the nominal capital paid up, or
credited as paid up, on the cumulative preference shares held by them and any accrued dividend, whether such dividend has been earned or declared or not,
calculated up to the date of the winding up.
Own shares
Own shares
Treasury shares
Own shares held by subsidiaries and employee benefit trusts
Total
The movement in treasury shares during the year is as follows:
Treasury shares
At 1 January
Transferred to employees in settlement of share awards
At 31 December
Number of shares
US$ million
Number of shares
US$ million
2016
2015
3,222,800
123,743,483
126,966,283
153
5,937
6,090
3,603,824
117,334,305
120,938,129
173
5,878
6,051
Number of shares
US$ million
Number of shares
US$ million
2016
2015
3,603,824
(381,024)
3,222,800
173
(20)
153
8,794,085
(5,190,261)
3,603,824
481
(308)
173
Tenon
Tenon Investment Holdings Proprietary Limited (Tenon), a wholly owned subsidiary of Anglo American South Africa Limited (AASA), has entered into
agreements with Epoch Investment Holdings Proprietary Limited (Epoch), Epoch Two Investment Holdings Proprietary Limited (Epoch Two) and Tarl
Investment Holdings Proprietary 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, provided all the funding required to acquire the Anglo American plc shares through the market. These payments by Tenon were
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 $3.95 per share to Epoch, $6.15 per share to Epoch Two and $5.10 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, as these are own shares of the Company, any resulting gain or loss recorded by Tenon will not be recognised in the Consolidated 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 on 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 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 2016 the Investment Companies together held 112,300,129 (2015: 112,300,129) Anglo American plc shares, which represented 8.0%
(2015: 8.0%) of the ordinary shares in issue (excluding treasury shares) with a market value of $1,603 million (2015: $498 million). 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.
The Investment Companies are considered to be structured entities. Although the Group has no voting rights in the Investment Companies and cannot appoint
or remove trustees of the charitable trusts, the Group considers that the agreement outlined above, including Tenon’s right to nominate the transferee of the
Anglo American plc shares held by the Investment Companies, result in the Group having control over the Investment Companies as defined under IFRS 10.
Accordingly, the Investment Companies are required to be consolidated by the Group.
Anglo American plc Annual Report 2016
155
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
32. CALLED-UP SHARE CAPITAL AND CONSOLIDATED EQUITY ANALYSIS continued
Employee benefit trust
The provision of shares to certain of the Company’s share option and share incentive schemes may be facilitated by an employee benefit trust or settled by
the issue of treasury shares. During 2016, 263,281 shares (2015: nil) from the trust were transferred to employees in settlement of share awards. Shares held
by the trust are recorded as own shares, and the carrying value is shown as a reduction within shareholders’ equity. The employee benefit trust has waived the
right to receive dividends on these shares. The costs of operating the trust are borne by the Group but are not material.
The market value of the 4,736,720 shares (2015: 1 share) held by the trust at 31 December 2016 was $67,609,894 (2015: $4).
Consolidated equity analysis
Fair value and other reserves comprise:
US$ million
At 1 January 2015
Total comprehensive (expense)/income
Equity settled share-based payment schemes
Other
At 31 December 2015
Total comprehensive expense
Equity settled share-based payment schemes
At 31 December 2016
Share-based
payment
reserve
540
–
(41)
–
499
–
(63)
436
Available
for sale
reserve
456
(153)
–
–
303
(11)
–
292
Cash
flow hedge
reserve
2
9
–
–
11
(11)
–
–
Other
reserves(1)
140
–
–
(17)
123
–
–
123
Total
fair value
and other
reserves
1,138
(144)
(41)
(17)
936
(22)
(63)
851
(1) Other reserves comprise a capital redemption reserve of $115 million (2015: $115 million) and a legal reserve of $8 million (2015: $8 million).
33. AUDITOR’S REMUNERATION
US$ million
Paid to the Company’s auditor for audit
of the Anglo American plc Annual Report
Paid to the Company’s auditor for other
services to the Group
Audit of the Company’s subsidiaries
Total audit fees
Audit related assurance services(1)
Taxation compliance services
Taxation advisory services
Other assurance services
Other non-audit services
Total non-audit fees
Paid/payable to Deloitte
2016
Paid/payable
to auditor (if
not Deloitte)
Paid/payable to Deloitte
2015
Paid/payable
to auditor (if
not Deloitte)
United
Kingdom
Overseas
Total
Overseas
United
Kingdom
Overseas
Total
Overseas
1.5
2.6
4.1
–
1.5
2.1
3.6
–
0.9
2.4
0.5
–
0.3
0.1
0.4
1.3
3.9
6.5
1.3
0.2
0.5
0.6
0.6
3.2
4.8
8.9
1.8
0.2
0.8
0.7
1.0
4.5
0.2
0.2
0.1
–
–
–
–
0.1
0.5
2.0
0.6
–
0.1
0.3
0.4
1.4
5.9
8.0
1.3
0.2
0.4
0.4
0.7
3.0
6.4
10.0
1.9
0.2
0.5
0.7
1.1
4.4
0.2
0.2
–
0.1
0.1
–
0.1
0.3
(1)
Includes $1.4 million (2015: $1.5 million) for the interim review.
156
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
34. CONTINGENT LIABILITIES
The Group is subject to various claims which arise in the ordinary course of business. Additionally, the Group has provided indemnities against certain liabilities
as part of agreements for the sale or other disposal of business operations. Having taken appropriate legal advice, the Group believes that a material liability
arising from the indemnities provided is remote.
The Group is required to provide guarantees in several jurisdictions in respect of environmental restoration and decommissioning obligations. The Group has
provided for the estimated cost of these activities.
No contingent liabilities were secured on the assets of the Group at 31 December 2016 or 31 December 2015.
Anglo American South Africa Limited (AASA)
AASA is named as one of 32 respondents in a consolidated class certification application filed in the South Gauteng High Court (Johannesburg) on behalf of
former mineworkers (or their dependants or survivors) who allegedly contracted silicosis or tuberculosis as a result of having worked for various gold mining
companies including some in which AASA was a shareholder and to which AASA provided various technical and administrative services. The High Court has
certified two classes of claimants: those with silicosis or who died from silicosis and those with tuberculosis or who died from tuberculosis. AASA and other
respondents are appealing the ruling.
AASA, AngloGold Ashanti, Gold Fields, Harmony Gold and Sibanye Gold announced in November 2014 that they had formed an industry working group
to address issues relating to compensation and medical care for occupational lung disease in the gold mining industry in South Africa. The companies are
in the process of engaging all stakeholders on these matters, including government, organised labour, other mining companies and legal representatives
of claimants who have filed legal suits against the companies. These legal proceedings are being defended. The industry working group is seeking a
comprehensive solution to address legacy compensation issues and future legal frameworks that is fair to past and current employees and enables
companies to continue to be competitive over the long term.
AASA was also a defendant in approximately 4,400 separate lawsuits filed in the North Gauteng High Court (Pretoria), which were referred to arbitration.
These 4,400 claims (approximately 1,200 of which were separately instituted against AngloGold Ashanti) were settled by AASA and AngloGold Ashanti in
2016, without admission of liability, for an amount which is not material to the Group.
35. RELATED PARTY TRANSACTIONS
The Group has a related party relationship with its subsidiaries, joint operations, associates and joint ventures (see notes 37 and 40). Members of the Board
and the Group Management Committee are considered to be related parties.
The Company and its subsidiaries, in the ordinary course of business, enter into various sale, purchase and service transactions with joint operations,
associates, joint ventures and others in which the Group has a material interest. These transactions are under terms that are no less favourable to the Group
than those arranged with third parties.
US$ million
Transactions with related parties
Sale of goods and services
Purchase of goods and services
Balances with related parties
Trade and other receivables from related parties
Trade and other payables to related parties
Loans receivable from related parties(2)
Associates
Joint ventures
Joint operations(1)
2016
2015
2016
2015
2016
2015
19
(399)
5
(126)
–
28
(425)
7
(135)
–
1
(137)
3
(183)
171
(3,390)
123
(2,606)
1
(30)
401
–
(15)
431
17
(79)
–
15
(68)
21
(1) Represents the portion of balances and transactions with joint operations or joint operation partners that the Group does not have the right to offset against the corresponding
amount recorded by the respective joint operations. These amounts primarily relate to purchases by De Beers and Platinum from their joint operations in excess of the Group’s attributable
share of their production.
Included in ‘Financial asset investments’ on the Consolidated balance sheet.
(2)
At 31 December 2016 the directors of the Company and their immediate relatives controlled 0.33% (2015: 0.2%) of the voting shares of the Company.
Remuneration and benefits received by directors are disclosed in the Remuneration report. Remuneration and benefits of key management personnel,
including directors, are disclosed in note 26.
Information relating to pension fund arrangements is disclosed in note 27.
Anglo American plc Annual Report 2016
157
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
36. EVENTS OCCURRING AFTER END OF YEAR
On 3 February 2017, the South African Revenue Services and Sishen Iron Ore Company Proprietary Limited (a subsidiary of Kumba Iron Ore Limited) agreed
on a R2.5 billion (approximately $185 million) settlement of a tax matter relating to the period covering 2006 to 2015 inclusive. The Group had previously
provided for R1.5 billion and an additional R1.0 billion was provided in 2016.
On 14 February 2017, the Group announced that it had agreed the sale of its interest in the Union platinum mine to Siyanda Resources Proprietary Limited
(‘Siyanda’) for consideration comprising upfront cash of R400 million (approximately $29 million) and deferred consideration based on the operation’s
free cash flow generation over a ten year period.
37. GROUP COMPANIES
The Group consists of the parent company, Anglo American plc, incorporated in the United Kingdom and its subsidiaries, joint operations, joint ventures and
associates. For information on the Group’s policies and the nature of any significant judgements in relation to the basis of accounting for interests in other
entities, see note 1. Further information on interests in associates and joint ventures is provided in note 13.
The Group holds certain interests in both consolidated and unconsolidated structured entities. Further details on consolidated structured entities can be found
in note 32. Unconsolidated structured entities consist of employee benefit trusts and community investment vehicles, principally in South Africa. Financial
support provided to these entities by the Group is not material.
The principal subsidiaries, joint operations, joint ventures and associates of the Group and the Group percentage of equity capital are set out below. All these
interests are held indirectly by the parent company and are consolidated within these financial statements. A complete list of the Group’s related undertakings
can be found in note 40.
Subsidiary undertakings
De Beers
De Beers Consolidated Mines Proprietary Limited(3)
De Beers plc(4)
Country of incorporation(1)
Business
South Africa
Jersey(5)
Diamonds
Diamonds
Percentage of equity owned(2)
2016
74%
85%
2015
74%
85%
South Africa
Platinum
78%
78%
Copper
Copper project
50.1%
81.9%
50.1%
81.9%
Nickel
100%
100%
Chile
Peru
Brazil
Brazil
Brazil
Brazil
South Africa
South Africa
Australia
South Africa
Canada
Niobium
Phosphates
Iron ore project
Iron ore
Iron ore
Coal
Coal
Coal
Country of incorporation(1)
Botswana
Namibia
Chile
Australia
Australia
Australia
Australia
Australia
Business
Diamonds
Diamonds
Copper
Coal
Coal
Coal
Coal
Coal
–
–
100%
100%
100%
69.7%
76.3%
100%
100%
100%
100%
69.7%
73.9%
100%
100%
100%
Percentage of equity owned(10)
2016
50%
50%
44%
70%
51%
88.2%
–
88%
2015
50%
50%
44%
70%
51%
88.2%
70%
88%
Platinum
Anglo American Platinum Limited(6)
Copper
Anglo American Sur S.A.
Anglo American Quellaveco S.A.
Nickel
Anglo American Níquel Brasil Limitada
Niobium and Phosphates(7)
Anglo American Nióbio Brasil Limitada
Anglo American Fosfatos Brasil Limitada
Iron Ore and Manganese
Anglo American Minério de Ferro Brasil S.A.
Kumba Iron Ore Limited
Sishen Iron Ore Company Proprietary Limited(8)
Coal
Anglo American Metallurgical Coal Holdings Limited
Anglo Coal(9)
Peace River Coal Inc.
Proportionately consolidated joint operations
Debswana Diamond Company (Proprietary) Limited(11)
Namdeb Holdings (Proprietary) Limited(12)
Compañía Minera Doña Inés de Collahuasi SCM
Capcoal(13)
Dawson(13)
Drayton(13)
Foxleigh(13) (14)
Moranbah North(13)
See page 159 for footnotes.
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FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
37. GROUP COMPANIES continued
Joint ventures
Ferroport Logística Comercial Exportadora S.A.
Samancor Holdings Proprietary Limited(15)(16)(17)
Groote Eylandt Mining Company Pty Limited (GEMCO)(15)(16)
Tasmanian Electro Metallurgical Company Pty Limited (TEMCO)(15)(16)
Country of incorporation(1)
Brazil
South Africa
Australia
Australia
Business
Port
Manganese
Manganese
Manganese
Associates
Carbones del Cerrejón Limited
Cerrejón Zona Norte S.A.
Jellinbah Group Pty Limited(19)
Country of incorporation(1)
Anguilla(18)
Colombia
Australia
Business
Coal
Coal
Coal
Percentage of equity owned(10)
2016
50%
40%
40%
40%
2015
50%
40%
40%
40%
Percentage of equity owned(10)
2016
33.3%
33.3%
33.3%
2015
33.3%
33.3%
33.3%
(1) The principal country of operation is the same as the country of incorporation for all entities with the exception of De Beers plc (De Beers), which has worldwide operations.
(2) The proportion of voting rights of subsidiaries held by the Group is the same as the proportion of equity owned.
(3) The 74% interest in De Beers Consolidated Mines Proprietary Limited (DBCM) is held indirectly through De Beers. The 74% interest represents De Beers’ legal ownership share in DBCM. For
accounting purposes De Beers consolidates 100% of DBCM as it is deemed to control the BEE entity, Ponahalo, which holds the remaining 26%. The Group’s effective interest in DBCM is 85%.
(4) This entity was previously known as De Beers Société Anonyme and incorporated in Luxembourg.
(5) Tax resident in the United Kingdom.
(6) The Group’s effective interest in Anglo American Platinum Limited is 79.6% which includes shares issued as part of a community empowerment deal.
(7) Niobium and Phosphates was sold on 30 September 2016 (see note 30).
(8) The 76.3% (2015: 73.9%) interest in Sishen Iron Ore Company Proprietary Limited (SIOC) is held indirectly through Kumba Iron Ore Limited, in which the Group has a 69.7% interest. A 3.1%
interest in SIOC was previously held by the Kumba Envision Trust for the benefit of participants in Kumba’s broad based employee share scheme for non-managerial Historically Disadvantaged
South African employees. The Trust met the definition of a subsidiary under IFRS, and was therefore consolidated by Kumba Iron Ore Limited. The earlier mentioned interest in the Kumba
Envision Trust is no longer held at year end due to the wind up of the Envision Trust in November 2016. Consequently the effective interest in SIOC included in the Group’s results is 53.2%
(2015: 53.7%).
(9) A division of Anglo Operations Proprietary Limited, a wholly owned subsidiary.
(10) All equity interests shown are ordinary shares.
(11) The 50% interest in Debswana Diamond Company (Proprietary) Limited is held indirectly through De Beers and is consolidated on a 19.2% proportionate basis, reflecting economic interest.
The Group’s effective interest in Debswana Diamond Company (Proprietary) Limited is 16.3%.
(12) The 50% interest in Namdeb Holdings (Proprietary) Limited is held indirectly through De Beers. The Group’s effective interest in Namdeb Holdings (Proprietary) Limited is 42.5%.
(13) The wholly owned subsidiary Anglo American Metallurgical Coal Holdings Limited holds the proportionately consolidated joint operations. These operations are unincorporated and
jointly controlled.
(14) The Group disposed of its interest in Foxleigh on 29 August 2016.
(15) Samancor has been accounted for as a joint venture since March 2015, following amendments to the agreement that governs the Group’s interests in Samancor which resulted in the Group
acquiring joint control over the business (previously accounted for as an associate).
(16) These entities have a 30 June year end.
(17) Samancor Holdings Proprietary Limited is the parent company of Hotazel Manganese Mines (HMM) and the Metalloys Smelter. BEE shareholders hold a 26% interest in HMM and therefore the
Group’s effective ownership interest in HMM is 29.6%.
(18) Tax resident in Colombia.
(19) The Group’s effective interest in the Jellinbah operation is 23.3%. The entity has a 30 June year end.
38. FINANCIAL RISK MANAGEMENT
The Board approves and monitors the risk management processes, including documented treasury policies, counterparty limits and 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 Consolidated balance sheet at
31 December is as follows (subcategorised into credit risk, commodity price risk, foreign exchange risk and interest rate risk). See note 24 for liquidity risk.
Market risks
a) Credit risk
Credit risk is the risk that a counterparty to a financial instrument will cause a loss to the Group by failing to pay for its obligation. The Group’s principal financial
assets are cash, trade and other receivables, investments and derivative financial instruments. The Group’s maximum exposure to credit risk primarily arises
from these financial assets and is as follows:
US$ million
Cash and cash equivalents
Trade and other receivables(1)
Financial asset investments(2)
Derivative financial assets
(1) Trade and other receivables exclude prepayments and tax receivables.
(2) Financial asset investments exclude available for sale investments.
2016
6,051
2,289
701
593
9,634
2015
6,895
1,885
662
1,149
10,591
The Group limits credit risk on liquid funds and derivative financial instruments through diversification of exposures with a range of financial institutions
approved by the Board. Counterparty limits are set for each financial institution with reference to credit ratings assigned by Standard & Poor’s, Moody’s and
Fitch Ratings, shareholder equity (in case of relationship banks) and fund size (in case of asset managers).
Given the diverse nature of the Group’s operations (both in relation to commodity markets and geographically), and the use of payment security instruments
(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.
A provision for impairment of 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. Details of the credit quality of trade receivables and the associated provision for impairment are disclosed in note 16.
Anglo American plc Annual Report 2016
159
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
38. FINANCIAL RISK MANAGEMENT continued
b) Commodity price risk
The Group’s earnings are exposed to movements in the prices of the commodities it produces.
The Group’s policy is to sell its products at prevailing market prices and is generally not to hedge commodity price risk, although some hedging may be
undertaken for strategic reasons. In such cases, the Group generally uses forward contracts to hedge the price risk.
Certain of the Group’s sales and purchases are provisionally priced, meaning that the selling price is determined normally 30 to 180 days after delivery
to the customer, based on quoted market prices stipulated in the contract, 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
Total net financial instruments
(excluding derivatives)
Derivatives
2016
Commodity price linked
Commodity price linked
Subject to
price
movements(1)
421
(28)
393
Fixed
price(2)
464
–
464
Not
linked to
commodity
price
Subject to
price
Total
movements(1)
(8,159)
(1,254)
(9,413)
(7,274)
(1,282)
(8,556)
337
16
353
Fixed
price(2)
334
–
334
Not
linked to
commodity
price
2015
Total
(11,674)
(1,330)
(13,004)
(11,003)
(1,314)
(12,317)
(1)
(2)
Includes provisionally priced trade receivables and trade payables.
Includes receivables and payables for commodity sales and purchases not subject to price adjustment at the balance sheet date.
Commodity based contracts that are classified as part of normal sales and purchases and settled through physical delivery of the Group’s production are not
marked to market.
c) Foreign exchange risk
As a global business, the Group is exposed to many currencies principally as a result of non-US dollar operating costs and, to a lesser extent, from non-US
dollar revenue. The Brazilian real, South African rand and Australian dollar are the most significant non-US dollar currencies influencing costs. A strengthening
of the US dollar against the currencies to which the Group is exposed has a positive effect on the Group’s underlying earnings. The Group’s policy is generally
not to hedge such exposures given the correlation, over the longer term, with commodity prices and the diversified nature of the Group, though exceptions can
be approved by the Group Management Committee.
In addition, currency exposures exist in respect of non-US dollar approved capital expenditure projects and non-US dollar borrowings in US dollar functional
currency entities. The Group’s policy is that such exposures should be hedged subject to a review of the specific circumstances of the exposure.
Analysis of foreign exchange risk associated with net debt balances and the impact of derivatives to hedge against this risk is included within note 24. Net
other financial liabilities (excluding net debt related balances and cash in disposal groups, but including the debit valuation adjustment attributable to
derivatives hedging net debt) are $72 million. This includes net assets of $503 million denominated in US dollars and $215 million denominated in Brazilian
real, and net liabilities of $212 million denominated in Australian dollars, $207 million denominated in Chilean pesos and $234 million denominated in
South African rand.
d) Interest rate risk
Interest rate risk arises due to fluctuations in interest rates which impact on the value of short term investments and financing activities. The Group is principally
exposed to US and South African interest rates.
The Group’s policy is to borrow funds at floating rates of interest given the link with economic output and therefore the correlation, over the longer term, with
commodity prices. The Group uses interest rate swap contracts to manage its exposure to interest rate movements on its debt. Strategic hedging using fixed
rate debt may also be undertaken from time to time if approved by the Group Management Committee.
In respect of financial assets, the Group’s policy is to invest cash at floating rates of interest and to maintain cash reserves in short term investments (less than
one year) in order to maintain liquidity, while achieving a satisfactory return for shareholders.
Analysis of interest rate risk associated with net debt balances and the impact of derivatives to hedge against this risk is included within note 24. Net other
financial liabilities (excluding net debt related balances and cash in disposal groups, but including the debit valuation adjustment attributable to derivatives
hedging net debt) of $72 million, are primarily non-interest bearing.
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FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
38. FINANCIAL RISK MANAGEMENT continued
e) Financial instrument sensitivities
Financial instruments affected by market risk include borrowings, deposits, derivative financial instruments, trade receivables and trade payables. The
following analysis is intended to illustrate the sensitivity of the Group’s financial instruments at 31 December to changes in foreign currencies, commodity
prices 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 at 31 December.
The following assumptions were made in calculating the sensitivity analysis:
• all income statement sensitivities also impact equity
• for debt and other deposits carried at amortised cost, 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
• no sensitivity has been calculated on derivatives and related underlying instruments designated into fair value hedge relationships as these are assumed
materially to offset one another
• all hedge relationships are assumed to be fully effective
• debt with a maturity of less than 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 table shows the illustrative effect on the income statement and equity that would result from reasonably possible
changes in the relevant foreign currency, commodity price and interest rate.
US$ million
Foreign currency sensitivities(1)
+10% US dollar to rand
–10% US dollar to rand
+10% US dollar to Brazilian real(2)
–10% US dollar to Brazilian real(2)
+10% US dollar to Australian dollar
–10% US dollar to Australian dollar
+10% US dollar to Chilean peso
–10% US dollar to Chilean peso
Commodity price sensitivities
10% increase in the copper price
10% decrease in the copper price
10% increase in the platinum group metals price
10% decrease in the platinum group metals price
Interest rate sensitivity
50bps increase in LIBOR(3)
50bps decrease in LIBOR(3)
Income
2016
Equity
Income
(74)
74
1
(1)
10
(10)
24
(24)
50
(50)
(30)
30
(30)
30
(74)
74
1
(1)
10
(10)
24
(24)
50
(50)
(30)
30
(30)
30
(19)
19
(46)
46
9
(9)
21
(24)
117
(117)
(13)
13
(32)
32
2015
Equity
(19)
19
(46)
46
9
(9)
21
(24)
117
(117)
(13)
13
(32)
32
(1) + represents strengthening of US dollar against the respective currency.
(2)
Includes sensitivities for derivatives related to capital expenditure.
(3) Without the impact of capitalised interest, the Group’s sensitivity to a 50bps increase and decrease in LIBOR would be $57 million (2015: $61 million) loss and gain respectively.
The above sensitivities are calculated with reference to a single moment in time and are subject to 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.
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 whilst, in reality, commodity prices,
interest rates and foreign currencies do not move independently.
Anglo American plc Annual Report 2016
161
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
39. ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRS Interpretations Committee
(IFRIC) interpretations as adopted for use by the European Union, with those
parts of the Companies Act 2006 applicable to companies reporting under
IFRS and with the requirements of the Disclosure and Transparency rules of
the Financial Conduct 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 revaluation of pension
assets and liabilities and certain financial instruments. A summary of the
principal Group accounting policies is set out below.
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.
As permitted by UK company law, the Group’s results are presented in
US dollars, the currency in which its business is primarily conducted.
Sales of metal concentrate are stated at their invoiced amount which is
net of treatment and refining charges. Sales of certain commodities are
provisionally priced such that the price is not settled until a predetermined
future date and is 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 recognised in
revenue, see note 4 for more information on provisional price adjustments.
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.
Revenue from services is recognised as services are rendered and accepted
by the customer. Amounts billed to customers in respect of shipping and
handling activities are classified as revenue where the Group is responsible
for freight. In situations where the Group is acting as an agent, amounts billed
to customers are offset against the relevant costs.
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.
Going concern
The directors have, at the time of approving the financial statements, a
reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future.
Thus the going concern basis of accounting in preparing the financial
statements continues to be adopted. Further details are contained in the
Directors’ report on page 198.
Basis of consolidation
The financial statements incorporate a consolidation of the financial
statements of the Company and entities controlled by the Company (its
subsidiaries). Control is achieved where the Company is exposed, or has
rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
The results of subsidiaries acquired or disposed of during the year are
included in the income statement from the effective date of acquisition
or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the results of subsidiaries, joint
arrangements 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, non-controlling interests are presented
in equity separately from the equity attributable to shareholders of the
Company. Profit or loss and other comprehensive income are attributed to
the shareholders of the Company and to non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
Changes in ownership interest in subsidiaries that do not result in a change
in control are accounted for in equity. The carrying amounts of the controlling
and non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiary. Any difference between the amount by
which the non-controlling interest is adjusted and the fair value of the
consideration paid or received is recorded directly in equity and attributed
to the shareholders of the Company.
39a. 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. 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.
39b. Borrowing costs
Interest on borrowings directly relating to the financing of qualifying assets
in the course of construction is added to the capitalised cost of those projects
under ‘Capital works in progress’, until such time as the assets are
substantially ready for their intended use or sale. 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.
39c. Tax
The tax expense includes the current tax and deferred tax charge recognised
in the income statement.
Current tax 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 reporting date.
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for taxation purposes. 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 of an asset or liability in a transaction (other
than in a business combination) that affects neither taxable profit nor
accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries, joint arrangements 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 reporting 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, based on the laws
that have been enacted or substantively enacted by the reporting date.
Deferred tax is charged or credited to 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.
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FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
39. ACCOUNTING POLICIES continued
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 in that taxation authority.
39d. Business combinations and goodwill arising thereon
The identifiable assets, liabilities and contingent liabilities of a subsidiary,
a joint arrangement or an associate, which can be measured reliably, are
recorded at their provisional fair values at the date of acquisition. Goodwill
is the fair value of the consideration transferred (including contingent
consideration and previously held non-controlling interests) less the fair
value of the Group’s share of identifiable net assets on acquisition.
Where a business combination is achieved in stages, the Group’s previously
held interests in the acquiree are remeasured to fair value at the acquisition
date and the resulting gain or loss is recognised in the income statement.
Amounts arising from interests in the acquiree prior to the acquisition date
that have previously been recognised in other comprehensive income are
reclassified to the income statement, where such treatment would be
appropriate if that interest were disposed of.
Transaction costs incurred in connection with the business combination
are expensed. Provisional fair values are finalised within 12 months of the
acquisition date.
Goodwill in respect of subsidiaries and joint operations is included within
intangible assets. Goodwill relating to associates and joint ventures is
included within the carrying value of the investment.
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 recognised directly in the income statement in the period of acquisition.
For non-wholly owned subsidiaries, non-controlling interests are initially
recorded at the non-controlling interests’ proportion of the fair values of net
assets recognised at acquisition.
39e. Non-mining licences and other intangibles
Non-mining licences and other intangibles are measured at cost less
accumulated amortisation and accumulated impairment losses. Intangible
assets acquired as part of an acquisition of a business are capitalised
separately from goodwill if the asset is separable or arises from contractual or
legal rights and the fair value can be measured reliably on initial recognition.
Intangible assets are amortised over their estimated useful lives, usually
between 3 and 20 years, except goodwill and those intangible assets that are
considered to have indefinite lives. For intangible assets with a finite life, the
amortisation period is determined as the period over which the Group expects
to obtain benefits from the asset, taking account of all relevant facts and
circumstances including contractual lives and expectations about the
renewal of contractual arrangements without significant incremental costs.
An intangible asset is deemed to have an indefinite life when, based on an
analysis of all of the relevant factors, there is no foreseeable limit to the period
over which the asset is expected to generate cash flows for the Group.
Amortisation methods, residual values and estimated useful lives are
reviewed at least annually.
39f. Impairment of goodwill
Goodwill arising on business combinations is allocated to the group of cash
generating units (CGUs) that is expected to benefit from 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. The
recoverable amount of the CGU, or group of CGUs, to which goodwill has
been allocated is tested for impairment annually, or when events or changes
in circumstances indicate that it may be impaired.
Any impairment loss is recognised immediately in the income statement.
Impairment of goodwill is not subsequently reversed.
39g. Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated
depreciation and accumulated impairment losses. Cost is the fair value of
consideration required to acquire and develop the asset and includes the
purchase price, acquisition of mineral rights, costs directly attributable to
bringing the asset to the location and condition necessary for it to be capable
of operating in the manner intended by management, the initial estimate of
any decommissioning obligation and, for assets that take a substantial period
of time to get ready for their intended use, borrowing costs.
Gains or losses on disposal of property, plant and equipment are determined
by comparing the proceeds from disposal with the carrying amount. The gain
or loss is recognised in the income statement.
Depreciation of property, plant and equipment
Mining properties are depreciated to their residual values using the unit of
production method based on Proved and Probable Ore Reserves and, in
certain limited circumstances, other Mineral Resources included in the Life
of Mine Plan. These other Mineral Resources are included in depreciation
calculations where, taking into account historical rates of conversion to Ore
Reserves, there is a high degree of confidence that they will be extracted
in an economic manner. This is the case principally for diamond operations,
where depreciation calculations are based on Diamond Reserves and
Diamond Resources included in the Life of Mine Plan. This reflects the unique
nature of diamond deposits where, due to the difficulty in estimating grade,
Life of Mine Plans frequently include significant amounts of Indicated or
Inferred Resources.
Buildings and items of plant and equipment for which the consumption of
economic benefit is linked primarily to utilisation or to throughput rather
than production, are depreciated to their residual values at varying rates
on a straight line basis over their estimated useful lives, or the Reserve Life,
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.
Under limited circumstances, items of plant and equipment may be
depreciated over a period that exceeds the Reserve Life by taking into
account additional Mineral Resources other than Proved and Probable
Reserves included in the Life of Mine Plan, after making allowance for
expected production losses based on historical rates of resource conversion.
‘Capital works in progress’ are measured at cost less any recognised
impairment. Depreciation commences when the assets are capable of
operating in the manner intended by management, at which point they are
transferred to the appropriate asset class.
Land is not depreciated.
When parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items (major components).
Depreciation methods, 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.
39h. Deferred stripping
The removal of rock or soil overlying a mineral deposit, overburden, and other
waste materials is often necessary during the initial development of an open
pit mine site, in order to access the orebody. The process of removing
overburden and other mine waste materials is referred to as stripping. The
directly attributable cost of this activity is capitalised in full within ‘Mining
properties and leases’, until the point at which the mine is considered to be
capable of operating in the manner intended by management. This is
classified as expansionary capital expenditure, within investing cash flows.
The removal of waste material after the point at which depreciation
commences is referred to as production stripping. When the waste removal
activity improves access to ore extracted in the current period, the costs of
production stripping are charged to the income statement as operating costs
in accordance with the principles of IAS 2 Inventories.
Anglo American plc Annual Report 2016
163
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
39. ACCOUNTING POLICIES continued
Where production stripping activity both produces inventory and improves
access to ore in future periods the associated costs of waste removal are
allocated between the two elements. The portion that benefits future ore
extraction is capitalised within ‘Mining properties and leases’. This is classified
as stripping and development capital expenditure, within investing cash
flows. If the amount to be capitalised cannot be specifically identified it is
determined based on the volume of waste extracted compared with expected
volume for the identified component of the orebody. Components are specific
volumes of a mine’s orebody that are determined by reference to the Life of
Mine Plan.
In certain instances significant levels of waste removal may occur during the
production phase with little or no associated production. This may occur at
both open pit and underground mines, for example longwall development.
The cost of this waste removal is capitalised in full to ‘Mining properties
and leases’.
All amounts capitalised in respect of waste removal are depreciated using the
unit of production method based on Proved and Probable Ore Reserves of
the component of the orebody to which they relate.
The effects of changes to the Life of Mine Plan on the expected cost of waste
removal or remaining Ore Reserves for a component are accounted for
prospectively as a change in estimate.
39i. Impairment of property, plant and equipment and
intangible assets excluding goodwill
At each reporting date, the Group reviews the carrying amounts of its
property, plant and equipment and intangible assets to determine whether
there is any indication that those assets are impaired. If such an indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of any impairment. Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the recoverable
amount of the 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 of disposal and value
in use (VIU). In assessing VIU, 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 loss is recognised in the income
statement.
Where an impairment loss subsequently reverses, the carrying amount of the
asset or CGU is increased to the revised estimate of its recoverable amount,
to the extent 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. A reversal of an impairment loss is
recognised in the income statement.
39j. Exploration and evaluation expenditure
Exploration and evaluation expenditure is expensed in the year in which it
is incurred.
Exploration expenditure is the cost of exploring for Mineral Resources other
than that occurring at existing operations and projects and comprises
geological and geophysical studies, exploratory drilling and sampling and
resource development.
Evaluation expenditure includes the cost of conceptual and pre-feasibility
studies and evaluation of Mineral Resources at existing operations.
When a decision is taken that a mining project is technically feasible and
commercially viable, usually after a pre-feasibility study has been completed,
subsequent directly attributable expenditure, including feasibility study costs,
are considered development expenditure and are capitalised within property,
plant and equipment.
Exploration properties acquired are recognised in the balance sheet when
management considers that their value is recoverable. These properties are
measured at cost less any accumulated impairment losses.
164
Anglo American plc Annual Report 2016
39k. Associates and joint arrangements
Associates are investments over which the Group has significant influence,
which is the power to participate in the financial and operating policy
decisions of the investee, but without the ability to exercise control or joint
control. Typically the Group owns between 20% and 50% of the voting equity
of its associates.
Joint arrangements are arrangements in which the Group shares joint control
with one or more parties. Joint control is the contractually agreed sharing of
control of an arrangement, and exists only when decisions about the activities
that significantly affect the arrangement’s returns require the unanimous
consent of the parties sharing control.
Joint arrangements are classified as either joint operations or joint ventures
based on the rights and obligations of the parties to the arrangement. In joint
operations, the parties have rights to the assets and obligations for the
liabilities relating to the arrangement, whereas in joint ventures, the parties
have rights to the net assets of the arrangement.
Joint arrangements that are not structured through a separate vehicle are
always joint operations. Joint arrangements that are structured through a
separate vehicle may be either joint operations or joint ventures depending
on the substance of the arrangement. In these cases, consideration is given
to the legal form of the separate vehicle, the terms of the contractual
arrangement and, when relevant, other facts and circumstances. When the
activities of an arrangement are primarily designed for the provision of output
to the parties, and the parties are substantially the only source of cash flows
contributing to the continuity of the operations of the arrangement, this
indicates that the parties to the arrangements have rights to the assets and
obligations for the liabilities.
The Group accounts for joint operations by recognising the assets, liabilities,
revenue and expenses for which it has rights or obligations, including its share
of such items held or incurred jointly.
Investments in associates and joint ventures are accounted for using the
equity method of accounting except when classified as held for sale. The
Group’s share of associates’ and joint ventures’ 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 and joint ventures
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
and joint ventures are reviewed on a regular basis and if there is objective
evidence that an impairment in value has occurred as a result of one or more
events during the period, the investment is impaired.
The Group’s share of an associate’s or joint venture’s losses in excess of its
interest in that associate or joint venture is not recognised unless the Group
has an obligation to fund such losses. Unrealised gains arising from
transactions with associates and joint ventures are eliminated against the
investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way, but only to the extent that there is no
evidence of impairment.
39l. Financial asset investments
Investments, other than investments in subsidiaries, joint arrangements
and associates, are financial asset investments and are initially recognised
at fair value. At subsequent reporting dates, financial assets classified as
held-to-maturity or as loans and receivables are measured at amortised cost,
less any impairment losses. Other investments are classified as either at fair
value through profit or loss (which includes investments held for trading) or
available for sale financial assets. Both categories are subsequently
measured 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 of or impaired, at which time the cumulative gain or loss previously
recognised in equity is recycled to the income statement.
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
39. ACCOUNTING POLICIES continued
39m. Impairment of financial assets (including receivables)
A financial asset not measured at fair value through profit or loss is assessed
at each reporting date to determine whether there is any objective evidence
that it is impaired. A financial asset is impaired if objective evidence indicates
that a loss event has occurred after the initial recognition of the asset.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount and the present
value of the estimated cash flows discounted at the asset’s original effective
interest rate. Losses are recognised in the income statement. When a
subsequent event causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through the income statement.
Impairment losses relating to available for sale investments are recognised
when a decline in fair value is considered significant or prolonged. These
impairment losses are recognised by transferring the cumulative loss that has
been recognised in the statement of comprehensive income to the income
statement. The loss recognised in the income statement is the difference
between the acquisition cost and the current fair value.
39n. 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 (own use) contracts that meet
the scope exemption in IAS 39 Financial Instruments: Recognition and
Measurement are recognised in earnings when they are settled by
physical delivery.
All derivatives are held at fair value in the balance sheet within ‘Derivative
financial assets’ or ‘Derivative financial liabilities’ except if they are linked
to settlement and delivery of an unquoted equity instrument and the fair
value cannot be measured reliably, in which case they are carried at cost.
A derivative cannot be measured reliably where the range of reasonable fair
value estimates is significant and the probabilities of various estimates cannot
be reasonably assessed.
Changes in the fair value of derivative financial instruments that are
designated and effective as hedges of future cash flows (cash flow hedges)
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 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 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.
The corresponding entry and gains or losses arising from remeasuring the
associated derivative are recognised in the income statement.
The gain or loss on hedging instruments relating to the effective portion
of a net investment hedge is recognised in equity (within the cumulative
translation adjustment reserve). The ineffective portion is recognised
immediately in the income statement. Gains or losses accumulated in the
cumulative translation adjustment reserve are recycled to the income
statement on disposal of the foreign operations to which they relate.
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 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 recycled to the
income statement for the period.
Changes in the fair value of any derivative instruments that are not designated
in a hedge relationship are recognised immediately in the income statement
and are classified within other gains and losses (operating costs) or net
finance costs depending on the type of risk to which the derivative relates.
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.
39o. Cash and debt
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 shown within short term borrowings in
current liabilities on the balance sheet. Cash and cash equivalents in the cash
flow statement are shown net of overdrafts. Cash and cash equivalents are
measured at amortised cost.
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.
Borrowings
Interest bearing borrowings and overdrafts are initially recognised at fair
value, net of directly attributable transaction costs. Finance charges,
including premiums payable on settlement or redemption and direct issue
costs are recognised in 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.
39p. Derecognition of financial assets and financial liabilities
Financial assets are derecognised when the right to receive cash flows from
the asset has 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.
39q. Inventories
Inventory and work in progress are measured 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 basis:
• Raw materials and consumables are measured at cost on a first in, first out
(FIFO) basis or a weighted average cost basis.
• Work in progress and finished products are measured at raw material cost,
labour cost and a proportion of manufacturing overhead expenses.
• Metal and coal stocks are included within finished products and are
measured at average cost.
At precious metals operations that produce ‘joint products’, cost is allocated
amongst products according to the ratio of contribution of these metals to
gross sales revenues.
39r. Environmental restoration and decommissioning
obligations
An obligation to incur environmental restoration, rehabilitation and
decommissioning costs arises when disturbance is caused by the
development or ongoing production of a mining asset. 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 recognised in the income statement 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 recognised in the income statement as
extraction progresses.
Anglo American plc Annual Report 2016
165
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
39. ACCOUNTING POLICIES continued
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 above.
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 disclosed separately on the balance sheet as
non-current assets.
The trusts’ assets are measured based on the nature of the underlying assets
in accordance with accounting policies for similar assets.
39s. Non-current assets and disposal groups held for sale
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 met only when a sale is highly
probable within one year from the date of classification, management is
committed to the sale and the asset or disposal group is available for
immediate sale in its present condition.
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 loss is
recognised in the income statement.
On classification as held for sale the assets are no longer depreciated.
Comparative amounts are not adjusted.
39t. Retirement benefits
The Group operates both defined benefit and defined contribution pension
plans for its employees as well as post employment medical plans. For
defined contribution plans the amount recognised in the income statement
is the contributions paid or payable during the year.
For defined benefit pension and post employment medical plans, full actuarial
valuations are carried out at least 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, is based on government bonds. Pension plan assets are
measured using year end market values.
Remeasurements comprising actuarial gains and losses, movements in asset
surplus restrictions and the return on scheme assets (excluding interest
income) are recognised immediately in the statement of comprehensive
income and are not recycled to the income statement. Any increase in the
present value of plan liabilities expected to arise from employee service
during the year is charged to operating profit. The net interest income or cost
on the net defined benefit asset or liability is included in investment income or
interest expense respectively.
Past service cost is recognised immediately to the extent that the benefits
are already vested and otherwise amortised on a straight line basis over the
average period until the benefits vest.
The retirement benefit obligation recognised on the balance sheet represents
the present value of the deficit or surplus of the defined benefit plans. Any
recognised surplus is limited to the present value of available refunds or
reductions in future contributions to the plan.
39u. Share-based payments
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 shares at the grant date. For all share schemes with
non-market 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.
39v. 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 the cost, representing the fair value of the BEE credentials obtained by
the subsidiary, is recorded in the income statement.
39w. Foreign currency transactions and translation
Foreign currency transactions by Group companies are recognised in the
functional currencies of the companies at the exchange rate ruling on the date
of the transaction. At each reporting date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates prevailing
on the reporting date. Gains and losses arising on retranslation are included in
the income statement for the period and are classified as either operating or
financing depending on the nature of the monetary item giving rise to them.
Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date
of the transaction.
On consolidation, the assets and liabilities of the Group’s foreign operations
are translated into the presentation currency of the Group at exchange rates
prevailing on the reporting date. Income and expense items are translated at
the average exchange rates for the period where these approximate the rates
at the dates of the transactions. Any exchange differences arising are
classified within the statement of comprehensive income 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 in the foreseeable future, 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 recycled from equity and recognised
as income or expense on disposal of the operation to which they relate.
Goodwill and fair value adjustments arising on the acquisition of foreign
entities are treated as assets of the foreign entity and translated at the
closing rate.
39x. 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 the right to use that asset is conveyed through the contract.
Rental costs under operating leases are recognised in the income statement
in equal annual amounts over the lease term.
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Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP
The Group consists of the parent company, Anglo American plc, incorporated in the United Kingdom and its subsidiaries, joint operations, joint ventures and
associates. In accordance with Section 409 of the Companies Act 2006 a full list of related undertakings, the country of incorporation and the effective
percentage of equity owned as at 31 December 2016 is disclosed below. Unless otherwise disclosed all entities with an indirect equity holding of greater than
51% are considered subsidiary undertakings. See note 37 for the Group’s principal subsidiaries, joint operations, joint ventures and associates.
Percentage of
equity owned
Registered address
Country of
incorporation(1)(2)
Angola
Anguilla(3)
Argentina
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Belgium
Belgium
Belgium
Name of undertaking
De Beers Angola Holdings S.A.
Carbones del Cerrejón Limited
Minera Anglo American Argentina S.A.
A.C.N. 127 881 510 Pty Ltd
Anglo American Australia Finance Limited
Anglo American Australia Holdings Pty Limited
Anglo American Australia Limited
Anglo American Exploration (Australia) Pty Ltd
Anglo American Investments (Australia) Limited
Anglo American Metallurgical Coal Assets Eastern Australia
Limited
Anglo American Metallurgical Coal Assets Pty Ltd
Anglo American Metallurgical Coal Finance Ltd
Anglo American Metallurgical Coal Holdings Limited
Anglo American Metallurgical Coal Pty Ltd
Anglo American Thermal Coal (Australia) Pty. Ltd.
Anglo Coal (Archveyor Management) Pty Limited
Anglo Coal (Capcoal Management) Pty Limited
Anglo Coal (Contracting) Pty Ltd
Anglo Coal (Dartbrook Management) Pty Limited
Anglo Coal (Dartbrook) Pty Ltd
Anglo Coal (Dawson Management) Pty Ltd
Anglo Coal (Dawson Services) Pty Ltd
Anglo Coal (Dawson South Management) Pty Ltd
Anglo Coal (Dawson South) Pty Ltd
Anglo Coal (Dawson) Holdings Pty Ltd
Anglo Coal (Dawson) Limited
Anglo Coal (Drayton Management) Pty Limited
Anglo Coal (Drayton South Management) Pty Ltd
Anglo Coal (Drayton South) Pty Ltd
Anglo Coal (Drayton) No.2 Pty Limited
Anglo Coal (Drayton) Pty Ltd
Anglo Coal (German Creek) Pty Ltd
Anglo Coal (Grasstree Management) Pty Limited
Anglo Coal (Grosvenor Management) Pty Ltd
Anglo Coal (Grosvenor) Pty Ltd
Anglo Coal (Jellinbah) Holdings Pty Ltd
Anglo Coal (Monash Energy) Holdings Pty Limited
Anglo Coal (Moranbah North Management) Pty Limited
Anglo Coal (Roper Creek) Pty Ltd
Anglo Coal (Theodore South) Pty Ltd
Anglo Operations (Australia) Pty Ltd
Bowen Basin Coal Pty Ltd
Dalrymple Bay Coal Terminal Pty Ltd
Dartbrook Coal (Sales) Pty Ltd
Dawson Coal Processing Pty Ltd
Dawson Highwall Mining Pty Ltd
Dawson Sales Pty Ltd
Dawson South Sales Pty Ltd
De Beers Australia Exploration Limited
Drayton Coal (Sales) Pty. Ltd.
Drayton Coal Shipping Pty. Limited
German Creek Coal Pty. Limited
Groote Eylandt Mining Company Pty Limited
Grosvenor Sales Pty Ltd
Jellinbah Group Pty Ltd
Jellinbah Mining Pty Ltd
Jellinbah Resources Pty Ltd
Jena Pty. Limited
JG Land Company Pty Ltd
Lake Vermont Marketing Pty Ltd
Lake Vermont Resources Pty Ltd
Monash Energy Coal Ltd
Monash Energy Pty Limited
Moranbah North Coal (No2) Pty Ltd
Moranbah North Coal (Sales) Pty Ltd
Moranbah North Coal Pty Ltd
QCMM (Lake Vermont Holdings) Pty Ltd
QCMM Finance Pty Ltd
Tasmanian Electro Metallurgical Company Pty Limited
Tremell Pty Ltd
De Beers Auction Sales Belgium NV
Diamond Trading Company Proprietary Ltd NV
International Institute of Diamond Grading and Research
Bermuda
(Belgium) NV
Coromin Limited
See page 174 for footnotes.
85% Rua Rainha Ginga 87 9º andar, Luanda, Caixa Postal 4031
33% Calle 100 No. 19-54 Piso 12. Bogota, Colombia
100% San Martin 1167 Piso 2° Mendoza
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100%(4) Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
23% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
25% Martin Armstrong Drive, Hay Point via Mackay, QLD 4741
84% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
51% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
51% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
85% 896 Beaufort Street, Suite 4, Inglewood, WA 6052
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
88% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
70% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
40% Level 235,108 St Georges Terrace, Perth, WA 6000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
23% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
50% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
88% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
100% Level 11, 201 Charlotte Street, Brisbane, QLD 4000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
40% Level 235, 108 St Georges Terrace, Perth, WA 6000
33% Level 7, Comalco Place, 12 Creek Street, Brisbane, QLD 4000
85% 8th Floor, 21 Schupstraat, 2018 Antwerp
85% 21 Schupstraat, 2018 Antwerp
85% 21 Schupstraat, 2018 Antwerp
100% Clarendon House, 2 Church Street, Hamilton
Anglo American plc Annual Report 2016
167
Financial statements
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP continued
Country of
incorporation(1)(2)
Bermuda
Botswana
Botswana
Botswana
Name of undertaking
Holdac Limited
Ambase Exploration (Botswana) (Pty) Ltd
Ambase Prospecting (Botswana) (Pty) Ltd
Anglo American Bokamoso (Pty) Ltd
Percentage of
equity owned
Registered address
100% Clarendon House, 2 Church Street, Hamilton
100% 1st Floor, Mokolwane House, Plot 67978, Fairground, Gaborone
100% 1st Floor, Mokolwane House, Plot 67978, Fairground, Gaborone
100% c/o KPMG, Chartered Accountants, Plot 67977, Off Tlokweng Road, Fairground,
PO Box 1519, Gaborone
Anglo American Corporation Botswana (Services) Limited
Anglo Coal Botswana (Pty) Ltd
Broadhurst Primary School (Pty) Ltd
De Beers Botswana (Pty) Ltd
De Beers Global Sightholder Sales (Pty) Ltd
De Beers Holdings Botswana (Pty) Ltd
Debswana ART Fund Trust
Debswana Diamond Company (Pty) Ltd
Diamond Trading Company Botswana (Pty) Ltd
Rainbow Gas and Coal Exploration (Pty) Ltd
Sesiro Insurance Company (Pty) Ltd
100% Plot 67977, Fairground Office Park, Gaborone
100% Plot 67977, Fairground Office Park, Gaborone
29% Plot 64288 Airport Road, Block 8, Gaborone
85% 3rd Floor, DTCB Building, Plot 63016, Block 8, Airport Road, Gaborone
85% 3rd Floor, DTCB Building, Plot 63016, Block 8, Airport Road, Gaborone
85% 5th Floor, Debswana House, Main Mall, Gaborone
43% Plot 64288, Airport Road, Block 8, Gaborone
43%(5) Plot 64288, Airport Road, Block 8, Gaborone
43% Plot 63016, Airport Road, Block 8, Gaborone
51% Plot 67977, Fairground Office Park, Gaborone
43% First Floor Debswana Corporate Centre, Plot 64288, Airport Road, Block 8,
The Diamond Trust
Anglo American Consultoria em Minério de Ferro Ltda.
Gaborone
21% Debswana House, The Mall, Gaborone
100% Rua Maria Luiza Santiago, nº. 200, 16º andar (parte), bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
Anglo American Investimentos - Minério de Ferro Ltda.
100% Rua Maria Luiza Santiago, nº. 200, 16º andar, sala 1603, bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
Anglo American Minério de Ferro Brasil S.A.
100% Rua Maria Luiza Santiago, nº. 200, 16º andar, sala 1601, bairro Santa Lucia,
CEP 30360-740, Belo Horizonte, Minas Gerais
Anglo American Níquel Brasil Ltda.
100% Rua Maria Luiza Santiago, nº. 200, 20º andar (parte), Santa Lúcia, CEP 30360-
Anglo American Participações Minério de Ferro Ltda.
100% Rua Maria Luiza Santiago, nº. 200, 16º andar, sala 1602, bairro Santa Lúcia,
Anglo Ferrous Brazil Participações S.A.
100% Rua Maria Luiza Santiago, nº. 200, 20º andar (parte), bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
740, Belo Horizonte, Minas Gerais
Coruripe Participações Ltda.
Element Six Ltda.
Ferroport Logística Comercial Exportadora S.A.
CEP 30360-740, Belo Horizonte, Minas Gerais
100% Rua Maria Luiza Santiago, nº. 200, 16º andar (parte), bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
51% Rua da Consolação, 368, 15º andar Consolação, São Paulo
50% Rua da Passagem, nº. 123, 11º andar, sala 1101, Botafogo, CEP 22290-030,
Rio de Janeiro/RJ
GD Empreendimentos Imobiliários S.A.
Gespa Gesso Paulista Ltda.
33% Rua Visconde de Ouro Preto, nº. 5, 11º andar (parte), Botafogo, Rio de Janeiro/RJ
100% Rua Maria Luiza Santiago, nº. 200, 16º andar (parte), bairro Santa Lúcia, CEP
Guaporé Mineração Ltda.
Instituto Anglo American Brasil
Mineração Itamaracá Ltda.
Mineração Tanagra Ltda.
Mineração Tariana Ltda.
Morro do Níquel Ltda.
30360-740, Belo Horizonte, Minas Gerais
49% Avenida Paulista, nº. 2.300, 10º andar (parte), CEP 01.310-300, São Paulo/SP
100% Avenida Paulista, nº. 2.300, 10º andar, CEP 01.310-300, São Paulo/SP
100% Rua Maria Luiza Santiago, nº. 200, 16º andar (parte), bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
49% Rua Maria Luiza Santiago, nº. 200, 20º andar (parte), bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
100% Rua Maria Luiza Santiago, nº. 200, 16º andar (parte), bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
100% Rua Maria Luiza Santiago, nº. 200, 16º andar (parte), bairro Santa Lúcia,
CEP 30360-740, Belo Horizonte, Minas Gerais
Câmara De Comércio Brasil República Sul Africana
Anglo American Services (International) Limited
100% Avenida Paulista, nº. 2.300, 10º andar, Cerqueira César, São Paulo/SP
100% 9 Columbus Centre, Pelican Drive, P.O. Box 805, Road Town, Tortola, VG1110
De Beers Angola Investments Limited
68% 9 Columbus Centre, Pelican Drive, Road Town, Tortola
De Beers Angola Prospecting Pty Ltd
68% Midocean Management and Trust Services (BVI) Limited, Midocean Chambers,
De Beers Centenary Angola Properties Ltd
85% Midocean Chambers, 9 Columbus Centre, Pelican Drive, Road Town, Tortola
P.O. Box 805, Road Town, Tortola
Delibes Holdings Limited
85% 9 Columbus Centre, Pelican Drive, P.O. Box 805, Road Town, Tortola, VG1110
Highbirch Ltd
100% 9 Columbus Centre, Pelican Drive, P.O. Box 805, Road Town, Tortola, VG1110
Loma de Niquel Holdings Limited
94% Craigmuir Chambers, P.O. Box 71, Road Town, Tortola
Scallion Limited
85% Midocean Chambers, 9 Columbus Centre, Pelican Drive, Road Town, Tortola
0912055 BC Ltd
4259785 Canada Inc.
Anglo American Exploration (Canada) Ltd.
Belcourt Saxon Coal Limited
Belcourt Saxon Coal Limited Partnership
De Beers Canada Holdings Inc.
De Beers Canada Inc.
Kaymin Resources Limited
Peace River Coal Inc.
Canada
Cayman Islands(6) Cheviot Holdings Limited
Chile
Chile
Chile
Chile
Anglo American Chile Inversiones S.A.
Anglo American Chile Ltda
Anglo American Sur S.A.
Compañía Minera Doña Inés de Collahuasi SCM
Chile
Compañía Minera Westwall S.C.M.
See page 174 for footnotes.
168
Anglo American plc Annual Report 2016
100% Suite 2400, 745 Thurlow Street, Vancouver, BC V6E 0C5
85% 333 Bay Street, Suite 2400, Toronto, ON M5H2T6
100% Suite 800, 700 West Pender Street, Vancouver, BC V6C 1G8
50% 1600-925 West Georgia Street, Vancouver, BC V6C 3L2
50% 1600-925 West Georgia Street, Vancouver, BC V6C 3L2
85% 2400-333 Bay Street, Toronto, ON M5H2T6
85% 2400-333 Bay Street, Toronto, ON M5H2T6
78% McCarthy Tetrault LLP, Pacific Centre, PO Box 10424, Suite 1300, 777 Dunsmuir
Street, Vancouver, BC V7Y 1K2
100% Suite 2400, 745 Thurlow Street, Vancouver, BC V6E 0C5
85% Maples and Calder, P.O. Box 309, George Town, Grand Cayman
100% Av. Pedro de Valdivia 291, Santiago
100% Av. Pedro de Valdivia 291, Santiago
50% Av. Pedro de Valdivia 291, Santiago
44% Avenida Andres Bello 2687, Piso 11 Edif. el Pacifico, Las Condes, Santiago,
Región Metropolitana
50% Av. Pedro de Valdivia 291, Santiago
Botswana
Botswana
Botswana
Botswana
Botswana
Botswana
Botswana
Botswana
Botswana
Botswana
Botswana
Botswana
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
Brazil
British Virgin
Islands
British Virgin
Islands
British Virgin
Islands
British Virgin
Islands
British Virgin
Islands(6)
British Virgin
Islands(6)
British Virgin
Islands(6)
British Virgin
Islands(6)
Canada
Canada
Canada
Canada
Canada
Canada
Canada
Canada
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP continued
Country of
incorporation(1)(2)
Chile
Chile
Chile
China
China
China
China
China
Colombia
Colombia
Colombia
Cyprus(6)
Cyprus(6)
Cyprus(6)
Democratic
Republic
of Congo
Democratic
Republic
of Congo
Finland
Gabon
Germany
Germany
Germany
Guernsey
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
India
India
India
India
India
India
India
India
India
India
Indonesia
Indonesia
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Isle of Man
Isle of Man
Israel
Israel
Italy
Italy
Japan
Japan
Japan
Japan
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Name of undertaking
Inversiones Anglo American Norte S.A.
Inversiones Anglo American Sur S.A.
Inversiones Minorco Chile S.A.
De Beers Jewellers Commercial (Shanghai) Co., Ltd
Element Six Hard Materials (Wuxi) Co., Ltd
Element Six Trading (Shanghai) Co., Ltd
Forevermark Marketing Shanghai Company Limited
Platinum Guild International (Shanghai) Co., Ltd
Anglo American Colombia Exploration S.A.
Carbones del Cerrejón Limited
Cerrejón Zona Norte S.A.
Anglo American Amcoll (UK) Limited
Anglo American Chile Investments (UK) Limited
Anglo American Clarent (UK) Limited
Ambase Exploration Africa (RDC) SPRL
Percentage of
equity owned
Registered address
100% Av. Pedro de Valdivia 291, Santiago
100% Av. Pedro de Valdivia 291, Santiago
100% Av. Pedro de Valdivia 291, Santiago
43% Room 1707B, 17F, Plaza 66, No. 1266 West Nanjing Road, Shanghai
51% No. 105-1, Xinjin Road, Meicun, Wuxi New District, Jiangsu Province, 214112
51% 2802A, Chong Hing Finance Centre, No. 288 Nan Jing Road West,
Huang Pu District, Shanghai, 200003
85% Unit 01 & 08 40F, Park Place No 1601, Nan Jing Road (W), Shanghai
78% Room 601, L’avenue, 99 XianXia Road, Shanghai, 200051
100% Avenida Carrera 9a # 115 – 06/30 Oficina 1702, Bogotá
33% Calle 100 19-54, 12th Floor, Bogotá
33% Calle 100 19-54, 12th Floor, Bogotá
100% Themistokli Dervi, 3, Julia House, 1066, Nicosia
100% Themistokli Dervi, 3, Julia House, 1066, Nicosia
100% Themistokli Dervi, 3, Julia House, 1066, Nicosia
100% No. 510 LP, Avenue Sumahili, Quartier Golf, Commune De Lubumbashi,
Lubumbashi
De Beers DRC Exploration SARL
85% 14, Avenue Sergent Moke, Commune de Ngaliema, Kinshasa
AA Sakatti Mining Oy
Samancor Gabon SA
Anglo Exploration GmbH
Element Six GmbH (DECAR)
Hydrogenious Technologies GmbH
Intersea Pension Services Ltd
De Beers Auction Sales Holdings Ltd
De Beers Auction Sales Hong Kong Ltd
De Beers Diamond Jewellers (Hong Kong) Limited
Diamdel (Hong Kong) Limited
Diamdel Holdings Limited
Element Six Ltd
Forevermark Limited
Platinum Guild International (Hong Kong) Limited
Anglo American (India) Private Limited
Anglo American Exploration (India) Private Limited
Anglo American Services (India) Private Limited
De Beers India Private Limited
100% AA Sakatti Mining Oy, Tuohiaavantie 2, 99600 Sodankylä
40% Immeuble 2 AG, Libreville, 4660
100% D 12163, Berlin
51% Staedeweg 18, 36151, Burghaun
27% Weidenweg 13, 91058 Erlangen
85% Albert House, South Esplanade, St Peter Port, Guernsey, Channel Islands
85% Unit 1001,10/F Unicorn Trade Centre, 127-131 Des Voeux Road, Central
85% Unit 1001,10/F Unicorn Trade Centre, 127-131 Des Voeux Road, Central
43% 24th Floor, Oxford House, 979 King's Road, Taikoo Place, Island East
85% Unit 1001,10/F Unicorn Trade Centre, 127-131 Des Voeux Road, Central
85% Unit 1001,10/F Unicorn Trade Centre, 127-131 Des Voeux Road, Central
51% 15/F Chung Hing Commercial Building, 62-63 Connaught Road, Central
85% 2602B, 2603, 2604, 2605, 2606, 26th floor Kinwick Centre, 32 Hollywood Road,
Central
78% Suites 2901-2, Global Trade Square, No. 21 Wong Chuk Hang Road
100% A-1/292, Janak Puri, New Delhi, 110058
100% A-1/292, Janak Puri, New Delhi, 110058
100% A-1/292, Janak Puri, New Delhi, 110058
85% Advanced Business Centre, 83 Maker Chambers VI, Nariman Point, Mumbai,
400 021
DTC Marketing India Private Limited
Forevermark Diamonds Private Limited
85% Peninsula Chambers, Ganpatrao Kadam Marg, Mumbai, Maharashtra, 400 013
85% Advanced Business Centre, 83 Maker Chambers VI, Nariman Point,
Hindustan Diamond Company Private Limited
43% E-6010, Bharat Diamond Bourse, Bandra Kurla Complex, Bandra (East),
Mumbai, 400 021
Inglewood Minerals Private Limited
International Institute of Diamond Grading & Research India
Private Limited
Platinum Guild India Private Limited
PT Anglo American Indonesia
PT Minorco Services Indonesia
Alluvium Limited
CMC-Coal Marketing Designated Activity Company
Coromin Insurance (Ireland) DAC
Element Six (Holdings) Limited
Element Six (Trade Marks)
Element Six Abrasives Treasury Limited
Element Six Limited
Element Six Treasury Limited
Element Six (Isle of Man) Corporate Trustee Limited
Element Six Limited
De Beers Auction Sales Israel Ltd
Diamdel Diamonds Ltd
Anglo American Italy
Forevermark Italy S.R.L.
De Beers Diamond Jewellers Ltd (Japan)
Element Six Ltd
Forevermark KK
PGI KK
A.R.H. Investments Limited
A.R.H. Limited
Anglo African Exploration Holdings Limited
Anglo American Exploration Colombia Limited
Anglo American Exploration Overseas Holdings Limited
Anglo American Ferrous Investments (Overseas) Limited
Anglo American Finance Overseas Holdings Limited
Anglo American Finland Holdings 1 Limited
Anglo American Finland Holdings 2 Limited
Anglo American Liberia Holdings Limited
Anglo American Michiquillay Peru Limited
Mumbai, 400051
100% A-1/292, Janak Puri, New Delhi, 110058
85% Advanced Business Centre, 83 Maker Chambers VI, Nariman Point,
Mumbai, 400 021
78% Notan Classic, 3rd Floor, 114 Turner Road, Bandra West, Mumbai, 400 050
100% Pondok Indah Office Tower 3, 17th Floor, Jl. Sultan Iskandar Muda, Pondok Indah,
Jakarta 12310
100% Belagri Hotel, Jl. Raja Ampat, No 1 Kampung Baru, Sorong, Papua Barat
100% Shannon Airport, Shannon, Co. Clare
33% Fumbally Square, New Street, Dublin D08 XYA5
100% Fourth Floor, 25/28 Adelaide Road, Dublin
51% Shannon Airport, Shannon, Co. Clare
51% Shannon Airport, Shannon, Co. Clare
51% Shannon Airport, Shannon, Co. Clare
51% Shannon Airport, Shannon, Co. Clare
85% Shannon Airport, Shannon, Co. Clare
85% Isle of Man Freeport, PO Box 6, Ballasalla
85% Isle of Man Freeport, PO Box 6, Ballasalla
85% 21 Toval Street, Ramat Gan, 52522
85% 21 Toval Street, Ramat Gan, 52522
100% Via Melchiorre Gioia, 8, 20124 Milano
85% Via Burlamacchi Francesco 14, 20135, Milan
43% 1-1, Hirakawacho 2-chome, Chiyoda-ku, Tokyo, Japan K.K.
51% 9F PMO Hatchobori, 3-22-13 Hatchobori, Chuo-ku, Tokyo, 104
85% New Otani Garden Court 7th Floor, 4-1 Kioi-cho, Chiyoda-ku, Tokyo
78% Imperial Hotel Tower 17F, 1-1-1 Uchisaiwai-cho, Chiyoda-ku, Tokyo, 100-8575
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100%(7) 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
See page 174 for footnotes.
Anglo American plc Annual Report 2016
169
Financial statements
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP continued
Country of
incorporation(1)(2)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Jersey(6)
Liberia
Liberia(6)
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Macau
Madagascar
Malta(6)
Malta
Mauritius
Mauritius
Name of undertaking
Anglo Australia Investments Limited
Anglo Coal International Limited
Anglo Diamond Investments Limited
Anglo Iron Ore Investments Limited
Anglo Loma Investments Limited
Anglo Operations (International) Limited
Anglo Peru Investments Limited
Anglo Quellaveco Limited
Anglo Venezuela Investments Limited
Aval Holdings Limited
Anglo American Buttercup Company Limited
Cencan plc
De Beers Investments plc
De Beers Exploration Holdings Limited
De Beers Holdings Investments Limited
De Beers plc
Anglo American Hermitage Limited
IIDGR Holdings Limited
Anglo American Midway Investment Limited
Minorco Limited
Minorco Peru Holdings Limited
Minpress Investments Limited
Anglo American Venezuela Corporation Limited
Anglo South American Investments Limited
Anglo American Kumba Exploration Liberia Ltd
Anglo American Corporation de Chile Holdings Limited
Ambras Holdings Sarl
Ammin Coal Holdings
Anglo American Capital Luxembourg
Anglo American Luxembourg
Element Six Abrasives S.A.
Element Six S.A.
Element Six Ventures Sarl
KIO Exploration Liberia Sarl
Kumba International Trading Sarl
Kumba Iron Ore Holdings Sarl
De Beers Diamond Jewellers (Macau) Company Limited
Societe Civille De Prospection De Nickel A Madagascar
Element Six Technologies Holding Ltd
Element Six Technologies Ltd
Anglo American International Limited
De Beers Centenary Mauritius Limited
Percentage of
equity owned
Registered address
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
85% 44 Esplanade, St Helier, JE4 9WG
85% 44 Esplanade, St Helier, JE4 9WG
85% 44 Esplanade, St Helier, JE4 9WG
85% 44 Esplanade, St Helier, JE4 9WG
85% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
85% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
100% 44 Esplanade, St Helier, JE4 9WG
35% The David A. B. Jallah Law Firm, P.O. Box 4069, Broad and Johnson Streets,
Monrovia
100% 80 Broad Street, Monrovia
100%(8) 48, rue de Bragance, Luxembourg, L-1255
100% 48, rue de Bragance, Luxembourg, L-1255
100% 48, rue de Bragance, Luxembourg, L-1255
100% 48, rue de Bragance, Luxembourg, L-1255
51% 48, rue de Bragance, Luxembourg, L-1255
85% 48, rue de Bragance, Luxembourg, L-1255
85% 48, rue de Bragance, Luxembourg, L-1255
70% 11-13 Boulevard de la Foire, L-1528
53% 11-13 Boulevard de la Foire, L-1528
53% 48, rue de Bragance, Luxembourg, L-1255
43% Avenida da Praia Grande, no 409, China Law Building 16/F - B79
32% 44 Main Street, Johannesburg, 2001
85% Leicester Court, Suite 2, Edgar Bernard Street, Gzira, GZR 1702
85% Leicester Court, Suite 2, Edgar Bernard Street, Gzira, GZR 1702
100% 2nd Floor, The AXIS26 Bank Street, Cybercity Ebene, 72201
85% C/o Cim Corporate Services Ltd, Les Cascades Building, 33, Edith Cavell Street,
Port Louis
Mauritius
De Beers Mauritius Holdings Private Ltd
85% C/o Cim Corporate Services Ltd, Les Cascades Building, 33, Edith Cavell Street,
Port Louis
Mauritius
De Beers Mauritius Private Ltd
85% C/o Cim Corporate Services Ltd, Les Cascades Building, 33, Edith Cavell Street,
Port Louis
Mauritius
Mexico
Inglewood Holdings Limited
Anglo American Mexico S.A. de C.V.
100% St Louis Business Centre, Cnr Desroches & St Louis Streets, Port Louis
100% C/o Chavero Y Asociados, S.C., Medanos No. 169 Colonia Las Aquilas Delegacion
Alvaro Obrego
Mexico
Servicios Anglo American Mexico S.A. de C.V.
100% Sanchez Mejorada, Velasco y Ribe, S.C., Paseo de la Reforma No. 450 Col. Lomas
Mongolia
Mozambique
Anglo American Development LLC
Anglo American Corporation Moçambique Servicos
100% Blue Sky Tower, Peace Avenue-17, Ulaanbaatar, 14240
100% 7th Flr Predio 33 Andares 25 De Setembro, 1230
de Chaptultepec 11000, D.F.
Limitada
Mozambique
Mozambique
Anglo American Corporation Mozambique Ltd
Anglo American Moçambique Limitada
100% 7th, 25 Setembro Ave, Maputo
90% Pestana Rovuma Hotel Office Centre, 5th Floor / 5º Andar, Rua da Sé No. 114,
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Netherlands(6)
Netherlands(6)
Netherlands(6)
Netherlands(6)
Netherlands(6)
Netherlands(6)
Netherlands(6)
Netherlands(6)
Ambase Prospecting (Namibia) (Pty) Ltd
De Beers Marine Namibia (Pty) Ltd
De Beers Namibia Holdings (Pty) Ltd
Debmarine Namdeb Foundation
DTC Valuations Namibia (Pty) Ltd
Exclusive Properties (Pty) Ltd
Longboat Trading (Pty) Ltd
Marmora Mines and Estates Limited
Namdeb Diamond Corporation (Pty) Ltd
Namdeb Holdings (Pty) Ltd
Namdeb Hospital Pharmacy (Pty) Ltd
Namdeb Properties (Pty) Ltd
Namibia Diamond Trading Company (Pty) Ltd
Oranjemund Town Management Company (Pty) Ltd
Oranjemund Private Hospital (Pty) Ltd
AA Holdings Argentina B.V.
Anglo American (NA) 1 B.V.
Anglo American (NA) 3 B.V.
Anglo American Exploration B.V.
Anglo American Exploration (India) B.V.
Anglo American Exploration (Philippines) B.V.
Anglo American India Holdings B.V.
Anglo American International B.V.
See page 174 for footnotes.
170
Anglo American plc Annual Report 2016
Maputo
100% 24 Orban Street, Klein Windhoek, Windhoek, PO Box 30, Windhoek
43% 4th Floor, Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
85% 6th floor, Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% 10th Floor Namdeb Centre 10 Dr Frans Indongo Street, Windhoek
85% 4th Floor, Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% 10th Floor, Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
100% 15 Albert Wessels Street, Northern Industrial, Windhoek
28% 10th Floor Namdeb Centre 10 Dr Frans Indongo Street, Windhoek
43% Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% 10th Floor Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% 10th Floor Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% 10th Floor Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% 10th Floor Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
43% 10th Floor Namdeb Centre, 10 Dr Frans Indongo Street, Windhoek
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP continued
Country of
incorporation(1)(2)
Netherlands(6)
Netherlands(6)
Netherlands
Netherlands(6)
Netherlands
Netherlands
Netherlands(6)
Netherlands(6)
Netherlands(6)
Papua
New Guinea
Peru
Peru
Peru
Peru
Peru
Peru
Philippines
Philippines
Philippines
Portugal
Singapore
Singapore
Singapore
Singapore
Singapore
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
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
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
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Name of undertaking
Anglo American Netherlands B.V.
Anglo Operations (Netherlands) B.V.
Element Six N.V.
Erabas B.V.
Indiapro B.V.
Kumba International B.V.
Loma de Niquel Holdings B.V.
Minorco Exploration (Indonesia) B.V.
Tarmac International Holdings B.V.
Anglo American Exploration PNG Limited
Anglo American Michiquillay S.A.
Anglo American Peru S.A.
Anglo American Quellaveco S.A.
Anglo American Servicios Perú S.A.
Asociación Michiquillay
Asociación Quellaveco
Anglo American Exploration (Philippines) Inc.
Percentage of
equity owned
Registered address
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
85% De Nieuwe Erven 2, 5431 NT, Cuijk
78% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
51% Beversestraat 20, 5431 SH, Cuijk
70% Stationsplein 8K, Maastricht, 6221 BT
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% 20 Carlton House Terrace, London, SW1Y 5AN, United Kingdom
100% Allens, Level 6, Mogoru Moto Building, Champion Parade, Port Moresby, National
Capital District
100% Calle Esquilache 371, Piso 10, San Isidro, Lima 27
100% Calle Esquilache 371, Piso 10, San Isidro, Lima 27
82% Calle Esquilache 371, Piso 10, San Isidro, Lima 27
100% Calle Esquilache 371, Piso 10, San Isidro, Lima 27
100% Calle Esquilache 371, Piso 10, San Isidro, Lima 27
100% Calle Esquilache 371, Piso 10, San Isidro, Lima 27
100% 27th Floor, Tower 2, The Enterprise Centre, 6766 Ayala Avenue corner
Minphil Exploration Co Inc.
Northern Luzon Exploration & Mining Co Inc.
Anglo American Corporation De Portugal SARL
Anglo American Exploration (Singapore) Pte. Ltd.
Anglo American Mongolia Holdings Pte. Ltd.
De Beers Auction Sales Singapore Pte. Ltd.
Kumba Singapore Pte. Ltd.
MR Iron Ore Marketing Services Singapore Pte. Ltd.
ACRO (Hanise) (Pty) Ltd
A E F Mining Services (Pty) Ltd
Africa Pipe Industries North (Pty) Ltd
Almenta 127 (Pty) Ltd
Amaprop Townships Limited
Ambase Investment Africa (Botswana) (Pty) Ltd
Ambase Investment Africa (DRC) (Pty) Ltd
Ambase Investment Africa (Mozambique) (Pty) Ltd
Ambase Investment Africa (Namibia) (Pty) Ltd
Ambase Investment Africa (Tanzania) (Pty) Ltd
Ambase Investment Africa (Zambia) (Pty) Ltd
Amcoal Collieries Recruiting Organisation (Pty) Limited
Ampros (Pty) Ltd
Anglo American Corporation of South Africa (Pty) Ltd
Anglo American EMEA Shared Services (Pty) Ltd
Anglo American Farms (Pty) Ltd
Anglo American Farms Investment Holdings (Pty) Ltd
Anglo American Group Employee Shareholder Nominees
Paseo de Roxas, Makati City
40% 27 Phitex Building, Brixton Street, Pasig, Metro Manila
40% 27 Phitex Building, Brixton Street, Pasig, Metro Manila
95% 244 Avenida Da Liberdade, Lisbon
100% 10 Collyer Quay, #38-00 Ocean Financial Centre, 049315
100% 10 Collyer Quay, #38-00 Ocean Financial Centre, 049315
85% 10 Collyer Quay, #03-04 Ocean Financial Centre, 049315
53% 10 Collyer Quay, #38- 00 Ocean Financial Centre, 049315
50% 10 Collyer Quay, #38- 00 Ocean Financial Centre, 049315
100% 44 Main Street, Gauteng, 1627
25% Zommerlust Building, Rietbok Road, Kathu, 8446
39% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 2nd Floor, Genesis House, 27 Fricker Road, Illovo, 2196
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 55 Marshall Street Johannesburg, 2001
100% 2nd Floor, Genesis House, 27 Fricker Road, Illovo, 2196
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% Vergelegen Wine Estate, Lourensford Road, Somerset West, 7130
100% Vergelegen Wine Estate, Lourensford Road, Somerset West, 7130
100% 44 Main Street, Johannesburg, 2001
(Pty) Ltd
Anglo American Inyosi Coal (Pty) Ltd
Anglo American Platinum Limited
Anglo American Properties Limited
Anglo American Prospecting Services (Pty) Ltd
Anglo American SA Finance Limited
Anglo American Sebenza Fund (Pty) Ltd
Anglo American SEFA Mining Fund (Pty) Ltd
Anglo American South Africa Limited
Anglo American Zimele (Pty) Ltd
Anglo American Zimele Community Fund (Pty) Ltd
Anglo American Zimele Green Fund (Pty) Ltd
Anglo Coal Investment Africa (Botswana) (Pty) Ltd
Anglo Corporate Enterprises (Pty) Ltd
Anglo Inyosi Coal Security Company Limited
Anglo Operations (Pty) Ltd
Anglo Platinum Management Services (Pty) Ltd
Anglo South Africa (Pty) Ltd
Anglo South Africa Capital (Pty) Ltd
Anglo Ventures (SA) (Pty) Ltd
Anglo American Zimele Business Support Services
(Pty) Ltd
Anseld Holdings Proprietary Limited
Asambeni Mining Solutions (Pty) Ltd
Atomatic Trading (Pty) Ltd
Balgo Nominees (Pty) Ltd
Blinkwater Farms 244KR (Pty) Ltd
Blue Lounge Trading 129 (Pty) Ltd
Blue Steam Investments (Pty) Ltd
Boikgantsho Platinum Mine (Pty) Ltd
Bokoni Platinum Holdings (Pty) Ltd
Bokoni Platinum Mines (Pty) Ltd
Butsanani Energy Investment Holdings (Pty) Ltd
Chamfron Limited
Colliery Training College (Pty) Ltd
Copper Moon Trading 567 (Pty) Ltd
Cytobex (Pty) Ltd
73% 44 Main Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
100% 2nd Floor, Genesis House, 27 Fricker Road, Illovo, 2196
100% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
50% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
56% 44 Main Street, Johannesburg, 2001
58% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
37% 5 Jellicoe Avenue, Rosebank, Johannesburg, 2196
38% 82 Grayston Drive, Sandton, Johannesburg, 2196
38% 4th Floor Atholl, Johannesburg, 2916
38% 4th Floor Atholl, Johannesburg, 2916
33% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
56% Cnr OR Tambo & Stevenson Str, Klipfontein, Emalahleni, 1034
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
See page 174 for footnotes.
Anglo American plc Annual Report 2016
171
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP continued
Country of
incorporation(1)(2)
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Name of undertaking
Cytoblox (Pty) Ltd
Cytobuzz (Pty) Ltd
Damelin Emalahleni (Pty) Ltd
Danjan (Pty) Ltd
DBCM Holdings (Pty) Ltd
De Beers Consolidated Mines (Pty) Ltd
De Beers Group Services (Pty) Ltd
Percentage of
equity owned
Registered address
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
20% Cnr OR Tambo and Beatrix Avenue, Witbank, 1035
51% 210 Cumberland Avenue, Bryanston, Gauteng, 2021
63% 36 Stockdale Street, Kimberley, 8301
63%(9) 36 Stockdale Street, Kimberley, 8301
85% De Beers House, Corner Diamond Drive and Crownwood Road, Theta,
Johannesburg, 2013
South Africa
De Beers Marine (Pty) Ltd
85% De Beers House, Corner Diamond Drive and Crownwood Road, Theta,
Johannesburg, 2013
South Africa
De Beers Matlafalang Business Development (Pty) Ltd
63% De Beers House, Corner Diamond Drive and Crownwood Road, Theta,
Johannesburg, 2013
South Africa
De Beers Sightholder Sales South Africa (Pty) Ltd
63% De Beers House, Corner Diamond Drive and Crownwood Road, Theta,
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
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
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
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
South Africa
South Africa
South Africa
South Africa
De Beers Small Business Start Up Fund (Pty) Ltd
Dido Nominees (Pty) Ltd
DMS Powders (Pty) Ltd
Dream Weaver Trading 140 (Pty) Ltd
Element Six (Production) (Pty) Ltd
Element Six (Pty) Ltd
Element Six South Africa (Pty) Ltd
Element Six Technologies (Pty) Ltd
Elipsis Blue Trading 43 (Pty) Ltd
Enanticept (Pty) Ltd
Fermain Nominees (Pty) Ltd
Fundirite (Pty) Ltd
Ga-Phasha Platinum Mine (Pty) Ltd
Godisa Supplier Development Fund (Pty) Ltd
Golden Pond Trading 248 (Pty) Ltd
High Ground Investments Limited
HL & H Timber Processors (Pty) Ltd
Hoddle Investment Holdings 6 (Pty) Ltd
Hotazel Manganese Mines (Pty) Ltd
Identity Development Fund Managers (Pty) Ltd
Ingagane Colliery (Pty) Ltd
Invincible Trading 14 (Pty) Ltd
KIO Investments Holdings (Pty) Ltd
Kumba BSP Trust
Kumba Iron Ore Limited
Kwanda Platinum Mine (Pty) Ltd
Lansan Investment Holdings (Pty) Ltd
Lebowa Platinum Mines Limited
Lexshell 49 General Trading (Pty) Ltd
Lexshell 688 Investments (Pty) Ltd
Longboat (Pty) Ltd
Longmeadow Home Farm (Pty) Ltd
Mafube Coal Mining (Pty) Ltd
Main Place Holdings Limited
Main Street 1252 (Pty) Ltd
Manganore Iron Mining Limited
Manngwe Mining (Pty) Ltd
Maotsi Stone Crushers (Pty) Ltd
Marikana Ferrochrome Limited
Marikana Minerals (Pty) Ltd
Masa Chrome Company (Pty) Ltd
Matthey Rustenburg Refiners(Pty)Ltd
Meruka Mining (Pty) Ltd
Micawber 146 (Pty) Ltd
Middelplaats Manganese (Pty) Ltd
Mindset Coal Consultancy Services CC
Modikwa Mining Personnel Services (Pty) Ltd
Modikwa Platinum Mine (Pty) Ltd
Mogalakwena Platinum Mines
Mototolo Holdings (Pty) Ltd
Muvhuso Minerals (Pty) Ltd
Ndowana Exploration (Pty) Ltd
Newshelf 480 (Pty) Ltd
Newshelf 1316 (Pty) Ltd
Nkangala Bucket Repair Services (Pty) Ltd
Norsand Holdings (Pty) Ltd
Peglerae Hospital (Pty) Ltd
Peruke (Pty) Ltd
PGM Investment Company (Pty) Ltd
Phola Coal Processing Plant (Pty) Ltd
Platmed Properties (Pty) Ltd
Platmed(Pty)Ltd
Polokwane Iron Ore (Pty) Ltd
Ponahalo Investments (Pty) Ltd
South Africa
South Africa
Pro Enviro (Pty) Ltd
R A Gilbert (Pty) Ltd
See page 174 for footnotes.
172
Anglo American plc Annual Report 2016
Johannesburg, 2013
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
21% 12th Floor Nedbank Building, 81 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
51% Debid Road, Nuffield, Springs, 1559
51% 1 Parry Road, Nuffield, Springs, 1559
51% Debid Road, Nuffield, Springs, 1559
85% Debid Road, Nuffield, Springs, 1559
30% Unit 6A, Phithaba Industrial Park, 97 Hefer Street, Rustenburg, 0299
30% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
50% 44 Main Street, Johannesburg, 2001
38% 4th Floor 82 Grayston Drive, Sandton, Johannesburg, 2196
50% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
50% Millennia Park,16 Stellentia Avenue, Stellenbosch
100% 44 Main Street, Johannesburg, 2001
30% 39 Melrose Boulevard, Melrose Arch, Johannesburg, 2076
20% 1st Floor, Etana House, 22 Oxford Road, Parktown, 2193
98% 55 Marshall Street, Johannesburg, 2001
20% 16 Euclid Road, Industria East, Ext 3, Germiston, 1400
70% 124 Akkerboom Street, Building 2B, Centurion, 0157
53% 124 Akkerboom Street, Building 2B, Centurion, 0157
70% 124 Akkerboom Street, Building 2B, Centurion, 0157
38% 82 Grayston Drive, Sandton, 2146
100% 44 Main Street, Johannesburg, 2001
38% 4th Floor Atholl, Johannesburg, 2916
35% 55 Marshall Street, Johannesburg, 2001
66% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
50% 44 Main Street, Johannesburg, 2001
39% 4 Stirling Street, Zonnebloem, Western Cape, 7295
63% De Beers House, Corner Diamond Drive and Crownwood Road, Theta,
Johannesburg, 2013
46% 39 Melrose Boulevard, Melrose Arch, Johannesburg, 2076
25% Suite 105D, Lorgadia Building, Embankment Road, Centurion, 0157
100% 44 Main Street, Johannesburg, 2001
100% 55 Marshall Street, Johannesburg, 2001
100% 55 Marshall Street, Johannesburg, 2001
39% 55 Marshall Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
30% 16 North Road, Dunkeld Court, Dunkeld West, 2196
78% 55 Marshall Street, Johannesburg, 2001
29% 39 Melrose Boulevard, Melrose Arch, Johannesburg, 2076
36% 298 Stokkiesdraai Street, Erasmusrand, Pretoria, 0181
39% 29 Impala Road, Chislehurston, Sandton, Gauteng, 2196
39% 29 Impala Road, Chislehurston, Sandton, Gauteng, 2196
78% 55 Marshall Street, Johannesburg, 2001
39% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
42% 36 Stockdale Street, Kimberley, 8301
55% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
19% 9 Milli Street, Middelburg, Mpumalanga, 1055
78% 55 Marshall Street, Johannesburg, 2001
31% 21 Oxford Manor, Rudd & Chaplin Roads, Illovo, Johannesburg, 2196
51% 44 Main Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
37% 55 Marshall Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
27% 124 Akkerboom Street, Building 2B, Centurion, 0157
0%(10) De Beers House, Corner Diamond Drive and Crownwood Road, Theta,
Johannesburg, 2013
20% Greenside Colliery, PTN off 331, Groenfontein, Black Hills, 1032
78% 55 Marshall Street, Johannesburg, 2001
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP continued
Country of
incorporation(1)(2)
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Name of undertaking
Ravenswood House (Pty) Ltd
Reitpoort Mining (Pty) Ltd
Resident Nominees (Pty) Ltd
Reunko Steel Suppliers (Pty) Ltd
Richards Bay Coal Terminal (Pty) Ltd
Richtrau No. 123 (Pty) Ltd
Rietvlei Mining Company (Pty) Ltd
Roodepoortjie Resources (Pty) Ltd
Rustenburg Platinum Mines Limited
Samancor Holdings (Pty) Ltd
Samancor Manganese (Pty) Ltd
Sheba’s Ridge Platinum (Pty) Ltd
Sibelo Resource Development (Pty) Ltd
SIOC International Finance (Pty) Ltd
Sishen Iron Ore Company (Pty) Ltd
Spectrem Air (Pty) Ltd
Springfield Collieries Limited
Steppe Eagle (Pty) Ltd
Sunbali Flowers (Pty) Ltd
Tenon Investment Holdings (Pty) Ltd
Terra Nominees (Pty) Ltd
The Village of Cullinan (Pty) Ltd
Tshipi Kwena Steel (Pty) Ltd
Vergelegen Wine Estate (Pty) Ltd
Vergelegen Wines (Pty) Ltd
Vika Investments Holdings (Pty) Ltd
Vumo MRF (Pty) Ltd
Whiskey Creek Management Services (Pty) Ltd
Zimshelf Four Investment Holdings (Pty) Ltd
Zimshelf One Investment Holdings (Pty) Ltd
Zimshelf Three Investment Holdings (Pty) Ltd
Zimshelf Two Investment Holdings (Pty) Ltd
Element Six AB
De Beers Centenary AG
Element Six SA
PGI SA
Samancor AG
Synova S.A.
Ambase Prospecting (Tanzania) (Pty) Ltd
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
South Africa
South Africa
South Africa
South Africa
South Africa
Sweden
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Tanzania
United Kingdom AP Ventures LLP
United Kingdom Anglo American (London)
United Kingdom Anglo American (London) 2
United Kingdom Anglo American (TIIL) Investments Limited
United Kingdom Anglo American 2005 Limited
United Kingdom Anglo American Australia Investments Limited
United Kingdom Anglo American Capital Australia Limited
United Kingdom Anglo American Capital International Limited
United Kingdom Anglo American Capital plc
United Kingdom Anglo American CMC Holdings Limited
United Kingdom Anglo American Corporate Secretary Limited
United Kingdom Anglo American Diamond Holdings Limited
United Kingdom Anglo American Farms (UK) Limited
United Kingdom Anglo American Ferrous 2
United Kingdom Anglo American Ferrous Investments Limited
United Kingdom Anglo American Finance (UK) Limited
United Kingdom Anglo American Global Finance Limited
United Kingdom Anglo American Group Foundation
United Kingdom Anglo American Holdings Limited
United Kingdom Anglo American International Holdings Limited
United Kingdom Anglo American Investments (NA) Limited
United Kingdom Anglo American Investments (UK) Limited
United Kingdom Anglo American Marketing Limited
United Kingdom Anglo American Medical Plan Limited
United Kingdom Anglo American Nickel Marketing Limited
United Kingdom Anglo American PNG Holdings Limited
United Kingdom Anglo American Prefco Limited
United Kingdom Anglo American REACH Limited
United Kingdom Anglo American Representative Offices Limited
United Kingdom Anglo American Services (UK) Ltd
United Kingdom Anglo American Services Overseas Limited
United Kingdom Anglo Base Metals Marketing Limited
United Kingdom Anglo Coal Holdings Limited
United Kingdom Anglo Coal Overseas Services Limited
United Kingdom Anglo Ferrous Metals Marketing Limited
United Kingdom Anglo Platinum Marketing Limited
United Kingdom Anglo Platinum Ventures Holdings Limited
United Kingdom Anglo UK Pension Trustee Limited
United Kingdom Anmercosa Finance Limited
United Kingdom Anmercosa Pension Trustees Limited
United Kingdom Anmercosa Sales Limited
United Kingdom Aurumar Alaska Holdings Ltd (UK)
See page 174 for footnotes.
Percentage of
equity owned
Registered address
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
20% 10372 Mfeka Street, Tokoza, 1421
23% South Dunes, Richards Bay Harbour, Kwa Zulu Natal, 3900
20% 55 Marshall Street, Johannesburg, 2001
20% Vunani House, Athol Ridge Office Park, 151 Katherine Street, Sandton, 2196
49% 16 North Road, Dunkeld Court, Dunkeld West, 2196
78% 55 Marshall Street, Johannesburg, 2001
40% 39 Melrose Boulevard, Melrose Arch, Johannesburg, 2076
40% 39 Melrose Boulevard, Melrose Arch, Johannesburg, 2076
27% Libanon Business Park, Hospital Street Off Cedar Avenue, Westonaria,
Gauteng, 1779
53% 124 Akkerboom Street, Building 2B, Centurion, 0157
53% 124 Akkerboom Street, Building 2B, Centurion, 0157
53% 124 Akkerboom Street, Building 2B, Centurion, 0157
21% 44 Main Street, Johannesburg, 2001
100% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
20% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
40% 39 Melrose Boulevard, Melrose Arch, Johannesburg, 2076
63% 36 Stockdale Street, Kimberley, 8301
100% 12 Piketberg Street, Helderkruin Ext. 7, Roodepoort, 1724
100% Vergelegen Wine Estate, Lourensford Road, Somerset West, 7130
100% Vergelegen Wine Estate, Lourensford Road, Somerset West, 7130
49% 44 Main Street, Johannesburg, 2001
100% 55 Marshall Street, Johannesburg, 2001
78% 55 Marshall Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
100% 44 Main Street, Johannesburg, 2001
51% Box 505, S-915 23, Robertsfors
85% Hertensteinstrasse 66, CH-6000, Lucerne 6
51% rue du Tir-au-Canon 2, Carouge, Geneva
78% Avenue Mon-Repos 24, Case postale 656, CH-1001 Lausanne
40% Jöchlerweg 2, Baar, CH-6340
28% 2, Chemin de la Dent-D’Oche, 1024, Ecublens
100% Pemba House, 269 Toure Drive Oyster Bay, Dar Es Salaam
50% C/O Hackwood Secretaries Limited, One Silk Street, London, EC2Y 8HQ
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100%(4) 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100%(4) 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100%(4) 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100%(4) 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
78% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
85% 17 Charterhouse Street, London, EC1N 6RA
Anglo American plc Annual Report 2016
173
Financial statements
ADDITIONAL DISCLOSURES
40. RELATED UNDERTAKINGS OF THE GROUP continued
Country of
incorporation(1)(2)
United Kingdom Birchall Gardens LLP
Name of undertaking
United Kingdom Charterhouse CAP Ltd
United Kingdom Curtis Fitch Limited
United Kingdom De Beers Diamond Jewellers Ltd
United Kingdom De Beers Diamond Jewellers Trade Mark Limited
United Kingdom De Beers Diamond Jewellers UK Ltd
United Kingdom De Beers Intangibles Ltd
United Kingdom De Beers Trademarks Ltd
United Kingdom De Beers UK Ltd
United Kingdom Ebbsfleet Property Limited
United Kingdom Element Six (Production) Ltd
United Kingdom Element Six (UK) Ltd
United Kingdom Element Six Holdings Limited
United Kingdom Element Six Ltd
United Kingdom Element Six Technologies Ltd
United Kingdom Ferro Nickel Marketing Limited
United Kingdom Firecrest Investments Limited
United Kingdom Forevermark Limited
United Kingdom IIDGR (UK) Limited
United Kingdom Mallord Properties Limited
United Kingdom Neville Street Limited
United Kingdom Northfleet Property LLP
United Kingdom Platinum Guild Limited (United Kingdom) Limited
United Kingdom Reunion Group Limited
United Kingdom Reunion Mining Limited
United Kingdom Rhoanglo Trustees Limited
United Kingdom Riverbank Investments Ltd
United Kingdom Security Nominees Limited
United Kingdom Swanscombe Development LLP
Percentage of
equity owned
Registered address
50% Grant Thornton UK LLP, 300 Pavilion Drive, Northampton, Northamptonshire,
NN4 7YE
85% 17 Charterhouse Street, London, EC1N 6RA
21% 6th Floor, Eagle Tower, Montpellier Drive, Cheltenham, Gloucestershire,
GL50 1TA
43% 45 Old Bond Street, London, W1S 4QT
43% 45 Old Bond Street, London, W1S 4QT
43% 45 Old Bond Street, London, W1S 4QT
85% 17 Charterhouse Street, London, EC1N 6RA
85% 17 Charterhouse Street, London, EC1N 6RA
85% 17 Charterhouse Street, London, EC1N 6RA
50% Grant Thornton UK LLP, 300 Pavilion Drive, Northampton, Northamptonshire,
NN4 7YE
51% Global Innovation Centre, Fermi Avenue, Harwell, Didcot, Oxfordshire, OX11 0QR
51% Global Innovation Centre, Fermi Avenue, Harwell, Didcot, Oxfordshire, OX11 0QR
85% 20 Carlton House Terrace, London, SW1Y 5AN
85% Global Innovation Centre, Fermi Avenue, Harwell, Didcot, Oxfordshire, OX11 0QR
85% Global Innovation Centre, Fermi Avenue, Harwell, Didcot, Oxfordshire, OX11 0QR
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
85% 17 Charterhouse Street, London, EC1N 6RA
85% 17 Charterhouse Street, London, EC1N 6RA
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
50% Grant Thornton UK LLP, 300 Pavilion Drive, Northampton, Northamptonshire,
NN4 7YE
78% New Bridge Street House, 30-34 New Bridge Street, London, SE1 9QR
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
100% 20 Carlton House Terrace, London, SW1Y 5AN
85% 17 Charterhouse Street, London, EC1N 6RA
100% 20 Carlton House Terrace, London, SW1Y 5AN
50% Grant Thornton UK LLP, 300 Pavilion Drive, Northampton, Northamptonshire,
NN4 7YE
United Kingdom The Diamond Trading Company Limited
Anglo American Exploration (USA), Inc.
United States
Anglo American US (Pebble) LLC
United States
85% 17 Charterhouse Street, London, EC1N 6RA
100% Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801
100% 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle,
DE 19808
United States
Anglo American US (Utah) Inc.
100% 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle,
DE 19808
United States
Big Hill, LLC
55% 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle,
United States
United States
United States
United States
United States
United States
United States
United States
United States
Coal Marketing Company (U.S.A.) Inc.
De Beers Diamond Jewellers US, Inc.
Element Six Technologies U.S. Corporation
33% 1180 Peachtree Street, Suite 2420, Atlanta, GA 30309
43% 598 Madison Avenue, 4th Floor, New York, NY 10022
85% Incorporating Services Limited, 3500 South Dupont Highway, Dover, County of
DE 19808
Element Six US Corporation
Forevermark US, Inc.
International Institute of Diamond Valuation Inc.
Platinum Guild International (U.S.A.) Jewelry Inc.
Primus Power Corporation
Anglo American US Holdings Inc.
Kent, DE 19901
51% 24900 Pitkin Road, Suite 250, Spring, TX 77386
85% 300 First Stamford Place, Stamford, CT 06902
85% Corporation Trust Center 1209 Orange Street, Wilmington, DE 19801
78% 125 Park Avenue, 25th Floor, New York, NY 10017
28% 3967 Trust Way, Hayward, CA 94545
100% 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle,
DE 19808
Venezuela
Anglo American Venezuela S.A.
100% Torre Humboldt, floor 9, office 09-07, Rio Caura Street, Prados del Este.
Caracas 1080
Venezuela
Minera Loma de Níquel C.A.
98% Torre Humboldt, floor 9, office 09-07, Rio Caura Street, Prados del Este.
Zambia
Zambia
Zambia
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Zimbabwe
Ambase Exploration (Zambia) (Pty) Ltd
Anglo Exploration (Zambia) Limited
Zamanglo Prospecting Limited
Addon Investments (Private) Limited
Amzim Holdings Limited
Anglo American Corporation Zimbabwe Limited
Broadlands Park Limited
Southridge Limited
Unki Mines (Private) Limited
Caracas 1080
100% Building 3, Acacia Park, Stand No 22768, Thabo Mbeki Road, Lusaka
100% Plot 2386, Longolongo Road, Lusaka
100% Building 3, Acacia Park, Stand No 22768, Thabo Mbeki Road, Lusaka
100% 28 Broadlands Road, Emerald Hill, Harare
78% 28 Broadlands Road, Emerald Hill, Harare
100% 28 Broadlands Road, Emerald Hill, Harare
100% 28 Broadlands Road, Emerald Hill, Harare
100% 28 Broadlands Road, Emerald Hill, Harare
78% 28 Broadlands Road, Emerald Hill, Harare
(1) All the companies with an incorporation in the United Kingdom are registered in England and Wales.
(2) The country of tax residence is disclosed where different from the country of incorporation.
(3) Tax resident in Colombia.
(4) 100% direct holding by Anglo American plc.
(5) The 50% interest in Debswana Diamond Company (Proprietary) Limited is held indirectly through De Beers and is consolidated on a 19.2% proportionate basis, reflecting economic interest.
The Group’s effective interest in Debswana Diamond Company (Proprietary) Limited is 16.3%.
(6) Tax resident in the United Kingdom.
(7) 5% direct holding by Anglo American plc.
(8) 2% direct holding by Anglo American plc.
(9) A 74% interest in De Beers Consolidated Mines Proprietary Limited (DBCM) is held indirectly through De Beers. The 74% interest represents De Beers’ legal ownership share in DBCM. For
accounting purposes De Beers consolidates 100% of DBCM as it is deemed to control the BEE entity, Ponahalo, which holds the remaining 26%. The Group’s effective interest in DBCM is 85%.
(10) Ponahalo Investments (Pty) Ltd is deemed to be controlled due to the financing structure in place and is consolidated as a majority owned subsidiary.
174
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION FINANCIAL STATEMENTS OF THE PARENT COMPANY
FINANCIAL STATEMENTS OF THE PARENT COMPANY
Balance sheet of the Company, Anglo American plc, as at 31 December 2016
US$ million
Fixed assets
Investment in subsidiaries
Current assets
Amounts due from subsidiaries
Cash at bank and in hand
Creditors due within one year
Amounts owed to group undertakings
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium account
Capital redemption reserve
Other reserves
Profit and loss account
Total shareholders’ funds (equity)
Note
2016
2015
1
29,344
15,125
576
8
584
(200)
(200)
384
29,728
29,728
772
4,358
115
1,955
22,528
29,728
15,067
15
15,082
(231)
(231)
14,851
29,976
29,976
772
4,358
115
1,955
22,776
29,976
2
2
2
2
2
The loss after tax for the year of the Company amounted to $343 million (2015: profit of $1,850 million).
The financial statements of Anglo American plc, registered number 03564138, were approved by the Board of directors on 20 February 2017 and signed on its
behalf by:
Mark Cutifani
Chief Executive
René Médori
Finance Director
Anglo American plc Annual Report 2016
175
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION FINANCIAL STATEMENTS OF THE PARENT COMPANY
1) Investment in subsidiaries
US$ million
Cost
At 1 January
Capital contributions(1)
Additions
At 31 December
Provisions for impairment
At 1 January
Charge for the year(2)
At 31 December
Net book value
2016
2015
15,142
146
14,520
29,808
(17)
(447)
(464)
29,344
15,088
54
–
15,142
(17)
–
(17)
15,125
(1) This amount is net of $13 million (2015: $78 million) of intra-group recharges.
(2) This relates to an impairment charge of $447 million that was recorded in the year with respect to an equity holding in one of the Company’s subsidiaries.
Further information about subsidiaries is provided in note 40 to the Consolidated financial statements.
2) Reconciliation of movements in equity shareholders’ funds
US$ million
At 1 January 2015
Profit for the financial year
Dividends payable to Company shareholders(3)
Capital contribution to Group undertakings
Other
At 31 December 2015
Loss for the financial year
Purchase of treasury shares under employee share schemes
Capital contribution to Group undertakings
At 31 December 2016
Called-up
share capital
772
–
–
–
–
772
–
–
–
772
Share
premium
account
4,358
–
–
–
–
4,358
–
–
–
4,358
Capital
redemption
reserve
115
–
–
–
–
115
–
–
–
115
Other
reserves(1)
1,955
–
–
–
–
1,955
–
–
–
1,955
Profit
and loss
account(2)
21,472
1,850
(684)
132
6
22,776
(343)
(64)
159
22,528
Total
28,672
1,850
(684)
132
6
29,976
(343)
(64)
159
29,728
(1) At 31 December 2016 other reserves of $1,955 million (2015: $1,955 million) were not distributable under the Companies Act 2006.
(2) At 31 December 2016 $2,685 million (2015: $2,685 million) of the Company profit and loss account of $22,528 million (2015: $22,776 million) was not distributable under the Companies Act 2006.
(3) Dividends payable relate only to shareholders on the United Kingdom principal register excluding dividends waived by Wealth Nominees Limited as nominees for Estera Trust (Jersey) 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 directors are proposing no final dividend in respect of the year ended 31 December
2016 (see note 10 of the Consolidated financial statements).
The audit fee in respect of the Company was $6,323 (2015: $10,613). 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 33.
176
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION FINANCIAL STATEMENTS OF THE PARENT COMPANY
3) Accounting policies: Anglo American plc (the Company)
The Company balance sheet and related notes have been prepared under the historical cost convention and in accordance with Financial Reporting Standards
100 Application of Financial Reporting Requirements (FRS 100) and 101 Reduced Disclosure Framework (FRS 101).
A summary of the principal accounting policies is set out below.
The preparation of financial statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires management to
exercise judgment in applying the Company's accounting policies.
As permitted by section 408 of the Companies Act 2006, the statement of comprehensive income of the Company is not presented as part of these financial
statements.
Significant accounting policies
Investments
Investments represent equity holdings in subsidiaries and are measured at cost less accumulated impairment.
Financial Instruments
The Company recognises financial instruments when it becomes a party to the contractual arrangements of the instrument. Financial instruments are
de-recognised when they are discharged or when the contractual terms expire.
Dividends
Interim equity dividends are recognised when paid. Final equity dividends are recognised when approved by the shareholders at an annual general meeting.
Share-based payments
The Company has applied the requirements of IFRS 2 Share-based payment.
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 related vesting
conditions, the fair value is determined using the Monte Carlo model 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
shares at the grant date. For all share schemes with non-market 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.
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.
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 2016.
Anglo American plc Annual Report 2016
177
Financial statements
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
SUMMARY BY BUSINESS OPERATION
This section includes certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including definitions, please
refer to page 188.
Marketing activities are allocated to the underlying operation to which they relate.
Group revenue(1)
Underlying EBITDA
Underlying EBIT
Underlying earnings
US$ million
De Beers
Mining
Debswana
Namdeb Holdings
South Africa
Canada
Trading
Other(2)
Projects and corporate
Platinum(3)
Mogalakwena
Amandelbult
Other operations
Projects and corporate
Copper
Los Bronces
Collahuasi
Other operations
Projects and corporate
Nickel
Codemin
Loma de Níquel
Barro Alto
Projects and corporate
Niobium and Phosphates(4)
Niobium
Phosphates
Projects and corporate
Iron Ore and Manganese
Kumba Iron Ore
Iron Ore Brazil
Samancor
Projects and corporate
Coal
Australia and Canada
South Africa
Colombia
Projects and corporate
Corporate and other
Other Mining and Industrial
Exploration
Corporate activities and unallocated costs
2016
2015
2016
6,068
4,671
1,406
n/a
n/a
n/a
n/a
n/a
n/a
–
4,394
968
739
2,687
–
3,066
1,386
1,068
612
–
426
82
–
344
–
495
137
358
–
3,426
2,801
–
625
–
5,263
2,547
2,109
607
–
4
–
–
4
23,142
n/a
n/a
n/a
n/a
n/a
n/a
–
4,900
1,092
712
3,096
–
3,539
1,852
971
716
–
146
100
–
46
–
544
111
433
–
3,390
2,876
–
514
–
4,888
2,374
1,893
621
–
925
921
–
4
23,003
571
184
268
79
378
(35)
(39)
532
393
102
77
(40)
903
326
569
83
(75)
57
9
4
54
(10)
118
41
80
(3)
1,536
1,347
(6)
258
(63)
1,646
996
473
235
(58)
(123)
(2)
(107)
(14)
6,075
2015
990
379
147
282
154
107
(30)
(49)
718
496
97
177
(52)
942
622
381
55
(116)
(3)
20
3
(14)
(12)
146
40
111
(5)
1,026
1,011
(20)
104
(69)
1,046
586
345
168
(53)
(11)
110
(152)
31
4,854
2016
1,019
543
163
172
13
371
(204)
(39)
185
269
46
(90)
(40)
261
(49)
342
43
(75)
(15)
3
3
(11)
(10)
79
21
61
(3)
1,275
1,135
(6)
209
(63)
1,112
661
366
143
(58)
(150)
(2)
(107)
(41)
3,766
2015
571
352
120
174
65
100
(191)
(49)
263
368
36
(89)
(52)
228
240
167
(63)
(116)
(22)
12
3
(25)
(12)
119
33
91
(5)
671
739
(21)
22
(69)
457
190
230
90
(53)
(64)
64
(154)
26
2,223
2016
667
n/a
n/a
n/a
n/a
n/a
n/a
n/a
65
n/a
n/a
n/a
n/a
354
n/a
221
n/a
(75)
(57)
(1)
2
(48)
(10)
78
22
59
(3)
566
475(5)
4
146
(59)(5)
913
625
258
85
(55)
(376)
3
(99)
(280)
2,210
2015
258
n/a
n/a
n/a
n/a
n/a
n/a
n/a
168
n/a
n/a
n/a
n/a
67
n/a
77
n/a
(89)
(19)
10
3
(21)
(11)
48
7
45
(4)
98
280(5)
(61)
(54)
(67)(5)
292
123
174
44
(49)
(85)
52
(142)
5
827
(1) Group revenue for copper is shown after deduction of treatment and refining charges (TC/RCs).
(2) Other includes Element Six, downstream activities and the purchase price allocation adjustment.
(3) Anglo American Platinum Limited has restated its results to correct certain computational errors affecting results reported in prior periods. These errors are not considered material to the
Group and consequently they have been corrected in the current year in the Group financial statements. See note 3 for further details.
(4) Niobium and Phosphates was sold on 30 September 2016, see note 30.
(5) Of the projects and corporate expense, which includes a corporate cost allocation, $37 million (2015: $42 million) relates to Kumba Iron Ore. The total contribution from Kumba Iron Ore to the
Group’s underlying earnings is $438 million (2015: $238 million).
178
Anglo American plc Annual Report 2016
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
KEY FINANCIAL DATA
This section includes certain Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including definitions, please
refer to page 188.
US$ million (unless otherwise stated)
Income statement measures
Group revenue
Underlying EBIT
Underlying EBITDA
Revenue
Net finance costs (before special items and remeasurements)
Profit/(loss) before tax
Profit/(loss) for the financial year
Non-controlling interests
Profit/(loss) attributable to equity shareholders of the Company
Underlying earnings
Balance sheet measures
Capital employed
Net assets
Non-controlling interests
Equity attributable to equity shareholders of the Company
Cash flow measures
Cash flows from operations
Capital expenditure
Net debt
Metrics and ratios
Underlying earnings per share (US$)
Earnings per share (US$)
Ordinary dividend per share (US cents)
Ordinary dividend cover (based on underlying earnings per share)
Underlying EBIT margin
Underlying EBIT interest cover(2)
Underlying effective tax rate
Gearing (net debt to total capital)(3)
2016
2015
2014
2013
2012
restated(1)
2011
2010
2009
2008
2007
23,142
3,766
6,075
21,378
(209)
2,624
1,926
(332)
1,594
2,210
4,933
7,832
6,620
9,520
2,223
4,854
23,003 30,988 33,063 32,785 36,548 32,929 24,637 32,964 30,559
4,957 10,085
9,590
6,253 11,095
9,763
6,930 11,847 12,132
8,860 13,348 11,983
20,455 27,073 29,342 28,680 30,580 27,960 20,858 26,311 25,470
(137)
8,821
8,172
(868)
7,304
5,761
(244)
(20)
(299)
(171) 10,782 10,928
7,922
(564)
8,119
(1,575)
(1,753)
(906)
6,544
6,169
(1,470)
4,976
6,120
2,860
(256)
(458)
(5,454)
(259)
(5,842) (1,524)
(989)
(5,624) (2,513)
2,217
(276)
1,700
426
(1,387)
(961)
2,673
(273)
4,029
2,912
(487)
2,425
2,569
(452)
8,571
6,120
(905)
5,215
5,237
827
218
31,904
24,325
(5,309) (4,773) (5,760)
19,016
32,842 43,782 46,551 49,757 41,667 42,135 36,623 29,808 24,401
21,342 32,177 37,364 43,738 43,189 37,971 28,069 21,756 24,330
(1,869)
(4,097)
16,569 26,417 31,671 37,611 39,092 34,239 26,121 20,221 22,461
(6,127)
(1,948)
(3,732)
(5,693)
(1,535)
7,729
6,949
4,240
5,838
(2,387) (4,177) (6,018)
(6,075)
(8,487) (12,901) (12,871) (10,652)
7,370 11,498
(5,672)
(5,947)
(1,374)
(8,510)
9,579
4,904
9,924
(4,902)
(5,282)
(4,707)
(7,384) (11,280) (11,340)
9,845
(4,002)
(4,851)
1.72
1.24
–
–
2.09
(0.75)
85
2.5
1.73
(1.96)
85
2.0
0.64
(4.36)
32
2.0
4.40
5.58
124
3.5
16.3% 9.7% 15.9% 20.0% 19.1% 30.4% 29.6% 20.1% 30.6% 28.4%
33.2
24.6% 31.0% 29.8% 32.0% 29.0% 28.3% 31.9% 33.1% 33.4% 31.8%
25.9% 37.7% 28.6% 22.2% 16.3% 3.1% 16.3% 28.7% 34.3% 16.6%
2.28
(1.17)
85
2.7
4.36
4.34
44
9.9
4.13
5.43
65
6.4
2.14
2.02
–
–
5.06
5.10
74
6.8
16.7
36.8
34.2
35.8
19.6
24.1
10.1
30.1
n/a
(1) Certain balances relating to 2012 were restated to reflect the adoption of new accounting pronouncements. See note 2 of the 2013 Consolidated financial statements for details.
(2) Underlying EBIT interest cover is underlying EBIT divided by net finance costs, excluding net foreign exchange gains and losses, unwinding of discount relating to provisions and other liabilities,
financing special items and remeasurements, and including the Group’s attributable share of associates’ and joint ventures’ net finance costs, which in 2011 resulted in a net finance income and
therefore the ratio is not applicable.
(3) Net debt to total capital is calculated as net debt divided by total capital (being ‘Net assets’ as shown in the Consolidated balance sheet excluding net debt).
Anglo American plc Annual Report 2016
179
Financial statements
2016
2015
13.73
3.25
0.81
1.38
0.95
667
10.69
14.70
3.48
0.74
1.34
0.90
676
10.89
2016
898
670
758
250
454
80
101
86
94
94
200
133
989
615
681
221
436
58
69
64
66
58
114
88
15.47
3.96
0.68
1.37
0.92
709
11.25
12.78
3.34
0.65
1.33
0.90
655
10.12
2015
868
555
644
213
393
43
46
49
50
45
89
71
1,051
691
932
249
536
56
67
57
59
52
102
84
US$/oz
US$/oz
US$/oz
US cents/lb
US cents/lb
US$/tonne
US$/tonne
US$/tonne
US$/tonne
US$/tonne
US$/tonne
US$/tonne
US$/oz
US$/oz
US$/oz
US cents/lb
US cents/lb
US$/tonne
US$/tonne
US$/tonne
US$/tonne
US$/tonne
US$/tonne
US$/tonne
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
EXCHANGE RATES AND COMMODITY PRICES
US$ exchange rates
Year end spot rates
South African rand
Brazilian real
Sterling
Australian dollar
Euro
Chilean peso
Botswana pula
Average rates for the year
South African rand
Brazilian real
Sterling
Australian dollar
Euro
Chilean peso
Botswana pula
Commodity prices
Year end spot prices
Platinum(1)
Palladium(1)
Rhodium(2)
Copper(3)
Nickel(3)
Iron ore (62% Fe CFR)(4)
Iron ore (66% Fe Concentrate CFR)(5)
Thermal coal (FOB South Africa)(6)
Thermal coal (FOB Australia)(7)
Thermal coal (FOB Colombia)(6)
Hard coking coal (FOB Australia)(8)
PCI (FOB Australia)(8)
Average market prices for the year
Platinum(1)
Palladium(1)
Rhodium(2)
Copper(3)
Nickel(3)
Iron ore (62% Fe CFR)(4)
Iron ore (66% Fe Concentrate CFR)(5)
Thermal coal (FOB South Africa)(6)
Thermal coal (FOB Australia)(7)
Thermal coal (FOB Colombia)(6)
Hard coking coal (FOB Australia)(9)
PCI (FOB Australia)(9)
(1) Source: London Platinum and Palladium Market (LPPM).
(2) Source: Comdaq.
(3) Source: London Metal Exchange (LME).
(4) Source: Platts.
(5) Source: Metal Bulletin.
(6) Source: McCloskey.
(7) Source: globalCOAL.
(8) Source: Represents the quarter four benchmark.
(9) Source: Represents the average quarterly benchmark.
180
Anglo American plc Annual Report 2016
ORE RESERVES AND MINERAL RESOURCES
INTRODUCTION
The Ore Reserve and Mineral Resource estimates presented in this
Annual Report are prepared in accordance with the Anglo American plc
(AA plc) Reporting of Exploration Results, Mineral Resources and Ore
Reserves standard. This standard requires that the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves
2012 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 Exploration Results, 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 (2012)
and SAMREC (2007 Edition as amended July 2009) Codes. Ore Reserves
in the context of this Annual Report have the same meaning as ‘Mineral
Reserves’ as defined by the SAMREC Code and the CIM (Canadian
Institute of Mining and Metallurgy) Definition Standards on Mineral
Resources and Mineral Reserves.
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. 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
information in the form and context in which it appears. The names of
the Competent Persons (CPs) along with their Recognised Professional
Organisation (RPO) affiliation and years of relevant experience are listed
in the Ore Reserve and Mineral Resource Report 2016.
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
suitably qualified Competent Persons from within the Anglo American
Group, or by independent consultants. The frequency and depth of the
reviews is a function of the perceived risks and/or uncertainties associated
with a particular Ore Reserve and Mineral Resource. The overall value of
the entity and time that has lapsed since an independent third-party review
is also considered. Those operations/projects that were subjected to
independent third-party reviews during the year are indicated in footnotes
to the tables.
The JORC and SAMREC Codes require due consideration of reasonable
prospects for eventual economic extraction for Mineral Resource
definition. 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. The calculation
of Mineral Resource and Ore Reserve estimates are based on long term
prices determined at the beginning of the second quarter each year. Ore
Reserves are dynamic and are more likely to be affected by fluctuations in
the prices of commodities, uncertainties in production costs, processing
costs and other mining, infrastructure, legal, environmental, social and
governmental factors which may impact the financial condition and
prospects of the Group. 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. Unless otherwise stated, Mineral Resources are additional
to (exclusive of) those resources converted to Ore Reserves and are
reported on a dry tonnes basis.
The appropriate Mineral Resource classification is determined by the
appointed Competent (or Qualified) Persons. The choice of appropriate
category of Mineral Resource depends upon the quantity, distribution and
quality of geoscientific information available and the level of confidence in
these data.
The detailed Ore Reserve and Mineral Resource estimates,
Reserve and Resource Reconciliation Overview, Definitions and Glossary
are contained in the separate Ore Reserves and Mineral Resources Report 2016
which is available in the Annual Reporting Centre on the Anglo American website.
To accommodate the various factors that are important in the development
of a classified Mineral Resource estimate, a scorecard approach is
generally used. Mineral Resource classification defines the confidence
associated with different parts of the Mineral Resource. The confidence
that is assigned refers collectively to the reliability of the Grade and
Tonnage estimates. This reliability includes consideration for the fidelity
of the base data, the geological continuity predicated by the level of
understanding of the geology, the likely precision of the estimated grades
and understanding of grade variability, as well as various other factors
(in particular density) that may influence the confidence that can be
placed on the Mineral Resource. Most business units have developed
commodity-specific scorecard-based approaches to the classification
of their Mineral Resources.
The estimates of Ore Reserves and Mineral Resources are stated as
at 31 December 2016. The figures in the tables have been rounded and,
if used to derive totals and averages, minor differences with stated results
could occur.
The Ore Reserves and Mineral Resources Report 2016 should be
considered the only valid source of Ore Reserve and Mineral Resource
information for the Anglo American group exclusive of Kumba Iron Ore
and Anglo American Platinum Limited which publish their own
independent annual reports.
It is accepted that mine design and planning may include some
Inferred Mineral Resources. Inferred Mineral Resources in the Life of
Mine Plan (LOM Plan) are described as ‘Inferred (in LOM Plan)’ separately
from the remaining Inferred Mineral Resources described as ‘Inferred
(ex. LOM Plan)’, as required. These resources are declared without
application of any Modifying Factors. Reserve Life reflects the scheduled
extraction period in years for the total Ore Reserves in the approved
Life of Mine Plan.
The Ownership (Attributable) Percentage that Anglo American holds in
each operation and project is presented beside the name of each entity.
Operations and projects which fall below the internal threshold for
reporting (25% attributable interest) are excluded from the Ore Reserves
and Mineral Resources estimates. Operations which were disposed of
during 2016 and hence not reported are: Kimberley Mines (Diamonds),
Rustenburg Mines (Platinum), Boa Vista (Niobium), Chapadão
(Phosphates), Callide and Foxleigh (Coal).
In South Africa, the Minerals and Petroleum Resources Development
Act, Number 28 of 2002 (MPRDA) was implemented on 1 May 2004
(subsequently amended by the Minerals and Petroleum Resources
Development Amendment Act 49 of 2008) effectively transferred
custodianship of the previously privately held mineral rights to the State.
A Prospecting Right is a 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.
A Mining Right is a right issued in terms of the MPRDA and is valid for
up to 30 years, with the possibility of a further extension of 30 years. The
Minister of Mineral Resources will grant a renewal of the Mining Right if the
terms and conditions of the Mining Right have been complied with and the
applicant is not in contravention of any relevant provisions of the MPRDA.
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 Mining Rights and Prospecting Rights have been
submitted and these are still being processed by the relevant regulatory
authorities, the relevant Ore Reserves and Mineral Resources have been
included in the statement.
• Where applications for Mining Rights and 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 Mineral
Resources have been included in the statement (any associated
comments appear in the footnotes).
Anglo American plc Annual Report 2016
181
O
r
e
R
e
s
e
r
v
e
s
a
n
d
M
n
e
r
a
i
l
R
e
s
o
u
r
c
e
s
ORE RESERVES AND MINERAL RESOURCES
ESTIMATED ORE RESERVES(1)
as at 31 December 2016
Detailed Proved and Probable estimates appear on the referenced pages in the Ore Reserves and Mineral Resources Report 2016.
Ownership
%
43.4
Mining
Method
OP
85.0
85.0
UG
OP
Ownership
%
62.9
Mining
Method
OP
62.9
UG
OP
Ownership
%
42.5
Mining
Method
OP
42.5
42.5
42.5
OP
OP
OP
LOM(2)
(years)
12
14
3
LOM(2)
(years)
30
4
LOM(2)
(years)
18
18
1
25
14
Proved + Probable
Saleable Carats
(M¢)
51.1
Treated Tonnes
(Mt)
33.3
Recovered Grade
(cpht)
153.4
7.4
0.3
5.9
1.9
126.0
15.8
Saleable Carats
(M¢)
24.8
Treated Tonnes
(Mt)
20.2
Recovered Grade
(cpht)
122.4
71.3
0.3
92.4
2.0
77.2
15.4
Saleable Carats
(M¢)
4.7
Treated Tonnes
(Mt)
25.0
Recovered Grade
(cpht)
18.7
138.8
–
8.5
144.9
106.4
–
34.9
157.3
130.4
–
24.2
92.2
Ownership
%
42.5
Mining
Method
OC
LOM(2)
(years)
3
Saleable Carats
(k¢)
186
Treated Tonnes
(kt)
2,288
Recovered Grade
(cpht)
8.13
42.5
42.5
42.5
42.5
OC
OC
MM
MM
22
4
20
2
49
139
Saleable Carats
(k¢)
4,326
94
Ownership
%
78.0
Mining
Method
UG
Reserve Life(2)
(years)
n/a
Contained Metal
(4E Moz)
8.0
UG
OP
UG
33.2
124.1
4.9
Ownership
%
44.0
Mining
Method
OP
Reserve Life(2)
(years)
69
Contained Copper
(kt)
24,809
2,969
656
6,707
1,311
Contained Nickel
(kt)
561
97
50.1
50.1
OP
OP
11
24
Ownership
%
100
Mining
Method
OP
100
OP
Ownership
%
53.2
Mining
Method
OP
53.2
OP
Ownership
%
100
Mining
Method
OP
OP
Ownership
%
40.0
Mining
Method
OP
29.6
29.6
OP
UG
Reserve Life(2)
(years)
26
14
Reserve Life(2)
(years)
18
17
Reserve Life(2)
(years)
45
Reserve Life(2)
(years)
8
17
67
2,858
13,952
Area
(k m2)
46,486
423
ROM Tonnes
(Mt)
56.4
248.8
1,413.9
45.5
ROM Tonnes
(Mt)
2,537.1
550.6
82.2
1,141.2
428.6
ROM Tonnes
(Mt)
40.4
7.7
Saleable Product
(Mt)
187
412
Saleable Product(6)
(Mt)
663
565
ROM Tonnes
(Mt)
74.0
59.9
93.6
1.71
1.00
Recovered Grade
(cpm2)
0.09
0.22
Grade
(4E g/t)
4.38
4.15
2.73
3.37
Grade
(%TCu)(5)
0.98
0.54
0.80
0.59
0.31
Grade
(%Ni)
1.39
1.26
Grade
(%Fe)
65.0
64.9
Grade(6)
(%Fe)
67.5
67.5
Grade
(%Mn)
44.2
37.0
42.2
DIAMOND(3) OPERATIONS – DBCi
(See page 10 in R&R Report for details)
Gahcho Kué
Kimberlite
Snap Lake
Victor
Kimberlite
Kimberlite
DIAMOND(3) OPERATIONS – DBCM
(See page 12 in R&R Report for details)
Venetia (OP)
Kimberlite
Venetia (UG)
Voorspoed
Kimberlite
Kimberlite
DIAMOND(3) OPERATIONS – Debswana
(See pages 14 &15 in R&R Report for details)
Damtshaa
Kimberlite
Jwaneng
Letlhakane
Orapa
Kimberlite
Kimberlite
TMR
Kimberlite
DIAMOND(3) OPERATIONS – Namdeb
(See page 16 in R&R Report for details)
Elizabeth Bay
Aeolian and Marine
Beaches
Mining Area 1
Orange River
Fluvial Placers
Atlantic 1
Midwater
Marine Placers
Marine
PLATINUM(4) OPERATIONS
(See page 18 in R&R Report for details)
Merensky Reef
UG2 Reef
Platreef
Main Sulphide Zone
In situ + stockpile
COPPER OPERATIONS
(See page 22 in R&R Report for details)
Collahuasi
Flotation – direct feed
Flotation – low grade stockpile
El Soldado
Los Bronces
Flotation
Flotation
Dump Leach
NICKEL OPERATIONS
(See page 25 in R&R Report for details)
Barro Alto
Saprolite
Niquelândia
Saprolite
KUMBA IRON ORE OPERATIONS
(See page 26 in R&R Report for details)
Kolomela
Hematite
Sishen
Hematite
IRON ORE BRAZIL OPERATIONS
(See page 28 in R&R Report for details)
Serra do Sapo
Friable Itabirite and Hematite
Itabirite
SAMANCOR MANGANESE OPERATIONS
(See page 29 in R&R Report for details)
ROM + Sand Tailings
GEMCO(7)
Mamatwan
Wessels
182
Anglo American plc Annual Report 2016
ORE RESERVES AND MINERAL RESOURCES
Estimated Ore Reserves continued
COAL OPERATIONS – Australia
(See page 30 in R&R Report for details)
Capcoal (OC)*
Metallurgical – Coking
Metallurgical – Other
Thermal – Export
Capcoal (UG)*
Metallurgical – Coking
Dawson
Metallurgical – Coking
Thermal – Export
Grosvenor
Moranbah North Metallurgical – Coking
Metallurgical – Coking
COAL OPERATIONS– Canada
(See page 30 in R&R Report for details)
Trend
Roman Mountain Metallurgical – Coking
Metallurgical – Coking
COAL OPERATIONS – Colombia
(See page 31 in R&R Report for details)
Cerrejón
Thermal – Export
COAL OPERATIONS – South Africa
(See page 31 in R&R Report for details)
Goedehoop
Thermal – Export
Greenside
Isibonelo
Kleinkopje
Kriel
Landau
Mafube
Thermal – Export
Synfuel
Thermal – Export
Thermal – Domestic
Thermal – Export
Thermal – Domestic
Thermal – Export
Thermal – Domestic
New Denmark
Thermal – Domestic
New Vaal
Zibulo
Thermal – Domestic
Thermal – Export
Thermal – Domestic
Reserve Life(2)
Saleable Tonnes(8)
Ownership
%
78.3
Mining
Method
OC
Reserve Life(2)
(years)
16
70.0
51.0
100
88.0
UG
OC
UG
UG
Ownership
%
100
Mining
Method
OC
100
OC
2
12
27
15
(years)
7
15
Ownership
%
33.3
Ownership
%
100
Mining
Method
OC
Mining
Method
UG
Reserve Life(2)
(years)
17
Reserve Life(2)
(years)
10
100
100
100
UG
OC
OC
73.0 UG&OC
100
50.0
100
100
OC
OC
UG
OC
73.0 UG&OC
11
11
9
4
4
14
23
14
17
Proved + Probable
Saleable Tonnes(8)
(Mt)
29.7
45.3
7.5
11.2
41.9
33.8
128.0
89.4
Saleable Quality
5.5 CSN
6,830 kcal/kg
6,190 kcal/kg
8.5 CSN
7.5 CSN
6,540 kcal/kg
8.5 CSN
8.0 CSN
(Mt)
8.3
25.8
Saleable Quality
7.0 CSN
7.0 CSN
Saleable Tonnes(8)
(Mt)
545.1
Saleable Quality
6,080 kcal/kg
Saleable Tonnes(8)
(Mt)
25.8
32.5
49.9
21.5
14.7
8.8
4.9
29.8
15.3
102.5
226.9
60.6
10.2
Saleable Quality
6,000 kcal/kg
5,920 kcal/kg
4,750 kcal/kg
6,260 kcal/kg
4,850 kcal/kg
6,190 kcal/kg
4,520 kcal/kg
6,050 kcal/kg
5,010 kcal/kg
5,100 kcal/kg
3,660 kcal/kg
5,990 kcal/kg
4,950 kcal/kg
Mining method: OP = Open Pit, UG = Underground, OC = Open Cast/Cut, MM = Marine Mining. TMR = Tailings Mineral Resource. Operations = Mines in steady-state or in ramp-up phase.
* Capcoal comprises opencast operations at Lake Lindsay and Oak Park, with an underground longwall operation at Grasstree.
(1) Estimated Ore Reserves are the sum of Proved and Probable Ore Reserves (on an exclusive basis, i.e. Mineral Resources are reported as additional to
Ore Reserves unless otherwise stated). Please refer to the detailed Ore Reserve estimates tables in the AA plc R&R Report for the individual Proved and
Probable Reserve estimates. The Ore Reserve estimates are reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (The JORC Code, 2012) as a minimum standard. Ore Reserve estimates for operations in South Africa are reported in accordance
with The South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (The SAMREC Code, 2007 Edition as amended
July 2009). The figures reported represent 100% of the Ore Reserves. Anglo American plc ownership is stated separately. Rounding of figures may cause
computational discrepancies.
(2) Reserve Life = The scheduled extraction period in years for the total Ore Reserves in the approved Life of Mine Plan.
LOM = Life of Mine (years) is based on scheduled Probable Reserves including some Inferred Resources considered for Life of Mine planning.
(3) DBCi = De Beers Canada, DBCM = De Beers Consolidated Mines, Debswana = Debswana Diamond Company, Namdeb = Namdeb Holdings.
k¢ = thousand carats. M¢ = million carats. k m² = thousand square metres.
Grade is quoted as carats per hundred metric tonnes (cpht) or as carats per square metre (cpm²).
Reported Diamond Reserves are based on a Bottom Cut-off (BCO) which refers to the bottom screen size aperture and varies between 1.00mm and 3.00mm
(nominal square mesh). Specific BCO’s applied to derive estimates are included in the detailed Diamond Reserve tables in the AA plc R&R Report.
Snap Lake has been placed on Care & Maintenance. Damtshaa will resume production in H2 2017.
No Diamond Reserves reported for Letlhakane Kimberlite as mining is now scheduled exclusively from Inferred Resources hence one year LOM.
(4) Estimates reported represent 100% of the Ore Reserves attributable to Anglo American Platinum Limited unless otherwise noted.
Details of the individual operations appear in the Anglo American Platinum Limited Ore Reserves and Mineral Resources Report.
4E is the sum of Platinum, Palladium, Rhodium and Gold.
(5) TCu = Total Copper.
(6) Saleable Product tonnes are reported on a wet basis (average moisture content is 9.0 wt% of the wet mass) with quality stated on a dry basis.
(7) GEMCO Manganese grades are reported as per washed ore samples and should be read together with their respective yields, see page 29 in the AA plc
R&R Report.
(8) Total Saleable Tonnes represents the product tonnes produced quoted as metric tonnes on a Product moisture basis. The coal quality for Coal Reserves is
quoted as either kilocalories per kilogram (kcal/kg) or Crucible Swell Number (CSN). Kilocalories per kilogram represent Calorific Value (CV) on a Gross
As Received (GAR) basis. CV is rounded to the nearest 10 kcal/kg and CSN to the nearest 0.5 index.
Metallurgical – Coking: High-, medium- or low-volatile semi-soft, soft or hard coking coal primarily for blending and use in the steel industry.
Metallurgical – Other: 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.
Thermal – Export: Low- to high-volatile thermal coal primarily for export in the use of power generation; quality measured by calorific value (CV).
Thermal – Domestic: Low- to high-volatile thermal coal primarily for domestic consumption for power generation.
Synfuel: Coal specifically for the domestic production of synthetic fuel and chemicals.
Peace River Coal (Trend and Roman Mountain Mines) has been placed on Care & Maintenance.
Anglo American plc Annual Report 2016
183
ORE RESERVES AND MINERAL RESOURCESOre Reserves and Mineral Resources
ESTIMATED MINERAL RESOURCES(1)
as at 31 December 2016
Detailed Measured, Indicated and Inferred estimates appear on the referenced pages in the Ore Reserves and Mineral Resources Report 2016.
Measured + Indicated
Total Inferred(2)
Carats
(M¢)
3.2
7.3
0.1
Carats
(M¢)
–
–
0.6
Carats
(M¢)
1.1
106.1
–
7.0
–
299.3
Carats
(k¢)
160
204
324
292
Carats
(k¢)
9,074
502
DIAMOND(3) OPERATIONS – DBCi
(See page 10 in R&R Report for details)
Gahcho Kué
Kimberlite
Snap Lake
Victor
Kimberlite
Kimberlite
DIAMOND(3) OPERATIONS – DBCM
(See page 12 in R&R Report for details)
Venetia (OP)
Kimberlite
Venetia (UG)
Voorspoed
Kimberlite
Kimberlite
DIAMOND(3) OPERATIONS – Debswana
(See pages 14&15 in R&R Report for details)
Damtshaa
Kimberlite
Jwaneng
Kimberlite
TMR
Letlhakane
Kimberlite
Orapa
TMR
Kimberlite
Ownership
%
43.4
Mining
Method
OP
85.0
85.0
UG
OP
Ownership
%
62.9
Mining
Method
OP
62.9
UG
OP
Ownership
%
42.5
Mining
Method
OP
42.5
42.5
42.5
OP
OP
OP
DIAMOND(3) OPERATIONS – Namdeb
(See pages 16&17 in R&R Report for details)
Aeolian and Deflation
Douglas Bay
Ownership
%
42.5
Mining
Method
OC
42.5
42.5
42.5
42.5
42.5
OC
OC
OC
MM
MM
Elizabeth Bay
Mining Area 1
Aeolian, Marine and Deflation
Beaches
Orange River
Fluvial Placers
Atlantic 1
Midwater
Marine Placers
Marine
PLATINUM(4) OPERATIONS
(See page 19 in R&R Report for details)
Merensky Reef
UG2 Reef
Platreef
Main Sulphide Zone
Ownership
%
78.0
Mining
Method
UG
Contained Metal
(4E Moz)
83.3
UG
OP
UG
185.8
94.8
18.1
COPPER OPERATIONS
(See page 23 in R&R Report for details)
Collahuasi
Heap Leach
Ownership
%
44.0
Mining
Method
OP
Contained Copper
(kt)
559
Flotation – direct feed
Flotation – low grade stockpile
Flotation
El Soldado
Los Bronces
Flotation
Dump Leach
NICKEL OPERATIONS
(See page 25 in R&R Report for details)
Barro Alto
Saprolite
Ferruginous Laterite
Niquelândia
Saprolite
KUMBA IRON ORE OPERATIONS
(See page 26 in R&R Report for details)
Kolomela
Hematite
Sishen
Hematite
IRON ORE BRAZIL OPERATIONS
(See page 28 in R&R Report for details)
Serra do Sapo
Friable Itabirite and Hematite
Itabirite
50.1
50.1
OP
OP
7,450
5,015
790
13,414
–
Ownership
%
100
Mining
Method
OP
Contained Nickel
(kt)
87
87
41
100
OP
Ownership
%
53.2
Mining
Method
OP
53.2
OP
Ownership
%
100
Mining
Method
OP
SAMANCOR MANGANESE OPERATIONS
(See page 29 in R&R Report for details)
GEMCO(7)(8)
Mamatwan(7)
Wessels(7)
ROM + Sand Tailings
Ownership
%
40.0
Mining
Method
OP
29.6
29.6
OP
UG
184
Anglo American plc Annual Report 2016
Tonnes
(Mt)
2.3
4.1
0.5
Tonnes
(Mt)
–
–
2.1
Tonnes
(Mt)
4.4
114.2
–
22.2
–
295.4
Tonnes
(kt)
2,269
3,176
20,897
78,790
Area
(k m2)
128,675
1,970
Tonnes
(Mt)
488.5
1,096.8
1,304.3
134.8
Tonnes
(Mt)
83.3
783.8
1,166.4
138.7
3,126.4
–
Tonnes
(Mt)
7.4
7.2
3.2
Tonnes
(Mt)
94.9
341.1
Tonnes(6)
(Mt)
409.4
1,441.6
Tonnes
(Mt)
131.9
91.4
143.5
Grade
(cpht)
135.9
177.9
24.0
Grade
(cpht)
–
–
27.2
Grade
(cpht)
25.0
92.9
–
31.7
–
101.3
Grade
(cpht)
7.05
6.43
1.55
0.37
Grade
(cpm2)
0.07
0.25
Grade
(4E g/t)
5.31
5.27
2.26
4.18
Carats
(M¢)
17.9
29.4
0.4
Carats
(M¢)
3.8
59.6
3.8
Carats
(M¢)
4.9
63.5
15.9
5.2
14.1
58.6
Carats
(k¢)
1
2,819
3,027
173
Carats
(k¢)
Tonnes
(Mt)
12.9
16.6
1.6
Tonnes
(Mt)
22.9
69.9
21.8
Tonnes
(Mt)
19.0
77.0
34.5
18.9
54.8
68.2
Tonnes
(kt)
127
37,959
193,336
47,543
Area
(k m2)
86,054
1,073,288
481
Contained Metal
(4E Moz)
86.1
94.6
72.2
6.3
Grade
(%TCu)(5)
0.67
Contained Copper
(kt)
277
29,371
7,269
65
7,025
27
Contained Nickel
(kt)
400
22
–
0.95
0.43
0.57
0.43
–
Grade
(%Ni)
1.19
1.21
1.30
Grade
(%Fe)
62.9
51.9
Grade(6)
(%Fe)
32.5
30.8
Grade
(%Mn)
42.4
35.0
42.3
2,249
Tonnes
(Mt)
540.6
536.4
1,134.8
46.0
Tonnes
(Mt)
52.2
3,204.1
1,597.2
14.7
1,621.8
8.6
Tonnes
(Mt)
29.3
1.8
–
Tonnes
(Mt)
109.3
92.9
Tonnes(6)
(Mt)
96.0
556.6
Tonnes
(Mt)
36.8
0.3
3.2
Grade
(cpht)
139.3
176.7
27.5
Grade
(cpht)
16.5
85.3
17.3
Grade
(cpht)
25.8
82.5
46.1
27.7
25.8
85.8
Grade
(cpht)
0.79
7.43
1.57
0.36
Grade
(cpm2)
0.08
0.21
Grade
(4E g/t)
4.95
5.49
1.98
4.25
Grade
(%TCu)(5)
0.53
0.92
0.46
0.44
0.43
0.31
Grade
(%Ni)
1.36
1.23
–
Grade
(%Fe)
64.0
51.3
Grade(6)
(%Fe)
35.7
31.1
Grade
(%Mn)
41.2
34.3
46.0
ORE RESERVES AND MINERAL RESOURCES
Estimated Mineral Resources continued
COAL OPERATIONS – Australia
(See page 32 in R&R Report for details)
Capcoal (OC)*
Capcoal (UG)*
Dawson
Grosvenor
Moranbah North
COAL OPERATIONS – Canada
(See page 32 in R&R Report for details)
Trend
Roman Mountain
COAL OPERATIONS – Colombia
(See pages 33 in R&R Report for details)
Cerrejón
COAL OPERATIONS – South Africa
(See pages 33 in R&R Report for details)
Goedehoop
Greenside
Isibonelo
Kleinkopje
Kriel
Landau
Mafube
New Denmark
Zibulo
Ownership
%
78.3
Mining
Method
OC
70.0
51.0
100
88.0
UG
OC
UG
UG
Ownership
%
100
Mining
Method
OC
100
OC
Ownership
%
33.3
Ownership
%
100
100
100
100
Mining
Method
OC
Mining
Method
UG
UG
UG
OC
73.0 UG&OC
100
50.0
100
OC
OC
UG
73.0 UG&OC
Measured + Indicated
Total Inferred(2)
MTIS(9)
(Mt)
166.3
Coal Quality
(kcal/kg)
6,920
90.4
353.9
194.4
72.0
6,730
6,770
6,580
6,670
MTIS(9)
(Mt)
26.5
Coal Quality
(kcal/kg)
6,980
4.3
7,910
MTIS(9)
(Mt)
3,674.9
Coal Quality
(kcal/kg)
6,570
MTIS(9)
(Mt)
197.1
Coal Quality
(kcal/kg)
5,340
23.8
16.8
–
99.4
82.9
75.1
70.3
327.1
5,720
5,400
–
4,850
5,190
5,090
5,790
4,920
MTIS(9)
(Mt)
197.3
Coal Quality
(kcal/kg)
6,840
6.3
207.9
37.3
2.2
6,470
6,730
6,650
6,710
MTIS(9)
(Mt)
2.6
Coal Quality
(kcal/kg)
6,370
2.2
7,950
MTIS(9)
(Mt)
644.7
Coal Quality
(kcal/kg)
6,470
MTIS(9)
(Mt)
7.9
Coal Quality
(kcal/kg)
4,770
0.2
–
3.7
–
5,590
–
6,070
–
18.1
5,500
–
–
–
–
249.0
4,760
Mining method: OP = Open Pit, UG = Underground, OC = Open Cast/Cut, MM = Marine Mining. TMR = Tailings Mineral Resource. Operations = Mines in steady-state or in ramp-up phase.
* Capcoal comprises opencast operations at Lake Lindsay and Oak Park, with an underground longwall operation at Grasstree.
(1) Estimated Mineral Resources are presented on an exclusive basis, i.e. Mineral Resources are reported as additional to Ore Reserves unless otherwise stated.
Please refer to the detailed Mineral Resource estimates tables in the AA plc R&R Report for the detailed Measured, Indicated and Inferred Resource estimates.
The Mineral Resource estimates are reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves (The JORC Code, 2012) as a minimum standard. The Mineral Resource estimates for operations in South Africa are reported in accordance with The
South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (The SAMREC Code, 2007 Edition as amended July
2009). The figures reported represent 100% of the Mineral Resources. Anglo American plc ownership is stated separately. Rounding of figures may cause
computational discrepancies.
(2) Total Inferred is the sum of ‘Inferred (in LOM Plan)’, the Inferred Resources within the scheduled Life of Mine Plan (LOM Plan) and ‘Inferred (ex. LOM Plan)’, the
portion of Inferred Resources with reasonable prospects for eventual economic extraction not considered in the Life of Mine Plan (LOM Plan) as relevant.
(3) DBCi = De Beers Canada, DBCM = De Beers Consolidated Mines, Debswana = Debswana Diamond Company, Namdeb = Namdeb Holdings.
Estimated Diamond Resources are presented on an exclusive basis, i.e. Diamond Resources are quoted as additional to Diamond Reserves.
k¢ = thousand carats. M¢ = million carats. k m² = thousand square metres.
Grade is quoted as carats per hundred metric tonnes (cpht) or as carats per square metre (cpm²).
Reported Diamond Resources are based on a Bottom Cut-off (BCO) which refers to the bottom screen size aperture and varies between 1.00mm and 3.00mm
(nominal square mesh). Specific BCO’s applied to derive estimates are included in the detailed Diamond Resource tables in the AA plc R&R Report.
(4) The figures reported represent 100% of the Mineral Resources attributable to Anglo American Platinum Limited unless otherwise noted.
Details of the individual operations appear in the Anglo American Platinum Limited Ore Reserves and Mineral Resources Report.
Merensky Reef and UG2 Reef Mineral Resources are estimated over a ‘Resource Cut’ which takes cognisance of the mining method, potential economic viability
and geotechnical aspects in the hangingwall or footwall of the reef.
4E is the sum of Platinum, Palladium, Rhodium and Gold.
(5) TCu = Total Copper.
(6) Tonnes and grades are reported on a dry basis.
(7) Mineral Resources are quoted as inclusive of those used to calculate Ore Reserves and must not be added to the Ore Reserves.
(8) GEMCO Manganese grades are reported as per washed ore samples and should be read together with their respective yields, see page 29 in the AA plc
R&R Report.
(9) Coal Resources are quoted on a Mineable Tonnes In Situ (MTIS) basis in million tonnes, which are in addition to those Coal Resources that have been modified
to produce the reported Coal Reserves. Coal Resources are reported on an in situ moisture basis. The coal quality for Coal Resources is quoted on an in situ heat
content as kilocalories per kilogram (kcal/kg), representing Calorific Value (CV) on a Gross As Received (GAR) basis. CV is rounded to the nearest 10 kcal/kg.
Anglo American plc Annual Report 2016
185
ORE RESERVES AND MINERAL RESOURCESOre Reserves and Mineral Resources
OTHER INFORMATION
GLOSSARY OF TERMS
Ore Reserves
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 or extracted and is
defined by studies at Pre-Feasibility or Feasibility level as appropriate that
include application of Modifying Factors. Such studies demonstrate that, at
the time of reporting, extraction could reasonably be justified. ‘Modifying
Factors’ are (realistically assumed) considerations used to convert Mineral
Resources to Ore Reserves. These include, but are not restricted to, mining,
processing, metallurgical, infrastructure, economic, marketing, legal,
environmental, social and governmental factors. Ore Reserves are sub-
divided in order of increasing confidence into Probable Ore Reserves and
Proved Ore Reserves.
A ‘Proved Ore Reserve’ is the economically mineable part of a Measured
Mineral Resource. A Proved Ore Reserve implies a high degree of confidence
in the Modifying Factors.
A ‘Probable Ore Reserve’ is the economically mineable part of an Indicated,
and in some circumstances, a Measured Mineral Resource. The confidence in
the Modifying Factors applying to a Probable Ore Reserve is lower than that
applying to a Proved Ore Reserve. A Probable Ore Reserve has a lower level
of confidence than a Proved Ore Reserve but is of sufficient quality to serve
as the basis for a decision on the development of the deposit.
Mineral Resources
A ‘Mineral Resource’ is a concentration or occurrence of solid material of
economic interest in or on the Earth’s crust in such form, grade (or quality),
and quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade (or quality), continuity and other
geological characteristics of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge, including
sampling. Mineral Resources are sub-divided, in order of increasing
geological confidence, into Inferred, Indicated and Measured categories.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which
quantity, grade (or quality), densities, shape, and physical characteristics are
estimated with confidence sufficient to allow the application of Modifying
Factors to support detailed mine planning and final evaluation of the
economic viability of the deposit. Geological evidence is derived from
detailed and reliable exploration, sampling and testing gathered through
appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes, and is sufficient to confirm geological and grade
(or quality) continuity between points of observation where data and samples
are gathered.
A Measured Mineral Resource has a higher level of confidence than that
applying to either an Indicated Mineral Resource or an Inferred Mineral
Resource. It may be converted to a Proved Ore Reserve or under certain
circumstances to a Probable Ore Reserve.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which
quantity, grade (or quality), densities, shape and physical characteristics are
estimated with sufficient confidence to allow the application of Modifying
Factors in sufficient detail to support mine planning and evaluation of the
economic viability of the deposit. Geological evidence is derived from
adequately detailed and reliable exploration, sampling and testing gathered
through appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes, and is sufficient to assume geological and grade
(or quality) continuity between points of observation where data and samples
are gathered.
An Indicated Mineral Resource has a lower level of confidence than that
applying to a Measured Mineral Resource and may only be converted to
a Probable Ore Reserve.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which
quantity and grade (or quality) are estimated on the basis of limited geological
evidence and sampling. Geological evidence is sufficient to imply but not
verify geological and grade (or quality) continuity. It is based on exploration,
sampling and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill holes.
An Inferred Mineral Resource has a lower level of confidence than that
applying to an Indicated Mineral Resource and must not be converted to
an Ore Reserve. It is reasonably expected that the majority of Inferred
Mineral Resources could be upgraded to Indicated Mineral Resources with
continued exploration.
Life of Mine Plan (LOM Plan)
A design and costing study of an existing operation in which appropriate
assessments have been made of realistically assumed geological, mining,
processing, metallurgical, infrastructure, economic, marketing, legal,
environmental, social, governmental, engineering, operational and all other
Modifying Factors, which are considered in sufficient detail to demonstrate
at the time of reporting that extraction is reasonably justified.
Reserve Life
The scheduled extraction period in years for the total Ore Reserves in the
approved LOM Plan.
Inferred (in LOM Plan)
Inferred Resources within the scheduled LOM Plan.
Inferred (ex. LOM Plan)
The portion of Inferred Resources with reasonable prospects for eventual
economic extraction not considered in the LOM Plan.
Fatal-injury frequency rate (FIFR)
FIFR is the number of employee or contractor fatal injuries due to all causes
per 200,000 hours worked.
Lost time injury frequency rate (LTIFR)
LTIFR is the number of lost time injuries (LTIs) for both employees and
contractors per 200,000 hours worked. An LTI is a work related injury
resulting in the person being unable to attend work or perform the routine
functions of his/her job, on the next calendar day after the day of the injury,
whether a scheduled workday or not. Restricted work cases are therefore
counted as LTIs.
Total recordable case frequency rate (TRCFR)
TRCFR is the number of fatal injuries, lost time injuries and medical treatment
cases for both employees and contractors per 200,000 hours.
New cases of occupational disease (NCOD)
NCOD is the sum of occupational diseases due to asbestosis, noise-induced
hearing loss, silicosis, coal-workers’ pneumoconiosis, chronic obstructive
airways disease, occupational tuberculosis, occupational asthma, hand/arm
vibration syndrome, musculoskeletal disorders, dermatitis, occupational
cancers and other occupational diseases.
Total energy consumed
Total amount of energy consumed is the sum of total energy from electricity
purchased, total energy from fossil fuels and total energy from renewable
fuels and is measured in million gigajoules (GJ).
Total new water consumed
Total amount of water used is the total new or make-up water entering the
operation and used for the operation’s primary operational activities and is
measured in million m3.
186
Anglo American plc Annual Report 2016
OTHER INFORMATION GLOSSARY OF TERMS
Greenhouse gases (GHGs)
The Intergovernmental Panel on Climate Change 2006 report (as updated in
2011) factors are applied as defaults for all carbon dioxide-equivalent (CO2e)
and energy calculations. Where emission factors are available for specific
countries or sub-regions from government and regulatory authorities, these
are applied. Australian operations apply conversion factors required by the
government for regulatory reporting and operations in Brazil apply local
factors for biomass and biofuel. Factors for CO2e from electricity are based
on local grid factors.
Based on a self-assessment, Anglo American believes it reports in
accordance with the WRI/WBCSD GHG Protocol, as issued prior to the 2015
revision on Scope 2 emissions reporting. In line with the GHG Protocol’s
‘management control’ boundary, 100% of the direct and indirect emissions
for managed operations are accounted for while zero emissions for joint
ventures and other investments are included in the reporting scope.
Level 3, 4 and 5 environmental incidents
Environmental incidents are unplanned or unwanted events resulting from
our operations that adversely impact the environment or contravene local
regulations/permit conditions. They are classified from minor (Level 1) to
significant (Level 5) depending on the duration and extent of impact, as well
as the sensitivity and/or biodiversity value of the receiving environment.
Level 3-5 incidents are those which we consider to have prolonged impacts
on the local environments, lasting in excess of one month and affecting areas
greater than several hundred metres on site, or extending beyond the
boundaries of our immediate operations.
Total amount spent on corporate social investment (CSI)
Categories for corporate social investment expenditure include charitable
donations, community investment and commercial initiatives. CSI is reported in
US dollars and converted from currency of the operations at the average foreign
exchange rate applied by Anglo American for financial reporting purposes.
Charitable donations include cash donations, contributions in kind, employees’
working hours spent on charity projects during work hours, and the cost of initiatives
designed to inform communities about community-benefit initiatives (e.g. the
production of reports that are issued to communities for the purpose of reporting
progress). Not included is expenditure that is necessary for the development of an
operation (e.g. resettlement of families) or receiving a licence. Training expenditure
for individuals who will be employed by the company following completion of training
is not included.
Community investment includes the funding of community partnerships which
address social issues, the costs of providing public facilities to community members
who are not employees or dependants, the marginal value of land or other assets
transferred to community ownership, and income creation schemes or mentoring/
volunteering initiatives which do not have a principally commercial justification.
Commercial initiatives include enterprise development and other community
initiatives/partnerships that also directly support the success of the Company
(such as supplier development). There must, however be a clear and primary
element of public benefit.
We prohibit the making of donations for political purposes to any politician,
political party or related organisation, an official of a political party or candidate
for political office in any circumstances either directly or through third parties.
Jobs created/sustained through enterprise development
initiatives in Chile
In Chile, Anglo American supports jobs through training and mentoring
programmes. On an annual basis, we report the number of entrepreneurs
who have been provided support through our local partner, TechnoServe.
The associated programmes are engaged in ongoing monitoring and data
is reported at the end of the reporting period.
Businesses supported through enterprise development
initiatives in South Africa
Anglo American supports a range of entrepreneurs and small and medium
enterprises in South Africa through the issuance of micro-finance loans.
Businesses supported are enterprises for which funding has been approved
and made available by the Zimele investment committee in the reporting year.
Anglo American plc Annual Report 2016
187
Other information
OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES
Introduction
When assessing and discussing the Group’s reported financial performance,
financial position and cash flows, management makes reference to
Alternative Performance Measures (APMs) of historical or future financial
performance, financial position or cash flows that are not defined or specified
under International Financial Reporting Standards (IFRS).
The APMs used by the Group fall into two categories:
• Financial APMs: These financial measures are usually derived from the
financial statements, prepared in accordance with IFRS. Certain financial
measures cannot be directly derived from the financial statements as they
contain additional information, such as financial information from earlier
periods or profit estimates or projections. The accounting policies applied
when calculating APMs are, where relevant and unless otherwise stated, the
same as those disclosed in the Group’s Consolidated financial statements
for the year ended 31 December 2016.
• Non-financial APMs: These measures incorporate certain non-financial
information which management believes is useful when assessing the
performance of the Group.
APMs are not uniformly defined by all companies, including those in the
Group’s industry. Accordingly, the APMs used by the Group may not be
comparable with similarly titled measures and disclosures made by other
companies.
APMs should be considered in addition to, and not as a substitute for or as
superior to, measures of financial performance, financial position or cash
flows reported in accordance with IFRS.
Purpose
The Group uses APMs to improve the comparability of information between
reporting periods and business units, either by adjusting for uncontrollable or
one-off factors which impact upon IFRS measures or, by aggregating
measures, to aid the user of the Annual Report in understanding the activity
taking place across the Group’s portfolio.
Their use is driven by characteristics particularly visible in the mining sector:
1. Earnings volatility: The Group mines and markets commodities and
precious metals and minerals. The sector is characterised by significant
volatility in earnings driven by movements in macroeconomic factors,
primarily price and foreign exchange. This volatility is outside the control of
management and can mask underlying changes in performance. As such,
when comparing year-on-year performance, management excludes
certain non-recurring items (such as those classed as ‘special items’) to aid
comparability and then quantifies and isolates uncontrollable factors in
order to improve understanding of the controllable portion of variances.
2. Nature of investment: Investments in the sector typically occur over several
years and are large, requiring significant funding before generating cash.
These investments are often made with partners and the nature of the
Group’s ownership interest affects how the financial results of these
operations are reflected in the Group’s results e.g. whether full
consolidation (subsidiaries), consolidation of the Group’s attributable
assets and liabilities (joint operations) or equity accounted (associates and
joint ventures). Attributable metrics are therefore presented to help
demonstrate the financial performance and returns available to the Group,
for investment and financing activities, excluding the effect of different
accounting treatments for different ownership interests.
3. Portfolio complexity: The Group operates in a number of different, but
complementary commodities, precious metals and minerals. The cost,
value of and return from each saleable unit (e.g. tonne, pound, carat,
ounce) can differ materially between each business. This makes
understanding both the overall portfolio performance, and the relative
performance of its constituent parts on a like-for-like basis, more
challenging. The Group therefore uses composite APMs to provide a
consistent metric to assess performance at the portfolio level.
Consequently, APMs are used by the Board and management for planning
and reporting. A subset is also used by management in setting director and
management remuneration. The measures are also used in discussions with
the investment analyst community and credit rating agencies.
Financial APMs
Closest equivalent
IFRS measure
Group APM
Income statement
Group revenue Revenue
Adjustments to reconcile to primary statements
Rationale for adjustments
• Revenue from associates and joint ventures
• Exclude the effect of different basis of consolidation to aid
comparability
Underlying
EBIT
Underlying
EBITDA
Underlying
earnings
Underlying
effective tax
rate
Underlying
earnings
per share
Balance sheet
Net debt
Attributable
ROCE
Driving Value
ROCE
Profit/(loss) before
net finance (costs)/
income and tax
• Operating and non-operating special items
and remeasurements
• Exclude the impact of non-recurring items or certain accounting
adjustments that can mask underlying changes in performance
• Underlying EBIT from associates and joint
• Exclude the effect of different basis of consolidation to aid
ventures
comparability
Profit/(loss) before
net finance (costs)/
income and tax
Profit/(loss) for the
financial year
attributable to equity
shareholders of the
Company
• Operating and non-operating special items
and remeasurements
• Depreciation and amortisation
• Underlying EBITDA from associates and joint
ventures
• Special items and remeasurements
• Exclude the impact of non-recurring items or certain accounting
adjustments that can mask underlying changes in performance
• Exclude the effect of different basis of consolidation to aid
comparability
• Exclude the impact of non-recurring items or certain accounting
adjustments that can mask underlying changes in performance
Income tax expense
• Tax related to special items and
remeasurements
• The Group’s share of associates’ and joint
ventures’ profit before tax, before special
items and remeasurements, and tax expense,
before special items and remeasurements
• Exclude the impact of non-recurring items or certain accounting
adjustments that can mask underlying changes in performance
• Exclude the effect of different basis of consolidation to aid
comparability
Earnings per share
• Special items and remeasurements
• Exclude the impact of non-recurring items or certain accounting
adjustments that can mask underlying changes in performance
Borrowings less cash
and related hedges
No direct equivalent
• Not applicable
obligation of the Group
• Not applicable
• Debit valuation adjustment
• Exclude the impact of accounting adjustments from the net debt
No direct equivalent
• Not applicable
• Not applicable
188
Anglo American plc Annual Report 2016
OTHER INFORMATION ALTERNATIVE PERFORMANCE MEASURES
Group APM
Cash flow
Capital
expenditure
(capex)
Closest equivalent
IFRS measure
Expenditure on
property, plant and
equipment
Attributable
free cash flow
Cash flows from
operations
Adjustments to reconcile to primary statements
Rationale for adjustments
• Cash flows from derivatives related to capital
• To reflect the net attributable cost of capital expenditure
expenditure
taking into account economic hedges
• Proceeds from disposal of property, plant and
equipment
• Direct funding for capital expenditure from
non-controlling interests
• Capital expenditure
• Cash tax paid
• Dividends from associates, joint ventures and
financial asset investments
• Net interest paid
• Dividends to non-controlling interests
• To measure the amount of cash available to finance returns to
shareholders or growth after servicing debt, providing a return
to minority shareholders and meeting existing capex
commitments
Group revenue
Group revenue includes the Group’s attributable share of associates’ and joint
ventures’ revenue.
A reconciliation to ‘Revenue’, the closest equivalent IFRS measure to Group
revenue is provided within note 3 to the Consolidated financial statements.
Underlying EBIT
Underlying EBIT is ‘Operating profit/(loss)’ presented before special items
and remeasurements(1) and includes the Group’s attributable share of
associates’ and joint ventures’ underlying EBIT. Underlying EBIT of associates
and joint ventures is the Group’s attributable share of associates’ and joint
ventures’ revenue less operating costs before special items and
remeasurements(1) of associates and joint ventures.
A reconciliation to ‘Profit/(loss) before net finance (costs)/income and tax’,
the closest equivalent IFRS measure to underlying EBIT is provided within
note 3 to the Consolidated financial statements.
Underlying EBITDA
Underlying EBITDA is underlying EBIT before depreciation and amortisation
and includes the Group’s attributable share of associates’ and joint ventures’
underlying EBIT before depreciation and amortisation.
A reconciliation to ‘Profit/(loss) before net finance (costs)/income and tax’,
the closest equivalent IFRS measure to underlying EBITDA, is provided within
note 3 to the Consolidated financial statements.
Underlying earnings
Underlying earnings is ‘Profit/(loss) for the financial year attributable to equity
shareholders of the Company’ before special items and remeasurements(1)
and is therefore presented after net finance costs, income tax expense and
non-controlling interests.
A reconciliation to ‘Profit/(loss) for the financial year attributable to equity
shareholders of the Company’, the closest equivalent IFRS measure to
underlying earnings, is provided within note 9 to the Consolidated financial
statements.
Underlying effective tax rate
The underlying effective tax rate equates to the income tax expense, before
special items and remeasurements(1) and including the Group’s share of
associates’ and joint ventures’ tax before special items and remeasurements,(1)
divided by profit before tax before special items and remeasurements(1) and
including the Group’s share of associates’ and joint ventures’ profit before tax
before special items and remeasurements.(1)
A reconciliation to ‘Income tax expense’, the closest equivalent IFRS measure
to underlying effective tax rate, is provided within note 8 to the Consolidated
financial statements.
Underlying earnings per share
Basic and diluted underlying earnings per share are calculated as underlying
earnings divided by the basic or diluted shares in issue. The calculation of
underlying earnings per share is disclosed within note 9 to the Consolidated
financial statements.
Net debt
Net debt is calculated as total borrowings less cash and cash equivalents
(including derivatives which provide an economic hedge of net debt, see note
19, before taking into account the effect of debit valuation adjustments
explained in note 18). A reconciliation to the Consolidated balance sheet is
provided within note 23 to the Consolidated financial statements.
(1) Special items and remeasurements are defined in note 6 to the Consolidated financial
statements.
Capital expenditure (capex)
Capital expenditure is defined as cash expenditure on property, plant and
equipment, including related derivatives, and is presented net of proceeds from
disposal of property, plant and equipment and includes direct funding for capital
expenditure from non-controlling interests in order to match more closely the
way in which it is managed. A reconciliation to ‘Expenditure on property, plant
and equipment’, the closest equivalent IFRS measure to capital expenditure,
is provided within note 22 to the Consolidated financial statements.
Operating cash flows generated by operations that have not yet reached
commercial production are also included in capital expenditure. However,
capital expenditure is also periodically shown on an underlying basis i.e.
before inclusion of capitalised operating cash flows. Where this occurs, the
measure is footnoted as such.
Attributable return on capital employed (ROCE)
ROCE is a ratio that measures the efficiency and profitability of a company’s
capital investments. Attributable ROCE displays how effectively assets are
generating profit on invested capital for the equity shareholders of the
Company. It is calculated as attributable underlying EBIT divided by average
attributable capital employed.
Attributable underlying EBIT excludes the underlying EBIT of non-controlling
interests.
Capital employed is defined as net assets excluding net debt and financial asset
investments. Attributable capital employed excludes capital employed of
non-controlling interests. Average attributable capital employed is calculated
by adding the opening and closing attributable capital employed for the relevant
period and dividing by two.
Attributable ROCE is also used as an incentive measure in executives’
remuneration and is predicated upon the achievement of ROCE targets in the
final year of a three year performance period. It is one of the performance
measures used in LTIP 15 and LTIP 16 and is proposed to be used in LTIP 17.
Capital employed by segment is disclosed in note 3 to the Consolidated
financial statements.
Driving Value ROCE
Driving Value ROCE is used for the measurement of LTIP 14 only. It is
calculated using Attributable ROCE adjusted for non-recurring items that do
not impact cash performance:
• Impairments announced after 10 December 2013 are added back to total
capital employed (unless the impairment resulted from the asset being
taken out of service).
• Earnings and return impacts from impairments (due to reduced
depreciation or amortisation expense) are excluded from earnings.
• The De Beers fair value uplift which resulted from the revaluing upward of
the Group’s 45% share in De Beers, owned at the time of acquisition of a
further 40% in 2012, is removed from 2012 capital employed onwards.
Attributable free cash flow
Attributable free cash flow is calculated as ‘Cash flows from operations’ plus
dividends received from associates, joint ventures and financial asset
investments, less capital expenditure, less tax cash payments excluding tax
payments relating to disposals, less net interest paid including interest on
derivatives hedging net debt, less dividends paid to non-controlling interests.
A reconciliation of ‘Cash flows from operations’, the closest equivalent IFRS
measure, is provided on page 38 of the Group Financial Review.
Anglo American plc Annual Report 2016
189
Other information
OTHER INFORMATION ALTERNATIVE PERFORMANCE MEASURES
Non-financial APMs
Some of our measures are not reconciled to IFRS either because they include non-financial information, because there is no meaningful IFRS comparison or
the purpose of the measure is not typically covered by IFRS.
Group APM
Copper equivalent production
Category
Portfolio complexity Communicate production/revenue generation movements in a single comparable measure
Purpose
removing the impact of price
Unit cost
Earnings volatility
Express cost of producing one unit of saleable product
Copper equivalent unit cost
Portfolio complexity Communicate the cost of production per unit in a single comparable measure for the portfolio
Productivity
Portfolio complexity Highlight efficiency in generating revenue per employee
Volume and cash cost improvements
Earnings volatility
Quantify year-on-year EBITDA improvement removing the impact of major uncontrollable factors
Copper equivalent production
Copper equivalent production, expressed as copper equivalent tonnes,
shows changes in underlying production volume. It is calculated by expressing
each commodity’s volume as revenue, subsequently converting the revenue
into copper equivalent units by dividing by the copper price (per tonne).
Long-term forecast prices (and foreign exchange rates where appropriate)
are used, in order that period-on-period comparisons exclude any impact for
movements in price.
When calculating copper equivalent production, all volumes relating to
domestic sales are excluded, as are volumes from Samancor and sales from
non-mining activities. Volume from projects in pre-commercial production
(e.g. Minas-Rio, Gahcho Kué) are included.
Unit cost
Unit cost is the direct cash cost including direct cash support costs incurred
in producing one unit of saleable production.
For bulk products (coal, iron ore), unit costs shown are FOB i.e. cost on board
at port. For base metals (copper, nickel), they are shown at C1 i.e. after
inclusion of by-product credits and logistics costs. For platinum and
diamonds, unit costs include all direct expensed cash costs incurred
i.e. excluding, amongst other things, market development activity, corporate
overhead etc. Platinum unit costs exclude by-product credits. Royalties are
excluded from all unit cost calculations.
Copper equivalent unit cost
Copper equivalent unit cost is the cost incurred to produce one tonne of
copper equivalent. Only the cost incurred in mined output from subsidiaries
and joint operations is included, representing direct costs in the Consolidated
income statement controllable by the Group. Costs and volumes from
associates and joint ventures are excluded, as are those from operations that
are not yet in commercial production, that deliver domestic production, and
those associated with third-party volume purchases of diamonds and
platinum concentrate.
When calculating copper equivalent unit cost, unit costs for each commodity
are multiplied by relevant production, combined and then divided by the total
copper equivalent production, to get a copper equivalent unit cost i.e. the cost
of mining one tonne of copper equivalent. The metric is in US dollars and,
where appropriate, long-term foreign exchange rates are used to convert
from local currency to US dollars.
Productivity
The Group’s productivity measure calculates the copper equivalent
production generated per employee. It is a measure that represents how well
headcount is driving revenue. It is calculated by dividing copper equivalent
production by the average direct headcount from consolidated mining
operations in a given year.
Volume and cash cost improvements
The Group uses an underlying EBITDA waterfall to understand its year-on-
year underlying EBITDA performance. The waterfall isolates the impact of
uncontrollable factors in order that the real year-on-year improvement in
performance can be seen by the user.
Three variables are normalised, in the results of subsidiaries and joint
operations, for:
• Price: The movement in price between comparative periods is removed, by
multiplying current year sales volume by the movement in realised price for
each product group
• Foreign exchange: The year-on-year movement in exchange is removed
from the current year non-US dollar cost base i.e. costs are restated at prior
year foreign exchange rates. The non-US dollar cash cost base excludes
costs which are price linked (e.g. purchase of concentrate from third-party
platinum providers, third-party diamond purchases)
• Inflation: CPI is removed from cash costs, restating these costs at the
pricing level of the base year.
The remaining variances in the underlying EBITDA waterfall are in real
US dollar terms for the base year i.e. for a waterfall comparing 2016 with 2015,
the sales volume and cash cost variances exclude the impact of price, foreign
exchange and CPI and are hence in real 2015 terms. This allows the user of
the waterfall to understand the underlying real movement in sales volumes
and cash costs on a consistent basis.
190
Anglo American plc Annual Report 2016
OTHER INFORMATION
PRODUCTION STATISTICS
The figures below include the entire output of consolidated entities and the Group’s attributable share of joint operations, associates and joint ventures where
applicable, except for Collahuasi in the Copper segment and De Beers’ joint operations which are quoted on a 100% basis.(1)
De Beers
Carats recovered 100% basis (unless otherwise stated)
Orapa
Letlhakane
Damtshaa
Jwaneng
Debswana
Namdeb
Debmarine Namibia
Namdeb Holdings
Kimberley
Venetia
Voorspoed
DBCM
Snap Lake
Victor
Gahcho Kué (51% basis)
De Beers Canada
Total carats recovered
Sales volumes
Total sales volume (100%) (Mct)
Consolidated sales volume (Mct)(2)
Number of Sights (sales cycles)
Platinum
Refined production
Platinum (troy oz)
Palladium (troy oz)
Rhodium (troy oz)
Copper refined (tonnes)(3)
Copper matte (tonnes)(3)
Nickel refined (tonnes)(3)
Nickel matte (tonnes)(3)
Gold (troy oz)
Produced ounces Platinum (troy oz)
Mogalakwena (troy oz)
Amandelbult (troy oz)
Unki (troy oz)
Independently managed (troy oz)(4)
Rustenburg (troy oz)(5)
Union (troy oz)
Other (troy oz)(6)
4E built-up head grade (g/tonne milled)(7)
Platinum sales volumes
Copper (tonnes) on a contained metal basis unless stated otherwise(8)
Collahuasi 100% basis (Anglo American share 44%)
Ore mined
Ore processed – Oxide
Ore processed – Sulphide
Ore grade processed – Oxide (% ASCu)(9)
Ore grade processed – Sulphide (% TCu)(10)
Production – Copper cathode
Production – Copper in concentrate
Total copper production for Collahuasi
Anglo American’s share of copper production for Collahuasi(11)
Anglo American Sur
Los Bronces mine(12)
Ore mined
Marginal ore mined
Ore processed – Sulphide
Ore grade processed – Sulphide (% TCu)
Production – Copper cathode
Production – Copper in concentrate
Production total
El Soldado mine(12)
Ore mined
Ore processed – Sulphide
Ore grade processed – Sulphide (% TCu)
Production – Copper cathode
Production – Copper in concentrate
Production total
Chagres Smelter(12)
Ore smelted
Production
Total copper production for Anglo American Sur
See page 193 for footnotes.
2016
2015
7,931,000
595,000
–
11,975,000
20,501,000
404,000
1,169,000
1,573,000
68,000
3,517,000
649,000
4,234,000
3,000
596,000
432,000
1,031,000
27,339,000
9,877,000
506,000
221,000
9,764,000
20,368,000
494,000
1,270,000
1,764,000
837,000
3,132,000
704,000
4,673,000
1,243,000
644,000
–
1,887,000
28,692,000
32.0
30.0
10
20.6
19.9
10
2,334,700
1,464,200
317,400
14,100
–
25,400
–
108,200
2,381,900
411,900
466,500
74,500
784,900
377,400
151,300
115,400
3.16
2,415,700
67,602,600
–
49,406,800
–
1.22
4,800
501,800
506,600
222,900
51,109,700
34,189,300
47,697,000
0.67
36,000
271,200
307,200
7,339,100
6,964,400
0.85
–
47,000
47,000
133,800
130,800
354,200
2,458,800
1,594,900
305,200
16,800
300
25,400
400
113,000
2,337,300
392,500
437,500
66,500
768,500
478,100
141,100
53,100
3.23
2,471,400
79,573,500
4,653,900
43,790,600
0.63
1.15
22,200
433,100
455,300
200,300
50,258,500
39,252,600
45,396,900
0.92
35,000
366,700
401,700
5,208,100
5,965,400
0.77
200
35,800
36,000
149,100
145,100
437,700
Anglo American plc Annual Report 2016
191
Other information
OTHER INFORMATION PRODUCTION STATISTICS
Copper (tonnes) (continued)
Anglo American Norte
Mantos Blancos mine
Ore processed – Sulphide
Ore grade processed – Sulphide (% TCu)
Production – Copper cathode
Production – Copper in concentrate
Production total
Mantoverde mine
Ore processed – Oxide
Ore processed – Marginal ore
Ore grade processed – Oxide (% ASCu)
Ore grade processed – Marginal ore (% ASCu)
Production – Copper cathode
Total copper production for Anglo American Norte
Total Copper segment copper production
Total attributable copper production(13)
Total attributable payable copper production
Attributable sales volumes
Total attributable payable sales volumes
Third party sales(14)
Nickel (tonnes) unless stated otherwise(15)
Barro Alto
Ore mined
Ore processed
Ore grade processed – %Ni
Production
Codemin
Ore mined
Ore processed
Ore grade processed – %Ni
Production
Total Nickel segment nickel production
Sales volumes
Niobium and Phosphates(16)
Niobium (tonnes) unless otherwise stated
Ore mined
Ore processed
Ore grade processed – %Nb
Production
Sales volumes
Phosphates (tonnes) unless otherwise stated
Concentrate
Concentrate grade – %P2O5
Phosphoric acid
Fertiliser
High analysis fertiliser
Low analysis fertiliser
Dicalcium phosphate (DCP)
Fertiliser sales volumes
Iron Ore and Manganese (tonnes)
Kumba Iron Ore
Lump
Fines
Total Kumba production
Sishen
Kolomela
Thabazimbi
Total Kumba production
Kumba sales volumes
RSA export iron ore
RSA domestic iron ore
Minas-Rio
Pellet feed (wet basis)
Minas-Rio sales volumes
Export – pellet feed (wet basis)
Samancor
Manganese ore(17)
Manganese alloys(17)(18)
Samancor sales volumes
Manganese ore
Manganese alloys
See page 193 for footnotes.
192
Anglo American plc Annual Report 2016
2016
2015
–
–
–
–
–
–
–
–
–
–
–
860,800
577,100
557,100
577,800
557,900
62,000
2,835,500
0.76
20,400
18,100
38,500
6,605,300
5,944,800
0.52
0.21
32,300
70,800
963,800
708,800
686,900
705,600
683,500
41,400
2,630,700
2,357,100
1.76
35,500
2,943,600
1,472,800
1.78
21,300
6,800
589,600
1.71
9,000
44,500
44,900
2,229,100
1,680,600
0.98
4,700
4,600
1,033,400
36.9
233,600
864,300
157,600
706,700
113,900
972,700
8,600
591,100
1.69
9,000
30,300
32,000
2,131,700
2,231,300
0.96
6,300
5,100
1,341,400
36.8
265,100
1,110,800
172,700
938,100
147,300
1,060,100
26,801,500
14,674,400
41,475,900
28,380,000
12,726,300
369,600
41,475,900
29,003,100
15,875,100
44,878,200
31,392,800
12,054,400
1,431,000
44,878,200
39,060,400
3,423,300
43,560,000
4,276,800
16,140,900
9,174,200
16,210,500
8,467,600
3,133,100
137,800
3,111,600
213,600
3,279,200
170,000
3,084,700
203,300
OTHER INFORMATION PRODUCTION STATISTICS
Coal (tonnes)
Australia
Metallurgical – Export Coking
Metallurgical – Export PCI
Production total
Thermal – Export
Thermal – Domestic
Production total
South Africa
Thermal – Export
Thermal – Domestic (Eskom)
Thermal – Domestic (Non-Eskom)
Production total
Colombia
Thermal – Export
Total Metallurgical coal production
Total Export Thermal coal production
Total Domestic Thermal coal production
Total Coal production
Weighted average achieved US$/t FOB prices
Australia and Canada
Metallurgical – Export HCC
Metallurgical – Export PCI
Thermal – Export
Thermal – Domestic
South Africa
Thermal – Export
Thermal – Domestic
Colombia
Thermal – Export
Sales volumes (own mined)
Australia and Canada
Metallurgical – Export(19)
Thermal – Export
Thermal – Domestic
South Africa
Thermal – Export
Thermal – Domestic
Colombia
Thermal – Export
Coal by mine (tonnes)
Australia
Callide
Capcoal (incl. Grasstree)
Dawson
Drayton
Foxleigh
Grosvenor
Jellinbah
Moranbah North
Production total
South Africa
Goedehoop
Greenside
Isibonelo
Kleinkopje
Kriel
Landau
Mafube
New Denmark
New Vaal
Zibulo
Production total
Colombia
Carbones del Cerrejón
Total Coal production
2016
2015
16,199,900
4,675,800
20,875,700
3,957,500
5,553,400
9,510,900
17,872,400
28,699,300
7,188,200
53,759,900
10,667,900
20,875,700
32,497,800
41,440,900
94,814,400
15,907,900
5,300,300
21,208,200
5,280,500
7,051,600
12,332,100
17,403,600
26,021,200
6,843,900
50,268,700
11,074,300
21,208,200
33,758,400
39,916,700
94,883,300
119
77
55
24
60
17
56
94
77
55
28
55
19
55
20,658,600
4,255,300
5,375,400
21,093,400
5,904,200
7,049,300
19,071,700
34,480,600
19,919,800
31,691,600
10,810,200
11,189,300
6,230,800
6,832,900
4,608,700
1,167,500
1,439,400
1,759,000
3,282,300
5,066,100
30,386,700
4,688,600
3,945,300
4,395,000
3,867,900
6,336,500
4,317,800
1,759,000
2,547,400
15,894,800
6,007,600
53,759,900
7,930,400
8,689,700
4,314,500
2,122,000
1,860,600
499,800
3,201,500
4,921,800
33,540,300
4,287,200
3,876,600
4,531,800
3,152,300
6,158,200
4,268,700
1,442,500
2,838,300
14,148,100
5,565,000
50,268,700
10,667,900
94,814,400
11,074,300
94,883,300
(1) With the exception of Gahcho Kué, which is on an attributable 51% basis.
(2) Consolidated sales volumes exclude De Beers’ JV partners’ 50% proportionate share of sales to entities outside the De Beers Group of Companies from the Diamond Trading Company
Botswana (DTCB) and the Namibia Diamond Trading Company (NDTC).
(3) Copper and nickel refined through third parties is shown as production of copper matte and nickel matte.
(4)
Independently managed operations include: BRPM, Bokoni, Kroondal, Mototolo and Modikwa.
(5) Restated to exclude third party production from Platinum Mile which was not sold as part of the Rustenburg transaction.
(6) Other includes Twickenham and third party purchases including purchased ounces from Rustenburg from 1 November 2016.
(7) 4E: the grade measured as the combined content of the four most valuable precious metals: platinum, palladium, rhodium and gold.
(8) Excludes Anglo American Platinum’s copper production.
(9) ASCu = acid soluble copper.
(10) TCu = total copper.
(11) Anglo American’s share of Collahuasi production is 44%.
(12) Anglo American ownership interest of Anglo American Sur is 50.1%. Production is stated at 100% as Anglo American consolidates Anglo American Sur.
(13) Difference between total copper production and attributable copper production arises from Anglo American’s 44% interest in Collahuasi.
(14) Relates to sales of copper not produced by Anglo American operations.
(15) Excludes Anglo American Platinum’s nickel production.
(16) Niobium and Phosphates was sold on 30 September 2016 (see note 30).
(17) Saleable production.
(18) Production includes medium carbon ferro-manganese.
(19) Includes both hard coking coal and PCI sales volumes.
Anglo American plc Annual Report 2016
193
Other information
QUARTERLY PRODUCTION STATISTICS
De Beers (diamonds recovered – carats)
100% basis(1)
Diamonds
Platinum refined production
Platinum (troy oz)
Palladium (troy oz)
Rhodium (troy oz)
Copper refined (tonnes)
Nickel refined (tonnes)
Gold (troy oz)
Produced ounces platinum (troy oz)
Copper (tonnes)(2)(3)
Nickel (tonnes)(4)
Niobium and Phosphates
Niobium (tonnes)
Phosphates (tonnes)
Concentrate
Phosphoric Acid
Fertiliser
Dicalcium phosphate (DCP)
Iron Ore and Manganese (tonnes)
Iron ore – Kumba
Iron ore – Minas-Rio
Manganese ore(5)
Manganese alloys(5)(6)
Coal (tonnes)
Australia
Metallurgical – Export
Thermal – Export
Thermal – Domestic
South Africa
Thermal – Export
Thermal – Domestic (Eskom)
Thermal – Domestic (Non-Eskom)
Colombia
Thermal – Export
31 December
2016
30 September
2016
30 June
2016
31 March
2016
31 December
2015
31 December 2016 v
30 September 2016
31 December 2016 v
31 December 2015
Quarter ended
% Change (Quarter ended)
7,752,000
6,273,000
6,448,000
6,866,000
7,052,000
24%
10%
631,600
397,400
92,200
3,300
6,200
33,900
610,100
694,600
412,900
86,800
3,800
7,100
24,100
619,100
747,600
472,300
90,700
3,700
6,400
22,300
585,700
260,800
181,600
47,700
3,300
5,700
27,900
567,000
744,900
468,400
85,700
4,700
7,300
29,500
598,000
146,600
139,800
144,200
146,500
181,400
10,900
11,300
11,100
11,200
10,500
–
–
–
–
–
2,100
1,200
1,400
1,600
342,400
80,900
303,500
40,900
358,000
73,600
285,900
41,500
333,100
79,100
274,900
31,500
355,700
63,900
303,400
38,700
11,927,900
4,855,300
804,200
37,100
11,759,900
4,452,400
761,700
38,900
8,863,600
3,483,800
791,300
29,700
8,924,500
3,349,400
775,900
32,100
10,935,200
3,252,500
596,000
43,500
5,359,700
671,900
661,800
4,489,700
7,514,700
1,704,200
5,506,600
1,112,700
1,682,000
4,750,900
8,083,900
1,855,900
5,483,300
1,107,000
1,716,700
4,655,800
6,708,700
1,824,300
4,526,100
1,065,900
1,492,900
3,976,000
6,392,000
1,803,800
5,484,300
1,154,300
1,978,800
3,878,000
5,533,500
1,821,500
2,800,600
2,927,800
2,329,500
2,610,000
2,628,100
(9)%
(4)%
6%
(13)%
(13)%
41%
(1)%
5%
(4)%
–
–
–
–
–
1%
9%
6%
(5)%
(3)%
(40)%
(61)%
(5)%
(7)%
(8)%
(4)%
(15)%
(15)%
8%
(30)%
(15)%
15%
2%
(19)%
4%
–
–
–
–
–
9%
49%
35%
(15)%
(2)%
(42)%
(67)%
16%
36%
(6)%
7%
(1) De Beers’ production is on a 100% basis, except for Gahcho Kué joint operation which is on an attributable 51% basis.
(2) Excludes Anglo American Platinum’s copper production.
(3) Copper segment attributable production.
(4) Excludes Anglo American Platinum’s nickel production.
(5) Saleable production.
(6) Production includes medium carbon ferro-manganese.
194
Anglo American plc Annual Report 2016
OTHER INFORMATION OTHER INFORMATION
NON-FINANCIAL DATA
Safety(1)
Work-related fatalities
Fatal-injury frequency rate (FIFR)(2)
Total recordable case frequency rate (TRCFR)(2)
Lost time injury frequency rate (LTIFR)(2)
Occupational health(1)
New cases of occupational disease (NCOD)(2)
Environment(1)
Total CO2 emissions (Mt CO2e)
Total energy consumed (million GJ)(2)
Total new water consumed (million m3)(2)
Human Resources(1)(3)
Women in management (%)(4)
Historically Disadvantaged South Africans in management (%)(5)
Resignations (%)(6)
Redundancies (%)(7)
Dismissals (%)(8)
Other reasons for leaving (%)(9)
Social(1)
CSI spend (total in US$ million)(10)
CSI spend (% of underlying EBIT)(10)
Businesses supported through enterprise development initiatives
Jobs created/maintained through enterprise development programmes
2016
2015
2014
2013
2012
11
0.007
0.71
0.37
111
17.8
105
191
25
62
2.2
7.1
1.8
3.5
6
0.004
0.93
0.47
163
18.3
106
222
25
60
1.9
3.5
1.4
4.2
6
0.003
0.80
0.35
175
17.3
108
196
24
60
2.0
0.9
1.0
1.9
15
0.008
1.08
0.49
209
17.1
106
201
23
64
2.0
4.1
1.5
2.7
13
0.007
1.29
0.58
174
18.5
113
156
23
62
2.4
0.6
1.4
2.4
84
3
62,447
116,298
124
6
62,661
108,423
136
3
58,257
96,873
127
2
48,111
76,543
146
3
40,217
64,927
(1) The data includes wholly owned subsidiaries and joint ventures over which Anglo American has management control, and does not include independently managed operations such as
Collahuasi, Carbones del Cerrejón and Samancor. De Beers data included from September 2012. Divested businesses are included up until the point of divestment.
(2) See pages 186–187 for definitions.
(3) Excludes Other Mining and Industrial.
(4) Women in management is the number of female managers as a percentage of all managers in the workforce excluding contractors.
(5) Historically Disadvantaged South Africans in management is the percentage of managers at Anglo American in South Africa who are ‘Historically Disadvantaged South Africans’.
(6) The number of people who resigned as a percentage of the total workforce excluding contractors.
(7) The number of people who have been retrenched as a percentage of total workforce excluding contractors.
(8) The number of people who have been dismissed or have resigned to avoid dismissal, as a percentage of total workforce excluding contractors.
(9) The number of people who left for reasons other than those shown above, for example retirement, ill health and death, as a percentage of total workforce excluding contractors.
(10) CSI spend is the sum of donations for charitable purposes and community investment (which includes cash and in-kind donations and staff time) as well as investments in commercial initiatives
with public benefit (such as enterprise development). Included within the CSI expenditure figure for 2016 is expenditure relating to Zimele ($2.3 million, 2015: $15.9 million).
Anglo American plc Annual Report 2016
195
Other information
THE BUSINESS – AN OVERVIEW
as at 31 December 2016
De Beers
100% owned
South Africa
De Beers Group Services
(Exploration and Services)
De Beers Marine
Canada
De Beers Canada
Snap Lake
Victor
Synthetic Diamond Supermaterials
Element Six Technologies
Sales
De Beers Global Sightholder Sales
Auction Sales
Brands
Forevermark
Platinum
100% owned
South Africa
Amandelbult Mine
Mogalakwena Mine
Waterval Smelter (including converting process)
Mortimer Smelter
Polokwane Smelter
Rustenburg Base Metals Refinery
Precious Metals Refinery
Twickenham Mine
Zimbabwe
Unki Mine
Copper
Chile
Chagres
El Soldado
Los Bronces
Collahuasi
Nickel
100% owned
Brazil
Barro Alto
Codemin
Other interests
South Africa
De Beers Consolidated
Mines(1)
Venetia
Voorspoed
De Beers Sightholder Sales
South Africa
Botswana
Debswana(3)
Damtshaa
Jwaneng
Orapa
Letlhakane
Canada
De Beers Canada
Gahcho Kué
Overall ownership:
85%
Namibia
Namdeb Holdings(2)
50%
74%
Namdeb Diamond Corporation
Mining Area 1
Orange River
Elizabeth Bay
Alluvial Contractors
Debmarine Namibia
Atlantic 1
50%
Sales
DTC Botswana
Namibia DTC
50%
50%
Synthetic Diamond Supermaterials
60%
Element Six Abrasives
51%
Brands
De Beers Diamond Jewellers
50%
Overall ownership:
78%(4)
Other interests
South Africa
Union Mine
Atomatic Trading Proprietary Limited
Masa Chrome Company
Joint operations or sharing agreements
Modikwa Platinum Joint Operation
Kroondal Pooling and Sharing Agreement
Mototolo Joint Operation
Associates
Bokoni
Pandora
Bafokeng-Rasimone
Atlatsa Resources Corporation
Johnson Matthey Fuel Cells
South Africa – other
Wesizwe Platinum Limited
Royal Bafokeng Platinum Limited
Peru
50.1% Quellaveco
50.1%
50.1%
44%
85%
74%
50.1%
50%
50%
50%
49%
42.5%
33%
23%
17.5%
13%
11.6%
81.9%
Overall ownership:
100%
(1) The 74% interest in De Beers Consolidated Mines (DBCM) is held indirectly through De Beers plc (De Beers). The 74% interest represents De Beers’ legal ownership share in DBCM. For
accounting purposes De Beers consolidates 100% of DBCM as it is deemed to control the BEE entity, Ponahalo, which holds the remaining 26%. The Group’s effective interest in DBCM is 85%.
(2) The 50% interest in Namdeb Holdings is held indirectly through De Beers. The Group’s effective interest in Namdeb Holdings is 42.5%.
(3) The 50% interest in Debswana is held indirectly through De Beers. The Group’s effective interest in Debswana is 16.3%.
(4) The Group’s effective interest in Anglo American Platinum is 79.6%, which includes shares issued as part of a community empowerment deal.
196
Anglo American plc Annual Report 2016
OTHER INFORMATION OTHER INFORMATION THE BUSINESS – AN OVERVIEW
Iron Ore and Manganese
Kumba Iron Ore (South Africa)
Sishen Iron Ore Company(1) (South Africa)
Minas-Rio (Brazil)
Ferroport (Brazil)(2)
Samancor (South Africa and Australia)
Coal
100% owned
Australia
Grosvenor
Monash Energy Holdings Ltd
Canada
Peace River Coal
South Africa
Goedehoop
Greenside
Isibonelo
Kleinkopje
Landau
New Denmark
New Vaal
Corporate and other
100% owned
Vergelegen (South Africa)
Other interests
Australia
Capcoal
Dartbrook
Dawson
Drayton
Moranbah North
Jellinbah
Australia – other
Dalrymple Bay Coal Terminal Pty Ltd
Newcastle Coal Shippers Pty Ltd
MBD Energy Ltd
South Africa
Mafube
Phola plant
Kriel(3)
Zibulo(3)
South Africa – other
Richards Bay Coal Terminal
Colombia
Carbones del Cerrejón
69.7%
76.3%
100%
50%
40%
70%
83.3%
51%
88.2%
88%
23.3%
25.3%
17.6%
14.8%
50%
50%
73%
73%
23.2%
33.3%
(1) The 76.3% interest in Sishen Iron Ore Company (SIOC) is held indirectly through Kumba Iron Ore, in which the Group has a 69.7% interest. A 3.1% interest in SIOC was previously held by the
Kumba Envision Trust for the benefit of participants in Kumba’s broad based employee share scheme for non-managerial Historically Disadvantaged South African employees. The Trust met
the definition of a subsidiary under IFRS, and was therefore consolidated by Kumba Iron Ore. The earlier mentioned interest in the Kumba Envision Trust is no longer held at year end due to the
wind up of the Envision Trust in November 2016. Consequently the effective interest in SIOC included in the Group’s results is 53.2%.
(2) Ferroport owns and operates the iron ore handling and shipping facilities at the port of Açu which is currently under construction.
(3) Kriel and Zibulo form part of the Anglo American Inyosi Coal Black Economic Empowerment (BEE) company of which Anglo American owns 73%.
Anglo American plc Annual Report 2016
197
Other information
OTHER INFORMATION
DIRECTORS’ REPORT
This section includes certain disclosures which are required by law to be
included in the Directors’ Report.
Significant shareholdings
The Company has been notified of the following significant shareholdings:
In accordance with the Companies Act 2006, the following items have
been reported in other sections of the Annual Report and are included in
this Directors’ Report by reference:
• Details of the directors of the Company can be found on pages 66-68
• Directors’ interests in shares at 31 December 2016 and any changes
thereafter can be found on page 105 of the directors’ remuneration report
• Post-balance sheet events are set out in note 36 to the financial statements
on page 158
• The Strategic Report on pages 2-64 gives a fair review of the business
and an indication of likely future developments and fulfils the requirements
set out in section 414C of the Companies Act 2006
• Details of the Group’s governance arrangements and its compliance
with the UK Corporate Governance Code (the Code) can be found on
pages 65-110
• Comprehensive details of the Group’s approach to financial risk
management are given in note 38 to the financial statements
on page 159
• The Group’s disclosure of its greenhouse gas emissions can be found
on pages 27-28.
Going concern
The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are set out in the Group financial review on pages 36-39.
Further details of our policy on financial risk management are set out in
note 38 to the financial statements. The Group’s net debt at 31 December
2016 was $8.5 billion (2015: $12.9 billion), representing a gearing level of
25.9% (2015: 37.7%). Details of borrowings and facilities are set out in
note 24 and net debt is set out in note 23.
The directors have considered the Group’s cash flow forecasts for the
period to the end of March 2018. The Board is satisfied that the Group’s
forecasts and projections, taking account of reasonably possible changes
in trading performance, show that the Group will be able to operate within
the level of its current facilities for the period assessed. For this reason
the Group continues to adopt the going concern basis in preparing its
financial statements.
Dividends
No dividends were paid in respect of the Company’s ordinary shares during
2016 and the directors are not recommending a final dividend. In accordance
with Article 4.1(a) of the Articles of Association (the Articles), a dividend of
£2,500 was paid in respect of the 5% cumulative preference shares.
Share capital
The Company’s issued share capital as at 31 December 2016, together
with details of share allotments and issue of treasury shares during the year,
is set out in note 32 on page 155.
Company
Public Investment Corporation
BlackRock Inc.
Silchester International Investors LLP
Coronation Asset Management (Pty) Ltd
Genesis Asset Managers, LLP
Tarl Investment Holdings (RF)
Proprietary Limited(1)
Epoch Two Investment Holdings (RF)
Proprietary Limited(1)
Number
of shares
186,786,134
78,605,710
70,110,363
56,038,671
55,426,734
47,275,613
42,166,686
Percentage
of voting rights
13.29%
5.60%
4.99%
3.99%
3.95%
3.37%
3.01%
(1) Epoch Two Investment Holdings Ltd (Epoch 2) and Tarl Investment Holdings
Limited (Tarl) are two of the independent companies that have purchased shares
as part of Anglo American’s share buyback programme. Epoch 2 and Tarl have
waived their right to vote all the shares they hold, or will hold, in Anglo American plc.
Disclosure table pursuant to Listing Rule 9.8.4C
Listing Rule
9.8.4(1)
9.8.4(2)
9.8.4(4)
9.8.4(5)
9.8.4(6)
9.8.4(7)
Information to be included
Interest capitalised by the Group
Unaudited financial information
(LR 9.2.18)
Long-term incentive scheme only
involving a director (LR 9.4.3)
Directors’ waivers of emoluments
Directors’ waivers of future
emoluments
Non pro rata allotments for cash
(issuer)
9.8.4(8)
9.8.4(9)
9.8.4(10)
9.8.4(11)
Non pro rata allotments for cash
(major subsidiaries)
Listed company is a subsidiary of
another company
Contracts of significance involving
a director
Contracts of significance involving
a controlling shareholder
9.8.4(12) Waivers of dividends
9.8.4(13) Waivers of future dividends
9.8.4(14)
Agreement with a controlling
shareholder LR 9.2.2AR(2)(a)
Disclosure
See note 7, page 130
None
None
See page 103
See page 103
Treasury shares have been
issued pursuant to the exercise
of options awarded under
shareholder approved schemes
None
Not applicable
None
Not applicable
See note 32, page 156
See note 32, page 156
Not applicable
Sustainable development
The Sustainability Report 2016 will be published online on 13 March 2017.
This report focuses on the safety, sustainable development, health and
environmental performance of the Group’s managed operations, its
performance with regard to the Company’s Code of Conduct, and the
operational dimensions of its social programmes.
Audit information
The directors confirm that, so far as they are aware, there is no relevant audit
information of which the auditor is 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 auditor is aware of that information.
Employment and other policies
The Group’s key operating businesses are empowered to manage within the
context of the different legislative and social demands of the diverse countries
in which those businesses operate, subject to the standards embodied in
Anglo American’s Code of Conduct. 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
198
Anglo American plc Annual Report 2016
OTHER INFORMATION DIRECTORS’ REPORT
• adherence to the International Labour Organisation’s core labour rights,
including: prohibition of child labour; prohibition of inhumane treatment
of employees and any form of forced labour, physical punishment or other
abuse; recognition of the right of our employees to freedom of association
and the promotion of workplace equality; and the elimination of all forms
of unfair discrimination
• continual promotion of safe and healthy working practices
• provision of opportunities for employees to enhance their work related
skills and capabilities
• adoption of fair and appropriate procedures for determining terms and
conditions of employment.
It is our policy that people with disabilities should have full and fair
consideration for all vacancies. Employment of disabled people is considered
on merit and with regard only to the ability of any applicant to carry out the
role. We endeavour to retain the employment of, and arrange suitable
retraining for, any employees in the workforce who become disabled during
their employment. Where possible we will adjust a person’s working
environment to enable them to stay in our 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.
The Code of Conduct is supplemented by four Anglo American ‘Way’
documents, covering the safety, environmental, occupational health and
social aspects of responsible operation and sustainable development.
These set out specific standards for each of these subject areas, in line with
international best practice. The Code of Conduct and the Anglo American
‘Way’ documents may be accessed on the Company’s website.
In addition, all Anglo American suppliers must commit to adhering to the
requirements set out in the ‘Sustainable Development in the Supply Chain
Policy’, which is available on the Company’s website.
The Business Integrity Policy and its 11 Performance Standards support our
anti-corruption commitment by making it clear that we will neither give, nor
accept, bribes, nor permit others to do so in our name, either in our dealings
with public officials or with our suppliers and customers. The Policy sets out
the standards of conduct required at every level of Anglo American, including
our subsidiaries, joint ventures and associates, in combating corrupt
behaviour of all types. It also sets out the requirements of those with whom
we do business and those who work on our behalf.
The Business Integrity Policy and Performance Standards have been
translated into all the main languages that we use at our operations. Two
dedicated business integrity managers, who operate within a broader risk
management and business assurance team, oversee implementation of the
policy by working with senior managers in our business units and corporate
functions and assisting them to put in place adequate procedures for
managing corruption risks (including extensive face-to-face training of
employees in high-risk roles).
Our internal audit team provide assurance on anti-corruption controls on an
annual basis and all stakeholders are able to confidentially report breaches,
or potential breaches, of the Business Integrity Policy through our
independently managed ‘Speak Up’ facility.
The Group has a social intranet called Eureka! which helps employees to
connect, communicate and collaborate more effectively.
Political donations
No political donations were made during 2016. 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.
Additional information for shareholders
Set out below is a summary of certain provisions of the Company’s current
Articles and applicable English law concerning companies (the Companies
Act 2006 (the Companies Act)) required as a result of the implementation of
the Takeover Directive in English law. This is a summary only and the relevant
provisions of the Articles or the Companies Act should be consulted if further
information is required.
Dividends and distributions
Subject to the provisions of the Companies Act, 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 Act.
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 a special
resolution passed by the shareholders.
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 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 Act, 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 meeting as a corporate representative. Where a
shareholder appoints more than one corporate representative in respect
of its shareholding, but in respect of different shares, those corporate
representatives can act independently of each other, and validly vote in
different ways.
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 Act.
Issue of shares
Subject to the provisions of the Companies Act relating to authority and
pre-emption rights and of any resolution of the Company in a UK 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.
Anglo American plc Annual Report 2016
199
Other information
OTHER INFORMATION DIRECTORS’ REPORT
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 so held and transferred.
Subject to the provisions of the Companies Act, 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 of the Company, may be held
in uncertificated form in accordance with any system outside the UK that
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 that 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 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 that 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 of shareholders. All transfers of shares that 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 therefore, 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 the
refusal to the allottee or the transferee within two months after the date on
which the letter of allotment or transfer was lodged with the Company.
Directors
Directors shall not be fewer than 10 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. At the 2017 AGM, shareholders will be
asked to vote on an ordinary resolution reducing the minimum number of
directors from 10 to five.
Powers of directors
Subject to the Articles, the Companies Act 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 and replacement 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.
The Articles provide that 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. However, in accordance with the Code, all directors will
be subject to annual re-election.
Significant agreements: Change of control
At 31 December 2016, Anglo American had committed bilateral and
syndicated borrowing facilities totalling $10.3 billion with a number of
relationship banks which contain change of control clauses. $5.4 billion of the
Group’s bond issues also contain change of control provisions. In aggregate,
this financing is 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 ordinary course of its business the Group’s subsidiaries enter into
a number of other commercial agreements, some of which would alter or
terminate upon a change of control of the Company. None of these are
considered by the Group to be significant to the Group as a whole.
Purchases of own shares
At the AGM held on 21 April 2016, authority was given for the Company to
purchase, in the market, up to 210.1 million ordinary shares of 5486⁄91 US cents
each. The Company did not purchase any of its own shares under this
authority during 2016. This authority will expire at the 2017 AGM and, in
accordance with usual practice, a resolution to renew it for another year will
be proposed.
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, which remain in force at the date of this report. Copies of
these indemnities are open for inspection at the Company’s registered office.
By order of the Board
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.
John Mills
Company Secretary
20 February 2017
200
Anglo American plc Annual Report 2016
OTHER INFORMATION
SHAREHOLDER INFORMATION
Annual General Meeting
Will be held at 14:30 on Monday 24 April 2017, at The Queen Elizabeth II
Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE.
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 or Computershare Investor Services
Pty Limited, at the relevant address below:
UK Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
England
Telephone:
In the UK: 0371 384 2026
From overseas: +44 121 415 7558
Transfer Secretaries in South Africa
Before 25 April 2017:
Link Market Services South Africa (Pty) Limited
13th Floor, Rennie House
19 Ameshoff Street, Braamfontein 2001
(PO Box 4844, Johannesburg 2000)
South Africa
Telephone: +27 (0) 11 713 0800
Fax: +27 (0) 86 674 2450
After 25 April 2017:
Computershare Investor Services Pty Limited
Rosebank Towers, 15 Biermann Avenue
Rosebank
PO Box 61051, Marshalltown, 2107
South Africa
Telephone: +27 (0) 11 370 5000
Fax: +27 (0) 11 688 5200
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
www.angloamerican.com
On the Investors section of the Group website a whole range of useful
information for shareholders can be found, including:
– investor calendar
– share price and tools
– dividend information
– AGM information
– FAQs.
Electronic communication
Shareholders may elect to receive, electronically, notification of the
availability on the Company’s website of future shareholder correspondence,
e.g. Annual Reports and Notices of AGMs.
By registering for this service, UK shareholders can also vote online in respect
of future AGMs and access information on their shareholding including, for
example, dividend payment history, sales and purchases and indicative
share prices. In order to register for these services, UK shareholders should
contact the UK Registrars or log on to www.shareview.co.uk and follow the
on-screen instructions. It will be necessary to have a shareholder reference
number when registering, which is shown on share certificates, dividend tax
vouchers and proxy cards. New UK shareholders also have the option to elect
via their proxy card.
Dividends
Dividends are declared and paid in US dollars to shareholders with registered
addresses in all countries except the UK, eurozone countries and South Africa
where they are paid in sterling, euros and South African rand respectively.
Shareholders outside South Africa may elect to receive their dividends in
US dollars.
Shareholders with bank accounts in the UK or South Africa can have their
cash dividends credited directly to their own accounts. Shareholders should
contact the relevant registrar to make use of this facility. South African branch
register shareholders would need South African exchange control approval to
mandate their dividends to an account outside South Africa.
The Company operates a dividend reinvestment plan (DRIP), which
enables shareholders to reinvest their cash dividends into purchasing
Anglo American shares. Details of the DRIP and how to join are available
from Anglo American’s UK Registrars and South African Transfer Secretaries
and on the Company’s website.
ShareGift
The Company supports ShareGift, the charity share donation scheme
administered by The Orr Mackintosh Foundation (registered charity number
1052686). Through ShareGift, shareholders with very small numbers of
shares which might be considered uneconomic to sell are able to donate
them to charity. Donated shares are aggregated and sold by ShareGift,
the proceeds being passed on to a wide range of charities. For those
shareholders who wish to use ShareGift, transfer forms are available
from the Registrars and further details of the scheme can be found on
the website www.sharegift.org.
Share dealing service
Telephone, internet and postal share dealing services have been
arranged through Equiniti, providing a simple way for UK residents to
buy or sell Anglo American shares. For telephone transactions call
0345 603 7037 during normal office hours and for internet dealing log
on to www.shareview.co.uk/dealing. You will need your shareholder
reference number, found on share certificates, dividend tax vouchers
and proxy cards. For further details on the postal dealing service call
0371 384 2026 (or +44 121 415 7558 from overseas).
Unsolicited mail
Under the Companies Act, the Company is obliged to make the share register
available upon request on payment of the appropriate fee. Because of this,
some shareholders may receive unsolicited mail. If you wish to limit the
receipt of addressed marketing mail you can register with the Mailing
Preference Service (MPS). The quickest way to register with the MPS is
via the website: www.mpsonline.org.uk. Alternatively you can register by
telephone on: 020 7291 3310, or by email to: mps@dma.org.uk, or by writing
to MPS Freepost LON20771, London W1E 0ZT.
Anglo American plc Annual Report 2016
201
Other information
OTHER ANGLO AMERICAN PUBLICATIONS
• Sustainability Report 2016
• Notice of 2017 AGM
• Business Unit Sustainability Reports (2016)
• Our Code of Conduct
• The Environment Way
• The Occupational Health Way
• The Projects Way
• The Safety Way
• The Social Way
• www.facebook.com/angloamerican
• www.twitter.com/angloamerican
• www.linkedin.com/company/anglo-american
• www.youtube.com/angloamerican
• www.flickr.com/angloamerican
• www.slideshare.com/angloamerican
Financial and sustainable development reports may be found at:
www.angloamerican.com/reportingcentre
If you would like to receive paper copies of Anglo American’s publications,
please write to:
Investor Relations
Anglo American plc
20 Carlton House Terrace
London SW1Y 5AN
England
Alternatively, publications can be ordered online at:
www.angloamerican.com/siteservices/requestreport
Strategic partners
Below is a selection of the many organisations with which Anglo American currently works in partnership.
These strategic relationships form an important part of the Group’s commitment to a wide range of key
sustainability and other objectives.
202
Anglo American plc Annual Report 2016
OTHER INFORMATION Designed and produced by
SALTERBAXTER MSLGROUP
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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.com
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