Anglo American Full Year Results 2014

RNS Number : 8115E

Anglo American PLC

12 February 2015

 

  

13 February 2015
Anglo American Preliminary Results 2014
Significant operational improvements amid sharply lower commodity prices
·	Delivered on all major commitments for 2014 – operational performance, project delivery and portfolio restructuring targets
·	Strong operational performance across every business (4% production increase on Cu Eq. basis(1))
·	Group underlying EBIT(2) of $4.9 billion, a 25% decrease due to sharply weaker commodity prices ($2.4 billion(3) underlying EBIT impact), partially offset by weaker producer country currencies ($1.3 billion positive impact to underlying EBIT) and increased production and sales volumes
·	Special items after tax and non-controlling interest include commodity price-driven impairments of $3.9 billion, including $3.5 billion at Minas-Rio
·	Net debt of $12.9 billion as at 31 December 2014 (2013: $10.7 billion), with $15.1 billion of liquidity;       $1.7 billion of bonds maturing in 2015 and $1.6 billion maturing in 2016

Financial highlights US$ million, unless otherwise stated	Year ended 31 December 2014		Year ended 31 December 2013	Change
Underlying EBIT(2)	4,933		6,620	(25)%
Underlying earnings(4)	2,217		2,673	(17)%
Group revenue (incl. associates and joint ventures)(5)	30,988		33,063	(6)%
Underlying EBITDA	7,832		9,520	(18)%
(Loss)/profit before tax(6)	(259)		1,700	(115)%
Loss for the financial year attributable to equity shareholders of the Company(6)	(2,513)		(961)	(161)%
Underlying earnings per share (US$)(4)	1.73		2.09	(17)%
Dividend per share (US$)	$0.85		$0.85	-
Attributable ROCE%(7)	8%		11%
Notes to the highlights and table are shown at the bottom of this section.

Mark Cutifani, Chief Executive of Anglo American, said: "2014 was a year of significant operational improvement against sharp commodity price declines amid generally adverse market conditions. We delivered on our major operational and portfolio commitments to shareholders, including delivering Minas-Rio, defining our future platinum business and resetting the performance of our operations.

"Our diversified product portfolio provided us with a degree of insulation from the particularly sharp price falls for the bulk commodities of iron ore and coal, albeit in an environment where weaker commodity prices accounted for $2.4 billion of underlying EBIT reduction. The operational turnaround of a number of our priority operations and the continued weakening of many producer country currencies also helped to mitigate the effects of the generally adverse pricing environment. After adjusting for the platinum strike, copper equivalent unit costs⁽¹⁾ in local currency terms decreased by 3% (real) in 2014, and we have delivered a $500 million sustainable reduction in overhead and project study and evaluation costs compared to our 2012 baseline. Our financial results reflect the substantial progress we have made to restore the performance of our mining operations, though further progress is necessary to meet our return targets through the cycle.

"We have shown in 2014 that we are adapting and delivering and are on the right track to transform the performance of Anglo American. Our mining operations are the engine of our business and we have delivered higher and more consistent volumes, with a clear focus on increased stability, productivity, margins and returns. There is significantly more improvement potential, as we continue to build the capability to achieve a step change in performance and returns from our exceptional resource endowment."

Mark Cutifani added: "Our safety and environmental performance is a leading indicator of how we are running the business. We have seen a very meaningful improvement across our key safety and environmental performance metrics, taking into account the five-month platinum strike, reflecting our focus on high risk activities, standards and controls. Despite the positive progress, I am saddened to report that we still lost six colleagues during the year, so we have a lot more work to do and our focus is unrelenting to achieve zero harm.

"It is clear that 2014 was a year of strong delivery across the business. Most prominently, we shipped our first ore from the Minas-Rio project in Brazil ahead of schedule in October and expect to bring the project in $400 million below the revised budget. However, the steep drop in the iron ore price has resulted in a $3.5 billion post-tax write down in the carrying value of Minas-Rio. In our Platinum business, we have made substantial progress towards creating a business fit for the future. We have defined the shape of our future platinum portfolio, restructured the assets that we plan to divest, set disposal processes under way and aligned our plans with government and with our employees.

"A platform of operational excellence is fundamental to delivering the full potential of Anglo American. Our top 16 priority assets contribute the majority of value and offer the scope for the greatest upside. The majority of those assets are now performing above plan (compared to only three in 2013) and the remainder are improving in line with our expectations. We have focused urgent attention on the performance of our largest and most valuable mines, a number of which had become severely constrained in recent years due to a lack of mine development, with the positive results seen in our 2014 operational performance.

"Our revised Operating Model is delivering strong underlying results and we are building on those foundations to complete the next phase of the transformation process. At Sishen, the redesign of the pit has successfully unlocked the challenge of excess waste material that needs to be mined to access the orebody. Sishen hit its target production level for 2014 of 35 Million tonnes (Mt) of iron ore and is now on track to recover its production level to 38 Mt in 2016, in excess of our original 37 Mt target. Similarly, at our Los Bronces copper mine in Chile, the waste backlogs and other pit constraints of previous years have been cleared and the mine and plant have been stabilised, enabling record material to be mined in the year and continuous ore to be fed into the plant.

"The performance of our diamond business, De Beers, is a clear demonstration of the benefits and value of our diversified business model. The integration of De Beers into Anglo American is complete; De Beers contributed $1.4 billion of underlying EBIT in 2014, 28% of - and the second largest contributor to - the Group's total, and delivered a 15% return on capital employed (ROCE).

"Consistent with our focus on returns, we must be disciplined with our deployment of physical and financial resources to those assets that will provide us with the greatest value for capital employed and potential upside. We are committed to maintaining a robust capital structure which balances long term business value growth with sustainable capital returns to shareholders. In 2014, net debt increased to $12.9 billion and we expect to touch a peak level of $13.5-$14 billion during 2015 after receipt of Lafarge Tarmac sales proceeds. Our focus on ROCE drives the right behaviours within the business and we will continue to allocate capital to our most value-accretive options, pursuing a syndication approach for major greenfield developments in line with managing individual risk exposures and with achieving our long term net debt target of $10-$12 billion, assisted by our asset disposal programme.

"Despite the headlines of economic uncertainty and geopolitical tensions, the underlying fundamentals of our business - applying world class technical skills to world class assets - remain attractive over the long term. In the immediate term, I expect tough trading conditions to prevail during 2015, but we are determined to continue to build on our already very significant operational improvements, drive towards an effective and efficient organisation and culture, and to be unwavering in our capital discipline."

Notes to the highlights and table on page 1&2

⁽¹⁾  Copper equivalent production, expressed as copper equivalent tonnes, is a metric used to show changes in underlying production volume. Each commodity's volumes are expressed as revenue, and then converted into a copper equivalent volume by dividing revenue by copper price (per tonne). The prices used for conversion by Anglo American are those from 30 June 2013. When aggregated, these give the group's production expressed in units of copper equivalent. Production volumes considered include both equity and purchased volumes (e.g. platinum concentrate from joint operation partners), as well as volumes from mines in pre-commercial production. No domestic thermal coal production is considered. Copper equivalent unit costs divide the gross costs associated with unit costs, by relevant copper equivalent volume. Only own equity volumes (and costs) are considered. Thabazimbi (iron ore) and domestic thermal coal production is excluded, as are operations not in commercial production. Both the copper equivalent production and copper equivalent unit cost metrics have been adjusted for the 532 koz of platinum production lost due to the strikes at Platinum operations.

⁽²⁾ Underlying EBIT is operating profit presented before special items and remeasurements 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. See notes 4 and 6 to the Condensed financial statements for underlying EBIT. For definition of special items and remeasurements, see note 7 to the Condensed financial statements.

⁽³⁾  Excludes De Beers volume/price and impact of the strike at Platinum.

⁽⁴⁾ See note 10 to the Condensed financial statements for basis of calculation of underlying earnings.

⁽⁵⁾  Includes the Group's attributable share of associates' and joint ventures' revenue of $3,915 million (2013: $3,721 million). See note 4 to the Condensed financial statements.

⁽⁶⁾  Stated after special items and remeasurements. See note 7 to the Condensed financial statements.

 ⁽⁷⁾ Attributable ROCE is based on underlying performance before the impact of impairments reported since 10 December 2013 and reflects realised prices and foreign exchange during the current period.

Operations review for the year ended 31 December 2014

In the operations review on the following pages, underlying EBIT includes the attributable share of associates' and joint ventures' EBIT and is before special items and remeasurements unless otherwise stated. Capital expenditure is defined as cash expenditure on property, plant and equipment including related derivatives, and is now presented net of proceeds from disposal of property, plant and equipment and includes direct funding for capital expenditure from non-controlling interests.

IRON ORE AND MANGANESE

Key performance indicators
	Production volume	Sales volume	Price	Revenue	Underlying EBITDA	Underlying EBIT	Capex	ROCE
	Mt(1)	Mt	$/tonne(2)	$m	$m	$m	$m
Segment	n/a	n/a	n/a	5,176	2,286	1,957	2,685	10%
Prior year	n/a	n/a	n/a	6,517	3,390	3,119	2,518	19%
Kumba Iron Ore	48.2	45.3	91	4,388	2,162	1,911	763	60%
Prior year	42.4	43.7	125	5,643	3,266	3,047	655	99%
Iron Ore Brazil	0.7	0.2	n/a	n/a	(29)	(34)	1,922	(1)%
Prior year	-	-	n/a	n/a	(27)	(31)	1,863	(1)%
Samancor	n/a	n/a	n/a	788	251	178	n/a	22%
Prior year	n/a	n/a	n/a	874	258	210	n/a	23%
Projects and Corporate	n/a	n/a	n/a	n/a	(98)	(98)	n/a	n/a
Prior year	n/a	n/a	n/a	n/a	(107)	(107)	n/a	n/a

⁽¹⁾    Iron Ore Brazil production is Mt (wet basis).

⁽²⁾    Prices for Kumba Iron Ore (Kumba) are the average realised export basket price.

Financial and operating overview

Kumba

Underlying EBIT decreased by 37% to $1.9 billion (2013: $3.0 billion), mainly attributable to the significant decline in the iron ore benchmark price, which declined 28% to an average of $97/tonne. In 2014, Kumba took steps to address its cost base and to establish a robust continuous improvement programme that builds off the implementation of Anglo American's Operating Model. Total operating costs decreased by 4%. Despite the 14% increase in waste mining, a 12% weakening of the South African rand against the US dollar, and benefits from the Operating Model, more than offset this headwind.

Export sales increased by 4% to 40.5 Mt (2013: 39.1 Mt) as a result of higher iron ore production which increased by 14% to 48.2 Mt (2013: 42.4 Mt). Kumba rebuilt stock on the back of the higher production. Total finished product stocks increased to 6.5 Mt as at 31 December 2014 compared with 2.9 Mt at 31 December 2013.

Iron Ore Brazil

First ore on ship was achieved on 25 October 2014, ahead of schedule and with total project capital expenditure expected to be $0.4 billion below the revised budget of $8.8 billion. Despite the project's complexity and logistical challenges, Minas-Rio achieved an exceptional safety performance with very low lost time injury rates compared to other projects of similar scale. Delivery of the project is a significant milestone. The ramp up schedule continues and is expected to hit design capacity during the second quarter of 2016. Minas-Rio is a world class asset benefiting from long life (~45 years); high quality iron ore saleable product (~67% Fe); and a favourable cash cost, and is expected to be in the bottom half of the cash cost curve.

Underlying EBIT is expected to be capitalised until the end of 2015, by which time the Minas-Rio project is expected to have achieved commercial production capacity. In 2014, Iron Ore Brazil's capitalised underlying EBIT loss was $57 million, while an amount of $34 million was charged to the income statement in relation to expenses that were not directly associated with the project.

Sales volumes of 0.2 Mt relate to three Panamax vessels transporting iron ore from Minas-Rio to customers in China. Iron ore production volumes for the year reached 0.7 Mt (wet basis).

Samancor

Underlying EBIT decreased by 15% to $178 million, driven by lower ore prices, offset to some extent by higher sales volumes and cost control.

Markets

Iron ore

	2014	2013
Average market prices (IODEX 62% Fe CFR China spot price - $/tonne) (1)	97	135
Average realised prices (Kumba export - $/tonne)	91	125

⁽¹⁾    Different products are priced against a number of different indices in the market. IODEX 62% has been used in this instance as a generic industry benchmark against which to compare average realised prices.

Demand for seaborne iron ore grew 6.7% (2013: 7.0%), or 79 Mt; however this was more than offset by seaborne supply which increased by 14.2%, or 167 Mt, on an equivalent basis. The result was a 28% decline in the iron ore price, which reached $72 per tonne (Platts 62% benchmark) at the end of the year. Kumba's achieved sales benefited from the inclusion of a significant share of high grade fines and lump products which attracted a market premium.

Manganese ore

The manganese ore market remained under pressure, with the benchmark ore price (CIF China) falling 16% over the prior year. Infrastructure constraints in South Africa were loosened, which eliminated a key bottleneck from the market. This resulted in South African production becoming the relevant price-setting assets.

Operating performance

Kumba

Overall, Kumba showed a marked improvement in production as plans put in place over the past few years yielded benefits. These were complemented by the implementation of Anglo American's Operating Model at Sishen in August. Sishen production of 35.5 Mt increased 15% (2013: 30.9 Mt), with total tonnes mined rising to 229.9 Mt (2013: 208.8 Mt). Of this amount, 187.2 Mt was waste (2013: 167.8 Mt). Although below the waste target set at the start of the year, waste-removal run rates are now meeting targets. Additional contractor capacity has been secured and the performance of Kumba's own mining fleet improved. The vertical rate of advance at the mine was increased, further strengthening the exposed ore position. The strategic redesign of the western pushbacks of the pit, together with the improved waste removal run rates, have achieved appropriate waste removal during the year to ensure sufficient exposed ore to support a 2015 production target of 36 Mt.

Execution of the pit redesign plan has resulted in an improved mining plan that enables better use of equipment, and the deployment of two priority pushbacks. Around 780 Mt of waste was taken out of the revised life of mine plan, reducing the average life of mine stripping ratio from 4.4 to 3.9, and the reserve life from 18 years to 16 years at the end of 2014.

Kolomela maintained its strong performance, with total tonnes mined increasing by 18% to 70.4 Mt (2013: 59.9 Mt). The mine produced 11.6 Mt of iron ore (2013: 10.8 Mt), an increase of 7%, and mined 55.5 Mt of waste (2013: 46.7 Mt).

Pre-stripping of the third pit (19.4 Mt), in order to maintain flexibility, was completed during the year, with first ore exposed during November.

Thabazimbi lifted output by 74% to 1.1 Mt (2013: 0.6 Mt), with waste mining volumes increasing by 19% to 31.6 Mt (2013: 26.5 Mt).

Volumes railed on the Iron Ore Export Channel were 6% higher at 42.2 Mt (2013: 39.7 Mt) on the back of the improved performance at Sishen and Kolomela, with Sishen and Kolomela accounting for 31.7 Mt and 10.5 Mt, respectively.

To facilitate the expansion of Sishen mine to the west, Phase 1 of the Dingleton relocation project was completed, with 71 homes in Dingleton North being moved to the new host site. Phase 2, the relocation of the 428 remaining houses, buildings and businesses, has commenced and is progressing well.

Samancor

Production of manganese ore remained consistent at 3.3 Mt (attributable basis), with a record performance in the second half. Production benefited from improved ore recovery and plant availability in South Africa, which offset the impact of weather-related stoppages in the first quarter in Australia.

Production of manganese alloys increased by 14% to 286,100 tonnes (attributable basis) owing to greater furnace stability and availability in South Africa and Australia.

Operational outlook

Kumba

Kumba will focus on optimising its production portfolio by reconfiguring its project portfolio to focus on low-cost production. The target is an additional ~5 Mt in South Africa over the next three to five years, through incremental volumes from projects at Sishen and Kolomela. Additional port capacity through the use of the Saldanha Multi-Purpose Terminal is expected to optimise port throughput. Sishen is aiming to increase production to around 36 Mt in 2015, as it ramps up its waste stripping to around 250 Mt. This will be supported by the Dingleton relocation project and ongoing implementation of Anglo American's Operating Model. Following the planned commissioning of a new modular plant in 2015, production guidance has been increased by 1 Mt to 38 Mt in both 2016 and 2017.

Kolomela's life of mine production capacity has been increased to 11 Mtpa from 2015, and studies are in progress, which could result in increasing production further to 12 Mt in 2016 and to 13 Mtpa from 2017. The future of Thabazimbi mine in Kumba's portfolio is currently being assessed.

Iron Ore Brazil

Iron ore production of between 11 Mt and 14 Mt (wet basis) is expected in 2015. Nameplate capacity is expected to be reached by Q2 2016, with production of between 24 Mt and 26.5 Mt (wet basis) expected in 2016. In addition to the safe ramp up of operations, activities also include the completion of the outstanding construction works and the regular cycle of licence and permit renewals required for the mining operations.

COAL

Key performance indicators
	Production volume	Sales volume	Price	Revenue	Underlying EBITDA	Underlying EBIT	Capex	ROCE
	Mt	Mt	$/tonne(1)	$m	$m	$m	$m
Segment	100	100	n/a	5,808	1,207	458	1,045	7%
Prior year	99	99	n/a	6,400	1,347	587	1,263	8%
Australia/Canada	33	34	111	2,970	543	(1)	952	(1)%
Prior year	31	32	140	3,396	672	106	1,049	1%
South Africa	56	55	70	2,083	463	350	93	30%
Prior year	57	57	77	2,187	479	356	214	27%
Colombia	11	11	67	755	255	163	n/a	15%
Prior year	11	11	73	817	299	228	n/a	20%
Projects/corporate	n/a	n/a	n/a	n/a	(54)	(54)	n/a	n/a
Prior year	n/a	n/a	n/a	n/a	(103)	(103)	n/a	n/a

⁽¹⁾  Australia and Canada is the weighted average metallurgical coal sales price achieved. South Africa is the weighted average export thermal coal price achieved.

Financial and operating overview

Australia and Canada

Australia and Canada recorded an underlying EBIT of $(1) million. The loss was attributable to a 21% decrease in the average quarterly hard coking coal (HCC) benchmark coal price, reducing underlying EBIT by $528 million. The impact was offset by productivity improvements that resulted in a 12% increase in metallurgical coal production despite market related production curtailments, significant cost reductions across the Australian operations and favourable Australian dollar exchange-rate movements. Underlying EBIT included a higher onerous contract provision release at Callide, an $86 million loss at Peace River Coal in Canada, which was placed on care and maintenance in December 2014 and the impact of lower insurance receipts.

Cost savings across labour, contractors and maintenance, combined with productivity improvements, resulted in the lowest unit costs since 2010, with Australian export FOB cash unit costs reducing by 9% from 2013, in local currency terms.

A focus on higher margin products resulted in a favourable product mix, with the proportion of HCC sales to total export sales increasing by 3% to 55%.

South Africa

South Africa's underlying EBIT of $350 million was flat year-on-year owing to a strong operational performance, lower costs and favourable currency movement which mitigated a 10% reduction in realised export prices. FOB cash unit costs at trade mines decreased by 5%, benefiting from the weaker rand and a focus on productivity and cost efficiency primarily related to maintenance and contractor costs, as well as lower overhead costs owing to the business restructuring. Underlying EBIT also included $38 million from the opportunistic sale of reserves and a surplus dragline.

Colombia

Underlying EBIT was $163 million, 29% down on the prior year, mainly owing to weaker prices reducing underlying EBIT by $73 million, offset in part by favourable exchange rate movements and cost reductions.

Markets

Metallurgical coal

	2014	2013
Average market prices ($/tonne) (1)	125	159
Average realised prices ($/tonne, FOB)	111	140

⁽¹⁾  Represents the quarterly average benchmark

The metallurgical coal market experienced growing Australian production and resilient US supply, which resulted in a surplus of seaborne metallurgical coal, while domestic Chinese production increased. As a key steelmaking ingredient, global demand growth for seaborne volumes slowed to 4%, with imports into China declining by 16% to 63 Mt. This was partially offset, however, by a 19% increase in demand from India to 49 Mt. Seaborne metallurgical coal prices have traded within a narrow range since April 2014, with spot price indices trading at historical lows throughout the year. Term contract prices have, however, maintained a consistent premium above these spot indices. The average quarterly HCC reference price decreased by 21% during 2014, to $125/tonne, reaching a low of $119/tonne in the fourth quarter.

Thermal coal

	2014	2013
Average market price ($/tonne, FOB Australia)	71	84
Average realised prices - Export Australia ($/tonne, FOB)	72	84
Average realised prices  - Export South Africa ($/tonne, FOB)	70	77
Average realised prices - Domestic South Africa ($/tonne)	19	19
Average realised prices - Colombia ($/tonne, FOB)	67	73

Thermal coal prices decreased during 2014 as supply growth in the market encountered softening demand growth, particularly in China. China's stronger hydro-electricity power performance displaced thermal coal in domestic generation and resulted in aggressive coal price discounting, ultimately dragging down the seaborne thermal coal price. The price of FOB Newcastle thermal coal decreased during the year by 27% from $85/tonne to a low of $62/tonne, ending the year at $65/tonne.

Operating performance

Australia and Canada

Australia and Canada achieved record metallurgical coal production of 20.9 Mt, chiefly attributable to a    step-change in performance at Grasstree following its implementation of the management operating system and improvements across all Australian open cut operations.

Australian export thermal coal production decreased by 17%, mainly the result of lower production at the Drayton open cut mine as the mine nears the end of its life.

Underground operations increased production by 11% to record their best-ever output. This was offset, however, by a 14% decrease in production at Moranbah North, from the prior year's record performance, owing to equipment design issues. Given the current market conditions, Moranbah North plans to rectify these issues during the planned longwall move in the third quarter of 2015.

Production at the open cut operations rose by 5%, mainly as a result of the productivity improvements at Dawson following the implementation of the management operating system and a recovery in production at Callide following the flooding and rail closures in the first quarter of 2013. Foxleigh open cut mine recorded a record output, reflecting productivity improvements.

South Africa

Export production at 18.2 Mt was 7% higher, with all operations delivering an increase in production. Trade mine productivity, measured through the percentage of benchmark overall equipment effectiveness, increased by 6% for the underground operations and 5% for the opencast operations.

Domestic production at 37.6 Mt decreased by 5%, primarily owing to Eskom reducing offtake from New Vaal, and planned production decreases at Kriel prior to a move to new mining areas.

Colombia

Our share of Cerrejón's output of 11.2 Mt was 2% higher than in 2013. In 2014, production was impacted by high dust emissions associated with the extended drought conditions that constrained production up until August, followed by heavy rainfall that led to production stoppages.

Operational outlook

Australia and Canada

Peace River Coal operations in Canada were placed on care and maintenance in December 2014 owing to weak market conditions. The Drayton South project which was intended to extend the life of Drayton mine has not yet received regulatory approval. A new development application and accompanying Environmental Impact Statement will be submitted early in 2015.

Metallurgical coal production in 2015 is expected to remain broadly flat at 20 Mt to 21 Mt as the increase in output from Australian underground operations and Grosvenor development coal will be offset by the suspension of activity at Peace River Coal.

South Africa

Export production is expected to be approximately 17 Mt to 18 Mt in 2015, as productivity improvement benefits are offset by logistics constraints and challenges associated with the ageing of the current coal reserves.

Colombia

Production is expected to be approximately 35 Mt (100% basis), subject to permitting and market conditions.

BASE METALS & MINERALS

COPPER

Key performance indicators
	Production volume	Sales volume	Realised price	Revenue	Underlying EBITDA	Underlying EBIT	Capex	ROCE
	kt	kt	c/lb	$m	$m	$m	$m
Copper	748	755	300	4,827	1,902	1,193	728	18%
Prior year	775	768	326	5,392	2,402	1,739	959	25%

Financial and operating overview

Copper recorded an underlying EBIT of $1,193 million, 31% lower, largely due to an 8% decline in the average realised copper price and a 2% decrease in sales volumes. Operating costs have increased owing to inflation, higher treatment and refining charges, and an increase in mine development at Los Bronces, partially offset by the benefits of a weaker Chilean peso. At the end of 2014, 164,700 tonnes of copper were provisionally priced at 287 c/lb. Provisional pricing plus final liquidation of copper sales resulted in a negative EBIT adjustment of $196 million for 2014, versus a negative EBIT adjustment of $92 million in 2013.

Markets

	2014	2013
Average market prices (c/lb)	311	332
Average realised prices (c/lb)	300	326

The average LME copper cash settlement price decreased by 6% in the year to 311 c/lb (2013: 332 c/lb). The copper price fell sharply in March due to fears of large scale destocking in China. Despite a rebound in the price following the Qingdao warehousing scandal in June, the recovery was tempered by a mild Chinese summer, leading to slower growth in the production of air conditioners, while usage of copper and copper alloys in Europe exhibited seasonal weakness. On the supply side, strong output from many of the largest producing mines and the ramp up of new production more than offset constraints in exports from Indonesia.

Operating performance

Production at Los Bronces was 404,500 tonnes, 3% lower than in 2013. Strong throughput performance was achieved as a result of higher mine-extraction rates improving the continuity of ore supply and debottlenecking of the plants. This was offset by expected lower grades. Material mined increased by 13% and reached record levels of 145 Mt, with waste stripping increasing by 14% to 62 Mt.

Anglo American's share of Collahuasi's production of 207,000 tonnes was 6% higher than the prior year. This was a reflection of continued high grades resulting from improved fleet and primary crusher performance allowing accelerated extraction from the Rosario pit, as well as throughput recovering from the 49-day shutdown of the SAG Mill 3 in 2013. Material mined also reached record levels at Collahuasi, increasing by 9% to 251 Mt (100% basis).

Production at El Soldado decreased by 37% following expected lower grades arising from the intersection with a geological fault encountered in 2013. Output at Mantos Blancos and Mantoverde decreased by 4% and 9% respectively, owing to expected lower grades.

Operational outlook

Production guidance for 2015 is in the range of 720,000 to 750,000 tonnes as lower throughput rates at     Los Bronces, resulting from constrained water supply during the first half of the year, are only partially offset by higher ore grades. Production is expected to be maintained at similar levels to 2014 at the other operations.

NICKEL

Key performance indicators
	Production volume	Sales volume	Realised price	Revenue	Underlying EBITDA	Underlying EBIT	Capex(1)	ROCE
	t	t	c/lb	$m	$m	$m	$m
Nickel	37,200	36,100	731	142	28	21	14	1%
Prior year	34,400	33,800	646	136	(37)	(44)	(28)	(2)%

⁽¹⁾ Cash capital expenditure for Nickel of $164 million (2013: $76 million is offset by the capitalisation of $150 million (2013: $104 million) of net operating cash inflows generated by Barro Alto, which has not yet reached commercial production.

Financial and operating overview

Nickel's underlying EBIT was $21 million, a $65 million improvement over the prior year (2013: $44 million loss), owing to a $24 million favourable non-cash balance sheet gain, as a result of a weakening in the Venezuelan bolivar (relating to remaining Minera Loma de Níquel creditors), higher pricing, favourable exchange rates and improved cash costs at Codemin. Underlying EBIT from the Barro Alto project continues to be capitalised as the asset is not yet in commercial production. Barro Alto's underlying EBIT, before capitalisation, was $152 million, a $208 million improvement over the prior year (2013: $56 million loss) owing to higher pricing, improved cash costs, gains on excess electricity sales and favourable exchange rates.

Markets

		2014		2013
Average market prices (c/lb)		765		680
	Average realised prices (c/lb)		731		646

The average LME nickel cash settlement price increased by 13% in the year to 765 c/lb (2013: 680 c/lb). Demand levels improved while supply was constrained due to a reduction in nickel pig iron (NPI) production in China following the Indonesian nickel ore ban, and reductions in output from certain other producers. Overall, nickel consumption increased by 6%, while supply decreased by 2%. The sizeable market surplus of 184,000 tonnes in 2013 was reduced to 43,000 tonnes by the end of 2014.

Operating performance

Nickel production increased by 8% as the improved performance at Barro Alto's furnaces and recovery from the operational issues experienced in 2013, more than offset the impact of the Line 2 rebuild which started in October 2014. At Codemin, output was 4% lower, reflecting the planned mining of lower grades.

Operational outlook

Production is expected to decline to a range of 20,000 to 25,000 tonnes in 2015, as a consequence of the rebuild of Barro Alto's two furnaces, thereafter increasing to between 40,000 and 45,000 tonnes in 2016.

NIOBIUM

Key performance indicators
	Production volume	Sales volume	Revenue	Underlying EBITDA	Underlying EBIT	Capex	ROCE
	t	t	$m	$m	$m	$m
Niobium	4,700	4,600	180	73	67	198	15%
Prior year	4,500	4,700	182	87	82	206	31%

Financial and operating overview

Underlying EBIT at Niobium decreased by 18% to $67 million (2013: $82 million). This resulted from higher cash costs, driven by inflation and escalation in the costs of labour, mining and contracted services, partly offset by reduced expenditure on project studies.

Markets

Global average niobium prices decreased slightly, due to the euro weakening against the US dollar and production capacity increasing in an environment of largely stable overall demand.

Operating performance

Production of 4,700 tonnes was 4% higher, mainly due to the mining of higher-grade ore and the start-up at the Boa Vista Fresh Rock (BVFR) project.

Operational outlook

Production from existing operations is expected to increase to 6,800 tonnes once BVFR has completed its ramp up.

PHOSPHATES

Key performance indicators
	Fertiliser production volume	Fertiliser sales volume	Price	Revenue	Underlying EBITDA	Underlying EBIT	Capex	ROCE
	kt	kt	$/tonne(1)	$m	$m	$m	$m
Phosphates	1,113	1,097	487	486	79	57	41	16%
Prior year	1,199	1,163	494	544	89	68	30	19%

⁽¹⁾    Average market price ($/tonne) MAP CFR Brazil.

Financial and operating overview

Underlying EBIT of $57 million was $11 million lower, mainly owing to lower sales prices and inflation, partly offset by favourable foreign exchange rates.

Markets

Average annual pricing in 2014 was broadly unchanged from 2013. In Brazil, demand for phosphate fertilisers totalled approximately 13.4 Mt, a 3% increase on the previous year, mainly as a result of increased production of soybean and corn crops.

Operating performance

Production of 1,113 kt of fertiliser was 7% lower than the prior year, mainly as a result of a reduction in throughput to optimise product quality, maintenance activities and a power outage.

Operational outlook

Fertiliser production over the next three years is expected to be broadly similar to 2014, with any             year-on-year variations relating to product mix optimisation (reflecting market demand) and major maintenance activities.

PLATINUM

Key performance indicators
	Equivalent refined production volume	Sales volume	Price	Revenue	Underlying EBITDA	Underlying EBIT	Capex	ROCE
	koz	koz	$/Pt oz(1)	$m	$m	$m	$m
Platinum	1,842	2,115	2,428	5,396	527	32	576	0%
Prior year	2,320	2,320	2,360	5,688	1,048	464	601	5%

⁽¹⁾    Average US$ basket price.

Financial and operating overview

Underlying EBIT decreased by $432 million to $32 million (2013: $464 million) as a consequence of the    five-month industrial action in South Africa, which had a material impact on production. Sales volumes were also impacted, though to a lesser extent, as sales commitments were met through the drawdown of both pipeline and refined product inventory.

Year-on-year cash operating costs per equivalent refined platinum ounce increased by 20% to $2,112 per ounce, owing primarily to lower production from strike-impacted mines that continued to incur fixed overhead costs during the period of industrial unrest and increased input costs, including the wage settlement which added approximately 9% to the cost of employment, and electricity costs. The impact of the strike was partially mitigated by applying the no-work-no-pay principle and implementing strict cost controls. The weaker rand also had a favourable impact on unit costs.

In addition to the higher operating costs, the drawdown of metal inventory during the year to fulfil sales commitments also impacted cost of sales adversely.

Markets

	2014	2013
Average platinum market price ($/oz)	1,385	1,487
Average palladium market price ($/oz)	803	725
Average rhodium market price ($/oz)	1,173	1,067
Average gold market price ($/oz)	1,266	1,410
US$ basket price - ($/Pt oz)	2,428	2,360
Rand basket price - (ZAR/Pt oz)	26,307	22,702

Platinum group metal (PGM) prices in 2014 reflected the impact of the strike, producers selling from normal working inventory and inventory built up ahead of the anticipated industrial action, and macro-economic factors negatively affecting prices in the second half. For the year as a whole, the average platinum market price decreased by 7% to $1,385 per ounce, with an average platinum price in the first half of $1,438 per ounce and in the second half of $1,335 per ounce. Palladium and rhodium market prices increased by 11% and 10% to $803 per ounce and $1,173 per ounce respectively, and the dollar basket price increased by 3% to $2,428 per ounce.

Operating performance

Total equivalent refined platinum production decreased by 21% to 1.84 million ounces (2013: 2.32 million ounces). The decline in production was primarily owing to the impact of the strike, which commenced on 23 January and ended on 24 June, and affected all of Platinum's managed underground mines. This resulted in a steep fall in output from Rustenburg, Amandelbult and Union mines and a loss of 424,000 ounces of platinum. The build-up to steady-state production in the third quarter resulted in a further loss of 108,000 ounces, bringing the total strike-related impact to 532,000 ounces. 

Production at Rustenburg and Union was also reduced following the planned restructuring and optimisation of these mines during 2013, and the closure of the last of the decline sections at Union mine during the fourth quarter of 2014, all of which accounted for a further reduction of 114,000 ounces.

These losses were partially compensated by strong performances from Mogalakwena mine and increases at some of Platinum's independently managed operations. Production from these operations rose by 2%, led by a 15% increase at Bokoni, 5% at BRPM and 4% at Kroondal.

The record production at Mogalakwena mine was due to higher head grades and increased concentrator throughput, supported by improved mining performance. On-mine production increased by 9% to 348,000 ounces, while toll concentrating activities at a third party concentrator yielded 22,000 ounces.

Refined platinum production was 21% lower at 1.89 million ounces (2013: 2.38 million ounces) owing to production shortfalls at the strike-affected operations. However, this was partially offset by a drawdown of pipeline metal inventory. The pipeline was steadily increased to normal operating levels by year end, once the mines had ramped up to full production. Refined palladium output decreased by 11%, while refined production of rhodium decreased by 22%, reflecting the industrial action, a different ore source mix from operations, and different pipeline processing times for each metal. Refined nickel production increased by 25% to 28,200 tonnes, which was boosted by an additional 2,000 tonnes from toll refining, resulting in an overall increase in base metal production to 47,600 tonnes, an increase of 10,000 tonnes.

Sales volumes exceeded production volumes owing to the drawdown of built-up metal inventory, but were 9% lower than 2013.

Operational outlook

As a result of the successful post-strike ramp up of operations during the third quarter of 2014, Platinum is expected to return to baseline production (equivalent refined and refined production) and sales of between 2.3 million and 2.4 million platinum ounces in 2015, with reduced output from the decline closures at Union mine in the fourth quarter of 2014 being offset by improved output through the implementation of operational improvement plans.

DE BEERS

Key performance indicators
	Production volume (1)	Consolidated Sales Volume (2)	Price (3)	Revenue	Underlying EBITDA	Underlying EBIT	Capex	ROCE
	'000 carats	'000 carats	$/ct	$m	$m	$m	$m
De Beers	32,605	32,730	198	7,114	1,818	1,363	689	15%
Prior year	31,159	29,277	198	6,404	1,451	1,003	476	11%

⁽¹⁾    Represents diamond production on a 100% basis and is not directly comparable to consolidated sales volumes.

⁽²⁾    Sales volumes (100% basis) were 34.4 million carats in 2014 (2013: 29.8 million carats).

⁽³⁾    Average realised price.

Financial and operational overview

De Beers' underlying EBIT increased by 36% to $1.4 billion (2013: $1.0 billion). The increase was due primarily to solid demand across key markets, particularly the US, which resulted in strong revenue growth. Operating costs benefited from favourable exchange rate movements, which offset underlying inflationary pressures.

De Beers' total sales rose 11% to $7.1 billion, with rough diamond sales up 12% to $6.5 billion. Higher rough diamond revenue was driven principally by a 12% increase in consolidated sales volumes to 32.7 million carats. Average realised diamond prices were in line with 2013 at $198/carat, driven by 5% higher average rough price index in 2014, offset by a marginally lower product mix.

Markets

Consumer demand for diamond jewellery showed positive growth in local currency terms in all the main markets in 2014. The economic recovery gained momentum in the US, the largest consumer diamond market, which resulted in healthy diamond jewellery sales growth throughout the year. Growth in diamond jewellery demand in China continued, albeit at more modest levels, reflecting slowing economic growth. Macro-economic conditions in India started improving in the final quarter of 2014, following the election of a new government earlier in the year, which boosted consumer confidence, lifting hopes that growth will return.

Polished prices ended the year broadly in line with where they started in 2014, with the increase in the first half of the year being offset by a reduction in the second half. Rough diamond prices increased over the course of 2014, albeit with some softness experienced towards the end of 2014 and early in 2015.

In July, De Beers announced details of a new approach to its rough diamond Sightholder sales contracts. The new contract period, which will start in March 2015 and run for three years, with an option for De Beers to extend, requires, amongst other things, its rough diamond customers to comply with more rigorous financial and governance criteria in order to be eligible for supply.

Operating performance

Mining and manufacturing

De Beers' full year production increase of 5% to 32.6 million carats (2013: 31.2 million carats) reflected a strong performance from Debswana, partly offset by slightly lower production at Snap Lake and Kimberley, with all other regions performing broadly in line with 2013.

Debswana benefited from greater efficiency at its processing plants following operational improvement initiatives, producing 24.2 million carats (Orapa 12.9 million and Jwaneng 11.3 million). Performance was enhanced by recovery from the carry-over effects through 2012 and 2013 of the Jwaneng slope failure    clean-up as well as the Orapa No. 1 plant maintenance stoppage that occurred in 2013. Jwaneng Cut-8 waste mining is progressing well, with just over 50% of the 500 million tonnes of waste stripping required to expose the ore now complete. During 2018, Cut-8 will become the main source of ore for Jwaneng and extend the life of one of the world's richest diamond mines to at least 2033, providing access to an estimated 91 million tonnes of ore, containing approximately 110 million carats⁽⁴⁾.

In Namibia, production was marginally higher at 1.9 million carats (Namdeb (land operations) 0.6 million and Debmarine Namibia 1.3 million), driven by strong operational improvement by the MV Mafuta vessel. Namdeb production was broadly in line with the previous year, despite a 19-day strike in the third quarter. Namdeb Holdings has received a 15-year licence extension for both land and sea operations to 2035.

In South Africa, a 2% decrease in output to 4.6 million carats (Venetia 3.2 million, Voorspoed 0.7 million and Kimberley 0.7 million), was principally due to lower grades at Kimberley.

In Canada, production was slightly lower at 1.8 million carats (Snap Lake 1.2 million and Victor 0.6 million). A decline in production at Snap Lake of 0.1 million carats was due to the impact of flooding, forest fire smoke protocols, and reviewing and implementing revised ground support standards. Work continues to optimise Snap Lake to enable economic access to the promising, though challenging, orebody.

Element Six (E6) enjoyed a year of solid growth, with a strong performance in the synthetic industrial diamond product groups, both for abrasives and advanced technology applications. This growth was offset partially by weakness in tungsten carbide sales in the first six months. In order to continue improving customer service and operating efficiencies, E6 announced in April that it would close its plant in Robertsfors, Sweden, to focus on its primary plants in Shannon, Ireland and Springs, South Africa.

Brands

Forevermark saw strong growth in 2014, with retail outlets up by 20%. The brand is now available in more than 1,500 outlets in 34 markets. Since the launch of Forevermark, more than one million diamonds have received the Forevermark inscription and unique identification number.

In 2014, De Beers Diamond Jewellers opened a new store in Selfridges in London and a concession in Saks Fifth Avenue, New York. There are now 35 De Beers stores in 12 key consumer markets around the world.

Operational Outlook

Diamond production (on a 100% basis) for 2015 is forecast to be in the range of 32 to 34 million carats, subject to market demand.

⁽⁴⁾ Scheduled Inferred Resources (below 401 metres below ground level) included in the Cut-8 estimates constitute 81% (89.3 Mct) of the estimated carats. Not all Inferred Resources may be upgraded to Ore Reserves, even after additional drilling. The numbers given are scheduled tonnes and carats as per the 2014 Life of Mine plan and reflect changes made to the Cut-6 and Cut-7 designs following the Cut-6 slope failure in 2013. The scheduled tonnes and carats exclude the fourth pipe that is intersected during Cut-8 and stockpiled for treatment at the end of the 2014 Life of Mine plan.

CORPORATE AND OTHER

Key performance indicators
	Revenue	Underlying EBITDA	Underlying EBIT	Capex
	$m	$m	$m	$m
Segment	1,859	(88)	(215)	42
Prior year	1,800	(257)	(398)	50
Other Mining and Industrial	1,854	162	62	2
Prior year	1,795	81	(13)	48
Exploration	-	(180)	(181)	-
Prior year	-	(205)	(207)	1
Corporate activities and unallocated costs	5	(70)	(96)	40
Prior year	5	(133)	(178)	1

Financial and operating overview

Other Mining and Industrial

Underlying EBIT of $62 million was an improvement on the underlying operating loss of $13 million in 2013, mainly attributable to an improved performance from the Lafarge Tarmac joint venture.

Lafarge Tarmac joint venture

Anglo American's share in the underlying EBIT of the joint venture was $78 million, a $69 million increase over 2013. Improved market conditions, combined with synergy delivery and efficiency initiatives, have led to improved margins and cash generation. The outlook for the UK construction market remains positive and further growth is expected in 2015.

Following the announcement on 7 July 2014 of an agreement in principle, the Group reached a binding agreement on 24 July 2014 to sell its 50% ownership interest in Lafarge Tarmac to Lafarge SA (Lafarge) for a minimum value of £885 million (approximately $1.35 billion at present) in cash, on a debt- and cash-free basis, and subject to other customary working capital adjustments. The sale is subject to a number of conditions, including the completion of the proposed merger of Lafarge and Holcim Limited.

Exploration

Anglo American exploration expenditure of $181 million represented a decrease of 13%, following reductions in diamonds, metallurgical coal and nickel exploration costs. Decreases are mainly attributable to an overall reduction in drilling activities.

Corporate activities and unallocated costs

Underlying EBIT was a $96 million loss, a decrease of $82 million.

Corporate costs decreased by 24% ($118 million), of which $44 million resulted from corporate cost savings initiatives embedded during the year. Further reductions were mainly owing to a lower share scheme charge of $27 million (a decrease of 39%), and a foreign exchange gain of $19 million compared to 2013. This was partly offset by a 20% reduction in the allocation of corporate costs to business units of $59 million, reflecting the lower corporate cost base.

Financial review of Group results for the year ended 31 December 2014

Summary

Anglo American reported underlying earnings of $2.2 billion (2013: $2.7 billion), with underlying EBIT decreasing by 25% to $4.9 billion.

Falling prices across most of our commodities ($2.4 billion impact⁽¹⁾), and the five month strike at Platinum ($0.8 billion impact) more than offset the increases in underlying EBIT, most notably at De Beers.

The Group's results also benefited from currency fluctuations in the countries where the operations are based. The strengthening of the US dollar against the South African rand and the Australian dollar resulted in a $1.3 billion favourable exchange variance in underlying EBIT compared with 2013. CPI inflation had an adverse $0.8 billion impact on underlying EBIT. Further gains were also made through moderation of input costs and cost reduction initiatives.

Net debt increased by $2.2 billion to $12.9 billion (2013: $10.7 billion) and total capital expenditure remained broadly flat at $6.0 billion (2013: $6.1 billion).

Operational performance (production/costs)

In contrast to the financial performance, operational performance across the majority of our commodities improved compared with the prior year. Production at Kumba increased by 14%, with a strong performance at both Kolomela and Sishen, and metallurgical coal production at Coal - Australia and Canada increased by 12% driven by improved operating equipment efficiencies at Grasstree. In addition, Minas-Rio produced 0.7 Mt (wet basis) in 2014 after commencing operations in the fourth quarter and reaching first ore on ship on 25 October. Platinum production (equivalent refined) was down 21%, largely driven by the 532,000 ounces lost as a result of the strike affecting three sites in South Africa.

Costs at Coal - Australia and Canada were down 8% largely in relation to labour, contractors and maintenance, while at Nickel lower electricity tariffs resulted in a 5% decrease in production costs. Costs at our South African operations increased as a result of inflationary pressures in the country, although underlying cost reduction initiatives, specifically in relation to corporate restructuring, have made progress.

Platinum unit costs increased by 20% from 2013, owing to the continued incurrence of costs during the strike in the first half of the year. However, during the strike, lower variable costs as a result of the 'no work, no pay policy' resulted in cost savings of $300 million.

⁽¹⁾  Excludes De Beers volume/price and impact of the strike at Platinum.

Income Statement

Underlying EBIT

$ million	Year ended 31 Dec 2014	Year ended 31 Dec 2013
Iron Ore and Manganese	1,957	3,119
Coal(1)	458	587
Copper	1,193	1,739
Nickel	21	(44)
Niobium(1)	67	82
Phosphates(1)	57	68
Platinum	32	464
De Beers	1,363	1,003
Corporate and other(1)	(215)	(398)
Total	4,933	6,620

⁽¹⁾  Refer to note 4 in the Condensed financial statements for changes in reporting segments. Comparatives have been reclassified to align with current year presentation.

Underlying Earnings

Group underlying earnings were $2.2 billion, a 17% decrease (2013: $2.7 billion).

				Year ended 31 Dec 2014
$ million		Underlying EBIT		Net finance costs and income tax expense		Non-controlling interests		Underlying earnings
Iron Ore and Manganese		1,957		(583)		(657)		717
	Coal(1)		458		(154)		(8)		296
	Copper		1,193		(482)		(218)		493
	Nickel		21		(15)		-		6
	Niobium(1)		67		(37)		-		30
	Phosphates(1)		57		(22)		-		35
	Platinum		32		(14)		7		25
	De Beers		1,363		(264)		(176)		923
Corporate and other(1)		(215)		(111)		18		(308)
Total		4,933		(1,682)		(1,034)		2,217

⁽¹⁾  Refer to note 4 in the Condensed financial statements for changes in reporting segments. Comparatives have been reclassified to align with current year presentation.

Net finance costs

Net finance costs, before special items and remeasurements, excluding associates and joint ventures, were $256 million (2013: $276 million). The decrease was due to lower average LIBOR rates on borrowings and increased capitalised interest, offset by lower interest income.

Tax

The effective rate of tax, before special items and remeasurements including attributable share of associates' and joint ventures' tax, decreased from 32.0% in 2013 to 29.8%. This lower rate was due to the impact of certain prior year adjustments, the remeasurement of withholding tax provisions across the Group, and the recognition of previously unrecognised losses. In future periods, it is expected that the effective tax rate will remain above the United Kingdom statutory tax rate.

Reconciliation to loss for the period from underlying earnings

$ million	Year ended 31 Dec 2014	Year ended 31 Dec 2013
Underlying earnings	2,217	2,673
Operating special items	(4,374)	(3,211)
Operating remeasurements	(1)	(550)
Non-operating special items	(385)	(469)
Financing special items and remeasurements	36	(130)
Special items and remeasurements tax	2	587
Non-controlling interests on special items and remeasurements	38	214
Share of associates' and joint ventures' special items and remeasurements	(46)	(75)
Loss for the financial period attributable to equity shareholders of the Company	(2,513)	(961)
Underlying earnings per share (US$)	1.73	2.09

Special items and remeasurements

Special items and remeasurements, after tax and non-controlling interests, primarily relate to impairments in respect of the Minas-Rio iron ore project ($3.5 billion, post-tax), Peace River Coal and other operations within the Coal segment ($0.3 billion, post-tax), and costs in respect of the closure of the Drayton coal mine in Australia ($0.2 billion, post-tax). Full details of the special items and remeasurements charges are to be found in note 7 to the Condensed financial statements.

Balance Sheet

Net assets of the Company totalled $32.2 billion at 31 December 2014 (31 December 2013: $37.4 billion). This decrease resulted from impairments of $3.9 billion, the impact of the weaker South African rand and Australian dollar of $1.9 billion, depreciation of $2.8 billion and net drawdown of additional debt of $1.8 billion. This was partially offset by capital expenditure for the year of $6.0 billion, and capitalised interest of $0.4 billion.

Group ROCE

Attributable ROCE was 8% in 2014 (2013: 11%) as a consequence of weaker commodity prices, alongside ongoing capital expenditure, primarily at Minas-Rio and Grosvenor, partially offset by depreciating foreign exchange and a lower proportion of post-tax earnings attributable to non-controlling interests. The 8% in 2014 would have been 10% at 30 June 2013 exchange rates and commodity prices. Average attributable capital employed increased from $39.7 billion in 2013 to $40.4 billion in 2014. No improvement to ROCE has been realised as a result of the impairments at Minas-Rio and Coal, in line with the ROCE methodology as described on page 203 of the Annual Report.

Net debt $ million	2014	2013
Opening net debt	(10,652)	(8,510)
EBITDA(1)	7,104	8,806
Working capital movements	9	(1,121)
Other cash flows from operations	(164)	44
Cash flows from operations	6,949	7,729
Capital expenditure including related derivatives(2)	(6,018)	(6,075)
Cash tax paid	(1,298)	(1,201)
Dividends from associates, joint ventures and financial asset investments	460	264
Net interest	(473)	(533)
Dividends paid to non-controlling interests	(823)	(1,159)
Attributable free cash flow	(1,203)	(975)
Dividends paid to Company shareholders	(1,099)	(1,078)
Tax on sale of non-controlling interest in Anglo American Sur	-	(395)
Disposals	44	112
Purchase of shares by subsidiaries for employee share schemes	(111)	(92)
Other net debt movements	150	286
Total movement in net debt	(2,219)	(2,142)
Closing net debt	(12,871)	(10,652)

⁽¹⁾        EBITDA is underlying EBITDA, as described in note 4 to the Condensed financial statements, less EBITDA of associates and joint ventures.

⁽²⁾        Please see note 11 to the Condensed financial statements for the definition of capital expenditure.

Liquidity and funding

At 31 December 2014, the Group had undrawn committed bank facilities of $8.4 billion and cash of $6.7 billion. The Group's forecasts and projection, taking account of reasonably possible changes in trading performance, indicate the Group's ability to operate within the level of its current facilities for the foreseeable future.

At 31 December 2014, Anglo American's ratings were Moody's Baa2 (negative outlook) and Standard & Poor's BBB (negative outlook).

Net debt

Net debt is a measure of the Group's financial position. The Group uses net debt to monitor the sources and uses of financial resources, the availability of capital to invest or return to shareholders, and the resilience of the balance sheet. Net debt is calculated as total borrowings less cash and cash equivalents (including derivatives which provide an economic hedge of debt). The reconciliation in the table above is the method by which management reviews movements in net debt and comprises key movements in cash and any significant non-cash movements on net debt items.

Net debt increased by $2.2 billion to $12.9 billion (2013: $10.7 billion) and net debt to total capital at 31 December 2014 was 28.6%, compared with 22.2% at 31 December 2013.

Cash flow from operations

In 2014, there was a cash reduction in working capital of $9 million compared with 2013. This was mainly driven by a $576 million decrease in debtors, reflecting the receipt of high year end 2013 debtors at Copper and Kumba following a production outperformance at the end of the year. There was no similar build in debtors at the end of that year. This reduction has been offset by an increase in stock of $129 million, primarily due to rail and port constraints at Kumba, as well as stock increases at De Beers, partially offset by  reductions in high stock levels due to strike action at Platinum. A decrease in creditors of $438 million, driven by working capital requirements at Cerrejón, offset the remaining year-on-year working capital movement.

Attributable free cash flow

Total capital expenditure remained broadly flat at $6.0 billion (2013: $6.1 billion). Capital expenditure is shown net of proceeds on the disposal of property, plant and equipment (2014: $71 million, 2013: $140 million) and is net of capital expenditure funded by the minority partner at Quellaveco (2014: $42 million, 2013: $46 million). Prior year comparatives have been re-presented to align with current year presentation.

Net debt is expected to continue to rise in 2015, as expenditure on the Group's projects offsets cash generated from operations.

The majority of dividends paid to non-controlling interests of $823 million (2013: $1,159 million) were to minority shareholders of Copper and Kumba, where external dividends of $116 million and $674 million were paid respectively (2013: $474 million and $663 million).

Disposals are mainly due to the receipt of deferred proceeds related to the formation of the Lafarge Tarmac joint venture.

Dividends

Analysis of dividends US cents per share	Year ended 31 Dec 2014	Year ended 31 Dec 2013
Interim dividend	32	32
Recommended final dividend	53	53
Total dividends	85	85

Anglo American's dividend policy is to provide a base dividend that will be maintained or increased through the cycle. Consistent with the policy, the Board has recommended to maintain the final dividend of 53 US cents per share, giving a total dividend of 85 US cents per share for the year (2013: 85 US cents per share), subject to shareholder approval at the Annual General Meeting to be held on 23 April 2015.

The maintenance of the level of the dividend reflects the Board's confidence in the underlying business. This recommendation is consistent with the commitment to have a disciplined balance between the maintenance of a strong investment grade rating, returns to shareholders and sequencing of future investment in line with resulting funding capacity. From time to time any cash surplus to requirements will be returned to shareholders.

Projects

In 2014, capital expenditure amounted to $6.0 billion, of which $3.2 billion was committed to expansionary projects and $2.0 billion to sustaining our existing business. Expansionary capex remains concentrated on the delivery of our portfolio of major projects (Minas-Rio, Barro Alto, and Grosvenor). As these projects transition into operational production, expansionary capital will decrease, which will enable the Group to further align its level of growth investment with prevailing commodity market conditions.

Projects in ramp up in 2014

In addition to delivering first ore on ship at Minas-Rio in October, the Group also completed the Boa Vista Fresh Rock (BVFR) niobium and Cerrejón P40 thermal coal projects in 2014.

The BVFR project delivered first production in November, and is expected to reach full nameplate capacity in 2017. When fully ramped up, production from existing operations is expected to increase to 6,800 tonnes of niobium per annum (2014: 4,700 tonnes).

The Cerrejón P40 project was also completed, increasing infrastructure capacity for coal exports. Ramp up of capacity at the shiploaders will continue in 2015, although production capacity is expected to be constrained at 35 million tonnes per annum (Mtpa) owing to market and operational constraints.

Projects advanced in 2014

The Grosvenor metallurgical coal project in Queensland advanced towards its target of first longwall coal production in late 2016. Once complete, the project is expected to deliver 5 Mtpa of high-quality metallurgical coal for the seaborne market. The Group is also evaluating surface infrastructure options to fully capture the value from the Moranbah - Grosvenor complex.

At Venetia in South Africa, De Beers continues to advance the development of the underground project, with the expectation of first underground production in 2021. In Nickel, the rebuild of the first of Barro Alto's two furnaces is under way, with the expectation that the plant will reach nameplate capacity during 2016.

Projects initiated in 2014

In line with its increased focus on capital discipline and responding to market conditions, the Group approved

relatively few new projects in 2014.

At De Beers, the Gahcho Kué project commenced construction following receipt of necessary permits and licences and is expected to deliver an estimated 52 million carats (100% basis) over its 13 year life from the second half of 2016. De Beers' 51% share of Gahcho Kué's capital expenditure is approximately $0.5 billion. The Group also supported investment in a new treatment plant at the Letlhakane diamond mine in Botswana, a low-risk, high-return project designed to process the extensive tailings mineral resource that has been deposited over 30 years. De Beers' 19.2% share of capital expenditure is less than $0.1 billion.

Acquisition and disposal activity

In July, Anglo American announced that it had reached a binding agreement to sell its 50% holding in Lafarge Tarmac to Lafarge SA (Lafarge) for a minimum value of £885 million (approximately $1.35 billion at present) in cash, on a debt- and cash-free basis, and subject to other customary working capital adjustments. The sale is subject to a number of conditions including the completion of the proposed merger of Lafarge and Holcim Limited. 

In December, the Group also gave notice to the Peruvian government to terminate the 2007 privatisation agreement, which has resulted in Anglo American withdrawing from the exploration-phase Michiquillay copper project.

For further information, please contact:

Media		Investors
UK James Wyatt-Tilby Tel: [phone]		UK Paul Galloway Tel: [phone]
Emily Blyth Tel: [phone]		Edward Kite Tel: [phone]
South Africa Pranill Ramchander Tel: [phone] Shamiela Letsoalo Tel: [phone]		Sarah McNally Tel: [phone]

Notes to editors:

Anglo American is a global and diversified mining business that provides the raw materials essential for economic development and modern life. Our people are at the heart of our business. It is our people who use the latest technologies to find new resources, plan and build our mines and who mine, process and move and market our products - from bulk commodities and base metals to precious metals and diamonds (through De Beers) - to our customers around the world. Our diversified portfolio of products spans the economic development cycle and, as a responsible miner, we are the custodians of precious resources. We work together with our key partners and stakeholders to unlock the long-term value that those resources represent for our shareholders, but also for the communities and countries in which we operate - creating sustainable value and making a real difference. Our mining operations, growth projects and exploration and marketing activities extend across southern Africa, South America, Australia, North America, Asia and Europe.

www.angloamerican.com

Webcast of presentation:

A live webcast of the results presentation, starting at 9.00am UK time on 25 July 2014, can be accessed through the Anglo American website at www.angloamerican.com

Note: Throughout this results announcement, '$' denotes United States dollars and 'cents' refers to United States cents; EBIT includes attributable share of associates' and joint ventures' EBIT and is before special items and remeasurements, unless otherwise stated; special items and remeasurements are defined in note 6 to the Condensed financial statements. Underlying earnings, unless otherwise stated, is calculated as set out in note 10 to the Condensed financial statements. Earnings before interest, tax, depreciation and amortisation (EBITDA) is EBIT before special items and remeasurements, depreciation and amortisation in subsidiaries and joint operations and includes attributable share of EBITDA of associates and joint ventures. 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 and acquisition strategy, plans and objectives of management for future operations (including development plans and objectives relating to Anglo American's products, production forecasts and reserve and resource positions), are forward-looking statements. 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 impact of foreign currency exchange rates on market prices and operating costs, the availability of sufficient credit, the effects of inflation, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or safety, health, environmental or other types of regulation in the countries where Anglo American operates, conflicts over land and resource ownership rights and such other risk factors identified in Anglo American's most recent Annual Report. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this 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 SWX Swiss Exchange, the Botswana Stock Exchange and the Namibian Stock Exchange and any other applicable regulations) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Anglo American's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Nothing in this 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 presents the views of those third parties, though these may not necessarily correspond to the views held by Anglo American.

Click on, or paste the following link into your web browser, to view the associated PDF document:

 http://www.rns-pdf.londonstockexchange.com/rns/8115E_1-2015-2-12.pdf

 

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