Wrap Text
Year end financial report for the year ended 31 December 2018
Anglo American plc (the "Company")
Registered office: 20 Carlton House Terrace, London SW1Y 5AN
Registered number: 3564138 (incorporated in England and Wales)
Legal Entity Identifier: 549300S9XF92D1X8ME43
ISIN: GBOOB1XZS820
JSE Share Code: AGL
NSX Share Code: ANM
YEAR END FINANCIAL REPORT
for the year ended 31 December 2018
21 February 2019
Anglo American Preliminary Results 2018
Consistent performance improvements deliver 4% increase in underlying EBITDA to $9.2 billion
Mark Cutifani, Chief Executive of Anglo American, said: "We are delivering improvements on a consistent
basis, with a further 4% increase in underlying EBITDA to $9.2 billion. Our commitment to disciplined capital
allocation has helped strengthen our balance sheet by more than $10 billion over three years, with net debt
reduced to $2.8 billion at the end of 2018. This strong financial result derives from our continued productivity
improvements in the underlying operations and better than expected prices for many of our products.
"No degree of financial performance is worth a life, however, and in 2018, five of our colleagues tragically died
in workplace safety incidents. The safety of our people is always front of mind and our determination to reach
and sustain zero harm is our most pressing challenge.
"Our focus on efficiency and productivity, including through our Operating Model implementation, is continuing
to deliver benefits - in terms of both safety and financial returns. In 2018, we produced 10% more product on
a copper equivalent basis from half the number of assets we had in 2012. As a result, our productivity(1) per
employee has doubled, supporting a 12 percentage point increase in mining margin(2) to 42% and placing us
amongst the leaders in the industry. Over that six-year period, we have delivered $4.6 billion of annual
underlying EBITDA improvement in terms of costs and volumes, including $0.4 billion in 2018. Looking forward,
we see significant further potential and by 2022, we are targeting an additional $3-4 billion annual underlying
EBITDA run-rate improvement, relative to 2017.
"Anglo American is a resilient and highly competitive business with a clear asset-led strategy. What's more,
our world-class portfolio benefits from considerable organic growth options, particularly in those products that
will supply a cleaner, more electrified world and that satisfy the consumer-led demands of a fast growing global
middle-class. Our focus is on unlocking the very significant additional potential that we see within the business
- from further productivity improvements, volume growth from existing and new operations, and the
deployment of FutureSmart Mining technologies - and to do so safely and responsibly, maintaining strict
capital discipline and creating a sustainable business in every sense."
Financial highlights - year ended 31 December 2018
- Generated underlying EBITDA* of $9.2 billion, a 4% increase, and $3.2 billion of attributable free cash flow*
- Delivered profit attributable to equity shareholders of $3.5 billion, a 12% increase
- Reduced net debt* to $2.8 billion, a 37% reduction since 2017 - 0.3x net debt / underlying EBITDA
- Achieved net cost and volume improvements of $0.4 billion(3)
- Expected 2019 cost and volume improvements of $0.5 billion, and on track to deliver $3-4 billion annual
EBITDA improvement by 2022, relative to 2017
- Proposed final dividend of $0.51 per share, equal to 40% of second half underlying earnings*
Year ended 31 December 31 December Change
US$ million, unless otherwise stated 2018 2017
Revenue 27,610 26,243 5%
Underlying EBITDA* 9,161 8,823 4%
Underlying earnings* 3,237 3,272 (1)%
Attributable free cash flow* 3,157 4,943 (36)%
Profit attributable to equity shareholders of the Company 3,549 3,166 12%
Underlying earnings per share* ($) 2.55 2.57 (1)%
Earnings per share ($) 2.80 2.48 13%
Dividend per share ($) 1.00 1.02 (2)%
Group attributable ROCE* 19% 19% -
Terms with this symbol * are defined as Alternative Performance Measures (APMs).
For more information on the APMs used by the Group, including definitions, please refer below.
SUSTAINABILITY PERFORMANCE
Safety
Anglo American's safety performance is the subject of very significant management attention in order to
eliminate the causes of harm in the workplace. Five people lost their lives in 2018, all in South Africa, two in
each of our Platinum Group Metals (PGMs) and Coal businesses and one in our Diamonds business. As a
matter of urgency, we launched an Elimination of Fatalities Taskforce during 2018 to further interrogate drivers
of fatal incidents at a more granular, cultural level, to understand how we can better manage fatal and
catastrophic risks. Our determination to deliver our commitment to zero harm is our most pressing challenge.
The Group's total recordable case frequency rate for the year provides a broader picture of significant progress,
with 2.66 injuries per million hours worked, a 16% improvement over the record performance rate achieved in
2017. However, we should not be experiencing major safety incidents and we have demonstrated time and
again that even our most potentially hazardous businesses can be incident-free for long periods.
Environment
We recorded one Level 4 and five Level 3 environmental incidents in 2018. The most serious related to two
leakages of non-hazardous iron ore slurry from Minas-Rio's pipeline in Brazil. Both leaks were stopped without
delay, without injuries and a thorough clean-up of the surrounding area was completed. We also took a
responsible approach to the inspection and repair of the pipeline, pre-emptively replacing a number of sections.
Our sustainability goals include our commitment to be a leader in environmental stewardship. By 2030, we aim
to: reduce GHG emissions by 30% against a 2016 baseline and improve energy efficiency by 30%; achieve a
50% net reduction in freshwater abstraction in water-scarce regions; and deliver net-positive impacts in
biodiversity wherever we operate. We are also working on ensuring all operations fully align with our
Biodiversity Standard and our best-in-class Integrated Mine Closure Planning System. Currently, 12% of our
energy needs are met by renewables, and we are working to increase this.
Tailings
We manage our tailings dams with the utmost care and have full confidence in the integrity of our 56 managed
tailings storage facilities around the world. We are, of course, following developments carefully to ensure any
learnings from recent tragic events are integrated into our own processes and controls. There is nothing we
have seen to date to cause us to alter our already stringent approach to tailings dam safety management.
We have a mandatory Group Technical Standard for tailings dam safety management which exceeds
regulatory requirements. We conduct daily and fortnightly inspections, with quarterly external audits performed
by specialised consulting firms. There are also annual inspections performed by the Engineer of Record (who
is external to Anglo American) who are themselves also subject to independent, external reviews. These
processes are in addition to the various forms of remote and other monitoring technologies installed at
appropriate sites that measure everything from ground movement to temperature and hydrology, as examples.
Sustainable mining
Our far-reaching Sustainable Mining Plan, launched in 2018 as part of the FutureSmart Mining programme,
commits us to a series of ambitious medium and longer terms goals. These relate to three major areas of
sustainability aligned to the UN's 2030 Sustainable Development Goals: trusted corporate leader
(i.e. advocating for the highest standards of governance to drive transparency and trust in mining and mined
products); healthy environment; and thriving communities. While our environmental goals will rely on many of
the technologies we are beginning to deploy, we are also thinking innovatively to create regional ecosystems
of sustainable economic activity, in partnership with appropriate development experts.
Anglo American has a long track record as a leader in sustainable, responsible mining. Such attributes were
recognised in April 2018 in the inaugural Responsible Mining Index, across all metrics and particularly in
relation to economic development, community wellbeing and lifecycle management.
(1) Productivity indexed to 2012 benchmark.
(2) The mining margin represents the Group's underlying EBITDA margin for the mining business. It excludes the impact of PGMs purchase
of concentrate, third-party purchases made by De Beers, third-party trading activities performed by Marketing, the Eskom-tied South
African domestic thermal coal business and reflects Debswana accounting treatment as a 50/50 joint venture.
(3) Excludes the impact of the suspension of operations at Minas-Rio.
Operational and financial review of Group results for the year ended
31 December 2018
OPERATIONAL PERFORMANCE
We have continued to improve the performance of our assets through increased efficiency and productivity,
including the implementation of our Operating Model and, as a result, have delivered $0.4 billion of cost and
volume improvements in 2018 ($0.8 billion excluding above CPI increases in oil and other energy costs, and
rail constraints at Kumba). Across the Group, production increased by 6% on a copper equivalent basis,
excluding the impact of the stoppage at Minas-Rio, primarily driven by continued strong performances at
Copper, Metallurgical Coal and De Beers, as well as improved production at our PGMs business. This was
partly offset by curtailed production at Kumba Iron Ore as a result of third-party rail constraints.
Copper production increased by 15% to 668,300 tonnes (2017: 579,300 tonnes), with increases at all
operations. Collahuasi delivered record copper in concentrate production, benefiting from a strong plant
performance following the completion of planned plant improvement initiatives and planned higher ore grades.
At Los Bronces, production increased by 20%, owing to strong mine and plant performance, as well as planned
higher ore grades.
Metallurgical coal production increased by 11% to 21.8 Mt (2017: 19.7 Mt), driven by a record performance
from Moranbah and production growth at Grosvenor.
De Beers' rough diamond production increased by 6% to 35.3 million carats (2017: 33.5 million carats).
Production increases at Orapa and the contribution from the ramp-up of Gahcho Kue more than offset the
effect of the temporary suspension of production at Venetia following a fatal incident and the placing of
Voorspoed mine onto care and maintenance.
At our PGMs business, platinum production increased by 4% to 2,484,700 ounces (2017: 2,397,400 ounces)
and palladium by 3% to 1,610,800 ounces (2017: 1,557,400 ounces), reflecting continued strong performance
at Mogalakwena and ongoing operational improvements at Amandelbult. Refined platinum production
decreased by 4% to 2,402,400 ounces (2017: 2,511,900 ounces) and refined palladium by 10% to
1,501,800 ounces (2017: 1,668,500 ounces) as scheduled smelter maintenance delayed refined production
into 2019.
At Kumba, iron ore output decreased by 4% to 43.1 Mt (2017: 45.0 Mt) due to Transnet's rail performance
constraints throughout 2018. In response, Kumba took the strategic decision to improve product quality to
maximise the value of those tonnes railed to the port, which in turn reduced total production.
At Thermal Coal - South Africa, total export production decreased by 1% to 18.4 Mt (2017: 18.6 Mt), as
operations continued to transition between mining areas.
Nickel production decreased by 3% to 42,300 tonnes (2017: 43,800 tonnes) owing to a 40-day planned
maintenance stoppage at Barro Alto. Manganese ore production increased by 3% to 3.6 Mt (2017: 3.5 Mt),
reflecting improved concentrator availability and favourable weather conditions at the Australian operations.
Group copper equivalent unit costs were in line with the prior year in both local currency and US dollar terms
as the effect of cost and productivity initiatives offset the impact of inflation across the Group. A 9% decrease
in unit costs at Copper, owing to increased production and continued cost savings across all the operations,
was offset by Metallurgical Coal, where increased costs were incurred to establish new mining areas to achieve
further productivity improvements, and at Kumba following lower production and higher strip ratios.
Excluded from the Group copper equivalent result is the impact of Minas-Rio suspending operations from
March 2018, following the two pipeline leaks. The operations resumed after the receipt of the appropriate
regulatory approvals on 20 December, following an extensive and detailed technical inspection and the
precautionary replacement of certain sections of the pipeline. In addition, on 21 December, a key regulatory
approval relating to the Minas-Rio Step 3 licence area was granted, providing greater operational flexibility and
access to higher grade iron ore to support the increase of production towards the full design capacity of
26.5 million tonnes per year.
FINANCIAL PERFORMANCE
Anglo American's profit attributable to equity shareholders increased to $3.5 billion (2017: $3.2 billion).
Underlying earnings were $3.2 billion (2017: $3.3 billion), while operating profit was $6.1 billion
(2017: $5.5 billion).
UNDERLYING EBITDA*
Group underlying EBITDA increased by 4% to $9.2 billion (2017: $8.8 billion). The underlying EBITDA margin
was 30% (2017: 31%) with the mining margin increasing to 42% (2017: 40%). This was driven by strong prices
across the Group, particularly the PGM basket of metals, thermal and metallurgical coal and nickel, as well as
continued productivity improvements and cost control across the portfolio, that more than offset the impact of
inflation across the Group. A reconciliation of 'Profit before net finance costs and tax', the closest equivalent
IFRS measure to underlying EBITDA, is provided within note 3 to the Condensed financial statements.
Underlying EBITDA* by segment
Year ended Year ended
$ million 31 December 2018 31 December 2017
De Beers 1,245 1,435
Copper 1,856 1,508
PGMs 1,062 866
Iron Ore 1,177 1,828
Coal 3,196 2,868
Nickel and Manganese 844 610
Corporate and other (219) (292)
Total 9,161 8,823
Underlying EBITDA* reconciliation 2017 to 2018
The reconciliation of underlying EBITDA from $8.8 billion in 2017 to $9.2 billion in 2018 shows the controllable
factors (e.g. cost and volume), as well as those largely outside of management control (e.g. price, foreign
exchange and inflation), that drive the Group's performance.
$ billion
2017 underlying EBITDA* 8.8
Price 0.9
Foreign exchange 0.2
Inflation (0.4)
Net volume and cost improvements 0.4
Volume 0.2
Cash cost 0.2
Minas-Rio (0.6)
Other (0.2)
2018 underlying EBITDA* 9.2
Price
Average market prices for the Group's basket of commodities and products increased by 4%, contributing
$0.9 billion of improvement to underlying EBITDA. In our Coal business, the realised price for South African
thermal export coal increased by 14%, while the realised price for Australian hard coking coal increased by
4%. The price achieved for the PGM basket of metals was 13% higher, largely due to palladium and rhodium,
which recorded price increases of 17% and 101% respectively. The nickel realised price increased by 24%
compared with 2017.
Foreign exchange
The positive foreign exchange impact on underlying EBITDA of $0.2 billion was largely due to revaluations of
monetary items on the balance sheet, resulting from the effect of weaker producer closing currency rates.
Inflation
The Group's weighted average CPI for the period was 4%, in line with 2017. This was principally influenced
by South Africa, which saw local CPI of around 5%. The impact of inflation on costs reduced underlying
EBITDA by $0.4 billion.
Volume
Increased volumes across the portfolio benefited underlying EBITDA by $0.2 billion, driven by an excellent
performance at Metallurgical Coal's longwall operations and strong mine and plant performance, coupled with
planned higher ore grades, at Copper. This was partly offset by Kumba, which was affected by third-party rail
constraints and a scheduled refurbishment of the shiploader at Saldanha Port, and by lower sales volumes at
De Beers, reflecting the higher proportion of lower value diamonds sold in 2017.
Cost
The Group's cost improvements benefited underlying EBITDA by $0.2 billion, with cost saving initiatives across
the Group and unit cost reductions at Copper outweighing the effects of above CPI inflationary pressure on
the mining industry related largely to higher oil and electricity prices.
Minas-Rio
The negative impact on the Group's underlying EBITDA from the suspension of operations at Minas-Rio from
March to December was $0.6 billion, compared to 2017. Production decreased to 3.4 Mt (2017: 16.8 Mt).
UNDERLYING EARNINGS*
Profit for the year increased by 8% to $4.4 billion (2017: $4.1 billion). Group underlying earnings were
marginally lower at $3.2 billion (2017: $3.3 billion), as a result of increased depreciation and amortisation
charges, offset by the 4% increase in underlying EBITDA.
Reconciliation from underlying EBITDA* to underlying earnings*
Year ended Year ended
$ million 31 December 2018 31 December 2017
Underlying EBITDA* 9,161 8,823
Depreciation and amortisation (2,784) (2,576)
Net finance costs and income tax expense (2,265) (2,223)
Non-controlling interests (875) (752)
Underlying earnings* 3,237 3,272
Depreciation and amortisation
Depreciation and amortisation increased to $2.8 billion (2017: $2.6 billion), owing to higher sustaining capital
expenditure, increased production at Moranbah and Grosvenor and stronger average local currencies.
Net finance costs and income tax expense
Net finance costs, before special items and remeasurements, were $0.4 billion (2017: $0.5 billion). Increases
in LIBOR were offset by lower average borrowings during the year resulting from a 24% reduction in gross debt.
The underlying effective tax rate was 31.3% (2017: 29.7%). The effective tax rate in 2018 benefited from the
release of a deferred tax liability balance in Chile, partially offset by the impact of the relative levels of profits
arising in the Group's operating jurisdictions. In future periods, it is expected that the underlying effective tax
rate will remain above the UK statutory tax rate. The tax charge for the year, before special items and
remeasurements, was $1.5 billion (2017: $1.3 billion).
Non-controlling interests
The share of underlying earnings attributable to non-controlling interests of $0.9 billion (2017: $0.8 billion)
principally relates to minority shareholdings in Kumba, Copper and PGMs.
SPECIAL ITEMS AND REMEASUREMENTS
Special items and remeasurements show a net gain of $0.3 billion (2017: net charge of $0.1 billion) and
included impairment reversals of $1.1 billion at Moranbah-Grosvenor and Capcoal (Metallurgical Coal),
partially offset by the write-off of assets in De Beers' South African operations of $0.1 billion following the
decision to close Voorspoed; the write-down to fair value of PGMs' investment in Bafokeng-Rasimone Platinum
Mine of $0.1 billion and a loss on disposal of $0.1 billion relating to Union; as well as losses arising on bond
buybacks completed in the year (Corporate and other) of $0.1 billion.
Full details of the special items and remeasurements recorded are included in note 9 to the Condensed
financial statements.
CASH FLOW
Cash flows from operations
Cash flows from operations decreased to $7.8 billion (2017: $8.4 billion). An increase in underlying EBITDA
from subsidiaries and joint operations was offset by lower working capital movements. In 2017, working capital
movements included operating payable inflows from transactions in PGMs that were not repeated in 2018.
Cash outflows on operating working capital were $30 million (2017: inflows of $879 million), driven mainly by
an increase in inventories at PGMs resulting from refining capacity constraints due to maintenance work on
the processing assets, and at Kumba owing to third-party rail constraints. These were offset by operating
payables inflows across the Group.
Capital expenditure*
Year ended Year ended
$ million 31 December 2018 31 December 2017
Stay-in-business 1,617 1,310
Development and stripping 796 586
Life extension projects(1) 245 216
Proceeds from disposal of property, plant and equipment (162) (52)
Sustaining capital 2,496 2,060
Growth projects(1) 340 168
Total 2,836 2,228
Capitalised operating cash flows (18) (78)
Total capital expenditure 2,818 2,150
(1) Life extension projects and growth projects are collectively referred to as expansionary capital expenditure.
Capital expenditure increased to $2.8 billion (2017: $2.2 billion), with rigorous capital discipline continuing to
be applied to all projects. Sustaining capital increased to $2.5 billion (2017: $2.1 billion), driven by stronger
average local currencies, planned additional stay-in-business expenditure across the Group, in line with our
increased production base, and increased capitalised development and stripping expenditure primarily due to
longwall productivity improvements at Metallurgical Coal and an optimisation of the mine plan at Mogalakwena.
In 2019, we expect total capital expenditure to increase to $3.8-$4.1 billion after utilising the remaining
$0.5 billion of capital expenditure funding for Quellaveco from the Mitsubishi subscription.
Attributable free cash flow*
The Group generated attributable free cash flow of $3.2 billion (2017: $4.9 billion). Cash flows from operations
of $7.8 billion were offset by increased sustaining capital expenditure of $2.5 billion (2017: $2.1 billion), driven
by stronger local currencies, planned additional stay-in-business capital expenditure and increased capitalised
development and stripping expenditure. In addition, there were higher tax payments at Metallurgical Coal and
Copper and an increase in dividend payments to minority shareholders.
Dividends
In line with the Group's established dividend policy to pay out 40% of underlying earnings, the Board has
proposed a dividend of 51 cents per share, equivalent to $660 million, bringing the total dividends paid and
proposed for the year to $1.00 per share (2017: $1.02 per share).
NET DEBT*
$ million 2018 2017
Opening net debt* at 1 January (4,501) (8,487)
Underlying EBITDA* from subsidiaries and joint operations 7,827 7,632
Working capital movements (30) 879
Other cash flows from operations (15) (136)
Cash flows from operations 7,782 8,375
Capital expenditure* (2,818) (2,150)
Cash tax paid (1,393) (843)
Dividends from associates, joint ventures and financial asset investments 738 517
Net interest(1) (315) (355)
Dividends paid to non-controlling interests (837) (601)
Attributable free cash flow* 3,157 4,943
Dividends to Anglo American plc shareholders (1,291) (618)
Disposals 193 52
Foreign exchange and fair value movements (248) 135
Other net debt movements(2) (158) (526)
Total movement in net debt*(3) 1,653 3,986
Closing net debt* at 31 December (2,848) (4,501)
(1) Includes cash outflows of $41 million (2017: inflows of $22 million), relating to interest payments on derivatives hedging net debt, which
are included in cash flows from derivatives related to financing activities.
(2) Principally made up of the purchase of shares for employee share schemes and losses recognised on bond buybacks, offset in 2018
by inflows related to the change in ownership interest in Quellaveco.
(3) Net debt excludes the own credit risk fair value adjustment on derivatives of $15 million (2017: $9 million).
Net debt (including related derivatives) of $2.8 billion decreased by $1.7 billion, representing gearing of 9%
(2017: 13%). Net debt at 31 December 2018 comprised cash and cash equivalents of $6.5 billion
(2017: $7.8 billion) and gross debt, including related derivatives, of $9.4 billion (2017: $12.3 billion). The
reduction in net debt was driven by $3.2 billion of attributable free cash flow, partly offset by the payment of
dividends to Group shareholders in 2018 (dividend payments resumed in the second half of 2017). During the
year, there were inflows of $0.9 billion related to the change in ownership interest in Quellaveco; this inflow is
being used to fund capital expenditure at the project, with $0.5 billion remaining at 31 December 2018.
BALANCE SHEET
Net assets of the Group increased to $29.8 billion (2017: $28.9 billion) as the profit for the year more than
offset the effects of foreign exchange on operating assets denominated in local currency, and dividend
payments to Company shareholders and non-controlling interests. Sustaining capital expenditure of $2.5 billion
was offset by depreciation and amortisation of $2.7 billion.
ATTRIBUTABLE ROCE*
Attributable ROCE was in line with the prior year at 19%. Attributable underlying EBIT was $5.2 billion
(2017: $5.1 billion), reflecting higher prices, improved sales volumes at Metallurgical Coal and Copper and the
continued delivery of cost-efficiency programmes across the Group, offset by inflation and the Minas-Rio
production stoppage. Average attributable capital employed was constant at $27.4 billion owing to capital
expenditure being largely offset by depreciation and amortisation.
LIQUIDITY AND FUNDING
The Group's liquidity remains conservative at $13.9 billion (2017: $16.8 billion), made up of $6.5 billion of cash
(2017: $7.8 billion) and $7.3 billion of undrawn committed facilities (2017: $9.0 billion). The reduction in Group
liquidity, in line with our strategy of lowering the cost of the overall capital structure, was driven primarily by a
continued focus on debt reduction and the refinancing of a number of credit facilities outlined in the transactions
below. These were partially offset by strong positive attributable free cash flow.
In March 2018, the Group completed the repurchase of $1.5 billion (including the cost of unwinding associated
derivatives) of US- and Euro-denominated bonds with maturities from April 2019 to April 2021. The Group also
issued a $0.7 billion 10-year bond in the US bond markets.
In May 2018, the Group completed the repurchase of $0.6 billion (including the cost of unwinding associated
derivatives) of US-denominated bonds with maturities between May 2020 and September 2020.
These transactions, as well as $1.3 billion of bond maturities during 2018, have reduced short term refinancing
requirements, increased the weighted average maturity of outstanding bonds by approximately one year to
5.0 years and reduced gross debt.
In March 2018, the Group replaced a number of credit facilities maturing between March 2019 and March 2020,
with a total value of $5.4 billion, with a $4.5 billion credit facility maturing in March 2023.
PORTFOLIO UPGRADE
In 2018, the Group completed a number of transactions, including the sale of our 88.2% interest in the Drayton
thermal coal mine (on care and maintenance since 2016) and the Drayton South project in Australia. In
South Africa, we completed the sale of the New Largo thermal coal project and the Eskom-tied domestic
thermal coal operations, PGMs' 33% interest in the Bafokeng-Rasimone Platinum Mine associate, as well as
its 11% listed stake in Royal Bafokeng Platinum, its 85% interest in Union mine and 50.1% interest in
Masa Chrome Company.
We also completed the acquisitions of the remaining 50% interest in the Mototolo joint operation in South Africa
from Glencore and Kagiso Platinum Ventures; and in Canada, the Chidliak Diamond Resource (through
De Beers) through the acquisition of Peregrine Diamonds Ltd.
Other transactions
In July 2018, Anglo American Platinum Limited (Platinum) announced that it had subscribed for interests in
two UK-based venture capital funds. Platinum's commitment to the funds is matched by a commitment from
South Africa's Government Employees Pension Fund represented by the Public Investment Corporation SOC
Limited.
Also in July, Anglo American completed a sale and leaseback transaction with M&G Investments with the
intention of redeveloping and relocating the Group's London headquarters to Charterhouse Street.
THE BOARD
In September 2018, Anglo American announced that Sir Philip Hampton and Jack Thompson would step down
from the Board after nine years of service. On 31 December 2018, Sir Philip Hampton stepped down from the
Board as Senior Independent Director and chair of the Remuneration Committee. On 1 January 2019,
Dr Byron Grote, a non-executive director since 2013 and chair of the Audit Committee since 2014, was
appointed as Senior Independent Director. With effect from the same date, Anne Stevens, a non-executive
director since 2012, was appointed as chair of the Remuneration Committee.
With effect from the close of the Annual General Meeting on 30 April 2019, Jack Thompson will step down
from the Board as a non-executive director and chair of the Sustainability Committee. Ian Ashby, a
non-executive director since 2017, will succeed Jack Thompson as chair of the Sustainability Committee on
30 April 2019.
The names of the Directors and the skills and experience our Board members contribute to the long-term
sustainable success of the Anglo American Group are set out in the Annual Report 2018 and on the Group's
website http://www.angloamerican.com/about-us/leadership-team/board
PRINCIPAL RISKS AND UNCERTAINTIES
Anglo American plc is exposed to a variety of risks and uncertainties which may have a financial, operational
or reputational impact on the Group, and which may also have an impact on the achievement of social,
economic and environmental objectives.
The principal risks and uncertainties facing the Group at the 2018 year-end are set out in detail in the strategic
report section of the Annual Report 2018. The principal risks relate to the following:
- Catastrophic risks
- Political and regulatory
- Safety
- Product prices
- Corruption
- Operational performance
- Water
- Cyber security
- Future demand for PGMs
- Future demand for diamonds
The Group is exposed to changes in the economic environment, as with any other business. Details of any
key risks and uncertainties specific to the period are covered in the Operations review section.
The Annual Report 2018 is available on the Group's website http://www.angloamerican.com.
DE BEERS
Financial and operational metrics(1)
Underlying
Production Sales Unit Group Underlying EBITDA Underlying
volume volume Price cost* revenue* EBITDA* margin EBIT* Capex* ROCE*
'000 '000
cts cts(2) $/ct(3) $/ct(4) $m(5) $m $m $m(6)
De Beers 35,297 31,656 171 60 6,082 1,245 20% 694 417 8%
Prior year 33,454 32,455 162 63 5,841 1,435 25% 873 273 9%
Botswana
(Debswana) 24,132 - 155 28 - 495 - 441 97 -
Prior year 22,684 - 159 28 - 484 - 447 86 -
Namibia
(Namdeb Holdings) 2,008 - 550 274 - 176 - 140 38 -
Prior year 1,805 - 539 257 - 176 - 146 33 -
South Africa (DBCM) 4,682 - 109 54 - 163 - 58 177 -
Prior year 5,208 - 129 62 - 267 - 119 114 -
Canada(7) 4,475 - 144 52 - 231 - 78 127 -
Prior year 3,757 - 235 57 - 205 - 58 (5) -
Trading - - - - - 413 - 407 2 -
Prior year - - - - - 449 - 443 1 -
Other(8) - - - - - (233) - (430) (24) -
Prior year - - - - - (146) - (340) 44 -
(1) Prepared on a consolidated accounting basis, except for production, which is stated on a 100% basis except for the Gahcho Kue joint
venture in Canada, which is on an attributable 51% basis.
(2) Consolidated sales volumes exclude pre-commercial production sales volumes from Gahcho Kue. Total sales volumes (100%), which
are comparable to production, were 33.7 million carats (2017: 35.1 million carats). Total sales volumes (100%) include pre-commercial
production sales volumes from Gahcho Kue and De Beers Group's JV partners' 50% proportionate share of sales to entities outside
De Beers Group from Diamond Trading Company Botswana and Namibia Diamond Trading Company.
(3) Pricing for the mining business units is based on 100% selling value post-aggregation of goods. The De Beers realised price includes
the price impact of the sale of non-equity product and, as a result, is not directly comparable to De Beers unit costs, which relate to
equity production only.
(4) Unit cost is based on consolidated production and operating costs, excluding depreciation and operating special items, divided by
carats recovered.
(5) Includes rough diamond sales of $5.4 billion (2017: $5.2 billion).
(6) In 2018, includes the acquisition of Peregrine Diamonds Limited for a consideration of $87 million. In 2017, includes pre-commercial
production capitalised operating cash inflows from Gahcho Kue.
(7) In 2017, price excludes Gahcho Kue contribution from sales related to pre-commercial production, which were capitalised in the first
half of 2017. Unit costs include Gahcho Kue contribution following achievement of commercial production on 2 March 2017.
(8) Other includes Element Six, downstream, acquisition accounting adjustments and corporate.
Financial and operational overview
Total revenue increased by 4% to $6.1 billion (2017: $5.8 billion), with rough diamond sales increasing by 4%
to $5.4 billion (2017: $5.2 billion), driven by improved overall consumer demand for diamond jewellery and a
1% increase in the average rough diamond price index. The average realised price increased by 6% to
$171/carat (2017: $162/carat), reflecting the lower proportion of lower value rough diamonds being sold in the
second half, which resulted in a 2% decrease in consolidated sales volumes to 31.7 million carats
(2017: 32.5 million carats). Other revenue also increased owing to improved 'high end' jewellery sales at
De Beers Jewellers (consolidated for a full year in 2018, compared with nine months in 2017), partly offset by
a 5% decrease in Element Six revenue due to a reduction in sales to the oil and gas market.
Underlying EBITDA decreased by 13% to $1,245 million (2017: $1,435 million). While unit costs and upstream
profit margins were maintained, De Beers undertook incremental expenditure on a number of new initiatives,
including the launch of Lightbox Jewelry (Lightbox), Tracr and Gemfair, as well as increasing
expenditure in marketing, exploration and evaluation in Canada and increasing provisions in respect of closure
obligations. Margins in the trading business were lower owing to volatile market conditions, and the margin at
Element Six decreased as a result of lower sales to the oil and gas market.
Markets
Preliminary data for 2018 indicates an improvement in global consumer demand for diamond jewellery, in
US dollar terms. Global growth during the first half of the year was driven by solid US and Chinese consumer
demand. However, during the second half, while the US maintained its growth rate, increased political and
policy uncertainty and stock exchange volatility led to a general slowdown of demand. Chinese demand also
slowed following the escalation in US-China trade tensions, slower economic growth and stock market
volatility. In India, the significant depreciation of the rupee reduced local demand in US dollar terms.
The midstream started the year on a positive note due to healthy demand for polished diamonds from US and
Chinese retailers. However, in the second half, the low-priced product segment came under considerable
pressure due to weak demand and surplus availability, the rapid depreciation of the rupee and a reduction in
bank financing in the midstream. This resulted in a surplus of low-priced polished diamonds at the end of the
year, leading to lower sales at the start of 2019.
Operational performance
Mining and manufacturing
Rough diamond production increased by 6% to 35.3 million carats (2017: 33.5 million carats), which was in
the lower half of the production guidance range of 35-36 million carats.
In Botswana (Debswana), production increased by 6% to 24.1 million carats (2017: 22.7 million carats).
Production at Jwaneng was flat, as the effect of processing planned lower grades was offset by a 12% increase
in plant throughput. At Orapa, a 13% increase in output was driven by higher plant utilisation and the full effect
of the successful restart of the Damtshaa operation.
In Namibia (Namdeb Holdings), production increased by 11% to 2.0 million carats (2017: 1.8 million carats).
Production from the marine operation increased by 4%, driven by fewer in-port days for the Mafuta crawler
vessel and the adoption of a technology-led approach for optimising the performance of the drill fleet.
Production at the land operations increased by 34% to 0.6 million carats (2017: 0.4 million carats) as a result
of access to consistently higher grades, despite placing Elizabeth Bay onto care and maintenance in
December.
In South Africa (DBCM), production decreased by 10% to 4.7 million carats (2017: 5.2 million carats), owing
to a period of suspended production at Venetia following a fatal incident, as well as lower run-of-mine ore
grades experienced as the mine approaches the end of the open pit. Output was also affected by the placing
of Voorspoed onto care and maintenance in the fourth quarter in preparation for closure.
In Canada, production increased by 19% to 4.5 million carats (2017: 3.8 million carats) due to the full year
contribution from Gahcho Kue, which entered commercial production in March 2017, and higher grades at
Victor. Victor is due to cease production in the first half of 2019, when the open pit is expected to have been
depleted.
Brands
Significant progress was made across the De Beers Group brands in 2018. De Beers Jewellers opened new
stores in Hong Kong and in Xi'an, China, and launched new franchise partnerships in Russia and Saudi Arabia.
In May, De Beers Jewellers also launched a new online store in partnership with Farfetch, a global marketplace
for the luxury industry with a presence in 100 countries.
Forevermark is now available in more than 2,400 retail outlets globally. New launches took place in
Indonesia, Nepal, Bangladesh, Germany and France, as well as the opening of its first stand-alone store in
Africa, in Botswana. In the year the brand celebrated its 10th anniversary, it launched a new retail concept,
Libert'aime, by Forevermark.
De Beers Group launched a number of new initiatives in 2018. Lightbox, a laboratory-grown diamond fashion
jewellery brand, was launched in the US and recorded its first sales in September. Tracr, De Beers Group's
blockchain project, was announced in January 2018. GemFair, an industry-wide pilot programme to create
a secure and transparent route to market for ethically sourced artisanal and small-scale mined (ASM)
diamonds, was launched in April, with the first export of diamonds in December.
Outlook
Although current economic forecasts remain positive, the outlook for 2019 global diamond jewellery consumer
demand faces a number of headwinds, including the risk of a potential intensification of US-China trade
tensions, the Chinese government's ability to rebalance economic growth towards consumption, and further
exchange rate volatility.
Production in 2019 is expected to be in the range of 31-33 million carats, subject to trading conditions. The
lower production is driven by the planned process of exiting from the Venetia open pit, with the underground
operation becoming the principal source of ore from 2023. Associated with this, an increased proportion of
production in 2019 is expected to come from De Beers Group's joint venture partners, a proportion of which
generates a trading margin, which is lower than the mining margin generated from own-mined production.
COPPER
Financial and operational metrics
Underlying
Production Sales Unit Group Underlying EBITDA Underlying
volume volume Price cost* revenue* EBITDA* margin(2) EBIT* Capex* ROCE*
kt kt(1) c/lb(2) c/lb(3) $m(4) $m $m $m
Copper 668 672 283 134 5,168 1,856 48% 1,234 703 22%
Prior year 579 580 290 147 4,233 1,508 41% 923 665 16%
Los Bronces 370 376 - 145 2,175 969 45% 625 217 -
Prior year 308 307 - 169 1,839 737 40% 401 245 -
Collahuasi(5) 246 243 - 105 1,460 960 66% 736 295 -
Prior year 231 232 - 113 1,314 806 61% 594 243 -
Quellaveco(6) - - - - - - - - 131 -
Prior year - - - - - - - - 128 -
Other operations 53 53 - - 1,533 82 26% 28 60 -
Prior year 40 41 - - 1,080 76 16% 39 49 -
Projects and
corporate - - - - - (155) - (155) - -
Prior year - - - - - (111) - (111) - -
(1) Excludes 178 kt third-party sales (2017: 111 kt).
(2) Realised price, excludes impact of third-party sales.
(3) C1 unit cost includes by-product credits.
(4) Revenue is shown after deduction of treatment and refining charges (TC/RCs).
(5) 44% share of Collahuasi production, sales and financials.
(6) Capex is presented on an attributable basis after deducting direct funding from non-controlling interests. FY 2018 capex, on a 100%
basis, was $505 million. $187 million was spent prior to project approval on 26 July, of which the Group funded $131 million and
Mitsubishi funded $56 million. A further $318 million was spent post-approval, of which the Group's 60% share was funded from the
Mitsubishi syndication transaction and hence is not included in reported capex.
Financial and operational overview
Underlying EBITDA increased by 23% to $1,856 million (2017: $1,508 million), driven by higher production
and lower unit costs across all operations. Unit costs decreased by 9% to 134 c/lb (2017: 147 c/lb), the lowest
since 2010, as a result of increased production and continued sustainable cost savings at all operations that
fully offset the impact of inflation. Production increased by 15% to 668,300 tonnes (2017: 579,300 tonnes). At
31 December 2018, 179,100 tonnes of copper were provisionally priced at an average price of 271 c/lb.
Markets
2018 2017
Average market price (c/lb) 296 280
Average realised price (c/lb) 283 290
The differences between market price and realised price are largely a function of the timing of sales across
the year and provisional pricing adjustments.
The average LME cash copper price was 6% higher, though spot prices closed the year 17% lower, despite
falling exchange inventories. Prices weakened notably from mid-year as trade frictions between the US and
China escalated. Furthermore, China's efforts to rein in shadow financing resulted in tighter liquidity, slowing
growth across key copper-consuming sectors. Reflecting such developments, funds generally showed a lack
of risk appetite through the year.
Operational performance
At Los Bronces, production increased by 20% to 369,500 tonnes (2017: 308,300 tonnes) owing to strong mine
and plant performance, as well as planned higher grades (0.76% vs. 2017: 0.71%). C1 unit costs decreased
by 14% to 145 c/lb (2017: 169 c/lb) reflecting the strong operational performance and higher by-product credits
(primarily molybdenum).
At Collahuasi, Anglo American's attributable share of copper production was 246,000 tonnes, an increase of
7% (2017: 230,500 tonnes), representing another record year of copper in concentrate production for the
operation. Production benefited from strong plant performance following the successful completion of planned
major maintenance of Line 3 (responsible for 60% of plant throughput), the installation of 24 new flotation cells
during the first half of the year and planned higher grades (1.29% vs. 2017: 1.25%). C1 unit costs decreased
by 7% to 105 c/lb (2017: 113 c/lb), reflecting the strong production performance, additional stripping credits
and higher by-product credits.
Production at El Soldado increased by 30% to 52,700 tonnes (2017: 40,500 tonnes), owing largely to the
temporary suspension of mine operations during the first half of 2017, which resulted in 6,000 tonnes of lost
output, and planned higher ore grade (0.85% vs. 2017: 0.69%). C1 unit costs decreased by 12% to 206 c/lb
(2017: 233 c/lb).
QUELLAVECO UPDATE
Project approval and syndication
In July 2018, the Board approved the development of the Quellaveco copper project in Peru, with an expected
capital cost of $5.0-$5.3 billion. At the same time, and aligned with the Group's disciplined approach to capital
allocation, agreement was reached with Mitsubishi to increase its interest in Anglo American Quellaveco S.A.
(AAQSA) from 18.1% to 40% via the issuance of new shares. Mitsubishi subscribed $500 million in upfront
consideration and an additional $351 million to fund its initial share of capital expenditure, resulting in a total
cash subscription of $851 million. The Group will receive up to a further $100 million in net payments(1) from
AAQSA conditional on the achievement of certain prescribed throughput rates. As a result of the syndication
transaction, the Group's share of capital expenditure to develop Quellaveco is $2.5-$2.7 billion.
Project update
Project execution is on track, benefiting from early works completed during the feasibility study stage. All major
permits are in place. In line with plan, the diversion of the Asana river was successfully completed in early
December, the first major milestone of the project. Engineering, contracting and procurement are well
advanced, with earthworks also meaningfully progressed. The full complement of accommodation required for
workers will be available during the first half of 2019.
The priority in 2019 is to continue progressing earthworks and start concrete works at the plant site. First
production is due in 2022, with the ramp-up complete in 2023. The project will deliver around 300,000 tonnes
per annum of copper equivalent production on average in the first 10 years of operation.
Total capital expenditure funded by the Group in 2018 was $131 million, representing the Group's attributable
share prior to project approval in July. Post-approval, capital expenditure (on a 100% basis) was $318 million,
of which the Group's 60% share was funded from the syndication transaction with Mitsubishi described above.
Operational outlook
Production guidance for 2019 is 630,000-660,000 tonnes.
(1) The payment, by way of preference dividend, will be grossed up to take account of the Group shareholding in AAQSA.
PLATINUM GROUP METALS
Financial and operational metrics
Production Production Sales Underlying
volume volume volume Basket Unit Group Underlying EBITDA Underlying
platinum palladium platinum price cost* revenue* EBITDA* margin(5) EBIT* Capex* ROCE*
$/Pt
koz(1) koz(1) koz(2) $/Pt oz(3) oz(4) $m $m $m $m
PGMs 2,485 1,611 2,424 2,219 1,561 5,680 1,062 29% 705 496 15%
Prior year 2,397 1,557 2,505 1,966 1,443 5,078 866 26% 512 355 10%
Mogalakwena 495 541 492 2,759 1,398 1,367 623 46% 478 210 -
Prior year 464 509 467 2,590 1,179 1,211 578 48% 448 151 -
Amandelbult 443 205 445 2,222 1,717 996 153 15% 96 74 -
Prior year 438 202 459 1,868 1,596 858 88 10% 34 34 -
Other operations(6) 386 268 367 - - 1,100 132 12% 9 212 -
Prior year 474 297 497 - - 1,125 83 7% (59) 170 -
Purchase of
concentrate(7) 1,161 597 1,120 - - 2,217 218 10% 186 - -
Prior year 1,021 549 1,082 - - 1,884 173 9% 145 - -
Projects and
corporate - - - - - - (64) - (64) - -
Prior year - - - - - - (56) - (56) - -
(1) Production disclosure reflects own-mined production and purchase of metal in concentrate.
(2) Sales volumes exclude the sale of refined metal purchased from third parties.
(3) Average US$ realised basket price. Excludes the impact of the sale of refined metal purchased from third parties.
(4) Total cash operating costs - includes on-mine, smelting and refining costs only.
(5) Underlying EBITDA margins exclude the impact of the sale of refined metal purchased from third parties. In addition, the total PGMs
margin excludes purchase of concentrate.
(6) Includes Unki, Union (prior to disposal), Mototolo (post-acquisition), PGMs' share of joint operations and revenue from trading activities.
(7) Purchase of concentrate from joint operations, associates and third parties for processing into refined metals.
Financial and operational overview
Underlying EBITDA increased by 23% to $1,062 million (2017: $866 million), largely as a result of a
13% increase in the basket price driven by stronger prices for palladium, rhodium, ruthenium and nickel. Unit
costs increased by 8% to $1,561/ounce (2017: $1,443/ounce) due to the impact of inflation and a change in
mine plan at Mogalakwena leading to an increase in waste mined and a reduction in ore stockpiled.
Markets
2018 2017
Average platinum market price ($/oz) 880 950
Average palladium market price ($/oz) 1,029 871
Average rhodium market price ($/oz) 2,214 1,097
Average gold market price ($/oz) 1,269 1,258
US$ realised basket price ($/Pt oz) 2,219 1,966
Rand realised basket price (R/Pt oz) 29,601 26,213
Strong prices for palladium, rhodium and the minor platinum group metals outweighed a 7% decline in the
platinum price during 2018, with the basket price climbing by 13% in dollar terms as a result. The platinum
price was driven lower, primarily by a decline in the share of diesel engines in the European car sector. Despite
disappointing global car sales, tighter global emissions regulation supported the prices of palladium and
rhodium, with their average price for the year increasing by 18% and 102% respectively.
Operational performance
Total platinum production (metal in concentrate) increased by 4% to 2,484,700 ounces
(2017: 2,397,400 ounces), while total palladium output was 3% higher at 1,610,800 ounces
(2017: 1,557,400 ounces).
Own-mined production
Own-mined production is inclusive of ounces from Mogalakwena, Amandelbult, Unki, Union (prior to its
disposal on 1 February 2018), and 50% of joint operation production, with 100% of Mototolo from
1 November 2018, following the completion of the acquisition of the remaining 50% on this date.
Own-mined platinum production decreased by 4% to 1,323,600 ounces (2017: 1,376,200 ounces), while
palladium production increased marginally to 1,013,500 ounces (2017: 1,008,700). Excluding Union,
own-mined platinum production increased by 7% to 1,312,000 ounces (2017: 1,221,700) and palladium
production increased by 8% to 1,008,300 ounces (2017: 937,300) on the back of a strong operational
performance across the portfolio.
Mogalakwena's platinum production increased by 7% to 495,100 ounces (2017: 463,800 ounces), and
palladium production increased by 6% to 540,900 ounces (2017: 508,900 ounces) through mining a higher
grade area as planned, as well as optimisation of the primary mill at the North concentrator plant which led to
improved throughput and metal recovery.
At Amandelbult, platinum production increased by 1% to 442,700 ounces (2017: 438,000 ounces), and
palladium output by 1% to 205,100 ounces (2017: 202,500 ounces) as increased underground production was
delivered to the concentrator, primarily from Dishaba's underground operations. Dishaba mine development
work led to a 7% increase in immediately stope-able reserves.
Platinum production from other operations decreased by 19% to 385,800 ounces (2017: 474,400 ounces) and
palladium production by 10% to 267,600 ounces (2017: 297,300 ounces), driven by the sale of Union mine to
Siyanda Resources (Siyanda) on 1 February 2018, from which date Union production was purchased as
concentrate. Excluding Union, platinum production from other operations increased by 17%, driven by PGMs'
share of platinum production from joint operations increasing by 10% to 270,800 ounces
(2017: 245,300 ounces) and its share of palladium production increasing by 9% to 176,000 ounces
(2017: 161,500 ounces), as well as the acquisition of the remaining 50% of Mototolo on 1 November 2018.
Purchase of concentrate
Purchase of concentrate increased by 14% and 9% for platinum and palladium respectively. The inclusion of
concentrate from Union following the sale to Siyanda was partly offset by the removal of unprofitable ounces
following the closure of Bokoni, which was placed onto care and maintenance in 2017.
Refined production
Refined platinum production decreased by 4% to 2,402,400 ounces (2017: 2,511,900 ounces), while refined
palladium output decreased by 10% to 1,501,800 ounces (2017: 1,668,500 ounces). The reduction was
primarily attributable to the planned rebuild of Mortimer smelter in the second quarter of 2018; the partial
rebuild at Polokwane smelter which was completed during the second half of the year; commissioning of the
Unki smelter in the third quarter; and maintenance work on other processing assets, which collectively resulted
in a build-up of work-in-progress inventory. Furthermore, 2017 refined production included 130,000 platinum
ounces (and associated PGMs) that were toll-refined by a third party following the Waterval Furnace 1 run-out
in 2016. It is expected that the build-up of work-in-progress inventory will be processed in full during 2019.
Sales volumes
Platinum sales volumes, excluding refined metals purchased from third parties, decreased by 3% to
2,424,200 ounces (2017: 2,504,600 ounces), while palladium sales decreased by 4% to 1,513,100 ounces
(2017: 1,571,700 ounces). The overall decrease resulted from lower refined production, compensated in part
by a drawdown in refined platinum inventory levels. In comparison, there were high sales volumes in 2017
owing to the refining of the backlog of material from the Waterval smelter run-out in the fourth quarter of 2016.
Trading activities generated further sales volumes of 94,000 platinum ounces and 124,500 palladium ounces.
Operational outlook
From 1 January 2019, Sibanye 4E(1) material is no longer purchased as concentrate, but toll-treated, with the
refined metal returned to Sibanye. As a result, platinum production (metal in concentrate) for 2019 is expected
to be lower than for 2018 at 2.0-2.1 million ounces. Palladium production (metal in concentrate) for 2019 is
expected to be 1.3-1.4 million ounces.
(1) Platinum, palladium, rhodium and gold.
IRON ORE
Financial and operational metrics
Underlying
Production Sales Unit Group Underlying EBITDA Underlying
volume volume Price cost* revenue* EBITDA* margin EBIT* Capex* ROCE*
Mt(1) Mt $/t(2) $/t(3) $m $m $m $m
Iron Ore - - - - 3,768 1,177 31% 747 415 3%
Prior year - - - - 4,891 1,828 37% 1,500 252 15%
Kumba Iron
Ore 43.1 43.3 72 32 3,440 1,544 45% 1,213 309 42%
Prior year 45.0 44.9 71 31 3,486 1,474 42% 1,246 229 47%
Iron Ore
Brazil 3.4 3.2 70 - 328 (272) - (371) 106 (9)%
(Minas-Rio)
Prior year 16.8 16.5 65 30 1,405 435 31% 335 23 6%
Projects and
corporate - - - - - (95) - (95) - -
Prior year - - - - - (81) - (81) - -
(1) Minas-Rio production is Mt (wet basis).
(2) Prices for Kumba Iron Ore are the average realised export basket price (FOB Saldanha). Prices for Minas-Rio are the average realised
export basket price (FOB Acu) (wet basis).
(3) Unit costs for Kumba Iron Ore are on an FOB dry basis. Unit costs for Minas-Rio are not disclosed for 2018, due to the suspension of
operations; 2017 unit costs are on an FOB wet basis.
Financial and operational overview
Kumba
Underlying EBITDA increased by 5% to $1,544 million (2017: $1,474 million), mainly driven by a $1/tonne
increase in the average realised iron ore price, partly offset by a 4% decrease in export sales volumes and a
3% increase in FOB unit costs. The increase in unit costs was driven by lower production, higher strip ratios
and higher fuel costs, largely offset by operational efficiencies and cost-saving initiatives.
Sales volumes decreased by 4% to 43.3 Mt (2017: 44.9 Mt) owing to the impact of third-party rail constraints
and single loading of vessels resulting from the scheduled refurbishment of the shiploader by Transnet at
Saldanha Port in the second half of 2018. Consequently, total finished stock held at the mines and port
increased to 5.3 Mt (2017: 4.3 Mt).
Minas-Rio
Minas-Rio recorded an underlying EBITDA loss of $272 million (2017: $435 million gain), reflecting the
suspension of operations from March 2018, following the two leaks in the 529 kilometre iron ore pipeline from
the mine to the Port of Acu.
Markets
2018 2017
Average market price (IODEX 62% Fe CFR China - $/tonne) 69 71
Average market price (MB 66% Fe Concentrate CFR - $/tonne) 95 87
Average realised price (Kumba export - $/tonne) (FOB Saldanha) 72 71
Average realised price (Minas-Rio - $/tonne) (FOB wet basis) 70 65
Kumba's outperformance over the IODEX (Platts) 62% Fe CFR China index was primarily due to the higher
iron (Fe) content and the relatively high proportion (approximately 68%) of lump in the overall product portfolio.
Minas-Rio also produces higher grade products (higher iron content and lower gangue) than the reference
product used for the IODEX 62% Fe CFR China index. IODEX 62% is referred to for comparison purposes only.
Operational performance
Kumba
Total production decreased by 4% to 43.1 Mt (2017: 45.0 Mt), in response to higher stock levels arising from
Transnet's rail constraints. Production volumes were also affected by a small decrease in processing plant
yields as Kumba focused on producing high quality products to maximise the value of tonnes railed to port and
benefit from the strong demand for premium, high grade ore.
In line with its strategy, production at Sishen reduced by 6% to 29.2 Mt (2017: 31.1 Mt), while output at
Kolomela remained constant at 13.9 Mt. Waste stripping at Sishen increased by 13% to 182.1 Mt
(2017: 161.7 Mt), with continued improvements in efficiencies through increased primary mining equipment
productivity. Consistent production performance at Kolomela led to a 1% increase in waste stripping to
56.0 Mt (2017: 55.6 Mt).
Minas-Rio
Production decreased by 80% to 3.4 Mt (2017: 16.8 Mt) following the suspension of operations since March
2018. The resumption of the operations occurred following the receipt of the appropriate regulatory approvals
on 20 December, and an extensive and detailed technical inspection and the precautionary replacement of
certain sections of the pipeline.
Operational outlook
Kumba
Kumba's production guidance for 2019 is 43-44 Mt, with waste movement for Sishen and Kolomela expected
to be 170-180 Mt and 55-60 Mt, respectively.
Minas-Rio
A key regulatory approval relating to the Minas-Rio Step 3 licence area was granted on 21 December 2018,
providing greater operational flexibility and access to higher grade iron ore to support the increase of
production towards the full design capacity of 26.5 Mtpa. As a result, 2019 production guidance for Minas-Rio
was increased to 18-20 Mt (previously 16-19 Mt). In addition, 2019 unit cost guidance was reduced to
$28-31/tonne (previously $30-33/tonne). Construction is under way for the next tailings dam lift and we expect
to be ready for the normal process of conversion of the installation licence to an operating licence in the second
quarter of 2019.
Legal
Sishen consolidated mining right granted
Sishen's application to extend the mining right area to include the Dingleton properties through the inclusion
of the adjacent Prospecting Rights was granted on 25 June 2017 and notarially executed on 29 June 2018.
The grant allows Sishen mine to expand its current mining operations within the adjacent Dingleton area.
Kolomela consolidated mining right granted
The Section 102 application to amend the Kolomela mining right and the mining work programme to include
Heuningkranz and portion 1 of Langverwacht was granted on 14 October 2018. The environmental
authorisation was approved on 7 November 2018. The grant allows Kolomela mine to expand its current mining
operations within the adjacent Heuningkranz area.
The transfer of Thabazimbi to ArcelorMittal SA
Sishen Iron Ore Company Proprietary Limited (SIOC) and ArcelorMittal SA entered into an agreement in 2016
to transfer Thabazimbi mine to ArcelorMittal SA, subject to the fulfilment of certain conditions precedent. On
12 October 2018, Kumba and ArcelorMittal South Africa announced that all the conditions precedent to the
transfer of Thabazimbi mine, together with the mining rights, had either been fulfilled or waived. The
employees, assets and liabilities, as well as the mining rights and the assumed liabilities of the mine, were
transferred at a nominal purchase consideration from SIOC to Thabazimbi Iron Ore Mine (Pty) Ltd, a
wholly-owned subsidiary of ArcelorMittal South Africa, previously ArcelorMittal South Africa Operations (Pty)
Ltd, on 1 November 2018.
COAL
Financial and operational metrics
Underlying
Production Sales Unit Group Underlying EBITDA Underlying
volume volume Price cost* revenue* EBITDA* margin(5) EBIT* Capex* ROCE*
Mt(1) Mt(2) $/t(3) $/t(4) $m $m $m $m
Coal 50.4 50.4 - - 7,788 3,196 46% 2,538 722 67%
Prior year 48.9 49.0 - - 7,211 2,868 46% 2,274 568 67%
Metallurgical Coal 21.8 22.0 190 64 4,231 2,210 52% 1,774 574 80%
Prior year 19.7 19.8 185 61 3,675 1,977 54% 1,594 416 86%
Thermal Coal -
South Africa 18.4 18.3 87 44 2,719 695 37% 566 148 68%
Prior year 18.6 18.6 76 44 2,746 588 32% 466 152 54%
Thermal Coal -
Colombia 10.2 10.1 83 36 838 388 46% 295 - 35%
Prior year 10.6 10.6 75 31 790 385 49% 296 - 35%
Projects and
corporate - - - - - (97) - (97) - -
Prior year - - - - - (82) - (82) - -
(1) Production volumes are saleable tonnes. South African production volumes include export primary production, secondary production
sold into export markets and production sold domestically at export parity pricing and excludes Eskom-tied operations production of
2.8 Mt (2017: 23.9 Mt) and other domestic production of 10.9 Mt (2017: 7.5 Mt). Metallurgical Coal production volumes exclude thermal
coal production of 1.4 Mt (2017: 1.6 Mt).
(2) South African sales volumes include export primary production, secondary production sold into export markets and production sold
domestically at export parity pricing and exclude domestic sales of 10.3 Mt (2017: 8.2 Mt), Eskom-tied operations sales of 2.8 Mt
(2017: 23.9 Mt) and non-equity traded sales of 9.5 Mt (2017: 7.6 Mt). Metallurgical Coal sales volumes exclude thermal coal sales of
1.6 Mt (2017: 1.8 Mt).
(3) Metallurgical Coal realised price is the weighted average hard coking coal and PCI sales price achieved. Thermal Coal - South Africa
realised price is the weighted average export thermal coal price achieved. Excludes third-party sales.
(4) FOB cost per saleable tonne, excluding royalties. Metallurgical Coal excludes study costs. Thermal Coal - South Africa unit cost is for
the trade operations.
(5) Excludes impact of third-party sales and Eskom-tied operations.
Financial and operational overview
Metallurgical Coal
Underlying EBITDA increased by 12% to $2,210 million (2017: $1,977 million), owing to an 11% increase in
sales volumes and a 3% improvement in the realised price for metallurgical coal. US dollar unit costs increased
by 5% to $64/tonne (2017: $61/tonne), as a result of establishing new mining areas to achieve further
productivity improvements, the impact of additional longwall moves and cost inflation.
Thermal Coal - South Africa
Underlying EBITDA increased by 18% to $695 million (2017: $588 million), driven by a 14% increase in the
realised export thermal coal price. Export sales decreased by 2% to 18.3 Mt (2017: 18.6 Mt), while domestic
sales increased by 26% to 10.3 Mt (2017: 8.2 Mt). US dollar unit costs for the export trade were in line with
the prior year at $44/tonne as productivity improvements and cost savings offset the 8% inflation impact.
The sale of the Eskom-tied domestic thermal coal operations, comprising New Vaal, New Denmark, and Kriel
collieries, as well as four closed collieries, to Seriti Resources was completed on 1 March 2018. Production
from these assets, until the date of completion, was 2.8 Mt.
Thermal Coal - Colombia
Underlying EBITDA increased marginally to $388 million (2017: $385 million), with an 11% increase in prices
offsetting lower volumes arising from permitting delays and weather impacts in the fourth quarter.
Markets
Metallurgical coal
2018 2017
Average market price for premium low-volatile hard coking coal ($/tonne)(1) 207 188
Average market price for premium low-volatile PCI ($/tonne)(1) 136 119
Average realised price for premium low-volatile hard coking coal ($/tonne) 194 187
Average realised price for PCI ($/tonne) 128 125
(1) Represents average spot prices.
Average realised prices differ from the average market price owing to differences in material grade and timing
of contracts.
Market prices in 2018 were supported by strong steelmaking margins globally and a number of supply
disruptions in Australia.
Thermal coal
2018 2017
Average market price ($/tonne, FOB Australia) 107 89
Average market price ($/tonne, FOB South Africa) 98 84
Average market price ($/tonne, FOB Colombia) 85 78
Average realised price - Export Australia ($/tonne, FOB) 103 91
Average realised price - Export South Africa ($/tonne, FOB) 87 76
Average realised price - Domestic South Africa ($/tonne) 19 21
Average realised price - Colombia ($/tonne, FOB) 83 75
The average realised price for export thermal coal was 89% of the average market price due to timing and
quality differences relative to the industry benchmark. The difference in the realised price compared with the
market price, between 2017 and 2018, reflects a changing quality mix owing to a higher proportion of
secondary products being sold into the export market.
Solid demand from South Korea and Japan underpinned the prices for higher energy coals in the Pacific
region. Various supply issues in Australia also affected the availability of these higher energy coals. Chinese
import demand decreased in the second half of the year as domestic stocks were rebuilt and a rebound in
supply from Indonesia and South Africa increased the discounts for lower energy material.
Operational performance
Metallurgical Coal
Total production increased by 11% to 21.8 Mt, largely driven by higher production from the underground
longwall operations which increased by 15% to 14.2 Mt (2017: 12.3 Mt). The increase was driven by sustained
strong performance at Moranbah, which improved on its previous record and produced 6.8 Mt; and Grosvenor,
which increased output to 3.8 Mt. Grasstree's production decreased by 25% to 3.6 Mt, marginally above
planned volumes, as the operation moved into more challenging areas of the mine as it nears its end of life
and undertook an additional longwall move in the year.
Thermal Coal - South Africa
Export production decreased by 1% to 18.4 Mt (2017: 18.6 Mt) as operations continued to transition between
mining areas. Total production from the Export mines increased by 12% to 24.6 Mt (2017: 22.0 Mt), driven by
productivity-led growth from the underground operations. Total output benefited as market prices allowed the
processing of mineral residue deposits (MRD), which generates earnings and avoids capital expenditure for
the MRD expansions, as well as helping to mitigate future rehabilitation costs. MRD production can be sold
either into the domestic or export markets.
Thermal Coal - Colombia
Anglo American's attributable production from its 33.3% ownership of Cerrejon decreased by 4% to 10.2 Mt
(2017: 10.6 Mt).
Operational outlook
Metallurgical coal
Full year 2019 production guidance for metallurgical coal is 22-24 Mt.
Export thermal coal
Full year 2019 production guidance for export thermal coal is 26-28 Mt.
NICKEL AND MANGANESE
Financial and operational metrics
Underlying
Production Sales Unit Group Underlying EBITDA Underlying
volume volume Price cost* revenue* EBITDA* margin EBIT* Capex* ROCE*
t(1) t(1) c/lb(2) c/lb(3) $m $m(3) $m(4) $m
Nickel and
Manganese - - - - 1,707 844 49% 685 38 28%
Prior year - - - - 1,391 610 44% 478 28 20%
Nickel 42,300 43,100 588 361 560 181 32% 75 38 4%
Prior year 43,800 43,000 476 365 451 81 18% 0 28 0%
Samancor(5) 3.8 3.7 - - 1,147 663 58% 610 - 159%
Prior year 3.6 3.6 - - 940 529 56% 478 - 115%
(1) Nickel production and sales are tonnes (t). Samancor production and sales are million tonnes (Mt).
(2) Realised price
(3) C1 unit cost.
(4) Nickel segment includes $8 million projects and corporate costs (2017: $8 million).
(5) Production, sales and financials include ore and alloy.
Financial and operational overview
Nickel
Underlying EBITDA increased by 123% to $181 million (2017: $81 million), primarily reflecting the higher nickel
price.
Nickel unit costs decreased by 1% to 361 c/lb (2017: 365 c/lb), despite lower production, driven by improved
operational stability and the effect of favourable exchange rates, partly offset by higher energy prices.
Samancor
Underlying EBITDA increased by 25% to $663 million (2017: $529 million), driven mainly by the continued
improvement in manganese ore prices.
Markets
Nickel
2018 2017
Average market price (c/lb) 595 472
Average realised price (c/lb) 588 476
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. Differences between market prices and realised prices are largely due to variances
between the LME and the ferronickel price.
The nickel price increased by 26% to an average of 595 c/lb in 2018, with strong demand growth maintaining
the market deficit. In the second half of the year, however, prices came under pressure from macro-economic
worries, including heightening trade war concerns. Stainless steel production (around 70% of nickel demand)
increased to record levels in 2018, while nickel consumption in batteries increased by more than 30%, as
demand for zero emission vehicles and lithium-ion based energy storage continued to accelerate.
Samancor
The average 2018 benchmark manganese ore price (Metal Bulletin 44% manganese ore CIF China) increased
by 23% to $7.24/dmtu (2017: $5.91/dmtu) due to continuing strong demand from China's steel manufacturing
sector.
Operational performance
Nickel
Nickel output decreased by 3% to 42,300 tonnes (2017: 43,800 tonnes) owing to a 40-day planned
maintenance stoppage at Barro Alto in the first half of 2018. Barro Alto produced 33,500 tonnes
(2017: 34,900 tonnes), while Codemin produced 8,800 tonnes (2017: 8,900 tonnes).
Samancor
Attributable manganese ore production increased by 3% to 3.6 Mt (2017: 3.5 Mt). Production from the
Australian operations increased by 10% due to improved concentrator availability, the effect of more favourable
weather conditions and increased premium concentrate ore (PC02) production. Ore production from the
South African operations decreased by 6% as an increase in higher quality premium material was more than
offset by a decline in fine grained secondary products.
Attributable production of manganese alloys increased by 5% to 157,000 tonnes (2017: 149,000 tonnes),
mainly as a result of improved furnace stability at the Australian operations for the majority of the year. In
South Africa, manganese alloy production improved by 6% while continuing to utilise only one of the
operation's four furnaces.
Operational outlook
Nickel
Production guidance for 2019 is 42,000-44,000 tonnes.
CORPORATE AND OTHER
Financial metrics
Group Underlying Underlying
revenue* EBITDA* EBIT* Capex*
$m $m $m $m
Segment 3 (219) (226) 27
Prior year 5 (292) (313) 9
Exploration - (113) (113) -
Prior year - (103) (103) -
Corporate activities and
unallocated costs 3 (106) (113) 27
Prior year 5 (189) (210) 9
Financial overview
Corporate and other reported an underlying EBITDA loss of $219 million (2017: $292 million loss).
Exploration
Exploration's underlying EBITDA loss increased to $113 million (2017: $103 million loss), reflecting increased
exploration activities across most product groups, but predominantly in diamonds.
Corporate activities and unallocated costs
Underlying EBITDA amounted to a $106 million loss (2017: $189 million loss), driven primarily by a
year-on-year gain recognised in the Group's self-insurance entity, reflecting lower net claims and settlements
during 2018, as well as higher premium income.
For further information, please contact:
Media Investors
UK UK
James Wyatt-Tilby Paul Galloway
james.wyatt-tilby@angloamerican.com paul.galloway@angloamerican.com
Tel: +44 (0)20 7968 8759 Tel: +44 (0)20 7968 8718
Marcelo Esquivel Robert Greenberg
marcelo.esquivel@angloamerican.com robert.greenberg@angloamerican.com
Tel: +44 (0)20 7968 8891 Tel: +44 (0)20 7968 2124
South Africa Emma Waterworth
Pranill Ramchander emma.waterworth@angloamerican.com
pranill.ramchander@angloamerican.com Tel: +44 (0)20 7968 8574
Tel: +27 (0)11 638 2592
Ann Farndell
ann.farndell@angloamerican.com
Tel: +27 (0)11 638 2786
Notes to editors:
Anglo American is a global diversified mining business and our products are the essential ingredients in almost every aspect of modern life. Our portfolio of
world-class competitive mining operations and undeveloped resources provides the metals and minerals to meet the growing consumer-driven demands of the
world's developed and maturing economies. With our people at the heart of our business, we use innovative practices and the latest technologies to discover
new resources and mine, process, move and market our products to our customers around the world.
As a responsible miner - of diamonds (through De Beers), copper, platinum and other precious metals, iron ore, coal and nickel - we are the custodians of
what are precious natural resources. We work together with our key partners and stakeholders to unlock the sustainable value that those resources represent
for our shareholders, the communities and countries in which we operate and for society at large. Anglo American is re-imagining mining to improve people's
lives.
http://www.angloamerican.com
Webcast of presentation:
A live webcast of the results presentation, starting at 9.00am UK time on 21 February 2019, can be accessed through the Anglo American website at
http://www.angloamerican.com
Note: Throughout this results announcement, '$' denotes United States dollars and 'cents' refers to United States cents. Tonnes are metric tons, 'Mt' denotes
million tonnes and 'kt' denotes thousand tonnes, unless otherwise stated.
Forward-looking statements:
This announcement includes forward-looking statements. All statements other than statements of historical facts included in this announcement, including,
without limitation, those regarding Anglo American's financial position, business, acquisition and divestment strategy, dividend policy, plans and objectives of
management for future operations (including development plans and objectives relating to Anglo American's products, production forecasts and Ore Reserves
and Mineral Resource estimates), are forward-looking statements. By their nature, 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 availability of transportation infrastructure, 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 permitting and 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 announcement. 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 Conduct Authority, the Listings Requirements of the securities exchange of the JSE Limited in
South Africa, the SIX 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 announcement 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 announcement is sourced from publicly available third-party sources. As such,
it has not been independently verified and presents the views of those third parties, though these may not necessarily correspond to the views held by Anglo
American and Anglo American expressly disclaims any responsibility for, or liability in respect of, such third-party information.
Anglo American plc
20 Carlton House Terrace London SW1Y 5AN United Kingdom
Registered office as above. Incorporated in England and Wales under the Companies Act 1985.
Registered Number: 3564138 Legal Entity Identifier: 549300S9XF92D1X8ME43
CONDENSED FINANCIAL STATEMENTS
for the year ended 31 December 2018
Consolidated income statement
for the year ended 31 December 2018
2018 2017
Before Special Before Special
special items and special items and
items and remeasure- items and remeasure-
remeasure- ments remeasure- ments
US$ million Note ments (note 9) Total ments (note 9) Total
Revenue 3 27,610 - 27,610 26,243 - 26,243
Operating costs (22,379) 838 (21,541) (21,001) 287 (20,714)
Operating profit 3 5,231 838 6,069 5,242 287 5,529
Non-operating special items 9 - (94) (94) - (5) (5)
Net income from associates and joint ventures 3 739 (11) 728 577 (10) 567
Profit before net finance costs and tax 5,970 733 6,703 5,819 272 6,091
Investment income 261 - 261 268 - 268
Interest expense (655) (102) (757) (694) (99) (793)
Other net financing losses 14 (32) (18) (47) (14) (61)
Net finance costs 5 (380) (134) (514) (473) (113) (586)
Profit before tax 5,590 599 6,189 5,346 159 5,505
Income tax expense 6 (1,490) (326) (1,816) (1,324) (122) (1,446)
Profit for the financial year 4,100 273 4,373 4,022 37 4,059
Attributable to:
Non-controlling interests 863 (39) 824 750 143 893
Equity shareholders of the Company 3,237 312 3,549 3,272 (106) 3,166
Earnings per share (US$)
Basic 4 2.55 0.25 2.80 2.57 (0.09) 2.48
Diluted 4 2.50 0.24 2.74 2.53 (0.08) 2.45
Consolidated statement of comprehensive income
for the year ended 31 December 2018
US$ million 2018 2017
Profit for the financial year 4,373 4,059
Items that will not be reclassified to the income statement (net of tax)
Remeasurement of net retirement benefit obligation 105 204
Net revaluation loss on equity investments (42) -
Items that have been or may subsequently be reclassified to the income statement (net of tax)
Net exchange differences:
Net (loss)/gain (including associates and joint ventures) (2,211) 1,725
Cumulative loss/(gain) transferred to the income statement on disposal of foreign operations 35 (81)
Revaluation of available for sale investments:
Net revaluation gain - 23
Cumulative revaluation gain transferred to the income statement on disposal - (43)
Revaluation of cash flow hedges:
Share of associates' and joint ventures' other comprehensive income - (1)
Other comprehensive (loss)/income for the financial year (net of tax) (2,113) 1,827
Total comprehensive income for the financial year (net of tax) 2,260 5,886
Attributable to:
Non-controlling interests 422 1,240
Equity shareholders of the Company 1,838 4,646
Consolidated balance sheet
as at 31 December 2018
US$ million Note 2018 2017
ASSETS
Non-current assets
Intangible assets 3,087 3,323
Property, plant and equipment 30,898 30,643
Environmental rehabilitation trusts 303 421
Investments in associates and joint ventures 1,715 1,956
Financial asset investments 396 561
Trade and other receivables 708 937
Deferred tax assets 910 1,191
Derivative financial assets 209 309
Other non-current assets 658 487
Total non-current assets 38,884 39,828
Current assets
Inventories 4,466 4,441
Trade and other receivables 2,026 2,136
Current tax assets 121 146
Derivative financial assets 132 81
Cash and cash equivalents 13 6,567 7,800
Total current assets 13,312 14,604
Assets classified as held for sale 17 - 129
Total assets 52,196 54,561
LIABILITIES
Current liabilities
Trade and other payables (4,734) (4,501)
Short term borrowings 13, 14 (600) (1,351)
Provisions for liabilities and charges (581) (562)
Current tax liabilities (818) (601)
Derivative financial liabilities (103) (336)
Total current liabilities (6,836) (7,351)
Non-current liabilities
Trade and other payables (145) (89)
Medium and long term borrowings 13, 14 (8,371) (10,620)
Retirement benefit obligations (609) (695)
Deferred tax liabilities (3,676) (4,188)
Derivative financial liabilities (613) (460)
Provisions for liabilities and charges (2,114) (2,235)
Total non-current liabilities (15,528) (18,287)
Liabilities directly associated with assets classified as held for sale 17 - (41)
Total liabilities (22,364) (25,679)
Net assets 29,832 28,882
EQUITY
Called-up share capital 772 772
Share premium account 4,358 4,358
Own shares (6,315) (6,191)
Other reserves (10,519) (8,702)
Retained earnings 35,302 32,735
Equity attributable to equity shareholders of the Company 23,598 22,972
Non-controlling interests 6,234 5,910
Total equity 29,832 28,882
The Condensed financial statements of Anglo American plc, registered number 03564138, were approved by the
Board of directors on 20 February 2019 and signed on its behalf by:
Mark Cutifani Stephen Pearce
Chief Executive Finance Director
Consolidated cash flow statement
for the year ended 31 December 2018
US$ million Note 2018 2017
Cash flows from operating activities
Profit before tax 6,189 5,505
Net finance costs including financing special items and remeasurements 514 586
Net income from associates and joint ventures (728) (567)
Non-operating special items 9 94 5
Operating profit 6,069 5,529
Operating special items and remeasurements 9 (838) (287)
Cash element of special items (3) (102)
Depreciation and amortisation 2,596 2,390
Share-based payment charges 183 180
Increase/(decrease) in provisions and net retirement benefit obligations 58 (311)
Increase in inventories (526) (294)
(Increase)/decrease in operating receivables (74) 23
Increase in operating payables 570 1,150
Other adjustments (253) 97
Cash flows from operations 7,782 8,375
Dividends from associates and joint ventures 737 506
Dividends from financial asset investments 1 11
Income tax paid (1,393) (843)
Net cash inflows from operating activities 7,127 8,049
Cash flows from investing activities
Expenditure on property, plant and equipment 11 (3,400) (2,278)
Cash flows from derivatives related to capital expenditure 11 15 40
Proceeds from disposal of property, plant and equipment 11 162 52
Investments in associates and joint ventures (99) (86)
Purchase of financial asset investments (3) (6)
Net (issuance)/redemption of financial asset loans and receivables (22) 168
Interest received and other investment income 204 165
Net cash outflow on acquisitions 18 (90) -
Net cash inflow on disposals 18 193 52
Other investing activities (58) (54)
Net cash used in investing activities (3,098) (1,947)
Cash flows from financing activities
Interest paid (478) (542)
Cash flows from derivatives related to financing activities 13 (250) (419)
Dividends paid to Company shareholders (1,291) (618)
Dividends paid to non-controlling interests (837) (601)
Proceeds from issuance of bonds 647 2,998
Proceeds from other borrowings 117 35
Repayments of bonds and borrowings (3,507) (5,189)
Net proceeds from issue of shares to non-controlling interests 875 36
Purchase of shares by Group companies for employee share schemes (293) (242)
Other financing activities 40 (11)
Net cash used in financing activities (4,977) (4,553)
Net (decrease)/increase in cash and cash equivalents (948) 1,549
Cash and cash equivalents at start of year 13 7,792 6,044
Cash movements in the year (948) 1,549
Effects of changes in foreign exchange rates (296) 199
Cash and cash equivalents at end of year 13 6,548 7,792
Consolidated statement of changes in equity
for the year ended 31 December 2018
Total equity
attributable
Cumulative to equity
Total translation shareholders Non-
share Own Retained adjustment Other of the controlling Total
US$ million capital(1) shares(2) earnings reserve reserves(3) Company interests equity
At 1 January 2017 5,130 (6,090) 29,976 (10,851) 851 19,016 5,309 24,325
Total comprehensive income/(loss) - - 3,351 1,577 (282) 4,646 1,240 5,886
Dividends - - (618) - - (618) (672) (1,290)
Issue of shares to non-controlling interests - - - - - - 36 36
Equity settled share-based payment schemes - (101) 26 - 6 (69) (3) (72)
Other - - - - (3) (3) - (3)
At 31 December 2017 5,130 (6,191) 32,735 (9,274) 572 22,972 5,910 28,882
Total comprehensive income/(loss) - - 3,657 (1,782) (37) 1,838 422 2,260
Dividends - - (1,291) - - (1,291) (873) (2,164)
Issue of shares to non-controlling interests - - - - - - 38 38
Equity settled share-based payment schemes - (124) 43 - (9) (90) (6) (96)
Change in ownership interest in subsidiaries - - 163 - - 163 674 837
Other - - (5) - 11 6 69 75
At 31 December 2018 5,130 (6,315) 35,302 (11,056) 537 23,598 6,234 29,832
(1) Includes share capital and share premium.
(2) Own shares comprise shares of Anglo American plc held by the Company (treasury shares), its subsidiaries and employee benefit trusts.
(3) Includes the share-based payment reserve, financial asset revaluation reserve, cash flow hedge reserve, capital redemption reserve and legal reserve.
Notes to the Condensed financial statements
1. BASIS OF PREPARATION
The Condensed financial statements for the year ended 31 December 2018 do not constitute statutory accounts
as defined in section 435 (1) and (2) of the Companies Act 2006. Statutory accounts for the year ended
31 December 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following
the Company's Annual General Meeting convened for 30 April 2019. The auditors have reported on these accounts;
their reports were unqualified, did not include a reference to any matters to which the auditors drew attention by way
of emphasis of matter and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Whilst the preliminary announcement (the Condensed financial statements) has been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) interpretations
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 United Kingdom Listing Authority (UKLA) Listing Rules, these
Condensed financial statements do not contain sufficient information to comply with IFRS. The Group will publish full
financial statements that comply with IFRS in March 2019.
Going concern
The financial position of the Group, its cash flows, liquidity position and borrowing facilities are set out in the Financial
review of Group results for the year ended 31 December 2018 is above. The Group's net debt (including
related hedges) at 31 December 2018 was $2.8 billion (31 December 2017: $4.5 billion) representing a gearing level
of 9% (31 December 2017: 13%). Further analysis of net debt is set out in note 13 and details of borrowings and
facilities are set out in note 14.
The directors have considered the Group's cash flow forecasts for the period to the end of 31 March 2020. The Board
is satisfied that the Group's forecasts and projections, taking into account reasonably possible changes in trading
performance, show that the Group will be able to operate within the level of its current facilities for the foreseeable
future. For this reason the Group continues to adopt the going concern basis in preparing its Condensed financial
statements.
Alternative Performance Measures
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 IFRS. 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. Further information on APMs is provided below of
these Condensed financial statements.
2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
The Condensed financial statements have been prepared under the historical cost convention as modified by the
revaluation of pension assets and liabilities and certain financial instruments.
The accounting policies applied are consistent with those adopted and disclosed in the Group financial statements for
the year ended 31 December 2017, except for changes arising from the adoption of the following new accounting
pronouncements which became effective in the current reporting period:
- IFRS 9 Financial Instruments
- IFRS 15 Revenue from Contracts with Customers
- IFRIC 22 Foreign Currency Transactions and Advance Consideration
- Annual Improvements to IFRSs: 2014-16 Cycle: IFRS 1 and IAS 28
- Clarifications to IFRS 15 Revenue from Contracts with Customers
- Amendments to IFRS 2 Share-based Payment Transactions
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers became effective for the Group from 1 January 2018, replacing all
previous revenue standards and interpretations. The Group's revenue is primarily derived from commodity sales, for
which 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 under the Incoterms, the timing and amount of revenue recognised by the Group for the sale of commodities is
not materially affected.
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, and a portion of the revenue earned under these contracts, representing the obligation to
perform the freight service, is deferred and recognised over time as this obligation is fulfilled, along with the
associated costs.
The impact of this transition difference is not considered material to the Group and hence comparative values have
not been restated. If comparative values had been restated, the impact would have been to reduce revenue and
operating costs respectively for the year ended 31 December 2017 by $29 million with no impact on profit. Current
assets and current liabilities as at 31 December 2017 would each have been higher by $39 million.
There was no impact on opening retained earnings at 1 January 2018 as a result of this transition difference.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments became effective for the Group from 1 January 2018, replacing IAS 39 Financial
Instruments: Recognition and Measurement. The impacts of adopting IFRS 9 on the Group results have been
as follows:
Impairment: The standard introduces an 'expected credit loss' model for the assessment of impairment of financial
assets held at amortised cost. The impact of this transition difference is not considered material to the Group and
hence comparative values and opening retained earnings at 1 January 2018 have not been restated. If comparative
values had been restated, the impact would have been to reduce the Group's opening retained earnings at 1 January
2017 by $18 million, to decrease the Group's operating costs by $17 million and to increase the Group's profit before
tax and underlying earnings by $17 million for the year ended 31 December 2017.
Classification and measurement: The measurement and accounting treatment of the Group's financial assets is
materially unchanged on application of the new standard with the exception of equity securities previously categorised
as available for sale. These are now held at fair value through other comprehensive income, meaning the recycling of
gains and losses on disposal and impairment losses is no longer permitted for this category of asset. There is no
material impact to the net assets of the Group at 1 January 2017, 31 December 2017 or 1 January 2018, or to the
Group's results for the year ended 31 December 2017 from this change.
Hedge accounting: The Group has elected to adopt the IFRS 9 hedge accounting requirements from 1 January 2018.
The adoption of the new standard had no effect on the amounts recognised in relation to hedging arrangements for
the year ended 31 December 2017 or the year ended 31 December 2018.
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
IFRS 16 Leases
IFRS 16 Leases became effective for the Group from 1 January 2019, replacing IAS 17 Leases. The Group has
completed the necessary changes to internal systems and processes to embed the new accounting requirements.
The principal impact of IFRS 16 is 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 a right-of-use asset and a related
liability for future lease payments.
The most significant impact on the Group of applying IFRS 16, based on contractual arrangements in place at
31 December 2018, will be the recognition of lease liabilities of $0.5 billion, along with right-of-use assets with a
similar aggregate value. This liability corresponds to the minimum lease payments under operating leases adjusted
for the effect of discounting. The present value of liabilities for existing operating leases of $0.5 billion will be included
in net debt on transition to IFRS 16 at 1 January 2019.
The Group will not bring leases of low value assets or short leases with 12 or fewer months remaining on to the
Consolidated balance sheet at 1 January 2019. In the Consolidated cash flow statement for the year ended
31 December 2019, the total amount of cash paid will be separated between repayments of principal and repayment
of interest, both presented within cash flows from financing activities.
Lease liabilities principally relate to corporate offices, diamond jewellery retail outlets and shipping vessels. The
impact of the standard on underlying earnings and profit before tax following adoption is not expected to be significant
although the income statement presentation of the cost of leases is changed. Instead of a rental charge recognised
within operating costs, the cost of leases will be allocated between the depreciation of right-of-use assets, and a
finance charge representing the unwind of the discount on lease liabilities.
The Group has elected to apply the modified retrospective approach on transition. The cumulative effect of transition
to IFRS 16 will be recognised in retained earnings at 1 January 2019 and the comparative period will not be restated.
FINANCIAL PERFORMANCE
Profit attributable to equity shareholders increased 12% to $3,549 million and underlying earnings decreased
1% to $3,237 million.
The following disclosures provide further information about the drivers of the Group's financial performance in the
year. This includes analysis of the respective contribution of the Group's reportable segments along with information
about its operating cost base, net finance costs and tax. In addition, disclosure on earnings per share and the
dividend is provided.
3. FINANCIAL PERFORMANCE BY SEGMENT
Overview
The Group's operating segments are aligned to those business units that are evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing performance. Operating segments
with similar economic characteristics are aggregated into reportable segments.
Following a reassessment of the Group's reportable segments, the Group has presented the results of the Iron Ore
businesses as the Iron Ore reportable segment. Manganese, which was previously reported with Iron Ore has been
aggregated with Nickel as a single reportable segment. Comparative information has been restated to reflect this
change. The 'Corporate and other' segment includes unallocated corporate costs and exploration costs. Exploration
costs represent the cost of the Group's exploration activities across all segments.
The disclosures in this note include certain Alternative Performance Measures (APMs).
For more information on the APMs used by the Group, including definitions, please refer below.
Segment results
2018
Net finance
Depreciation costs and Non-
Group Underlying and Underlying income tax controlling Underlying
US$ million revenue EBITDA amortisation EBIT expense interests earnings
De Beers 6,082 1,245 (551) 694 (288) (57) 349
Copper 5,168 1,856 (622) 1,234 (125) (192) 917
Platinum Group Metals 5,680 1,062 (357) 705 (153) (134) 418
Iron Ore 3,768 1,177 (430) 747 (424) (440) (117)
Coal 7,788 3,196 (658) 2,538 (736) (47) 1,755
Nickel and Manganese 1,707 844 (159) 685 (147) (12) 526
Corporate and other 3 (219) (7) (226) (392) 7 (611)
30,196 9,161 (2,784) 6,377 (2,265)(1) (875) 3,237
Less: associates and joint ventures (2,586) (1,334) 188 (1,146) 395 12 (739)
Subsidiaries and joint operations 27,610 7,827 (2,596) 5,231 (1,870) (863) 2,498
Reconciliation:
Net income from associates and joint ventures 728 728
Special items and remeasurements 744 323
Profit before net finance costs and tax 6,703
Profit attributable to equity shareholders of the Company 3,549
2017
Net finance
Depreciation costs and Non-
Group Underlying and Underlying income tax controlling Underlying
US$ million revenue EBITDA amortisation EBIT expense interests earnings
De Beers 5,841 1,435 (562) 873 (244) (101) 528
Copper 4,233 1,508 (585) 923 (440) (113) 370
Platinum Group Metals 5,078 866 (354) 512 (218) (77) 217
Iron Ore 4,891 1,828 (328) 1,500 (254) (443) 803
Coal 7,211 2,868 (594) 2,274 (484) (27) 1,763
Nickel and Manganese 1,391 610 (132) 478 (257) (2) 219
Corporate and other 5 (292) (21) (313) (326) 11 (628)
28,650 8,823 (2,576) 6,247 (2,223)(1) (752) 3,272
Less: associates and joint ventures (2,407) (1,191) 186 (1,005) 426 2 (577)
Subsidiaries and joint operations 26,243 7,632 (2,390) 5,242 (1,797) (750) 2,695
Reconciliation:
Net income from associates and joint ventures 567 567
Special items and remeasurements 282 (96)
Profit before net finance costs and tax 6,091
Profit attributable to equity shareholders of the Company 3,166
(1) Comprises net finance costs of $395 million (2017: $526 million) and income tax expense of $1,870 million (2017: $1,697 million).
The segment results are stated after elimination of inter-segment interest and dividends and include an allocation of
corporate costs.
Further information
Segments predominantly derive revenue as follows - De Beers: rough and polished diamonds; Copper: copper;
Platinum Group Metals: platinum group metals and nickel; Iron Ore: iron ore; Coal: metallurgical coal and thermal
coal; Nickel and Manganese: nickel, manganese ore and alloys. The revenue analysis below includes the Group's
share of revenue in equity accounted associates and joint ventures. Refer to note 12. Other revenue includes
shipping revenue which predominantly relates to the Iron Ore segment.
Group revenue by product
US$ million 2018 2017
Diamonds 6,082 5,841
Copper 4,928 4,128
Platinum 2,235 2,454
Palladium 1,709 1,417
Rhodium 707 327
Iron ore 3,336 4,489
Metallurgical coal 3,931 3,357
Thermal coal 3,853 3,854
Nickel 882 728
Manganese ore and alloys 1,147 940
Other 1,386 1,115
30,196 28,650
Group revenue by destination
The Group's geographical analysis of segment revenue is allocated based on the customer's port of destination.
Where the port of destination is not known, revenue is allocated based on the customer's country of domicile.
US$ million 2018 2017
China 6,933 6,451
India 3,796 3,636
Japan 2,840 2,625
Other Asia 5,813 5,514
South Africa 1,466 1,876
Other Africa 1,816 1,709
Brazil 383 422
Chile 540 432
Other South America 35 9
North America 714 875
Australia 47 41
United Kingdom (Anglo American plc's country of domicile) 1,889 1,571
Other Europe 3,924 3,489
30,196 28,650
4. EARNINGS PER SHARE
Overview
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 below.
US$ 2018 2017
Earnings per share
Basic 2.80 2.48
Diluted 2.74 2.45
Underlying earnings per share
Basic 2.55 2.57
Diluted 2.50 2.53
Headline earnings per share
Basic 2.04 2.29
Diluted 2.00 2.26
Further information
The calculation of basic and diluted earnings per share is based on the following data:
Profit attributable to equity
shareholders of the Company Underlying earnings Headline earnings
2018 2017 2018 2017 2018 2017
Earnings (US$ million)
Basic and diluted earnings 3,549 3,166 3,237 3,272 2,590 2,920
Weighted average number of shares (million)
Basic number of ordinary shares outstanding 1,269 1,275 1,269 1,275 1,269 1,275
Effect of dilutive potential ordinary shares 27 18 27 18 27 18
Diluted number of ordinary shares outstanding 1,296 1,293 1,296 1,293 1,296 1,293
The weighted average number of ordinary shares in issue excludes shares held by employee benefit trusts and
Anglo American plc shares held by Group companies. The diluted number of ordinary shares outstanding, including
share options and awards, is calculated on the assumption of conversion of all potentially dilutive ordinary shares. In
the year ended 31 December 2018 there were no (2017: 132,188) share options that were potentially dilutive but not
included in the calculation of diluted earnings because they were anti-dilutive.
Headline earnings, a Johannesburg Stock Exchange defined performance measure, is reconciled from underlying
earnings as follows:
US$ million 2018 2017
Underlying earnings for the financial year 3,237 3,272
Operating special items - restructuring - 31
Other operating special items (58) (60)
Operating remeasurements (113) (86)
Non-operating special items - (charges)/credits relating to BEE transactions (31) 14
Financing special items and remeasurements (132) (114)
Tax special items and remeasurements (137) (32)
Associates' and joint ventures' special items and remeasurements (11) (8)
Other reconciling items (165) (97)
Headline earnings for the financial year 2,590 2,920
The reconciling items above are shown net of tax and non-controlling interests.
Other reconciling items include the impact of business combinations and disposals of property, plant and equipment
and investments (2017: principally relate to the settlement of class action claims).
5. NET FINANCE COSTS
US$ million 2018 2017
Investment income
Interest income from cash and cash equivalents 188 154
Interest income from associates and joint ventures 22 35
Other interest income 27 52
Net interest income on defined benefit arrangements 23 16
Dividend income from financial asset investments 1 11
Investment income 261 268
Interest expense
Interest and other finance expense (561) (580)
Net interest cost on defined benefit arrangements (45) (49)
Unwinding of discount relating to provisions and other liabilities (90) (100)
(696) (729)
Less: interest expense capitalised 41 35
Interest expense before special items and remeasurements (655) (694)
Financing special items (102) (99)
Interest expense (757) (793)
Other net financing gains/(losses)
Net foreign exchange gains/(losses) 14 (47)
Other net financing gains/(losses) before special items and remeasurements 14 (47)
Financing remeasurements (32) (14)
Other net financing losses (18) (61)
Net finance costs (514) (586)
6. INCOME TAX EXPENSE
Overview
The effective tax rate for the year of 29.3% (2017: 26.3%) is higher (2017: higher) than the applicable weighted
average statutory rate of corporation tax in the United Kingdom of 19.0% (2017: 19.25%).
2018
Profit before tax Tax (charge)/credit Effective
US$ million US$ million tax rate
Calculation of effective tax rate (statutory basis) 6,189 (1,816) 29.3%
Adjusted for:
Special items and remeasurements (599) 326
Associates' and joint ventures' tax and non-controlling interests 392 (380)
Calculation of underlying effective tax rate 5,982 (1,870) 31.3%
The underlying effective tax rate was 31.3% for the year ended 31 December 2018. This is higher than the equivalent
underlying effective tax rate of 29.7% for the year ended 31 December 2017. The effective tax rate in 2018 benefited
from the release of a deferred tax liability balance in Chile, partially offset by the impact of the relative levels of profits
arising in the Group's operating jurisdictions. In future periods, it is expected that the underlying effective tax rate will
remain above the United Kingdom statutory tax rate.
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 below.
a) Analysis of charge for the year
US$ million 2018 2017
United Kingdom corporation tax 26 29
South Africa tax 673 649
Other overseas tax 1,030 689
Prior year adjustments (56) (162)
Current tax 1,673 1,205
Deferred tax (183) 119
Income tax expense before special items and remeasurements 1,490 1,324
Special items and remeasurements tax (note 9) 326 122
Income tax expense 1,816 1,446
Current tax 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 reconciling items between the statutory effective tax rate and the income tax expense are:
US$ million 2018 2017
Profit before tax 6,189 5,505
Less: Net income from associates and joint ventures (728) (567)
Profit before tax (excluding associates and joint ventures) 5,461 4,938
Tax calculated at United Kingdom corporation tax rate of 19.0% (2017: 19.25%) 1,038 951
Tax effects of:
Items non-deductible/taxable for tax purposes 55 124
Temporary difference adjustments 170 (160)
Special items and remeasurements 212 89
Other adjustments
Dividend withholding taxes (195) 245
Effect of differences between local and United Kingdom tax rates 556 353
Prior year adjustments to current tax (56) (162)
Other adjustments 36 6
Income tax expense 1,816 1,446
The special items and remeasurements reconciling item of $212 million (2017: $89 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 and tax special items and remeasurements.
Included within dividend withholding taxes for the year ended 31 December 2018 is a credit of $285 million
(2017: charge of $99 million) due to a reassessment of future dividend distributions.
Associates' and joint ventures' tax included within Net income from associates and joint ventures for the year ended
31 December 2018 is a charge of $391 million (2017: charge of $371 million). Excluding special items and
remeasurements, this becomes a charge of $380 million (2017: charge of $373 million).
7. DIVIDENDS
2018 2017
Proposed final ordinary dividend per share (US cents) 51 54
Proposed final ordinary dividend (US$ million) 660 695
These financial statements do not reflect the proposed final ordinary dividend as it is still subject to shareholder
approval.
Dividends paid during the year are as follows:
US$ million 2018 2017
Final ordinary dividend for 2017 - 54 US cents per ordinary share (2016: Nil per ordinary share) 681 -
Interim ordinary dividend for 2018 - 49 US cents per ordinary share (2017: 48 US cents per
ordinary share) 610 618
1,291 618
SIGNIFICANT ITEMS
Special items and remeasurements are a net gain of $0.3 billion and include impairment reversals of
$1.1 billion relating to Moranbah-Grosvenor and Capcoal (Coal), partially offset by the write-off of assets in
De Beers' South African operations (De Beers) of $0.1 billion and losses arising on bond buybacks
completed in the year (Corporate and other) of $0.1 billion.
During 2018, the significant accounting matters addressed by management included:
- the assessment of impairment and impairment reversal indicators; and
- the estimation of cash flow projections for impairment testing.
8. SIGNIFICANT ACCOUNTING MATTERS
In the course of preparing financial statements, management necessarily makes judgements and estimates that can
have a significant impact on the financial statements. The critical judgements and sources of estimation uncertainty
that affect the results for the year ended 31 December 2018 are set out below. In addition to these items, further
detail on other significant judgements and estimates determined by management is provided, where applicable, in the
relevant note to the Condensed financial statements.
Impairment and impairment reversals of assets
i) Critical accounting judgements
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, including those that could be impacted by the Group's principal risks, 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 (Iron Ore);
Moranbah-Grosvenor, Capcoal, Dawson and Isibonelo (Coal); Barro Alto and Samancor (Nickel and Manganese) and
El Soldado (Copper). These assets have a combined carrying value of $9.1 billion within property, plant and
equipment as at 31 December 2018.
ii) Cash flow projections for 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. Where discounted cash flow models based on management's assumptions are
used, the resulting fair value measurements are considered to be at level 3 in the fair value hierarchy, as defined in
IFRS 13 Fair Value Measurement, as they depend to a significant extent on unobservable valuation inputs.
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 Resources 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. Long-term foreign exchange rates are kept constant on a real basis.
- 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 7.0% (2017: 7.0%). 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 (for example, the grade of Ore
Reserves varying significantly over time and unforeseen operational issues). 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).
iii) Key sources of estimation uncertainty
For assets where indicators of impairment or impairment reversal are identified, the Group performs impairment
reviews to assess the recoverable amount of its operating assets principally with reference to fair value less costs of
disposal, assessed using discounted cash flow models. 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. Management applies judgement in determining the assumptions that are considered to be
reasonable and consistent with those that would be applied by market participants.
Minas-Rio
Following pipeline leaks identified on 12 March 2018 and 29 March 2018, the Group announced the suspension of
operations at Minas-Rio, with effect from 29 March, in order to conduct a full inspection of the pipeline. Operations
have since resumed in December 2018. The recoverable amount, based on a discounted cash flow model, supports
the carrying value of $4.1 billion.
The valuation is inherently sensitive to changes in economic and operational assumptions which could materially
increase or reduce the valuation. Key assumptions include the long-term realised iron ore price, and the timing of
receipt 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 $0.6 billion.
Moranbah-Grosvenor
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 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.
During 2018, Grosvenor has achieved improved levels of production and operating efficiencies. Additionally, the long-
term outlook for metallurgical coal has improved, reflected in an increase in price forecasts by analysts and an
increase in the Group's forecast real long-term metallurgical coal price. This follows a forecast tightening of supply,
sustained demand for high grade coal and an increased industry cost base. Consequently, the valuation of the
Moranbah-Grosvenor operation has been assessed and the previous impairment has been reversed to the carrying
value of $2.6 billion that would have been determined had no impairment loss previously been recorded, resulting in a
gain of $876 million ($652 million after tax and non-controlling interests). Of the impairment reversal, $528 million has
been recorded against plant and equipment, $278 million against mining properties and leases, $50 million against
capital work in progress and $20 million against land and buildings, with an associated tax charge of $224 million.
The valuation, based on discounted cash flows, is sensitive to changes in input assumptions particularly in relation to
future metallurgical coal prices and Australian dollar foreign exchange rates. For example, a $5/tonne increase in the
long-term price forecast for metallurgical coal equates to a $0.2 billion increase in the valuation. The recoverable
amount has been assessed under a range of valuation scenarios, all of which indicated full or significant impairment
reversals.
Capcoal
The Capcoal complex located in Queensland, Australia, consists of an open cut operation and the Grasstree
underground operation. During 2015, the Group recorded an impairment of $639 million ($537 million after tax) at
Capcoal, driven by the impact of weak coal prices on margins, particularly for the open cut operations. This was
based on a recoverable amount of $0.2 billion at 31 December 2015. The valuation was based on the fair value less
costs of disposal of the CGU, measured using discounted cash flow projections.
During 2018, a decision was taken to extend the life of the Grasstree underground operation by three years to the end
of 2021. Furthermore, the Group's forecast real long-term metallurgical coal price has increased. Consequently, the
valuation of the Capcoal operation has been assessed and the previous impairment has been reversed by
$266 million ($259 million after tax and non-controlling interests) to the carrying value of $0.6 billion that would have
been determined had no impairment loss previously been recorded.
The valuation, based on discounted cash flows, is sensitive to changes in input assumptions particularly in relation to
future metallurgical coal prices and Australian dollar foreign exchange rates. For example, a $5/tonne increase in the
long-term price forecast for metallurgical coal equates to a $0.1 billion increase in the valuation. The recoverable
amount has been assessed under a range of valuation scenarios, all of which indicated full or significant impairment
reversals.
9. SPECIAL ITEMS AND REMEASUREMENTS
Overview
2018 2017
Non-controlling
US$ million Before tax Tax interests Net Net
Impairments and impairment reversals 1,043 (203) 11 851 111
Restructuring costs - - - - 31
Other operating special items (80) 22 - (58) (60)
Operating remeasurements (125) 8 4 (113) (86)
Operating special items and remeasurements 838 (173) 15 680 (4)
Disposals of businesses and investments (47) 1 21 (25) 71
Adjustments relating to business combinations 7 - - 7 53
Adjustments relating to former operations (18) (10) (11) (39) (86)
(Charges)/credits relating to BEE transactions (36) - 5 (31) 14
Non-operating special items (94) (9) 15 (88) 52
Financing special items and remeasurements (134) - 2 (132) (114)
Tax special items and remeasurements - (144) 7 (137) (32)
Total 610 (326) 39 323 (98)
Associates' and joint ventures' special items and
remeasurements (11) (10)
Non-controlling interests on associates' and joint ventures'
special items and remeasurements - 2
Total special items and remeasurements 312 (106)
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
interests, 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 below.
- Operating special items are those that relate to the operating performance of the Group and principally include
impairment charges and reversals 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 disposals 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.
- Tax special items are those that relate to tax charges or credits where the associated cash outflow or inflow is
anticipated to be significant due to its size and nature, principally including resolution of tax enquiries.
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 within
either revenue, operating costs or net finance costs as appropriate. 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 costs
or capital expenditure transactions. They also include the reversal through depreciation and amortisation of a fair
value gain or loss, 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.
Operating special items
Impairments and impairment reversals
Net impairments and impairment reversals of $1,043 million ($851 million after tax and non-controlling interests) for
the year ended 31 December 2018 principally comprise the impairment reversals of Moranbah-Grosvenor (Coal) of
$876 million ($652 million after tax and non-controlling interests) and Capcoal (Coal) of $266 million ($259 million
after tax and non-controlling interests) and the impairment of $99 million ($60 million after tax and non-controlling
interests) relating to the write-off of assets in De Beers' South African operations that are no longer expected to
generate future economic benefit. Further information on significant accounting matters relating to impairments and
impairment reversals is provided in note 8.
2017
Net impairments and impairment reversals of $111 million after tax and non-controlling interests for the year ended
31 December 2017 consisted of impairment reversals of $216 million for Sishen (Iron Ore) and $65 million for
El Soldado (Copper) offset by the impairment of the investment in Bafokeng-Rasimone Platinum Mine (Platinum
Group Metals) of $116 million and an impairment of $44 million in Coal South Africa (Coal).
Restructuring costs
There were no restructuring costs recorded in the year ended 31 December 2018.
2017
In 2017, following the finalisation of the Driving Value programme and the decision to continue metallurgical coal
operations in Australia, restructuring provisions recognised in 2016 relating to the closure of the Brisbane Corporate
Office were derecognised, resulting in a credit of $31 million ($31 million after tax).
Other operating special items
The loss of $80 million ($58 million after tax) relates to the cost to the Group of the transfer of liabilities of a South
African pension scheme.
2017
The loss of $91 million ($60 million after tax) related to the cost to the Group of an arbitration settlement relating to
a commercial dispute arising during the construction of the Barro Alto Nickel project.
Operating remeasurements
Operating remeasurements reflect a net loss of $125 million ($113 million after tax and non-controlling interests)
which principally relates to a $114 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. In
addition, there were net losses on derivatives of $11 million, principally related to economic hedges of capital
expenditure.
2017
Operating remeasurements reflected a net loss of $95 million ($86 million after tax and non-controlling interests) for
the year ended 31 December 2017.
Non-operating special items
Disposals of businesses and investments
On 10 December 2018, Anglo American Platinum completed the sale of its 33% interest in the Bafokeng-Rasimone
Platinum Mine (BRPM), an associate of the Group, to Royal Bafokeng Platinum Limited (RBPlat) for consideration of
R2.16 billion ($146 million) of which $107 million is receivable on a deferred basis. On entering into the binding sale
and purchase agreement, an impairment charge of $85 million ($52 million after tax and non-controlling interests) was
recorded to bring the carrying amount of the Group's investment in BRPM into line with its fair value less costs to sell
based on the fair value of the sale consideration.
On 1 March 2018, the Group completed the sale of the Eskom-tied domestic coal operations in South Africa to a
wholly owned subsidiary of Seriti Resources Holdings Proprietary Limited. The consideration payable for the
operations as at 1 January 2017 was R2.3 billion (approximately $164 million). A gain on disposal of $84 million
($59 million after tax and non-controlling interests) was recorded.
In addition, a gain on disposal of $34 million ($34 million after tax) was recorded on the disposal of the Group's
88.17% shareholding in the Drayton mine (Coal) and a loss on disposal of $71 million ($54 million after tax and non-
controlling interests) was recorded on the disposal of the Group's interests in the Union platinum mine and Masa
Chrome Company Proprietary Limited (Platinum Group Metals).
2017
The net gain of $71 million after tax and non-controlling interests related to the disposals of the Dartbrook mine
(Coal), long-dated Mineral Resources in Platinum Group Metals and Dreamvision Investments 15 Proprietary Limited,
and the impairment in advance of the sale of the Group's interest in the Union platinum mine and Masa Chrome
Company Proprietary Limited (Platinum Group Metals).
Adjustments relating to business combinations
The $7 million gain during the year ended 31 December 2018 relates to adjustments in respect of business
combinations in prior periods, including a gain on settlement of a related commercial dispute.
2017
The gain of $53 million after non-controlling interests related to the acquisition of the remaining 50% share in
De Beers Jewellers (De Beers) and adjustments in respect of business combinations in prior periods.
Adjustments relating to former operations
The loss of $18 million ($39 million after tax and non-controlling interests) relates to adjustments in respect of
disposals completed in prior periods.
2017
The net loss of $86 million after tax and non-controlling interests related principally to the settlement of class
action claims.
Charges/credits relating to BEE transactions
The loss of $36 million ($31 million after tax and non-controlling interests) relates to a modification charge under
IFRS 2 Share-based Payment following the refinancing of Ponahalo Investments (Pty) Ltd.
2017
In 2017 the net gain of $14 million after tax and non-controlling interests related to the revaluation of provisions
associated with De Beers BEE transactions recorded in prior years.
Financing special items and remeasurements
Financing special items and remeasurements principally comprise a loss of $98 million (2017: loss of $95 million)
arising on bond buybacks completed in the period and a net fair value loss of $33 million (2017: $14 million)
on derivatives hedging net debt.
Tax associated with special items and remeasurements
This includes a tax remeasurement charge of $110 million (2017: charge of $34 million) principally arising on Brazilian
deferred tax assets.
Of the total tax charge of $326 million (2017: charge of $122 million), there was a net current tax charge of $16 million
(2017: charge of $1 million) and a net deferred tax charge of $310 million (2017: charge of $121 million).
Associates' and joint ventures' special items and remeasurements
Associates' and joint ventures' special items and remeasurements relates to the Coal segment (2017: Coal and
Platinum Group Metals segments).
CAPITAL BASE
We have a value-focused approach to capital allocation with clear prioritisation: maintain asset integrity; pay
dividends to our shareholders while ensuring a strong balance sheet. Discretionary capital is then allocated
based on a balanced approach.
Value-disciplined capital allocation throughout the cycle is critical to protecting and enhancing our shareholders'
capital, given the long-term and capital intensive nature of our business.
The Group uses attributable return on capital employed (ROCE) to monitor how efficiently assets are generating profit
on invested capital for the equity shareholders of the Company. Attributable ROCE is an Alternative Performance
Measure (APM). For more information on the APMs used by the Group, including definitions, please refer below.
Attributable ROCE %
2018 2017
De Beers 8 9
Copper 22 16
Platinum Group Metals 15 10
Iron Ore 3 15
Coal 67 67
Nickel and Manganese 28 20
Corporate and other n/a n/a
19 19
Attributable ROCE remained consistent at 19% during 2018 (2017: 19%).
10. CAPITAL BY SEGMENT
The disclosures in this note include certain Alternative Performance Measures (APMs).
For more information on the APMs used by the Group, including definitions, please refer below.
Capital employed by segment
Capital employed is the principal measure of segment assets and liabilities reported to the Group Management
Committee. Capital employed is defined as net assets excluding net debt and financial asset investments.
Capital employed
US$ million 2018 2017
De Beers 8,349 9,294
Copper Chile 6,463 5,899
Platinum Group Metals 4,058 4,510
Iron Ore 6,929 7,603
Coal 4,131 3,384
Nickel and Manganese 2,390 2,364
Corporate and other (51) (241)
Capital employed 32,269 32,813
Reconciliation to Consolidated balance sheet:
Net debt (2,848) (4,501)
Debit valuation adjustment attributable to derivatives hedging net debt 15 9
Financial asset investments 396 561
Net assets 29,832 28,882
Non-current assets by location
Intangible assets and
Property, plant and equipment Total non-current assets
US$ million 2018 2017 2018 2017
South Africa 9,687 10,818 10,181 11,638
Botswana 4,071 4,536 4,071 4,536
Other Africa 1,033 1,121 1,039 1,127
Brazil 5,643 5,589 5,891 5,729
Chile 6,210 6,281 6,240 6,282
Other South America 1,960 1,282 3,019 2,128
North America 644 741 644 739
Australia and Asia 3,374 2,302 3,848 2,798
United Kingdom (Anglo American plc's country of domicile) 1,279 1,168 1,383 1,247
Other Europe 84 128 84 128
Non-current assets by location 33,985 33,966 36,400 36,352
Unallocated assets 2,484 3,476
Total non-current assets 38,884 39,828
Total non-current assets by location primarily comprise Intangible assets, Property, plant and equipment,
Environmental rehabilitation trusts and Investments in associates and joint ventures.
11. 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 below.
Capital expenditure by segment
US$ million 2018 2017
De Beers 417 273
Copper 703 665
Platinum Group Metals 496 355
Iron Ore 415 252
Coal 722 568
Nickel and Manganese 38 28
Corporate and other 27 9
Capital expenditure 2,818 2,150
Reconciliation to Consolidated cash flow statement:
Cash flows from derivatives related to capital expenditure 15 40
Proceeds from disposal of property, plant and equipment 162 52
Direct funding for capital expenditure received from non-controlling interests 374 36
Reimbursement of capital expenditure 31 -
Expenditure on property, plant and equipment 3,400 2,278
Direct funding for capital expenditure received from non-controlling interests represents capital expenditure relating to
the Quellaveco project funded by cash subscriptions from Mitsubishi. This is deducted in order to present capital
expenditure on an attributable basis. The remaining $515 million of cash subscription, received as part of the
Quellaveco syndication transaction, will be offset against capital expenditure on the Quellaveco project in 2019.
Reimbursement of capital expenditure relates to funding provided for the development of the Charterhouse
Street office.
Capitalised operating cash flows
Capital expenditure includes net capitalised operating cash inflows of $18 million (2017: net inflows of $78 million)
generated by operations prior to reaching commercial production for accounting purposes.
Capital expenditure by category
US$ million 2018 2017
Expansionary 567 306
Stay-in-business 1,617 1,310
Stripping and development 796 586
Proceeds from disposal of property, plant and equipment (162) (52)
2,818 2,150
Expansionary capital expenditure includes the cash flows from derivatives related to capital expenditure and is net of
direct funding for capital expenditure received from non-controlling interests. Stay-in-business capital expenditure is
net of reimbursement of capital expenditure.
12. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Overview
Investments in associates and joint ventures represent businesses the Group does not control, but instead exercises
joint control or significant influence. These include (within the respective business units) the associates Cerrejon and
Jellinbah (Coal) and the joint ventures Ferroport (Iron Ore) and Samancor (Nickel and Manganese).
Further information
The Group's share of the results of the associates and joint ventures is as follows:
Income Statement
US$ million 2018 2017
Revenue 2,586 2,407
Operating costs (before special items and remeasurements) (1,440) (1,402)
Associates' and joint ventures' underlying EBIT 1,146 1,005
Net finance costs (15) (53)
Income tax expense (380) (373)
Non-controlling interests (12) (2)
Net income from associates and joint ventures (before special items and remeasurements) 739 577
Special items and remeasurements - (12)
Special items and remeasurements tax (11) 2
Net income from associates and joint ventures 728 567
Revenue Underlying EBITDA Underlying EBIT Share of net income
US$ million 2018 2017 2018 2017 2018 2017 2018 2017
De Beers 6 18 - 3 - 2 - 2
Platinum Group Metals 84 148 18 10 (3) (16) (3) (27)
Iron Ore 29 81 14 60 7 56 (2) 13
Coal 1,320(1) 1,220(1) 634 590 527 486 348 321
Nickel and Manganese 1,147 940 663 529 610 478 380 259
Corporate and other - - 5 (1) 5 (1) 5 (1)
2,586 2,407 1,334 1,191 1,146 1,005 728 567
(1) Includes $838 million of thermal coal revenue (2017: $791 million) arising in Cerrejon, and $482 million predominantly relating to metallurgical coal revenue
(2017: $429 million).
Aggregate investment
US$ million 2018 2017
De Beers 23 23
Platinum Group Metals 29 200
Iron Ore 123 140
Coal 1,109 1,127
Nickel and Manganese 404 444
Corporate and other 27 22
1,715 1,956
NET DEBT
Net debt decreased from $4.5 billion to $2.8 billion during the year, driven by operating cash inflows. Gearing
has decreased from 13% at 31 December 2017 to 9% at 31 December 2018.
US$ million 2018 2017
Net assets 29,832 28,882
Net debt including related derivatives (note 13) 2,848 4,501
Total capital 32,680 33,383
Gearing 9% 13%
Net debt is calculated as total borrowings less cash and cash equivalents (including derivatives that provide an
economic hedge of net debt and excluding the impact of the debit valuation adjustment). Total capital is calculated as
'Net assets' (as shown in the Consolidated balance sheet) excluding net debt.
13. NET DEBT
Overview
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 below.
Movement in net debt
Cash and Medium and Net debt Derivatives Net debt
cash Short term long term excluding hedging including
US$ million equivalents borrowings borrowings derivatives net debt derivatives
At 1 January 2017 6,044 (1,799) (11,363) (7,118) (1,369) (8,487)
Cash flow 1,549 1,838 318 3,705 419 4,124
Reclassifications - (1,077) 1,077 - - -
Movement in fair value - (7) 210 203 601 804
Other non-cash movements - (151) (144) (295) - (295)
Currency movements 199 (128) (718) (647) - (647)
At 31 December 2017 7,792 (1,324) (10,620) (4,152) (349) (4,501)
Cash flow (948) 1,077 1,666 1,795 250 2,045
Reclassifications - (434) 434 - - -
Movement in fair value - 8 116 124 (345) (221)
Other non-cash movements - 34 (137) (103) - (103)
Currency movements (296) 58 170 (68) - (68)
At 31 December 2018 6,548 (581) (8,371) (2,404) (444) (2,848)
Further information
Reconciliation to the Consolidated balance sheet
Cash and Medium and
cash equivalents Short term borrowings long term borrowings
US$ million 2018 2017 2018 2017 2018 2017
Balance sheet 6,567 7,800 (600) (1,351) (8,371) (10,620)
Balance sheet - disposal groups - 19 - - - -
Bank overdrafts (19) (27) 19 27 - -
Net cash/(debt) classifications 6,548 7,792 (581) (1,324) (8,371) (10,620)
South Africa net cash
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. On an
owned basis cash and cash equivalents in South Africa is $5,316 million (31 December 2017: $4,276 million) and net
cash is $4,603 million (31 December 2017: $3,446 million).
As part of the Group cash pooling arrangement cash that is legally owned by South African companies is managed
outside of South Africa. Below is a breakdown of net cash managed in South Africa.
US $million 2018 2017
Cash and cash equivalents 1,382 1,651
Short term borrowings (113) (34)
Medium and long term borrowings (601) (798)
Net cash excluding derivatives 668 819
Derivatives hedging net debt 1 2
Net cash including derivatives 669 821
Debit valuation adjustment
The debit valuation adjustments reduce the valuation of derivative liabilities hedging net debt reflecting the impact of
the Group's own credit risk. These adjustments are excluded from the Group's definition of net debt (as detailed below).
The movement in the debit valuation adjustments are as follows:
US$ million 2018 2017
At 1 January 9 73
Movement in fair value 6 (64)
At 31 December 15 9
New IFRS accounting standards not yet adopted
IFRS 16 Leases
IFRS 16 Leases is effective for the Group from 1 January 2019. On transition, the present value of liabilities for
existing operating leases of $0.5 billion will be included within net debt. Further information is provided in note 2.
14. BORROWINGS
Overview
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.
Between March and May 2018, the Group completed a number of bond buyback transactions consisting of euro and
US dollar denominated bonds with maturities from April 2019 to April 2021. The Group used $2.24 billion of cash to
retire $2.14 billion of contractual repayment obligations (including derivatives hedging the bonds).
In March 2018, the Group issued $650 million 4.5% senior notes due 2028 through accessing the US bond markets.
Further information
2018 2017
Contractual Contractual
Medium and repayment Medium and repayment
Short term long term Total at hedged Short term long term Total at hedged
US$ million borrowings borrowings borrowings rates borrowings borrowings borrowings rates
Secured
Bank loans and overdrafts 25 31 56 56 18 39 57 57
Other loans 12 115 127 127 13 68 81 81
37 146 183 183 31 107 138 138
Unsecured
Bank loans and overdrafts 13 129 142 142 24 123 147 147
Bonds 420 8,095 8,515 8,981 1,114 10,263 11,377 11,806
Interest payable and other loans 130 1 131 131 182 127 309 309
563 8,225 8,788 9,254 1,320 10,513 11,833 12,262
Total borrowings 600 8,371 8,971 9,437 1,351 10,620 11,971 12,400
The Group had the following undrawn committed borrowing facilities at 31 December:
US$ million 2018 2017
Expiry date
Within one year 223 490
Greater than one year, less than two years 1,182 598
Greater than two years, less than three years 1,035 7,676
Greater than three years, less than four years - -
Greater than four years, less than five years 4,874 244
7,314 9,008
In March 2018 the Group replaced a number of credit facilities maturing between March 2019 and March 2020 with a
total value of $5.4 billion, with a $4.5 billion credit facility maturing in March 2023. On 8 February 2019, the Group
extended the maturity of $4.3 billion of its revolving credit facility by one year from March 2023 to March 2024.
Undrawn committed borrowing facilities expiring within one year include undrawn South African rand facilities
equivalent to $0.2 billion (2017: $0.3 billion) in respect of facilities with a 364 day maturity which roll automatically on
a daily basis, unless notice is served.
In addition to the amounts above, on 1 January 2019, a committed shareholder loan facility of $1.8 billion from
Mitsubishi Corporation became available to Anglo American Quellaveco S.A. to meet Mitsubishi's commitment to fund
40% of remaining capital expenditure on the Quellaveco project (Copper).
UNRECOGNISED ITEMS AND UNCERTAIN EVENTS
15. EVENTS OCCURRING AFTER END OF YEAR
On 20 February 2019, the Group gave notice to terminate a long-term power supply contract in Copper. The
termination could potentially result in a one-off cost of approximately $175 million and is expected to enable improved
cost performance in the medium and long term. The termination is a non-adjusting event that has no impact on the
Consolidated financial statements for the year ended 31 December 2018.
With the exception of the proposed final dividend for 2018, there have been no other reportable events since
31 December 2018.
16. 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.
GROUP STRUCTURE
17. ASSETS AND LIABILITIES HELD FOR SALE
There were no assets classified as held for sale as at 31 December 2018.
2017
Assets classified as held for sale as at 31 December 2017 of $129 million and associated liabilities of $41 million
related to the Union mine (Platinum Group Metals) in South Africa and the former head office of De Beers in the UK.
The sale of the Union mine was completed on 1 February 2018, and sale of the former De Beers head office
completed on 19 July 2018.
18. ACQUISITIONS AND DISPOSALS
Acquisitions
The Group increased its ownership interest in the Mototolo joint operation (Platinum Group Metals) from 50% to 100%
for cash consideration of $90 million and estimated deferred consideration of $64 million. As a result of this
transaction the Group acquired control of Mototolo and has fully consolidated this operation from 1 November 2018.
Disposals
The Group received net cash on disposals of $193 million during the year. This principally comprised net cash inflows
relating to the sale of the Eskom-tied domestic coal operations in South Africa (Coal), and net cash outflows relating
to the sale of the Group's interests in the Union mine and Masa Chrome Company Proprietary Limited (Platinum
Group Metals), which included working capital support provided to Union as part of the transaction.
2017
Disposals in 2017 principally related to the Group's 83.3% interest in the Dartbrook coal mine (Coal), long dated
Mineral Resources (Platinum Group Metals) and financial asset investments including Dreamvision Investments.
Summary by operation
This section includes certain Alternative Performance Measures (APMs).
For more information on the APMs used by the Group, including definitions, please refer below.
Marketing activities are allocated to the underlying operation to which they relate.
2018
Realised Group Underlying Underlying Underlying Capital
US$ million (unless otherwise stated) Sales volume price Unit cost revenue(1) EBITDA EBIT earnings expenditure
'000 cts $/ct $/ct
De Beers 31,656(2) 171(3) 60(4) 6,082(5) 1,245 694 349 417
Mining
Botswana (Debswana) n/a 155(3) 28(4) n/a 495 441 n/a 97
Namibia (Namdeb Holdings) n/a 550(3) 274(4) n/a 176 140 n/a 38
South Africa (DBCM) n/a 109(3) 54(4) n/a 163 58 n/a 177
Canada n/a 144(3) 52(4) n/a 231 78 n/a 127(6)
Trading n/a n/a n/a n/a 413 407 n/a 2
Other(7) n/a n/a n/a n/a (184) (381) n/a (50)
Projects and corporate n/a n/a n/a n/a (49) (49) n/a 26
kt c/lb c/lb
Copper 672(8) 283(8) 134(9) 5,168 1,856 1,234 917 703
Los Bronces 376 n/a 145(9) 2,175 969 625 n/a 217
Collahuasi(10) 243 n/a 105(9) 1,460 960 736 642 295
Quellaveco(11) n/a n/a n/a n/a n/a n/a n/a 131
Other operations 53(8) n/a n/a 1,533 82 28 n/a 60
Projects and corporate n/a n/a n/a - (155) (155) (104) -
koz $/Pt oz $/Pt oz
Platinum Group Metals 2,424(12) 2,219(13) 1,561(14) 5,680 1,062 705 418 496
Mogalakwena 492(12) 2,759(13) 1,398(14) 1,367 623 478 n/a 210
Amandelbult 445(12) 2,222(13) 1,717(14) 996 153 96 n/a 74
Other operations(15) 367(12) n/a n/a 1,100 132 9 n/a 212
Purchase of concentrate(16) 1,120(12) n/a n/a 2,217 218 186 n/a -
Projects and corporate n/a n/a n/a - (64) (64) n/a -
Mt $/t $/t
Iron Ore n/a n/a n/a 3,768 1,177 747 (117) 415
Kumba Iron Ore 43.3 72(17) 32(18) 3,440 1,544 1,213 465(19) 309
Iron Ore Brazil (Minas-Rio) 3.2 70(20) n/a(21) 328 (272) (371) (492) 106
Projects and corporate n/a n/a n/a - (95) (95) (90)(19) -
Mt $/t $/t
Coal 50.4 n/a n/a 7,788 3,196 2,538 1,755 722
Metallurgical Coal 22.0(22) 190(23) 64(24) 4,231 2,210 1,774 1,280 574
Thermal Coal - South Africa 18.3(25) 87(26) 44(27) 2,719 695 566 379 148
Thermal Coal - Colombia 10.1 83 36 838 388 295 193 -
Projects and corporate n/a n/a n/a - (97) (97) (97) -
Nickel and Manganese n/a n/a n/a 1,707 844 685 526 38
Nickel 43,100 t 588 c/lb 361 c/lb(28) 560 181 75 171 38
Manganese (Samancor)(29) 3.7 Mt n/a n/a 1,147 663 610 355 -
Corporate and other n/a n/a n/a 3 (219) (226) (611) 27
Exploration n/a n/a n/a - (113) (113) (105) -
Corporate activities and
unallocated costs n/a n/a n/a 3 (106) (113) (506) 27
n/a n/a n/a 30,196 9,161 6,377 3,237 2,818
See below for footnotes.
2017
Realised Group Underlying Underlying Underlying Capital
US$ million (unless otherwise stated) Sales volume price Unit cost revenue(1) EBITDA EBIT earnings expenditure
'000 cts $/ct $/ct
De Beers 32,455(2) 162(3) 63(4) 5,841(5) 1,435 873 528 273
Mining
Botswana (Debswana) n/a 159(3) 28(4) n/a 484 447 n/a 86
Namibia (Namdeb Holdings) n/a 539(3) 257(4) n/a 176 146 n/a 33
South Africa (DBCM) n/a 129(3) 62(4) n/a 267 119 n/a 114
Canada(30) n/a 235(3) 57(4) n/a 205 58 n/a (5)
Trading n/a n/a n/a n/a 449 443 n/a 1
Other(7) n/a n/a n/a n/a (110) (304) n/a 44
Projects and corporate n/a n/a n/a n/a (36) (36) n/a -
kt c/lb c/lb
Copper 580(8) 290(8) 147(9) 4,233 1,508 923 370 665
Los Bronces 307 n/a 169(9) 1,839 737 401 n/a 245
Collahuasi(10) 232 n/a 113(9) 1,314 806 594 356 243
Quellaveco n/a n/a n/a n/a n/a n/a n/a 128
Other operations 41(8) n/a n/a 1,080 76 39 n/a 49
Projects and corporate n/a n/a n/a - (111) (111) (72) -
koz $/Pt oz $/Pt oz
Platinum Group Metals 2,505(12) 1,966(13) 1,443(14) 5,078 866 512 217 355
Mogalakwena 467(12) 2,590(13) 1,179(14) 1,211 578 448 n/a 151
Amandelbult 459(12) 1,868(13) 1,596(14) 858 88 34 n/a 34
Other operations(15) 497(12) n/a n/a 1,125 83 (59) n/a 170
Purchase of concentrate(16) 1,082(12) n/a n/a 1,884 173 145 n/a -
Projects and corporate n/a n/a n/a - (56) (56) n/a -
Mt $/t $/t
Iron Ore n/a n/a n/a 4,891 1,828 1,500 803 252
Kumba Iron Ore 44.9 71(17) 31(18) 3,486 1,474 1,246 467(19) 229
Iron Ore Brazil (Minas-Rio) 16.5 65(20) 30(21) 1,405 435 335 413 23
Projects and corporate n/a n/a n/a - (81) (81) (77)(19) -
Mt $/t $/t
Coal 49.0 n/a n/a 7,211 2,868 2,274 1,763 568
Metallurgical Coal 19.8(22) 185(23) 61(24) 3,675 1,977 1,594 1,348 416
Thermal Coal - South Africa 18.6(25) 76(26) 44(27) 2,746 588 466 311 152
Thermal Coal - Colombia 10.6 75 31 790 385 296 181 -
Projects and corporate n/a n/a n/a - (82) (82) (77) -
Nickel and Manganese n/a n/a n/a 1,391 610 478 219 28
Nickel 43,000 t 476 c/lb 365 c/lb(28) 451 81 - (4) 28
Manganese (Samancor)(29) 3.6 Mt n/a n/a 940 529 478 223 -
Corporate and other n/a n/a n/a 5 (292) (313) (628) 9
Exploration n/a n/a n/a - (103) (103) (91) -
Corporate activities and
unallocated costs n/a n/a n/a 5 (189) (210) (537) 9
n/a n/a n/a 28,650 8,823 6,247 3,272 2,150
See below for footnotes.
(1) Group revenue for copper is shown after deduction of treatment and refining charges (TC/RCs).
(2) Consolidated sales volumes exclude pre-commercial production sales volumes from Gahcho Kue. Total sales volumes (100%), which are comparable to production,
were 33.7 million carats (2017: 35.1 million carats). Total sales volumes (100%) include pre-commercial production sales volumes from Gahcho Kue and De Beers
Group's JV partners' 50% proportionate share of sales to entities outside De Beers Group from Diamond Trading Company Botswana and Namibia Diamond
Trading Company. In 2017, includes pre-commercial production sales volumes from Gahcho Kue.
(3) Pricing for the mining business units is based on 100% selling value post-aggregation of goods. The De Beers realised price includes the price impact of the sale
of non-equity product and, as a result, is not directly comparable to De Beers unit costs, which relate to equity production only.
(4) Unit cost is based on consolidated production and operating costs, excluding depreciation and operating special items, divided by carats recovered.
(5) Includes rough diamond sales of $5.4 billion (2017: $5.2 billion).
(6) In 2018, includes the acquisition of Peregrine Diamonds Limited for consideration of $87 million.
(7) Other includes Element Six, downstream and acquisition accounting adjustments.
(8) Excludes 178 kt third-party sales (2017: 111 kt).
(9) C1 unit cost includes by-product credits.
(10) 44% share of Collahuasi sales and financials.
(11) Capex is presented on an attributable basis after deducting direct funding from non-controlling interests. FY 2018 capex on a 100% basis was $505 million.
$187 million was spent prior to project approval on 26 July, of which the Group funded $131 million and Mitsubishi funded $56 million. A further $318 million was
spent post-approval, of which the Group's 60% share was funded from the Mitsubishi syndication transaction and hence is not included in reported capex.
(12) Sales volumes are platinum sales and exclude the sale of refined metal purchased from third parties.
(13) Average US$ basket price. Excludes the impact of the sale of refined metal purchased from third parties.
(14) Total cash operating costs: includes on-mine, smelting and refining costs only.
(15) Includes Unki, Union (prior to disposal), Mototolo (post-acquisition), Platinum Group Metals' share of joint operations and revenue from trading activities.
(16) Purchase of concentrate from joint operations, associates and third parties for processing into refined metals.
(17) Prices for Kumba Iron Ore are the average realised export basket price (FOB Saldanha).
(18) Unit costs for Kumba Iron Ore are on an FOB dry basis.
(19) Of the projects and corporate expense, which includes a corporate cost allocation, $46 million (31 December 2017: $49 million) relates to Kumba Iron Ore. The total
contribution from Kumba Iron Ore to the Group's underlying earnings is $414 million (31 December 2017: $418 million).
(20) Prices for Minas-Rio are the average realised export basket price (FOB Acu) (wet basis).
(21) Unit costs for Minas-Rio are not disclosed for 2018 due to the suspension of operations; 2017 unit costs are on an FOB wet basis.
(22) Metallurgical Coal sales volumes exclude thermal coal sales of 1.6 Mt (31 December 2017: 1.8 Mt).
(23) Metallurgical Coal realised price is the weighted average hard coking coal and PCI sales price achieved.
(24) FOB cost per saleable tonne, excluding royalties. Metallurgical Coal excludes study costs.
(25) South African sales volumes includes export primary production, secondary production sold into export markets and production sold domestically at export parity
pricing and exclude domestic sales of 10.3 Mt (2017: 8.2 Mt), Eskom-tied operations sales of 2.8 Mt (2017: 23.9 Mt) and non-equity traded sales of 9.5 Mt
(2017: 7.6 Mt).
(26) Thermal Coal - South Africa realised price is the weighted average export thermal coal price achieved. Excludes third-party sales.
(27) FOB cost per saleable tonne, excluding royalties. Thermal Coal - South Africa unit cost is for the trade operations.
(28) C1 unit cost.
(29) Sales and financials include ore and alloy.
(30) For Canada, price excludes Gahcho Kue contribution from sales related to pre-commercial production, which were capitalised in the first half of 2017. Unit costs
include Gahcho Kue contribution following achievement of commercial production on 2 March 2017. Capital expenditure includes pre-commercial production
capitalised operating cash inflows from Gahcho Kue.
Key financial data
This section includes certain Alternative Performance Measures (APMs).
For more information on the APMs used by the Group, including definitions, please refer below.
US$ million (unless otherwise stated) 2018 2017 2016 2015 2014 2013 2012 restated(1) 2011 2010 2009
Income statement measures
Group revenue 30,196 28,650 23,142 23,003 30,988 33,063 32,785 36,548 32,929 24,637
Underlying EBIT 6,377 6,247 3,766 2,223 4,933 6,620 6,253 11,095 9,763 4,957
Underlying EBITDA 9,161 8,823 6,075 4,854 7,832 9,520 8,860 13,348 11,983 6,930
Revenue 27,610 26,243 21,378 20,455 27,073 29,342 28,680 30,580 27,960 20,858
Net finance costs (before special items
and remeasurements) (380) (473) (209) (458) (256) (276) (299) (20) (244) (273)
Profit/(loss) before tax 6,189 5,505 2,624 (5,454) (259) 1,700 (171) 10,782 10,928 4,029
Profit/(loss) for the financial year 4,373 4,059 1,926 (5,842) (1,524) 426 (564) 7,922 8,119 2,912
Non-controlling interests (824) (893) (332) 218 (989) (1,387) (906) (1,753) (1,575) (487)
Profit/(loss) attributable to equity
shareholders of the Company 3,549 3,166 1,594 (5,624) (2,513) (961) (1,470) 6,169 6,544 2,425
Underlying earnings 3,237 3,272 2,210 827 2,217 2,673 2,860 6,120 4,976 2,569
Balance sheet measures
Capital employed 32,269 32,813 31,904 32,842 43,782 46,551 49,757 41,667 42,135 36,623
Net assets 29,832 28,882 24,325 21,342 32,177 37,364 43,738 43,189 37,971 28,069
Non-controlling interests (6,234) (5,910) (5,309) (4,773) (5,760) (5,693) (6,127) (4,097) (3,732) (1,948)
Equity attributable to equity
shareholders of the Company 23,598 22,972 19,016 16,569 26,417 31,671 37,611 39,092 34,239 26,121
Cash flow measures
Cash flows from operations 7,782 8,375 5,838 4,240 6,949 7,729 7,370 11,498 9,924 4,904
Capital expenditure (2,818) (2,150) (2,387) (4,177) (6,018) (6,075) (5,947) (5,672) (4,902) (4,707)
Net debt (2,848) (4,501) (8,487) (12,901) (12,871) (10,652) (8,510) (1,374) (7,384) (11,280)
Metrics and ratios
Underlying earnings per share (US$) 2.55 2.57 1.72 0.64 1.73 2.09 2.28 5.06 4.13 2.14
Earnings per share (US$) 2.80 2.48 1.24 (4.36) (1.96) (0.75) (1.17) 5.10 5.43 2.02
Ordinary dividend per share (US cents) 100 102 - 32 85 85 85 74 65 -
Ordinary dividend cover (based on
underlying earnings per share) 2.6 2.5 - 2.0 2.0 2.5 2.7 6.8 6.4 -
Underlying EBIT margin 21.1% 21.8% 16.3% 9.7% 15.9% 20.0% 19.1% 30.4% 29.6% 20.1%
Underlying EBIT interest cover(2) 19.9 16.5 16.7 10.1 30.1 35.8 36.8 n/a 34.2 19.6
Underlying effective tax rate 31.3% 29.7% 24.6% 31.0% 29.8% 32.0% 29.0% 28.3% 31.9% 33.1%
Gearing (net debt to total capital)(3) 9% 13% 26% 38% 29% 22% 16% 3% 16% 29%
(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).
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,
substantially the same as those disclosed in the Group's Consolidated financial statements for the year ended
31 December 2017 with the exception of the new accounting pronouncements disclosed in note 2.
- Non-financial APMs: These measures incorporate certain non-financial information that 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 factors or special items 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 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
Group APM IFRS measure Adjustments to reconcile to primary statements Rationale for adjustments
Income statement
Group Revenue - Revenue from associates and joint - Exclude the effect of different basis of consolidation to aid
revenue ventures comparability
Underlying Profit/(loss) before - Operating and non-operating special items - Exclude the impact of certain items due to their size and
EBIT net finance income/ and remeasurements nature to aid comparability
(costs) and tax - Underlying EBIT from associates and joint - Exclude the effect of different basis of consolidation to aid
ventures comparability
Underlying Profit/(loss) before - Operating and non-operating special items - Exclude the impact of certain items due to their size and
EBITDA net finance income/ and remeasurements nature to aid comparability
(costs) and tax - Depreciation and amortisation - Exclude the effect of different basis of consolidation to aid
- Underlying EBITDA from associates and comparability
joint ventures
Underlying Profit/(loss) for the - Special items and remeasurements - Exclude the impact of certain items due to their size and
earnings financial year nature to aid comparability
attributable to equity
shareholders of the
Company
Underlying Income tax expense - Tax related to special items and - Exclude the impact of certain items due to their size and
effective tax remeasurements nature to aid comparability
rate - The Group's share of associates' and joint - Exclude the effect of different basis of consolidation to aid
ventures' profit before tax, before special comparability
items and remeasurements, and tax
expense, before special items and
remeasurements
Underlying Earnings per share - Special items and remeasurements - Exclude the impact of certain items due to their size and
earnings nature to aid comparability
per share
Balance sheet
Net debt Borrowings less - Debit valuation adjustment - Exclude the impact of accounting adjustments from the net
cash and related debt obligation of the Group
hedges
Attributable No direct equivalent - Non-controlling interests' share of capital - Exclude the effect of different basis of consolidation to
ROCE employed and underlying EBIT aid comparability
- Average of opening and closing
attributable capital employed
Cash flow
Capital Expenditure on - Cash flows from derivatives related to - To reflect the net attributable cost of capital expenditure
expenditure property, plant and capital expenditure taking into account economic hedges
(capex) equipment - Proceeds from disposal of property, plant
and equipment
- Direct funding for capital expenditure from
non-controlling interests
Attributable Cash flows from - Capital expenditure - To measure the amount of cash available to finance returns
free cash flow operations - Cash tax paid to shareholders or growth after servicing debt, providing a
- Dividends from associates, joint ventures return to minority shareholders and meeting existing capex
and financial asset investments commitments
- Net interest paid
- Dividends to non-controlling interests
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
Condensed 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 income/(costs) and tax', the closest equivalent IFRS measure to
underlying EBIT, is provided within note 3 to the Condensed 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 income/(costs) and tax', the closest equivalent IFRS measure to
underlying EBITDA, is provided within note 3 to the Condensed 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 3 to the Condensed 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 6 to the Condensed 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 4 to the Condensed
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 13, before taking into account the effect of debit valuation adjustments
explained in note 13). A reconciliation to the Consolidated balance sheet is provided within note 13 to the Condensed
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 11 to the Condensed 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.
Sustaining capital
Sustaining capital is calculated as capital expenditure excluding capitalised operating cash flows and growth projects.
Expenditure on growth projects in 2018 principally related to Quellaveco and the acquisition of Peregrine Diamonds
(2017: principally Quellaveco). The Group uses sustaining capital as a measure to provide additional information to
understand the capital needed to sustain the current production base of existing assets.
(1) Special items and remeasurements are defined in note 9 to the Condensed financial statements.
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 17 and LTIP 18 and is proposed to be used in LTIP 19.
A reconciliation to 'Profit/(loss) before net finance income/(costs) and tax', the closest equivalent IFRS measure to
underlying EBIT, is provided within note 3 to the Condensed financial statements. A reconciliation to 'Net assets', the
closest equivalent IFRS measure to capital employed, is provided within note 10 to the Condensed financial
statements. The table below reconciles underlying EBIT and capital employed to attributable underlying EBIT and
average attributable capital employed by segment.
Attributable ROCE %
2018 2017
De Beers 8 9
Copper 22 16
Platinum Group Metals 15 10
Iron Ore 3 15
Coal 67 67
Nickel and Manganese 28 20
Corporate and other n/a n/a
19 19
2018
Less: Less:
Non- Non-
controlling controlling
interests' Opening interests' Closing Average
share of Attributable attributable Closing share of attributable attributable
Underlying underlying underlying capital capital closing capital capital capital
US$ million EBIT EBIT EBIT employed employed employed employed employed
De Beers 694 (104) 590 7,970 8,349 (1,185) 7,164 7,567
Copper 1,234 (303) 931 4,159 6,463 (2,129) 4,334 4,247
Platinum
Group Metals 705 (176) 529 3,841 4,058 (642) 3,416 3,628
Iron Ore 747 (568) 179 6,345 6,929 (1,130) 5,799 6,072
Coal 2,538 (60) 2,478 3,287 4,131 (65) 4,066 3,677
Nickel and
Manganese 685 (11) 674 2,364 2,390 - 2,390 2,377
Corporate
and other (226) - (226) (241) (51) - (51) (146)
6,377 (1,222) 5,155 27,725 32,269 (5,151) 27,118 27,422
2017
Less: Less:
Non- Non-
controlling controlling
interests' Opening interests' Closing Average
share of Attributable attributable Closing share of attributable attributable
Underlying underlying underlying capital capital closing capital capital capital
US$ million EBIT EBIT EBIT employed employed employed employed employed
De Beers 873 (140) 733 7,481 9,294 (1,324) 7,970 7,725
Copper 923 (236) 687 4,189 5,899 (1,740) 4,159 4,174
Platinum
Group Metals 512 (121) 391 3,796 4,510 (669) 3,841 3,818
Iron Ore 1,500 (573) 927 6,006 7,603 (1,258) 6,345 6,176
Coal 2,274 (37) 2,237 3,420 3,384 (97) 3,287 3,354
Nickel and
Manganese 478 - 478 2,432 2,364 - 2,364 2,398
Corporate
and other (313) - (313) (335) (241) - (241) (288)
6,247 (1,107) 5,140 26,989 32,813 (5,088) 27,725 27,357
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 above.
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 Category Purpose
Copper equivalent production Portfolio complexity Communicate production/revenue generation movements in a single comparable
measure 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 sales from
non-mining activities. Volume from projects in pre-commercial production 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 Group Metals 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 2018 with 2017, the sales volume and cash cost variances exclude the impact of price, foreign
exchange and CPI and are hence in real 2017 terms. This allows the user of the waterfall to understand the
underlying real movement in sales volumes and cash costs on a consistent basis.
Exchange rates and commodity prices
US$ exchange rates 2018 2017
Year end spot rates
South African rand 14.38 12.31
Brazilian real 3.88 3.31
Sterling 0.78 0.74
Australian dollar 1.42 1.28
Euro 0.87 0.83
Chilean peso 694 615
Botswana pula 10.71 9.85
Average rates for the year
South African rand 13.25 13.31
Brazilian real 3.65 3.19
Sterling 0.75 0.78
Australian dollar 1.34 1.30
Euro 0.85 0.89
Chilean peso 642 649
Botswana pula 10.18 10.34
Commodity prices 2018 2017
Year end spot prices
Copper(1) US cents/lb 270 325
Platinum(2) US$/oz 794 925
Palladium(2) US$/oz 1,263 1,057
Rhodium(3) US$/oz 2,445 1,700
Iron ore (62% Fe CFR)(4) US$/tonne 73 74
Iron ore (66% Fe Concentrate CFR)(5) US$/tonne 91 96
Hard coking coal (FOB Australia)(4) US$/tonne 220 262
PCI (FOB Australia)(4) US$/tonne 122 147
Thermal coal (FOB South Africa)(6) US$/tonne 97 95
Thermal coal (FOB Australia)(7) US$/tonne 103 104
Thermal coal (FOB Colombia)(6) US$/tonne 79 86
Nickel(1) US cents/lb 481 556
Manganese ore (44% CIF China)(5) US$/dmtu 6.85 6.88
Average market prices for the year
Copper(1) US cents/lb 296 280
Platinum(2) US$/oz 880 950
Palladium(2) US$/oz 1,029 871
Rhodium(3) US$/oz 2,214 1,097
Iron ore (62% Fe CFR)(4) US$/tonne 69 71
Iron ore (66% Fe Concentrate CFR)(5) US$/tonne 95 87
Hard coking coal (FOB Australia)(4) US$/tonne 207 188
PCI (FOB Australia)(4) US$/tonne 136 119
Thermal coal (FOB South Africa)(6) US$/tonne 98 84
Thermal coal (FOB Australia)(7) US$/tonne 107 89
Thermal coal (FOB Colombia)(6) US$/tonne 85 78
Nickel(1) US cents/lb 595 472
Manganese ore (44% CIF China)(5) US$/dmtu 7.24 5.91
(1) Source: London Metal Exchange (LME).
(2) Source: London Platinum and Palladium Market (LPPM).
(3) Source: Comdaq.
(4) Source: Platts.
(5) Source: Metal Bulletin.
(6) Source: Argus/McCloskey.
(7) Source: globalCOAL.
ANGLO AMERICAN plc
(Incorporated in England and Wales - Registered number 03564138)
(the Company)
Notice of Dividend
(Dividend No. 34)
Notice is hereby given that a final dividend on the Company's ordinary share capital in respect of the year to
31 December 2018 will be paid as follows:
Amount (United States currency) (note 1) 51 cents per ordinary share
Amount (South African currency) (note 2) R7.20518 per ordinary share
Last day to effect removal of shares between the United Kingdom (UK) and
South African (SA) registers Monday, 11 March 2019
Last day to trade on the JSE Limited (JSE) to qualify for dividend Tuesday, 12 March 2019
Ex-dividend on the JSE from the commencement of trading (note 3) Wednesday, 13 March 2019
Ex-dividend on the London Stock Exchange from the commencement of trading on Thursday, 14 March 2019
Record date (applicable to both the UK principal register and SA branch register) Friday, 15 March 2019
Movement of shares between the UK and SA registers permissible from Monday, 18 March 2019
Last day for receipt of US$:GBP/EUR currency elections by the UK Registrars (note 1) Wednesday, 10 April 2019
Last day for receipt of Dividend Reinvestment Plan (DRIP) mandate forms by the UK
Registrars (notes 4, 5 and 6) Wednesday, 10 April 2019
Last day for receipt of DRIP mandate forms by Central Securities Depository
Participants (CSDPs) (notes 4, 5 and 6) Tuesday, 23 April 2019
Last day for receipt of DRIP mandate forms by the South African Transfer Secretaries
(notes 4, 5 and 6) Wednesday, 24 April 2019
Currency conversion US$:GBP/EUR rates announced on Tuesday, 16 April 2019
Payment date of dividend Friday, 3 May 2019
Notes
1. Shareholders on the UK register of members with an address in the UK will be paid in sterling and those with an address in a country in the European
Union which has adopted the euro will be paid in euros. Such shareholders may, however, elect to be paid their dividends in US dollars provided the
UK Registrars receive such election by Wednesday, 10 April 2019. Shareholders with an address elsewhere will be paid in US dollars except those
registered on the South African branch register who will be paid in South African rand.
2. Dividend Tax will be withheld from the amount of the gross dividend of R7.20518 per ordinary share paid to South African shareholders at the rate of
20% unless a shareholder qualifies for exemption. After the Dividend Tax has been withheld, the net dividend will be R5.76414 per ordinary share.
Anglo American plc had a total of 1,405,465,332 ordinary shares in issue, including 540,634 treasury shares, as at the date hereof. In South Africa the
dividend will be distributed by Anglo American South Africa Limited, a South African company with tax registration number 9030010608, or one of its
South African subsidiaries, in accordance with the Company's dividend access share arrangements. The currency conversion date applicable to the SA dividend
amount is 20 February 2019.
3. Dematerialisation and rematerialisation of registered share certificates in South Africa will not be effected by CSDPs during the period from the JSE
ex-dividend date to the record date (both days inclusive).
4. Those shareholders who already participate in the DRIP need not complete a DRIP mandate form for each dividend as such forms provide an ongoing
authority to participate in the DRIP until cancelled in writing. Shareholders who wish to participate in the DRIP should obtain a mandate form from the
UK Registrars, the South African Transfer Secretaries or, in the case of those who hold their shares through the STRATE system, their CSDP.
5. In terms of the DRIP, and subject to the purchase of shares in the open market, share certificates/CREST notifications are expected to be mailed and
CSDP investor accounts credited/updated on or about Wednesday, 29 May 2019. CREST accounts will be credited on Thursday, 9 May 2019.
6. Copies of the terms and conditions of the DRIP are available from the UK Registrars or the South African Transfer Secretaries.
Registered office UK Registrars South African Transfer Secretaries
20 Carlton House Terrace Equiniti Computershare Investor Services Proprietary Limited
London Aspect House Rosebank Towers, 15 Biermann Avenue
SW1Y 5AN Spencer Road Rosebank, Johannesburg, 2196
United Kingdom Lancing PO Box 61051
West Sussex Marshalltown, 2107
BN99 6DA South Africa
United Kingdom
The Company has a primary listing on the Main Market of the London Stock Exchange and secondary listings on the Johannesburg Stock Exchange,
the Botswana Stock Exchange, the Namibia Stock Exchange and the SIX Swiss Exchange.
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
21 February 2019
Date: 21/02/2019 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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