Bank of America Merrill Lynch 2012 Global Metals, Mining & Steel Conference
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We aim to deliver a future with real and sustainable value. Read our presentation as delivered by Cynthia Carroll, Chief Executive, Anglo American, at the Bank of America Merrill Lynch 2012 Global Metals, Mining & Steel Conference. You can find out more about Anglo American here: http://www.angloamerican.com/ http://www.facebook.com/angloamerican http://www.twitter.com/angloamerican http://www.youtube.com/angloamerican http://www.flickr.com/photos/angloamerican http://www.linkedin.com/company/anglo-american
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Bank of America Merrill Lynch 2012 Global Metals, Mining & Steel Conference
- 1. BAML GLOBAL METALS & MINING CONFERENCE CYNTHIA CARROLL – 15 May 2012
- 2. CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American plc (“Anglo American”) and comprises the written materials/slides for a presentation concerning Anglo American. By attending this presentation and/or reviewing the slides you agree to be bound by the following conditions. This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Anglo American. Further, it does not constitute a recommendation by Anglo American or any other party to sell or buy shares in Anglo American or any other securities. All written or oral forward-looking statements attributable to Anglo American or persons acting on their behalf are qualified in their entirety by these cautionary statements. Forward-Looking Statements This presentation includes forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding Anglo American’s financial position, business and acquisition strategy, plans and objectives of management for future operations (including development plans and objectives relating to Anglo American’s products, production forecasts and reserve and resource positions), are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Anglo American, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Anglo American’s present and future business strategies and the environment in which Anglo American will operate in the future. Important factors that could cause Anglo American’s actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of global demand and commodity market prices, mineral resource exploration and development capabilities, recovery rates and other operational capabilities, the availability of mining and processing equipment, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, the availability of sufficient credit, the effects of inflation, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or safety, health, environmental or other types of regulation in the countries where Anglo American operates, conflicts over land and resource ownership rights and such other risk factors identified in Anglo American’s most recent Annual Report. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this presentation. Anglo American expressly disclaims any obligation or undertaking (except as required by applicable law, the City Code on Takeovers and Mergers (the “Takeover Code”), the UK Listing Rules, the Disclosure and Transparency Rules of the Financial Services Authority, the Listings Requirements of the securities exchange of the JSE Limited in South Africa, the SWX Swiss Exchange, the Botswana Stock Exchange and the Namibian Stock Exchange and any other applicable regulations) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Anglo American’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in this presentation should be interpreted to mean that future earnings per share of Anglo American will necessarily match or exceed its historical published earnings per share. Certain statistical and other information about Anglo American included in this presentation is sourced from publicly available third party sources. As such it presents the views of those third parties, but may not necessarily correspond to the views held by Anglo American. No Investment Advice This presentation has been prepared without reference to your particular investment objectives, financial situation, taxation position and particular needs. It is important that you view this presentation in its entirety. If you are in any doubt in relation to these matters, you should consult your stockbroker, bank manager, solicitor, accountant, taxation adviser or other independent financial adviser (where applicable, as authorised under the Financial Services and Markets Act 2000 in the UK, or in South Africa, under the Financial Advisory and Intermediary Services Act 37 of 2002.). 2
- 3. DELIVERING REAL AND SUSTAINABLE VALUE Proceeds from divestments (excludes AA Sur) Improving cost positions Gross proceeds 1 Copper Nickel Platinum Export Export Hard Iron Ore Coking Coal $million a 100% Tarmac 551 2nd half 80% cost curve Scaw 1,538 60% Zinc 1,599 1st half 40% Coal 594 cost curve 20% Total divestment program 4,282 0% 1 Gross proceeds before transaction costs. 2011 2015 2011 2015 2011 2015 2011 2016 2011 2015 Source: AME, Brook Hunt - Wood Mackenzie company, Anglo American Platinum Optimised and simplified portfolio Capital allocation 2011 Underlying Earnings % 140 % Capex 1 Net equity distribution 2 Net acquisitions 3 2% 120 % 100 % 18 % 59 % 35 % 28 % 80 % 42 % 30% 40% 35 % 14 % 60 % 9% 40 % 66 % 58 % 65 % 20 % 47 % 49 % 0% 28% (1)% (24)% (20)% Anglo (40)% American Peer 1 Peer 2 Peer 3 Peer 4 Investment Consumption Late cycle Other Source: UBS and Capital IQ. Major Diversified Miners from 2003 to date 1 Includes purchase of property, plant and equipment; and exploration expenditure 3 2 Includes issuance and repurchase of common stock; and common, special and preference dividends paid 3 Includes cash acquisitions and divestitures
- 4. STRONG PRODUCTION PERFORMANCE; PROJECTS RAMPING UP TO FULL CAPACITY Copper production (Q1 12 vs. Q1 11) Iron Ore, Kolomela (Mt) 21% 3% 78% (13%) 2011 1.5 (18%) (18%) 2012 production Q1 2012 peak utilisation Anglo Peer 1 Peer 2 Peer 3 Peer 4 American Copper, Los Bronces (kt) Iron Ore production (Q1 12 vs. Q1 11) 86% 2011 19 17% Q1 2012 peak utilisation 14% 2012 production 9% (2%) Nickel, Barro Alto (kt) Anglo Peer 1 Peer 2 Peer 3 American 2011 74% 6 Met Coal production (Q1 12 vs. Q1 11) 2012 production Q1 2012 peak utilisation Thermal Coal, Zibulo (Mt) 73% 100% 10% 5% (18%) 2011 3.4 Anglo Peer 1 Peer 2 Peer 3 American 2012 production Q1 2012 peak utilisation 4 Source: Q1 2011 and Q1 2012 production reports. Peers consists of BHP Billiton, Rio Tinto and Xstrata.
- 5. INDUSTRY WIDE CAPITAL AND OPERATING COST PRESSURE REMAINS 2011 vs. 2010 % cost increase Costs and commodity prices indexed to 100 Chile South Africa Australia Oil Hot rolled Copper Premium hard sheet steel price coking coal price 160 140 120 32% 27% 26% 25% 22% 100 15% 16% 8% 5% 0 Electricity Labour Diesel Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 5
- 6. RESILIENT PORTFOLIO WITH BALANCED EXPOSURE TO ALL STAGES OF DEVELOPMENT Unique portfolio composition Long term fundamentals remain robust 2011 EBITDA % Indexed intensity of use – China 1.1 2011e 1.0 0.9 Peer 1 Demand per GDP 0.8 0.7 Peer 2 0.6 0.5 Peer 3 Steel 0.4 Copper Autocat PGMs 0.3 Peer 4 Diamonds 0.2 2 4 6 8 10 12 14 16 18 20 22 Investment 1 Consumption 2 Late cycle 3 Other 4 US$ PPP GDP per Capita Source: Company information; peers include BHP Billiton, Vale, Rio Tinto and Xstrata. Based on 2011 EBITDA contribution (2010 operating profit in the case of Vale). Anglo American is based on pro- forma full consolidation of De Beers 2011 EBITDA 1 Includes iron ore, metallurgical coal, manganese 2 Includes aluminium, copper, nickel, zinc 3 Includes thermal coal, petroleum, platinum, diamonds 6 4 Includes Other Mining & Industrial (Anglo American), other (Rio Tinto), other (Xstrata)
- 7. A CHALLENGING AND EVOLVING SUPPLY LANDSCAPE Key Risks Taxes/ Royalties Availability of Human Resources Mongolia Canada Access to Infrastructure Community Opposition Licensing / Permitting Access to Water Guinea Electricity Supply USA Philippines DRC Peru Brazil Indonesia Australia Chile South Africa 7 Source: Company Reports; Newsmedia
- 8. TAKING THE LEAD IN SUSTAINABLE MINING Anglo American is the only mining company to achieve Platinum status in the UK’s leading voluntary benchmark of corporate responsibility, the Business in the Community Corporate Responsibility Index Tripartite Health and Safety Significant contributor to Initiative in South Africa local economies e.g. Chile received Visible - $6.5bn invested since Management Commitment 1980; 10,000 Chileans Award at the DuPont Safety employed Awards Committed to 44% reduction in lost-time creating and sustaining injury frequency rate since local jobs through 2007 Zimele, 19,500 jobs Isibonelo received South created, $78m invested in African national safety new businesses awards in 2011 Project Alchemy goes beyond BEE compliance - Kumba’s employees giving local communities rewarded through Envision equity ownership in – industry leading broad Platinum based share scheme 80% of our operations and planned projects are in water stressed environments; however in 2011, 66% of the water our operations used was re-used/recycled 8
- 9. STRATEGIC PROJECT MANAGEMENT APPROACH Metallurgical Coal delivering four longwalls in the same region offers value accretive synergies Project delivery Our approach Target outcomes Benefits objectives Project Cost Planned growth profile 1. One standard design Progressive engineering 120% 100% requires a project that: & management efficiencies 80% & cost reductions 60% • Achieves lower 40% 20% capital costs 2. Partnerships with Reduced delivery 0% suppliers lead times 1 2 3 4 • Provides greater schedule Start-up Time 120% predictability Strategic equipment 3. Standard organisation sourcing 100% 80% • Reduces risk structures & integrated 60% resourcing 40% • Enhances public Construction safety and 20% 0% profile and productivity gains 4. Integrated community 1 2 3 4 corporate engagement and reputation management Improved production ramp-up Operability 115% (Moranbah 2020) and operability • Enhances 110% Sustainability 105% outcomes 5. Dedicated port terminal Team continuity and 100% 95% of 30 Mt performance 90% 1 2 3 4 Number of Longwalls 9
- 10. MOST DIVERSIFIED AND BALANCED GROWTH OPTIONS Advanced stage projects (Approved or Feasibility) Minas-Rio Phase 1; Grosvenor Iron ore, Phase 1; Roman (Peace River >100% metallurgical Coal); Sishen Expansion Project Investment coal, phase 1B; Drayton South; Groote manganese Eylandt Expansion Project (GEEP 2) >75% >50% Copper, Collahuasi expansion Phase 2; Consumption nickel Quellaveco Cerrejón P500 Phase 1; Thermal coal, Twickenham; Bathopele Phases 4 Late cycle platinum, & 5; Jwaneng-Cut 8; Venetia UG; diamonds Gahcho Kué; Siphumelele 1 UG2; Modikwa Phase 2; New Largo Other Other mining Boa Vista Fresh Rock & industrial 2010 2014 Medium term Future growth options Investment Consumption Late Cycle Other De Beers assumed to be fully consolidated in 2014 forecast and thereafter. Transaction subject to regulatory and government approval 10
- 11. INDUSTRY LEADING GROWTH IN HIGHLY ATTRACTIVE METALLURGICAL COAL Met Coal production Competitor growth comparison (Hard Coking Coal) 2010 - 2020 12% CAGR 13.9 Mt 6% CAGR 3% CAGR 2011 2012 2013 Future Anglo American BHP Billiton Teck potential Advanced stage projects Capital intensity for Grosvenor Project is attractive $/t Project Stage Volume 1 2,500 Grosvenor Phase 1 2 Approved 5 Mtpa 2,000 Roman (Peace River) Feasibility 3 Mtpa Grosvenor Phase 2 Prefeasibility 6 Mtpa 1,500 Moranbah South Prefeasibility 12 Mtpa 1,000 Grosvenor 500 = $340/t 0 1 100% of average incremental production, at full production 2 Capital expenditure of $1.7bn. First development coal expected in 2013 and the commissioning of the Grosvenor Bowen Basin Bowen Basin Bowen Basin 11 longwall in 2016 phase 1 1 2 3
- 12. FLEXIBILITY TO GROW HIGH QUALITY AND LOW COST IRON ORE BUSINESS Iron Ore Production 1 Average cash cost iron ore delivered to China $/t Range of Pilbara producers 41.3 Mt India Pilbara Sishen Minas-Rio 2011 2012 2013 Future Producers 3 at full production 4 potential Projects A quality proposition 10% 1 Australia - Project Type Volume Australia - high quality Minas-Rio Phase 1 2 Greenfield 26.5 Mtpa 8% medium quality India Alumina + silica content Other Africa Kolomela Expansion Brownfield 6 Mtpa CIS 6% Dotted bubble North America Sishen Expansion Brownfield 0.7 Mtpa indicates China 5 Project 1B 4% Sishen processed ore Minas-Rio Phase1 Minas-Rio Phase 2 Brownfield TBD Bubble size Amapá indicates an Brazil 2% average 1 Excludes Amapá. Future potential excludes Minas-Rio Phase 2 as the scale of project is to be production of 50 determined Mtpa 2 First production expected in H2 2013. As announced previously capital budget is under review Minas-Rio expansion and we expect to contain the increase to approximately15% of $5.0bn 0% 3 Estimated range of 3 Pilbara producers (Rio Tinto, BHP Billiton and FMG) 56% 58% 60% 62% 64% 66% 68% 70% 12 4 On a fully ramped up 2011 real basis Grade 5 Chinese production (rich ore equivalent) inferred from a small sample of mines Source: CRU, AME, Anglo American
- 13. PRIORITISING THE NEXT PHASE OF COPPER GROWTH OPTIONS Copper production Hypothetical copper demand / supply gap Mt Cu 25 Demand 20 599 kt Supply 15 (firm supply excl. uncommitted projects) 10 Future 0 2011 2012 2013 2000 2004 2008 2012 2016 2020 potential Source: Anglo American Projects Copper supply - increasing capital intensity $ per /yr Cu eq Project Type Volume 1 25,000 Concentrate producers Quellaveco Greenfield 225 ktpa SxEw (solvent extraction / electro winning) Annual production scale kt/yr Cu 20,000 Collahuasi Brownfield 469 ktpa Projects under construction expansion Phase 3 Projects probable 15,000 Michiquillay Greenfield 187 ktpa Michiquillay Brownfield Expansion to 300 ktpa 10,000, expansion Pebble Greenfield 175 ktpa 300 5,000 150 50 Los Bronces District Brownfield TBD 13 0 1 100% of average incremental production, at full production 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 Source: Brook Hunt – Wood Mackenzie – May 2011
- 14. CONSOLIDATING CONTROL OF THE WORLD’S LEADING DIAMOND COMPANY Access to significant reserve base and sustainable Emerging supply demand gap production / competitive growth position New production unable to keep pace with growing demand Hope PWP (polished wholesale price) Expected demand Expected demand Alros a (nominal pipeline call) (nominal pipeline call) Rio Tinto Supply Petra . (at constant prices) BHP Billiton Expected supply (at constant prices) Gem 14 Harry Wins ton 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: De Beers, Company reports and announcements. Note: Inclusive of reserves and resources Source: De Beers. Indicative supply demand view based on current assumptions Higher margin assets Share of Chinese households in each income level will shift dramatically by 2020 70% of De Beers production is located on the lower half of the cost curve Share of urban households by annual household Projected CAGR income 2000-2020, % 2.5 147m 226m 328m Total = 4.1 100% 20.4 2.0 80% Affluent (>34,000) Namdeb operations Cost/revenue (x) Gahcho Kue (project) Snap lake 1.5 26.6 60% Mainstream Damtshaa ($16,000-$34,000) 1.0 Orapa Venetia 40% Value ($6,000- Jwaneng $15,999) 1.2 0.5 20% Poor (<$6,000) 0.0 0% -3.8 12,000 10,000 14,000 16,000 2,000 4,000 6,000 8,000 0 2000 2010 2020 14 Source: McKinsey Quarterly Source: De Beers 2010 Cumulative revenue (US$m)
- 15. REPLENISHING TIER ONE ASSETS WITH INDUSTRY LEADING EXPLORATION Industry leading exploration Discovery of world leading Tier 1 deposits Copper discovery & acquisition costs ($/lb) 5.50 • Industry leading greenfield exploration expertise delivering value • Sakatti is a significant grass roots discovery of copper, nickel, PGE in Northern Finland. Deposit is 2.70 located in an area of excellent infrastructure and is within an existing mining region • Early exploration results are promising based on 0.48 mineralised intersections • Drilling programmes continue to delineate the Anglo American Industry discovery Industry acquisition mineralisation Exploration cost 1 cost 2 1 Cu MEG 2011, Ni MEG 2010 2 MEG; 2006-2010, reserves & resources, non-producing Significant resource growth Sakatti – significant Tier 1 discovery Metallurgical Coal Minas-Rio Resources Resources Mt Mt +97% +363% 3,627 5,771 1,838 1,246 2005 2011 2007 2011 Project pipeline Project pipeline A 3D view of the Sakatti deposit showing an interpreted Operations & approved projects 0.2%Cu cut–off envelope with the current drilling Source: Anglo American Annual Reports and Competent Person Reports. Due to the uncertainty that may be attached to some Inferred Mineral Resources, it cannot be assumed that all or part of 15 an Inferred Mineral Resource will necessarily be upgraded to an Indicated or Measured Resource after continued exploration. Minas-Rio project pipeline represents Itapahoacanga and Serra Do Sapo only
- 16. COMMITTED TO DELIVERING RETURN AND VALUE FOR SHAREHOLDERS Annual dividends ($bn) • Reviewing the shape and size of Platinum portfolio in pursuit of maximising shareholder Minority 0.8 value and returns through the cycle Interests 0.8 1.4 • Continue to prioritise the most value accretive options in our projects pipeline 0.6 AA plc 1.5 1.5 • Committed to a base dividend that will be 0.8 0.9 maintained or increased through the cycle 0.5 2008 2009 • Financial flexibility will increase as growth 2007 2010 2011 projects delivered in 2011 ramp-up to full Capital expenditure profile ($bn) 1 production De Beers Stay in business (SIB) • Surplus cash will be returned to shareholders; Approved Projects Future options 7.0 taking into account our disciplined investment 6.0 approach, future earnings potential and 5.3 5.1 5.0 5.0 preserving a robust balance sheet 4.7 3.5 2007 2008 2009 2010 2011 2012 2013 2014 16 1 Normalised capex profile on a continuing operations basis
- 17. SUMMARY Capital allocation • Consistent strategy and simplified organisational structure delivering results 140 % Capex 1 Net equity distribution 2 Net acquisitions 3 • Driving Tier 1 assets to deliver robust performance against a backdrop of challenging 120 % conditions • Delivery and strong ramp-up of key strategic 100 % projects demonstrates our ability to execute our 18 % 59 % growth strategy 80 % 35 % 28 % 42 % • Successful divestment programme despite 60 % 35 % 14 % challenging macroeconomic environment 9% • Rigorous and disciplined approach to capital 40 % allocation 66 % 58 % 65 % 20 % 47 % 49 % • Flexibility to prioritise growth options from a diversified and well balanced pipeline 0% • Leadership in social and sustainable (1)% (24)% development (20)% Anglo Peer 1 Peer 2 Peer 3 Peer 4 • Commitment to return cash to shareholders (40)% American Source: BAML, UBS and Capital IQ. Major Diversified Miners from 2003 to Feb 2011. 1 Includes purchase of property, plant and equipment; and exploration expenditure 2 Includes issuance and repurchase of common stock; and common, special 17 and preference dividends paid 3 Includes cash acquisitions and divestitures
Notes de l'éditeur
- Thank you Jason.Good afternoon ladies and gentlemen.It’s very good to see you. I am so pleased to present at the Bank of America Merrill Lynch Global Metals and Mining Conference.
- Today I would like to start by providing an overview of the journey Anglo American has been on over the past five years to transform ourselves into a company that delivers on its commitments by delivering shareholder value.In that time we have delivered an improvement in safety and embedded a performance culture focused on achievingbest practices.We’ve simplified and optimised our portfolio to focus on extracting value from the most attractive commodities and are close to completing our divestment program – with the recent announcement of the sale of Scaw South Africa, generating more than $4 billion in proceeds from our disposal program.We’ve turned around business unit performance and moved down the cost curve. Being at the lower end of the cost curve places us in a very competitive position, especially in the current uncertain macro environment.Our decision in 2009 to continue investing in our four major projects, is paying off. Three projects started production on or ahead of schedule in 2011.These are very competitive from an operating and capital cost perspective.For example the capital intensity for the LosBronces expansion is 34% lower than a recently announced project by one of our peers in Chile. (NOTE: On 3 May capex at the 80ktpa Antucoya project at Chile Antofagasta region has increased 31% from $1.3bn to $1.7bn despite only being approved in December 2011. Capex intensity for Antucoya of $21,250/t versus Los Bronces expansion of $14,000/t, 200ktpa at $2.8bn.)Before I turn to our cash flow allocation approach, I will give a quick update on our first quarter operational performance.
- During the first quarter, Kolomela, Los Bronces expansion and Barro Alto ramped up well. Within 5 months of commissioning, Los Bronces expansion achieved 86% of capacity utilisation.Kolomela which was completed in December, 5 months ahead of schedule, has achieved almost 80% of capacity utilisation. Whilst we are seeing good progress with our projects, a number of our operations faced interruptions since the start of the year including inclement weather.In addition, existing mines are facing grade declines and increasing waste stripping.
- In our last result presentation, we highlighted that normalised inflationary pressure for 2011 was around five percent.Typically falling input prices will lag cost reduction. However, we are continuing to face sustained inflationary pressures particularly around labour and electricity in South Africa and Chile, as well as high oil prices.We will continue to take action to mitigate these costs pressure through our asset optimisation and supply chain initiatives. To further maximise value, we have launched a commercial operating model, based on a co-ordinated global marketing approach, with centres in Singapore and London.
- I now turn to some of the challenges faced by the industry and how we approach cash flow allocation.While in the short term there continues to be uncertainty in the global economy, particularly in Europe, I remain optimistic about the long-term outlook for Anglo American’s diversified mix of commodities.Looking at the left side of the page, you will see that Anglo American has the most diversified and balanced portfolio in the industry.We are well positioned in iron ore and met coal to take advantage of short term upswing in pricing.And the portfolio is equally well positioned to benefit from late cycle commodities such as platinum and diamonds.We believe as development in emerging countries shifts from investment to consumption, growth rates in steel consumption will moderate, while platinum and diamonds demand will benefit.Despite China’s slowdown and structural adjustment towards a consumption driven economy, its inland provinces, are experiencing and will continue to experience double-digit growth.In India, a growing middle class and rising disposable incomes should continue to drive demand for coal, diamonds and platinum group metals. In the emerging countries overall, we expect sustained growth driven by increasing living standards.
- But where there is risk, there is also opportunity. What sets us apart is our leadership in sustainable mining.I believe the best way to drive value in a challenging and evolving landscape is to conduct ourselves to the highest standards and to build strong partnerships with our stakeholders including governments, trade unions and local communities.Mining companies that demonstrate genuine commitment to promoting the development and well-being of their host communities, and to engaging in frank dialogue and partnership with stakeholders, are better positioned to access high quality resources.Our leadership in social and sustainable development has been recognised once again by Business in the Community, the UK’s leading benchmark of corporate responsibility. We are the only mining company to achieve the top Platinum ranking and we have now done so for three years running.We have taken the view that supporting the communities in which we operate and plan to operate through sustainable contributions is the only way to secure and maintain our licence to operate.
- Our ability to optimise the development of our Tier 1 assets is also crucial.Barro Alto, Los Bronces, Kolomela showcase our ability to build large, complex projects.This slide is an example of what we are doing to standardise our project management in Met Coal.This standardised approach will enable us to deliver our projects efficiently and effectively.
- Finally,consolidating control of De Beers gives us additional exposure to late development cycle demand.We expect demand to significantly outperform mine supply in the long term. De Beers is a recognised global leader in the exploration, mining, distribution, and sales and marketing of diamonds.They have the largest diamond resource and reserve position in the world, including the world’s richest diamond mine, JwanengThere is significant potential from leading pipeline of greenfield and brownfield projects within De Beers.It is well placed to benefit from the growth in diamond demand.
- In a world of diminishing Tier One assets, our world class exploration approach truly gives us a competitive edge.Since 1999, we have made 15 major discoveries and have received international recognition for Los Sulfatos and Sakatti.Sakatti is a porphyry deposit of high quality copper, nickel, PGMs and cobalt, and forms part of our tenements covering more than 800 square kilometres. The deposit is within a stone’s throw of world class infrastructure, and sits in an existing mining region. Our drilling has yet to determine the extent of the deposit towards the North, the South, and the West as well as the depth of the deposit.As with all projects, we will work through the relevant environmental approvals. This will take at least two to three years.
- We have a reasonable view of future cash flows taking into consideration the uncertainty on macro conditions and many challenges I have highlighted earlier.It is important that we take that into consideration as we take prudent measures to manage our portfolio.This is to ensure that we are well positioned to deliver shareholder value and returns through the cycleIn Platinum, we are embarking on a review to assess the optimal configuration of the Platinum portfolio.We will do this with a single purpose in mind, maximising medium to long term margins and returns.We expect to complete the review by the end of the year.In 2010, we set a clear dividend policy to maintain our base dividend through the cycle. We are committed to the promise of paying the base dividend from operating cash flow.While we have not changed our approach to cash allocation, we recognise that cash flow will be impacted by short term uncertainty, a weaker US dollar, higher capital and operating costs.On the other hand, as our approved growth projects are delivered and completed projects ramp up, our financial flexibility will improve.With that in mind, we continue to take a discipline approach to allocate cash in the most efficient way, ensuring that surplus cash will be returned to shareholders be it in the form of a special dividend or other measures.