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TRANSCRIPT
1 2008 Annual results
Site Visit: Mogalakwena Mine and Polokwane SmelterApril 12th 2010
2 Site Visit April 12th 2010
Agenda
• Welcome and Introduction
• Overview of Platinum industry and Anglo Platinum
– Neville Nicolau, CEO
• Presentation on Mogalakwena Mine
– Ted Muhajir, General Manager
• Question and Answer session
3 Site Visit April 12th 2010
MARKET OVERVIEW
4 Site Visit April 12th 2010
2009: Global platinum supply: 6,060m oz
Anglo Platinum40%
Impala22%
Lonmin11%
Norilsk 11%
Other16%
Global platinum supply: only 4 major players –extremely high geographical concentration
• c.20% of platinum is produced as a by-product to nickel or palladium
5 Site Visit April 12th 2010
• Diverse application base• Balance of elastic and inelastic applications – beneficial price role from 2H08• Geographically diverse demand
*Includes Chemical, Electrical, Glass, Petroleum and Other
Unique metal market dynamics
0
5
10
15
20
25
30
35
40
45
50
Autocatalysts(net)
Jewellery Industrial* Investment
%
2008 2009
6 Site Visit April 12th 2010
Platinum market: In deficit for 10 of last 13 years
-800
-700
-600
-500
-400
-300
-200
-100
0
100 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net surplus/(deficit) ‘000 oz
Source: Johnson Matthey, Anglo Platinum estimates
7 Site Visit April 12th 2010
• Continued tighter legislation - Euro V 2011
• Continued increase in diesel car popularity – cost and emissions efficiency
• Early voluntary particulate filter fitment
• Heavy duty vehicle retrofitting - high loadings
• Vehicle volume growth in China
Autocatalyst demand driver: emissions legislation
8 Site Visit April 12th 2010
Autocatalyst demand driver: emissions legislation timetable
Source: Johnson Matthey
Rest of World
China
Russia
Japan
European Union
USA
1990 1995 2000 2005 2010 2015
Tier 1
LEV I(CA)
N-LEV
Tier 2
LEV II(CA)
US04(HDD)
US07(HDD)
US2010(HDD)
Tier 4(non-road)
Euro 1 Euro 2 Euro 3 Euro 4 Euro 5 Euro 6
Euro III(HDD)
Euro IV(HDD)
Euro V(HDD)
Euro VI(HDD)
Stage IIIB(non-road)
Stage IV(non-road)
Euro 2Euro 3
Euro 4
J-200 NLT
Japan LTP(HDD)
Japan(HDD)
PNLT
Euro 3(national 1)
Euro III(HDD)
Euro 4(national 1)
Euro IV(HDD)
Brazil L4
South KoreaK-ULEV
BrazilEuro III (HDD)
South KoreaEuro IV (HDD)
IndiaEuro III (HDD)
IndiaEuro 3 (national)Brazil L5
IndiaEuro IV (HDD)
BrazilEuro IV (HDD)
9 2009 Financial Results
2010
• Vehicle production forecast to increase to match sales
• Diesel share in Europe re-established through fleet purchases
2009
• Vehicle stock adjustments exacerbated poor production performance in mature markets
• Stimulus schemes boosted small car sales favouring palladium
• Chinese vehicle production growth exceptional
Autocatalyst demand rebuilding
10 Site Visit April 12th 2010
• Asian markets – provide the volume
• Rest of World – provides influence and style
• Chinese consumer demand remains firm and
margins are robust
• Development campaign in India revitalised
Jewellery demand 2009
70%
13%
8% 6% 3%ChinaJapanEuropeNorth AmOther
Global jewellery demand Oz 000's
0
500
1000
1500
2000
2500
2004 2005 2006 2007 2008 2009
OtherNorth AmEuropeJapanChina
Asia delivers on platinum jewellery
11 Site Visit April 12th 2010
Platinum jewellery: unique source of price support
Shock-absorber effect at differing price levels• Jewellery demand: price elastic vs. Industrial demand: price inelastic• Demand balance results in lower price volatility
Price tension (upward pressure on price):• Strong consumer demand
• Sophisticated marketing: PGI focus on niche and new markets• High brand awareness• Well-established bridal support
• Consumer has adjusted to higher prices over time
China is different….• Platinum jewellery sales in China increased by over 600,000 ounces 1H09 vs. 1H08 • Unique market characteristics• Majority of purchases are self-purchase or non-bridal gift• Over 70% metal-only pieces (< $300)• Unsaturated market – retail store growth
12 Site Visit April 12th 2010
Platinum jewellery: China is different
Primary consumer – demographics and behaviour• Better educated urban employee between 20 and 40• Buys her own plain platinum pieces; fashion and emotion• Average value of her purchase: US$250• Remained employed through global crisis• Well aware of the low price opportunity; jewellery sold by weight• High appeal of price dip to first time buyer; unsaturated market
Beijing retailer - May holiday Shanghai retailer - Valentines day
13 Site Visit April 12th 2010
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2007/04/20
Palla
dium
ETF
oun
ces
150
200
250
300
350
400
450
500
550
600
650
Pric
e (U
S$/o
z)
ETC ZKB US ETC US$/oz
• Platinum and palladium ETFs introduced in April-May 2006 by ETF Securities and ZurcherKantonal Bank and in January 2010 in the US by ETF Securities
• Platinum ETF holdings currently at 947k oz, including 309k oz in US ETF
• Palladium ETF holdings currently at 1695k oz, including 549k oz in US ETF
Platinum ETF positions to end March 2010 Palladium ETF positions to end March 2010
Investment: a growing source of visible demand
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2007/04/20
Pla
tinum
ETF
oun
ces
500
1,000
1,500
2,000
2,500
Price
(US$
/oz)
ETC ZKB US ETC US$/oz
14 Site Visit April 12th 2010
• Increasing autocatalyst demand from BRIC car production and sales
• Palladium use in diesel catalysts: 25-30% of PGM loadings medium to
longer-term
• Investment activity and Exchange Traded Funds continue to increase
• Potential for further jewellery development
• Overhang of Russian stockpiles remains for now
• Potential to move into a sustained production deficit once Russian
stockpiles deplete
Palladium: Moving into a sustained production deficit
15 Site Visit April 12th 2010
COMPANY OVERVIEW
16 Site Visit April 12th 2010
Safe, Profitable Platinum
Our strategy is to maximise value by understanding and developing the market for platinum group metals, to expand our production into that opportunity and
to conduct our business safely, cost-effectively and competitively
Our Strategy
17 Site Visit April 12th 2010
• The world’s largest primary producer of platinum, c.40% market share
• Refined production (000’ oz):
• Headline Earnings:
• Ordinary shares in issue (m)*:
• Market capitalization (US$ bn):
• Anglo American plc shareholding: 76.5%79.6%79.7%
35.013.325.6
236.4237.1236.8
1,7411,722359US$ m
12,32513,292710R m
PGMs
Rhodium
Palladium
Platinum
4,7874,5314,751
329299350
1,3901,3191,361
2,4742,3872,452200720082009
World leader in platinum production
*As at 31st December
18 Site Visit April 12th 2010
• Expansion decisions based on platinum demand growth
• Value and return based on rand revenue of basket of metals sold
•Anglo Platinum basket price: net sales revenue (all metals) per platinum ounce refined in FY09
2009: split of gross revenue by metal
Primary platinum production drives our strategy
Platinum69%
Palladium8%
Rhodium12%
Nickel6%
Other5%
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Ran
d ba
sket
pric
e pe
r Pt o
unce
5001,0001,5002,0002,5003,0003,5004,0004,5005,000
US
$ B
aske
t pric
e pe
r Pt o
unce
Ave Rand Basket price Ave Dollar Basket price
R20,780$2,906
R19,748$2,268
R14,683$1,556
R15,095$1,929
R29,848$3,813
2007 1H08 2H08 1H09 2H09
19 Site Visit April 12th 2010
South Africa Bushveld Complex and our operations
20 Site Visit April 12th 2010
• Proved and probable reserves of 1,315 Mt @ 4.03 g/t: 170.5m oz (4E)
– Implied life of mines: c.55 years
• Measure and Indicated resource: 2,406 Mt @ 3.95 g/t: 305m oz (4E)
– Implied life of mines: c.50 years
• Total implied life of mines (reserves and resources): +100 years
• c.60% of South Africa’s Pt and 4E reserves
Extensive high quality ore reserves and resources
21 Site Visit April 12th 2010(1) 85% owned (2) Tonnes mined per total employee per month
Our wholly-owned mines: FY09 statistics
11,710
10,268
10,291
9,245
13,118
13,972
12,659
10,647
13,297
Cash operating cost per equivalent refined Pt oz
443.9TOTAL
586.0TOTAL
1,555.1TOTAL
Platreef1,141(2)NA233.3Mogalakwena
4.563291.9Ivan, 22 Vertical, Richard and Spud shaftsUnion(1)
East Upper UG2 Project4.447150.1Dishaba (2 shaft)
4 shaft is a project6.178293.8Tumela (1 & 4 shafts)Amandelbult
2 shaft on care and maintenance5.464157.0Khuseleka (1 & 2 shafts)
2 shaft is a project shaft5.48179.3Thembelani (1 & 2 shafts)
5.540105.5Khomanani (1 & 2 shafts)
15.6
4.2
M2 per total operating employee
Mechanised mine
2 and 3 shafts on care and maintenance
Comments
100133.6Bathopele (East and Central shafts)
56110.6Siphumele (1, 2 & 3 shafts)
Rustenburg
% UG2
Refined Pt ProductionMine (Shafts)Mine area
22 Site Visit April 12th 2010
Our Joint-Venture Operations: FY09 statistics
Managed by AnooraqResources
Managed by Aquarius
Managed by Aquarius
Managed by Xstrata
Managed by ARM
Managed by Anglo Platinum
Other information
28.6
19.8
115.8
54.5
67.2
88.8
FY09 PoC*
51% AnooraqResources
50% Aquarius
50% Aquarius
50% Xstrata
50% African Rainbow Minerals
50% Royal Bafokeng Resources
Structure
3.518,9203828.649%Bokoni**
6.211,03710045.450%Marikana
12.7
15.8 (some mechanised)
10.2
6.5
M2 per total operating employee
10,437
9,132
13,740
9,992
Cash operating cost per equivalent refined Pt oz
100115.850%Kroondal
10054.550%Mototolo
9967.250%Modikwa
184.550%BRPM
% UG2
FY09 mined ounces
AP ownershipMine
*PoC: ‘Purchase of Concentrate’; ** Formerly known as Lebowa; Ounces information to 30/06/09 only; accounted for as an Associate from 1/7/09
23 Site Visit April 12th 2010
• Extensive high quality ore reserves
• Building flexibility into portfolio of long-life assets
• Superior market intelligence
• Extensive HDSA JV experience
• Conversion of all mining rights granted, including at project level
Unique competitive advantages
24 Site Visit April 12th 2010
Latest financial results: 2009 highlights
• Safety: continued progress– 4 month fatality-free record as at 20 January 2010
• Financial results:– Headline Earnings down 95% to R710 million due to the metal price decline
• Strong recovery in PGM prices since 2H09 and continued positive market outlook
• Operational improvement targets met:– Production of 2.4 million ounces of platinum, as planned
– Employee complement reduction of 15,752 since January 2009
– Cash operating costs per equivalent refined platinum ounce kept essentially flat at R11,236
– Mining productivity average 6.33m2 per operating employee during year, 13% improvement yr/yr
– Capital expenditure of R9.7 billion
• Balance Sheet restructured:– Rights Offer of R12.5 billion now concluded, 2.8x over-subscribed by minority shareholders
– Future financial and operational flexibility secured and capacity for growth created
25 Site Visit April 12th 2010
Safety:
Cost management:
Declining grade and recovery:
Project pipeline management:
Balance sheet management:
– Focus on achieving zero harm
– Targeting unit costs to remain flat until 2011– Three-stage process of (i) reducing employee numbers and improving productivity, (ii) reducing overhead and allocated costs; (iii) improving efficiency of infrastructure
– Increased UG2 and quality of Merensky
– Production of metal to meet market demand– Reduction in capex: R8 bn per annum for next two years
– Successful R12.5 billion Rights Issue– Resumption of dividend payments
Key opportunities and issues for Anglo Platinum
26 Site Visit April 12th 2010
Safety is our first value
Zero is possible
Safety
27 Site Visit April 12th 2010
• Marked improvement in safety:• LTIFR down 32.5% since 2007• 4Q09 fatality free, a first in the history of the Company• Fatality-free shift achievements in 2010:
– Dishaba Mine: 3.5 million; Tumela Mine: 4 million; Khuseleka 1 Shaft: 2 million; Khomanani 1 Shaft: 1 million
Solid progress towards ‘zero-harm’
LTI/200 000 hours
0
0.5
1
1.5
2
2007 2008 2009
2.03
1.74
1.37
Number of fatalities
25
18
46
3
00
5
10
15
20
25
30
2007 2008 1Q09 2Q09 3Q09 4Q09
28 Site Visit April 12th 2010
• Restructuring of our largest mines into smaller, more manageable units
• Introducing a matrix management structure at Head Office
• Instilling cost management into our corporate culture
• Matching our capex spend to our production profile
• Solid progress on road to ‘zero harm’
Turning Anglo Platinum around: some key actions taken
29 Site Visit April 12th 2010
Cost management being instilled across the group
Target: flat nominal cash operating costs per equivalent refined platinum ounce FY09-FY11
A three-step process to reinforce cost management:
1. Employee complement reduction and productivity improvements
2. Correct allocation of costs across mines; reduction of overhead costs and removal of overheads from shafts on ‘care and maintenance’
3. Improving efficiency of infrastructure
…in a high inflation environment
30 Site Visit April 12th 2010
•Rand cash operating costs per equivalent refined platinum ounce flat in 2009 versus 2008
2009: split of cash operating costs*
*Includes On-mine costs (comprise mining and concentrating costs) smelting and refining costs
Solid progress in meeting cost target
Labour38%
Contractors13%
Stores26%
Utilities8%
Sundries14%
Toll refining1%
31 Site Visit April 12th 2010
• Cash operating unit costs essentially flat year-on-year– Cash operating costs per equivalent refined platinum ounce of R11,236 vs. R11,096 in 2008, a
c.6% reduction in real terms
– Cash operating cost per tonne milled decreased 5% to R453 in nominal terms
• Employee complement reduction:– Reduction of 724 positions in corporate and regional offices in 2009; total reduction of 1,150
since July 2008
– 15,752 reduction in total complement since January 2009, against initial expectation of 10,000; reduction of 18,786 since October 2008
• Asset Optimisation and Supply Chain– Asset Optimisation operating profit benefit: R2,731 million
– Supply Chain savings: R821 million
FY09 saw a turning point in cost management
32 Site Visit April 12th 2010
Surface outcrop decline shaft access
First generationvertical shaft
Second and third generation shafts
Merensky reef4-6 g/t, narrow width
‘Short’ distance betweenreefs 40 – 100m
UG2 reef3-5 g/t, wide, high
Chrome
Anglo Platinum ‘typical’ Impala Platinum ‘typical’
Brownfields projectCo-extraction
Average Depth 0 – 1200m
mined outreef
Improving our infrastructure efficiencies
At Rustenburg, c.70% of employees are more than 2.5 km away from infrastructure, vs. c.30% at Impala’s Lease Area
Southern African
BushveldPlatinum mining
33 Site Visit April 12th 2010
Improving our infrastructure efficiencies
• Improving mine development layout and design of new mining areas– Example: transition from manual to hybrid mining at Union
• Shaft optimisation to fully utilise capacity and maximise low cost ounces– Examples:
• Reduce activity at Union Merensky Deeps and Merenksy levels at Rustenburg
• Increase UG2 production close to existing shafts whilst reducing Merensky mining at a distance
• Infrastructure optimization– Example: closure of Thembelani 1 shaft to route all activity through Thembelani 2 shaft, once completed
• Implementing reclamation/refurbishment strategies– Examples:
• Salvage and reuse of mining equipment
• In-sourcing of equipment repair and maintenance
34 Site Visit April 12th 2010
Moving to lower half of cost curve
35 Site Visit April 12th 2010
Asset Optimisation and Supply Chain deliver value
• Asset Optimisation FY09 operating profit benefit:– R2,731 million or $332 million*
• Supply Chain FY09 savings:– Supply Chain savings: R821 million
Main contributing projects:•Mogalakwena volume increases•Smelter capacity improvements
•Labour productivity improvements•Steel ball reduction in milling circuits
•Process chemicals reduction
Main contributing projects:• Steel balls and grinding media
• Tyres• Mobile cranes• Caustic soda
• Sustainable Asset Optimisation and Supply Chain savings targets:– 2010: $250m (AO), $195m (SC)
– 2011: $335m (AO), $349m (SC) * Sustainable savings of $233 million
36 Site Visit April 12th 2010
• Increasing proportion of UG2: lower grade and recovery
•Increased UG2 mined vs. total output: 2004: 48% to 2009: 55%
• Built-up head grade decreased from 2004: 4.16 to 2009: 3.31 g/tonne milled
• Ore mix management and process recovery optimisation
•Focus on improving flexibility by increasing ore reserve development
Built up head grade
Declining grade and recovery – an industry issue
% UG2
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2004 2005 2006 2007 2008 20090
10
20
30
40
50
60
70
37 Site Visit April 12th 2010
Rep
lace
men
t pro
ject
s
• Approved projects form pipeline of $5 billion• Stay-in-business and Project capital expenditure reduced from R14 billion ($1.5b) in 2008 to R8 billion (c.$1b) per annum for 2010 and 2011
2009 2010 2011 20172012 2013 2014 2015 2016 2018 2019
All production shown at 100% full ramp up and in ‘000 ounces per annum; dates show full production dates
Selected Major Projects
2452Refined production
Thembelani 2 Shaft (120k oz)
Tumela 4 Shaft (271k oz)
Gro
wth
pro
ject
s Dishaba East Upper UG2 (100k oz)
Twickenham (180k oz)
Styldrift Merensky phase 1 (245k oz)
Capex:$316m
Capex:$1602m
Capex:$800m
Capex:$1621m
Project pipeline management: rigorous capital allocation management
Unki (65k oz) Capex:$457m
Capex:$224m
38 Site Visit April 12th 2010
• R12.5 billion, equating to 24,891,473 million shares
• Issue price of R502.18, set at 25% discount to Theoretical Ex-Rights Price (5 February 2010)
• Anglo American followed its rights (79.72%) and fully underwrote the balance of the offering
• Pro-forma net debt post Rights Issue: R6.8 billion
• Reduction in pro-forma interest charge expected to be c. R800 million
• Dividend payments to be resumed when market conditions and the operating environment permit
Balance sheet management: Successful R12.5 billion Rights Issue
39 Site Visit April 12th 2010
In summary
• Fundamentally attractive market:– Strategic industrial metals– Strong demand recovery – restocking, autocat demand returning, Chinese jewellery remains strong– Geological concentration and scarcity of PGMs– Stable industry structure – well established fabricators and users – concentrated supply
• Performance improvement underway:– Commitment to optimising value from diverse portfolio of assets:
– Three high cost shafts placed on care and maintenance– Additional output from lower cost operations can be flexed to keep production steady
– Disciplined capital allocation– Rigorous cost management, including supply chain and asset optimisation initiatives
• Anglo Platinum is the largest platinum producer globally:– Largest suite of mining, smelting and refining assets in industry– 40% of global platinum market; 21% share of global palladium market
• Strong growth prospects:– Largest resources and reserves of any PGM player– Unrivalled PGM optionality through portfolio of assets and presence on all four Southern African reefs