Anglo American interim results to 30 June 2013

RNS Number : 2020K

Anglo American PLC

26 July 2013

HALF YEAR FINANCIAL REPORT

for the six months ended 30 June 2013

26 July 2013

Anglo American announces underlying EBITDA⁽¹⁾ of $4.7 billion and underlying operating profit⁽²⁾ of $3.3 billion for the half year

Financial results impacted by weaker prices, partially offset by exchange gains and improved production

· Group underlying operating profit of $3.3 billion, a 15% decrease

· Underlying earnings⁽³⁾ of $1.3 billion, underlying EPS of $0.98

· Profit attributable to equity shareholders⁽⁴⁾ of $0.4 billion

· Net debt⁽⁵⁾ of $9.8 billion at 30 June 2013

· Attributable ROCE⁽⁶⁾ of 11%

Safety

· Eight employees and contractors lost their lives, and a further two remain missing, in work related incidents. Our safety programmes continue to drive for zero harm, focusing on operational risk management and learning from incidents

Disciplined capital allocation

· Interim dividend maintained at 32 US cents per share, reflecting the Board's commitment to maintaining an investment grade rating and to providing a base dividend, which will be maintained or increased through the cycle

· 2013 capital expenditure reduced by $1.0 billion reflecting deferrals of spending in light of current market environment and more stringent capital allocation framework

Cash flow uplift of $1.3 billion p.a. targeted by 2016, with further potential to drive attributable⁽⁶⁾ ROCE in excess of 15% target

· New business process model to drive clear accountability and a step change in operational performance and project execution

· Commercial and marketing overlay target of $500 million p.a. (including $100 million from supply chain)

· Organisational structure and overhead savings of $500 million p.a. targeted

· Rigorous capital allocation focused on value realisation - $300 million p.a. targeted savings from early stage project studies

· Achieving the right balance between value adding growth and shareholder returns

Operational performance

· Solid operational performance and strategic focus on margin preservation partially offset substantially lower commodity prices and the impact of industrial action

· Kumba Iron Ore - continued strong performance at Kolomela offset the impact of Sishen strike and higher waste stripping

· Metallurgical Coal - improved productivity and cost reduction initiatives drove an 18% decrease in unit costs at the Australian export operations partially offsetting a 21% decline in export metallurgical coal prices

· Copper - improved efficiency and recovery in production from Los Bronces and Collahuasi resulted in a 7% increase in production, helping to achieve broadly flat unit costs, despite the high mining inflation environment

· Platinum - restructuring proposals consultation process concluded with the South African Department of Mineral Resources (DMR), and the section 189 Labour Relations Act process resumed on 10 June 2013

Project update

· Minas-Rio 26.5 Mtpa iron ore pellet feed (wet tonnes) (Brazil) - progress in line with plan; FOOS end of 2014

· Grosvenor 5.0 Mtpa Metallurgical Coal (Australia) - capital costs of $1.95 billion, an increase of $0.25 billion primarily due to geotechnical changes; longwall production end of 2016

HIGHLIGHTS US$ million, except per share amounts	6 months ended 30 June 2013	6 months ended 30 June 2012⁽⁸⁾	Change
Group revenue including associates and joint ventures⁽⁷⁾	16,193	16,408	(1)%
Operating profit including associates and joint ventures before special items and remeasurements⁽²⁾	3,262	3,826	(15)%

Underlying earnings⁽³⁾	1,250	1,738	(28)%

Underlying EBITDA⁽¹⁾	4,709	5,067	(7)%

Net cash inflows from operating activities	3,167	2,665	19%

Profit before tax⁽⁴⁾	1,994	3,035	(34)%

Profit for the financial period attributable to equity shareholders⁽⁴⁾	403	1,254	(68)%

Earnings per share (US$):
Basic earnings per share⁽⁴⁾	0.31	1.02	(70)%
Underlying earnings per share⁽³⁾	0.98	1.41	(30)%
Dividend per share	0.32	0.32	-
Attributable ROCE⁽⁶⁾	11%	14%	(3)%

⁽¹⁾Underlying earnings before interest, tax, depreciation and amortisation (underlying EBITDA) is operating profit before special items and remeasurements, depreciation and amortisation in subsidiaries and joint operations and includes attributable share of underlying EBITDA of associates and joint ventures. See note 2 to the Condensed financial statements.

⁽²⁾Underlying operating profit includes attributable share of associates' and joint ventures' operating profit (before attributable share of associates' and joint ventures' interest, tax and non-controlling interests) and is before special items and remeasurements, unless otherwise stated. See note 2 to the Condensed financial statements. For the definition of special items and remeasurements see
note 4 to the Condensed financial statements.

⁽³⁾ See notes 3 and 8 to the Condensed financial statements for basis of calculation of underlying earnings.

⁽⁴⁾Stated after special items and remeasurements. See note 4 to the Condensed financial statements.

⁽⁵⁾Net debt includes related hedges and net debt in disposal groups. See note 11 to the Condensed financial statements.

⁽⁶⁾Attributable ROCE is the annualised underlying operating profit on adjusted capital employed attributable to equity shareholders of Anglo American, and therefore excludes the portion of the annualised underlying operating profit and capital employed attributable to non-controlling interests in operations where Anglo American has control but does not hold 100% of the equity. Adjusted capital employed is the average of net assets excluding net debt and financial asset investments, adjusted for remeasurements of a previously held equity interest as a result of business combination and impairments incurred in the current year.

⁽⁷⁾ Includes the Group's attributable share of associates' and joint ventures' revenue of $1,788 million (six months ended 30 June 2012: $2,772 million). See note 2 to the Condensed financial statements.

⁽⁸⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Mark Cutifani, Chief Executive, said: "The first half of 2013 has been characterised across the mining industry by continuing downward pressure on commodity prices, driven by uncertain short term prospects in many of the world's major economies, combined with cost inflation which has resulted in significant margin compression. Some improvement in Anglo American's production performance and depreciating producer country currencies have worked to partially offset these pressures, resulting in a 15% decrease in underlying operating profit to $3.3 billion. Underlying EBITDA was 7% lower at $4.7 billion, while underlying earnings decreased by 28% to $1.3 billion.

As always, safety is my first priority. Whilst we continue to achieve significant safety improvements at Anglo American, we must always focus on a safe and healthy workplace. Through our safety programmes we continue to drive for zero harm, focusing primarily on operational risk management and learning from incidents. I am saddened to report that in the first six months of the year, eight of our people lost their lives and my sincerest condolences go out to their families, friends and colleagues. A further two people involved in a fatal incident at Amapá's Santana port are still missing.

Turning to my review of Anglo American, my first few months have reinforced my initial impression about the value potential of this company. An in depth review of all of our 95 operations and projects is well under way and will be completed over the next three months, but it is already clear that we have a very strong platform of assets and talent from which we can build. Preliminary feedback also indicates that we do not require wholesale change to our portfolio, but we do need to become much more disciplined, more effective and more efficient to drive a step change in delivery to extract greater value and returns for our shareholders.

The need for a step change in performance is ever clearer against the headwinds of the macro environment. Over recent months, the defining traits of the world around us have continued to be led by volatility and uncertainty around the short to medium term prospects of many of the major economies. In this context, we also need a fundamental shift in the organisation to a more commercial, value-oriented philosophy to focus on how we deliver value now whilst we retain exposure to a more positive longer term trajectory.

Consistent with these objectives, the review process is working towards a comprehensive action plan focusing on a number of different areas which I expect will deliver $1.3 billion p.a. of cash flow uplift by 2016, including:

- defining a new approach and rigour to the capital allocation process, resulting in more disciplined growth with reduced upfront capital outlay. Projects will need to clear rigorous stage gates and only once we have a high level of confidence that it is the best use of our resources will capital be deployed ‒ we are targeting an attributable ROCE in excess of 15% by 2016 and a $300 million p.a. saving from early stage project studies, also by 2016;

- delivering an effective commercial overlay to leverage our production scale and diversification ‒ we are targeting a $500 million p.a. operating profit uplift by 2016, including a $100 million contribution from supply chain improvements;

- creating a clear and efficient organisation structure motivated and incentivised by the right value metrics in order to promote the right behaviour, enable accountability and remove unnecessary overheads ‒ we are targeting a $500 million p.a. cost saving by 2016;

- ensuring that at all times we live up to our commitments and responsibilities to our stakeholders.

We have also identified additional value through the implementation of our new business process model. This is expected to deliver meaningful cost and production gains across our portfolio, with more consistent standards and performance across the Group, while we see further value upside from the ongoing asset review which we are in the process of quantifying. We are pushing hard across all these fronts and will provide a further update on our progress and plans before the end of this year."

Review of the six months ended 30 June 2013

Financial results

Anglo American's underlying earnings for the first half of 2013 were $1.3 billion, 28% lower than for the same period in 2012, with an underlying operating profit of $3.3 billion, down 15% from $3.8 billion. Continuing weak global economic growth coupled with increases in seaborne commodity supply have led to a further decline in commodity prices. The depressed price environment in combination with increasing unit costs across most of the Group's operations resulted in decreased earnings.

Iron Ore and Manganese recorded an underlying operating profit of $1,653 million, 10% lower than the corresponding period in 2012. This was driven by a 7% decrease in achieved iron ore prices at Kumba and higher costs, primarily due to the ramp-up in waste volumes. This was partially offset by higher prices achieved at Samancor and a lower underlying operating loss at Iron Ore Brazil.

Metallurgical Coal delivered an underlying operating profit of $98 million, a 38% decrease on the first half of 2012, primarily due to the impact of lower realised export prices. This was partially offset by strong cost management resulting in an 18% decrease in unit cash costs at the Australian export operations and a self-insurance recovery of $73 million.

Thermal Coal's underlying operating profit of $247 million was 43% lower than the corresponding period in 2012 due to decreased realised prices and lower sales volumes from Cerrejón following a strike in the first quarter of 2013. This was partially offset by the devaluation of the rand against the dollar.

Copper delivered an underlying operating profit of $635 million, 38% lower than for the first half of 2012, due to a 14% lower realised average copper price and increased mine development costs. Sales volumes increased by 7% mainly driven by the ramp-up of the Los Bronces expansion project.

Nickel reported an underlying operating loss of $11 million. Underlying operating profit in the prior year, however, included a self-insurance recovery of $57 million. Profit from the Barro Alto project continues to be capitalised as the asset is not yet in commercial production.

Platinum generated an underlying operating profit of $187 million, 123% higher than the corresponding period in 2012, primarily driven by a favourable exchange variance and higher sales volumes. A positive stock adjustment of $38 million (30 June 2012: $172 million) relating to the annual physical stock count contributed to the underlying operating profit.

Diamonds recorded an underlying operating profit of $571 million in the period compared with $249 million in the first half of 2012. The increase in underlying operating profit was primarily due to the Group's increased ownership. In addition, results have benefited from favourable exchange rate movements and improved realised pricing, partly offset by acquisition depreciation of $80 million.

Niobium and Phosphates' underlying operating profit was $90 million, 25% higher than the first half of 2012. Phosphates underlying operating profit was 69% higher owing to lower cash costs driven by increased cost discipline and lower sulphur prices, while Niobium generated an underlying operating profit 4% lower following production decreases, reflecting declining ore quality.

Other Mining and Industrial Non-core's underlying operating loss was $30 million. Amapá's underlying operating profit in 2013 is for the benefit of the purchaser and has been excluded from the Group results. In the first half of 2012, Amapá generated an underlying operating profit of $110 million largely due to the reversal of penalty provisions which was not repeated in 2013. The Group's share of Lafarge Tarmac's underlying operating loss amounted to $16 million and was in line with that incurred by Tarmac Quarry Materials in the first half of 2012. Scaw South Africa was disposed of in the second half of 2012.

Production

Production increases were delivered at the Metallurgical Coal, Copper, Diamonds and Phosphates businesses and for manganese. Other businesses were impacted by a number of events, including strikes and inclement weather.

Iron Ore and Manganese production of iron ore was flat at 21.6 Mt. The ramp-up of Kolomela was offset by lower production at Sishen as the operation recovered from the unprotected strike in the second half of 2012. Manganese ore production increased by 2% to 1.7 Mt, while manganese alloy production rose by 53% to 130,100 tonnes.

Metallurgical Coal production increased by 3% to 14.8 Mt, with export metallurgical coal production of
9.0 Mt benefiting from productivity improvements at both the open cut and underground operations, partially offset by weather-related stoppages at Dawson. A focus on high-margin products has resulted in a favourable product mix towards higher quality coking coal with the proportion of sales of hard coking coal (HCC) to pulverised coal injection (PCI) increasing by 9%.

Thermal Coal production declined by 2% to 32.4 Mt due to the strike at Cerrejón, partially offset by increased productivity at the South African operations.

Copper production increased by 7% to 353,300 tonnes, largely due to the ramp-up of the Los Bronces expansion project and operational improvements at Collahuasi which were offset by planned maintenance at Collahuasi's SAG mill 3.

Nickelproduction decreased by 36% to 14,700 tonnes reflecting the permanent cessation of production at Loma de Níquel at the end of 2012 and continued efforts to address the design issues at the kilns and furnaces at Barro Alto.

Platinum equivalent refined production of 1.2 million ounces was in line with 2012, with operational improvements offset by production losses due to labour disruptions and the lack of flexibility to redeploy employees in the current environment.

Diamonds production increased by 6% to 14.3 million carats, due to improved grades at Debswana offset by flooding at Venetia which was mitigated through processing of the stockpiles.

Niobium production decreased 4% to 2.2 kt following an expected decline ore grade which more than offset improvements in throughput and recoveries.

Phosphates production of 0.6 Mt of fertiliser, a 15% increase on 2012, was due to a number of asset optimisation initiatives which improved overall performance at Catalão and Cubatão.

Capital expenditure

$ million	6 months ended 30 June 2013	6 months ended 30 June 2012⁽²⁾
Iron Ore and Manganese	877	844
Metallurgical Coal	420	370
Thermal Coal	56	101
Copper	472	606
Nickel	(18)⁽¹⁾	89
Platinum	235	356
Diamonds	255	n/a
Niobium	64	14
Phosphates	8	13
Other Mining and Industrial Non-core	18	82
Corporate and exploration	10	11
Total capital expenditure	2,397	2,486

⁽¹⁾ Cash capex for Nickel of $19 million was offset by the capitalisation of $37 million of net operating cash flows generated at Barro Alto which has not yet reached commercial production.

⁽²⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Capital expenditure for the first half of 2013 was $2,397 million, 4% lower than for the first half of 2012. Expenditure was broadly in line with the first half of 2012 due to the phasing of costs by most business units in 2013 towards the latter half of the year and into 2014. This was partially offset by the inclusion of De Beers in 2013. Capital expenditure guidance for 2013 is $6.9 billion including $0.4 billion of deferred stripping capital expenditure. This is lower by $1.0 billion on a like for like basis from earlier guidance.

Capital structure

Net debt (including related hedges) of $9,756 million was $1,246 million higher than at 31 December 2012 and $6,734 million higher than at 30 June 2012. The increase in net debt compared to full year 2012 was driven mostly by capital expenditure of $2,389 million, the payment of dividends of $1,291 million and the payment of withholding tax and capital gains tax relating to the disposal of 49.9% Anglo American Sur to Codelco and Mitsubishi ($395 million in total). This was partially offset by cash from operating activities of $3,167 million.

Following the issue of $5.1 billion of bonds in 2012, the Group issued further bonds of $1.0 billion under the Euro Medium Term Note programme during the period. In March 2013 the Group replaced a $3.5 billion credit facility maturing in July 2015 with a $5.0 billion credit facility maturing in March 2018. At the same time the De Beers $2.0 billion multi-currency credit facility was repaid and cancelled.

Anglo American's objective is to maintain a strong investment grade rating; which demands rigorous capital discipline. However, we recognise that over the next two years we will have limited flexibility due to heavier capital expenditure commitments as we complete the development of Minas-Rio and Grosvenor in Australia, after which we expect capital expenditure to be moderated.

Dividends

An interim dividend of 32 US cents per share (30 June 2012: 32 US cents per share) has been declared, in line with the Board's commitment to provide a base dividend, which will be maintained or increased through the cycle.

Outlook

Economic news has been mixed in recent months, with increasing uncertainty and volatility around the short-term outlook. In China, activity is slowing as the authorities seek to rebalance the economy away from investment towards domestic consumption. Over the next few years, China's economic growth rate should run well below the average rate of the last decade, which will be a drag on growth in other emerging economies. There are more encouraging signs of an upturn in the major advanced economies. The US housing market is improving but tighter fiscal policy is weighing on economic growth and there is increasing uncertainty around possible changes in the Federal Reserve's monetary policy. The Japanese economy is also recovering in response to the Abe government's radical policy shift, but there are some doubts about the sustainability of the upturn. In Europe, economies appear to be stabilising as downside risks diminish.

This has created a challenging macro environment and impacted short term prices for all of the Group's products, with the possible exception of palladium where the supply demand fundamentals are particularly strong. Intra-year volatility to the downside has been severe, exacerbated by muted seaborne supply reactions particularly in thermal and metallurgical coals due to fixed mining and logistics costs.

In the medium term, the Company expects solid global economic growth broadly in line with its underlying trend. In China and other emerging economies, there remains significant potential for further urbanisation and industrialisation to support robust growth, and demand for key commodities including crude steel (iron ore, and metallurgical coal), copper, nickel and thermal coal. The emergence of the expanding middle class will support rising intensity of consumption for the late cycle products in our portfolio - PGMs and diamonds - and also benefits the phosphates business.

Medium term supply growth poses challenges to the prices of some global commodities, most notably iron ore and copper. However, in the long term prices for Anglo American's products are expected to be supported by supply constraints in many jurisdictions and the challenges producers face in bringing new supply into production. Economic uncertainty, as we are seeing currently, tends to restrain new supply, so for all these reasons, in the longer term the Company expects to see tightening market fundamentals and a recovery in price performance.

For further information, please contact:

Media		Investors
UK James Wyatt-Tilby Tel: +44 (0)20 7968 8759		UK Leng Lau Tel: +44 (0)20 7968 8540
Emily Blyth Tel: +44 (0)20 7968 8481		Caroline Crampton Tel: +44 (0)20 7968 2192
South Africa Pranill Ramchander Tel: +27 (0)11 638 2592		Sarah McNally Tel: +44 (0)20 7968 8747

Anglo American is one of the world's largest mining companies, is headquartered in the UK and listed on the London and Johannesburg stock exchanges. Anglo American's portfolio of mining businesses spans bulk commodities - iron ore and manganese, metallurgical coal and thermal coal; base metals - copper and nickel; and precious metals and minerals - in which it is a global leader in both platinum and diamonds. Anglo American is committed to the highest standards of safety and responsibility across all its businesses and geographies and to making a sustainable difference in the development of the communities around its operations. The company's mining operations, extensive pipeline of growth projects and exploration activities span 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 26 July, 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; underlying operating profit includes attributable share of associates and joint ventures' operating profit and is before special items and remeasurements, unless otherwise stated; special items and remeasurements are defined in note 4 to the Condensed financial statements. Underlying earnings, unless otherwise stated, is calculated as set out in note 3 to the Condensed financial statements. Earnings before interest, tax, depreciation and amortisation (underlying EBITDA) is underlying operating profit before special items and remeasurements, depreciation and amortisation in subsidiaries and joint operations and includes attributable share of underlying EBITDA of associates and joint ventures. Underlying EBITDA is reconciled to 'Total profit from operations and associates' and joint ventures in note 2 to the Condensed financial statements. Tonnes are metric tonnes, 'Mt' denotes million tonnes and 'kt' denotes thousand tonnes, unless otherwise stated. 'Mct' denotes million carats

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. 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.

Financial review of Group results for the six months ended 30 June 2013

Underlying operating profit/(loss) $ million	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Iron Ore and Manganese	1,653	1,838
Metallurgical Coal	98	159
Thermal Coal	247	433
Copper	635	1,022
Nickel	(11)	58
Platinum	187	84
Diamonds	571	249
Other Mining and Industrial	60	180
Exploration	(93)	(72)
Corporate Activities and Unallocated costs	(85)	(125)
Operating profit including associates and joint ventures before special items and remeasurements	3,262	3,826

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Group underlying operating profit for the first half of 2013 was $3,262 million, 15% lower than the first half of 2012. Lower realised prices of commodities resulted in a reduction of $1,235 million in underlying operating profit. The lower prices included a 21% decrease in achieved Australian export metallurgical coal prices, a 7% decrease in achieved FOB iron ore prices, a 17% decrease in realised South African export thermal coal price and a 14% decrease in realised copper prices. Despite a decrease in Metallurgical Coal unit costs, the Group's costs were affected by general inflation, industry-wide costs pressures and higher waste-stripping costs.

The decrease in underlying operating profit was partly offset by the appreciation of the US dollar ($690 million), and the inclusion of 100% of De Beers' operating profit (30 June 2012: 45%).

Corporate costs for the first half of 2013 were $85 million, $40 million lower than the first half of 2012. This reduction was driven by a $46 million decrease in the self-insurance captive loss, mainly due to one-off events in previous years at the Nickel and Copper operations being settled in 2012 and an increase in insurance premium income in 2013, offset by the final settlement this year of flood claims in 2010 and 2011 relating to Metallurgical Coal's operations in Australia.

Exploration costs for the first half of 2013 were $93 million, 29% higher than the first half of 2012. This is mainly as a result of the inclusion of De Beers where expenditure for the first half of 2013 was $25 million on various exploration projects in Canada, Angola, Botswana, South Africa and India.

Group underlying earnings were $1,250 million, a 28% decrease on the first half of 2012. Group underlying earnings per share were $0.98 compared with $1.41 in the first half of 2012. In addition to the decrease in Group underlying operating profit, net finance costs and higher non-controlling interest in AA Sur also impacted the Group's underlying earnings.

Restatement

Anglo American's financial performance and position for the six months ended 30 June 2012 and the year ended 31 December 2012, have been restated to reflect the adoption of IFRS 11, IFRIC 20 and IAS 19R. The impact of these restatements on the prior year income statement, statement of comprehensive income, balance sheet and cash flow statement is outlined in note 1 to the Condensed financial statements.

Summary income statement $ million	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Operating profit from subsidiaries and joint operations before special items and remeasurements	3,048	3,342
Operating special items	(410)	(368)
Operating remeasurements	(402)	(84)
Operating profit from subsidiaries and joint operations	2,236	2,890
Non-operating special items	(83)	(39)
Share of net income from associates and joint ventures (see reconciliation below)	77	307
Profit before finance items and tax	2,230	3,158
Net finance costs before remeasurements	(201)	(138)
Financing remeasurements	(35)	15
Profit before tax	1,994	3,035
Income tax expense	(841)	(1,028)
Profit for the financial period	1,153	2,007
Non-controlling interests	(750)	(753)
Profit for the financial period attributable to equity shareholders of the Company	403	1,254
Basic earnings per share ($)	0.31	1.02
Group operating profit including associates and joint ventures before special items and remeasurements⁽²⁾	3,262	3,826

Operating profit from associates and joint ventures before special items and remeasurements	214	484
Special items and remeasurements	(23)	(11)
Net finance costs (before special items and remeasurements)	(17)	(46)
Income tax expense (after special items and remeasurements)	(93)	(115)
Non-controlling interests (after special items and remeasurements)	(4)	(5)
Share of net income from associates and joint ventures	77	307

Reconciliation of profit for the period to underlying earnings⁽³⁾ $ million	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Profit for the financial period attributable to equity shareholders of the Company	403	1,254
Operating special items	433	384
Operating remeasurements	402	80
Non-operating special items	83	39
Financing remeasurements	35	(16)
Special items and remeasurements tax	(61)	51
Non-controlling interests on special items and remeasurements	(45)	(54)
Underlying earnings	1,250	1,738
Underlying earnings per share ($)	0.98	1.41

⁽¹⁾Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

⁽²⁾Operating profit before special items and remeasurements from subsidiaries and joint operations was $3,048 million (30 June 2012: $3,342 million) and the attributable share from associates and joint ventures underlying operating profit was $214 million (30 June 2012: $484 million). For special items and remeasurements, see note 4 to the Condensed financial statements.

⁽³⁾Amounts shown include the Group's attributable share of the equivalent items in associates and joint ventures.

Special items and remeasurements

	6 months ended 30 June 2013			6 months ended 30 June 2012⁽¹⁾
$ million	Subsidiaries and joint operations	Associates and joint ventures	Total	Subsidiaries and joint operations	Associates and joint ventures	Total
Operating special items	(410)	(23)	(433)	(368)	(16)	(384)
Operating remeasurements	(402)	-	(402)	(84)	4	(80)
Operating special items and remeasurements	(812)	(23)	(835)	(452)	(12)	(464)
Non-operating special items	(83)	-	(83)	(39)	-	(39)
Financing remeasurements	(35)	-	(35)	15	1	16
Special items and remeasurements tax	75	(14)	61	(54)	3	(51)

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Operating special items, including associates and joint ventures, amount to a loss of $433 million, principally in respect of impairment and related charges of $252 million (30 June 2012: $340 million).These principally relate to an impairment of $143 million in relation to the Isibonelo operation in Thermal Coal, reflecting management's revised expectation of the operation's future profitability under a long term coal supply contract, and an impairment of $100 million at the Kleinkopje operation in Thermal Coal, driven primarily by a decline in export thermal coal prices. the remaining reversal of De Beers inventory uplift, relating to inventory which was fair valued on acquisition, of $126 million (30 June 2012: nil), and restructuring costs of $42 million (30 June 2012: nil). Operating remeasurements reflect net losses on non-hedge derivatives, mainly related to capital expenditure in Iron Ore Brazil.

Non-operating special items principally relate to a loss of $55 million in respect of the formation of the Lafarge Tarmac joint venture and the downward revaluation of $46 million relating to Amapá assets held for sale. For more information on Amapá, refer to page 34.

Financing remeasurements, including associates and joint ventures, reflect a net loss of $35 million as a result of fair value movements on interest rate swaps and other derivatives.

Special items and remeasurements tax, including associates and joint ventures, amounted to a tax credit of $61 million which included a special items and remeasurements tax credit of $246 million partially offset by a tax remeasurement charge of $185million.

Net finance costs

Net finance costs, before remeasurements, excluding associates and joint ventures, were $201 million (30 June 2012: $138 million). Interest income decreased due to a lower average cash balance over the period and decreased dividends from financial asset investments. Interest costs were higher due to increases in debt.

Tax before special items and remeasurements

	6 months ended 30 June 2013			6 months ended 30 June 2012⁽¹⁾
$ million (unless otherwise stated)	Before special items and remeasurements	Associates and joint ventures tax and non-controlling interests	Including associates and joint ventures	Before special items and remeasurements	Associates and joint ventures tax and non-controlling interests	Including associates and joint ventures
Profit before tax	2,961	83	3,044	3,520	122	3,642
Tax	(916)	(79)	(995)	(974)	(118)	(1,092)
Profit for the financial period	2,045	4	2,049	2,546	4	2,550
Effective tax rate including associates and joint ventures			32.7%			30.0%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

The effective rate of tax before special items and remeasurements including attributable share of associates and joint ventures tax for the six months ended 30 June 2013 was 32.7%. This was higher than the equivalent effective rate of 30.0% in the six months ended 30 June 2012 due to various prior year adjustments. In future periods it is expected that the effective tax rate, including associates and joint ventures tax, will remain above the United Kingdom statutory tax rate.

Balance sheet

Equity attributable to equity shareholders of the Company was $34,190 million at 30 June 2013 (31 December 2012: $37,611 million). This decrease reflects the weakening of the rand over the period partially offset by the profit for the period of $403 million. Investments in associates and joint ventures were $1,509 million higher than at 31 December 2012, principally as a result of the formation of the Lafarge Tarmac joint venture. Property, plant and equipment decreased by $2,585 million compared to 31 December 2012, as a result of foreign exchange losses and depreciation partly offset by asset additions.

Cash flow

Net cash inflows from operating activities were $3,167 million (30 June 2012: $2,665 million), an increase of 19% despite the 7% decrease in underlying EBITDA. This primarily reflects lower tax payments in the current period and lower expenditure on working capital. Outflows on working capital in the current period reflected $587 million expenditure on inventories, primarily due to investment in stock at Platinum following low stock levels at 31 December 2012, as well as stock increases at Amapá following the port closure.

Net cash used in investing activities of $2,436 million (30 June 2012: $2,300 million) was primarily attributable to expenditure on property plant and equipment of $2,389 million (30 June 2012: $2,500 million).

Net cash used in financing activities was $1,682 million compared with $766 million in the six months ended 30 June 2012. This includes dividend payments to Company shareholders and non-controlling interests totalling $1,291 million, as well as interest payments of $512 million.

Liquidity and funding

Net debt, including related hedges, was $9,756 million, an increase of $1,246 million from $8,510 million at 31 December 2012.

Net debt at 30 June 2013 comprised $17,831 million of debt and derivative liabilities, offset by $8,075 million of cash and cash equivalents. At 30 June 2013 the gearing level was 19.6%, compared with 16.3% at 31 December 2012. At 30 June 2013, the Group had undrawn committed bank facilities of $8.6 billion and cash and cash equivalents of $8.1 billion.

The Group's forecasts and projections, taking account of reasonable possible changes in trading performance, indicate the Group's ability to operate within the level of its current facilities for the foreseeable future.

Corporate activities and unallocated costs

Corporate costs which are considered to be value adding to the business units are allocated to each business unit. Costs reported externally as Group corporate costs only comprise costs associated with parental or direct shareholder related activities.

Dividends

An interim dividend of 32 US cents per share (30 June 2012: 32 US cents per share) has been declared.

The Board

As part of the continual process of refreshing the board, Dr Mphu Ramatlapeng joined the board as a non-executive director on 8 July 2013. Dr Ramatlapeng is an expert in the field of healthcare in Africa, with a particular focus on HIV, Tuberculosis and Malaria in southern Africa. She currently serves as the Vice Chair of the Global Fund to Fight AIDS, TB and Malaria and as Executive Vice President of HIV and TB for the Clinton Health Access Initiative. Dr Ramatlapeng was the Minister of Health and Social Welfare in the government of Lesotho from 2007 until 2012. Dr Ramatlapeng also joined the Board's Safety and Sustainable Development Committee.

Related party transactions

Related party transactions are disclosed in note 14 to the Condensed financial statements.

Principal risks and uncertainties

Anglo American 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 year end were set out in detail in the operating and financial review section of the Annual Report 2012, and remain appropriate in 2013. Key headline risks relate to the following:

· Commodity prices

· Liquidity risk

· Counterparty risk

· Currency risk

· Inflation

· Health and safety

· Environment

· Exploration

· Political, legal and regulatory

· Climate change

· Supply risk

· Ore Reserves and Mineral Resources

· Operational performance and project delivery

· Event risk

· Employees

· Contractors

· Business integrity

· Joint ventures

· Acquisitions and divestments

· Infrastructure

· Community relations

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 2012 is available on the Group's website www.angloamerican.com.

Operations review for the six months ended 30 June 2013

In the operations review on the following pages, underlying operating profit includes the attributable share of associates' and joint ventures operating profit and is before special items and remeasurements unless otherwise stated. Capital expenditure relates to cash expenditure on property, plant and equipment including cash flows on related derivatives.

IRON ORE AND MANGANESE

$ million (unless otherwise stated)	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Underlying operating profit	1,653	1,838
Kumba Iron Ore	1,596	1,946
Iron Ore Brazil	(12)	(64)
Samancor	116	20
Projects and corporate	(47)	(64)
Underlying EBITDA	1,787	1,971
Net operating assets	9,363	13,102
Capital expenditure	877	844
Share of Group underlying operating profit	51%	48%
Share of Group net operating assets	19%	29%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Underlying operating profit decreased by 10% to $1,653 million (six months to 30 June 2012: $1,838 million). This was principally due to 7% weaker average iron ore export prices, lower export sales volumes and cost increases particularly at Kumba's Sishen mine, partially offset by higher ore prices at Samancor.

Markets⁽¹⁾

Global crude steel production increased by 3% to 787 Mt for the first half of 2013 (30 June 2012: 766 Mt), with China's record production of 385 Mt being 8% higher (six months to 30 June 2012: 356 Mt). However, faced with strong pressure on steel margins, Chinese steel mills reduced iron ore inventory levels and as a result, demand for seaborne iron ore grew at a slower pace than crude steel production. Global seaborne iron ore supply increased by 4%, driven by strong growth of 18% from Australia, partly offset by a 1% decline from Brazil.

Average prices in the first half of 2013 were marginally down and averaged at $137/t for the period (30 June 2012: $142/t). Iron ore index (CFR China 62% Fe) prices peaked in February at $160/t but have steadily declined since then, with the index ending the first half of 2013 at $115/t.

Operating performance

	6 months ended 30 June 2013	6 months ended 30 June 2012
Attributable iron ore production (tonnes)	21,613	21,556

Kumba Iron Ore

At Sishen mine, the waste stripping ramp-up is continuing as planned in order to improve mining flexibility in the longer term. Total tonnes mined at Sishen increased by 15% to 102.6 Mt (30 June 2012: 88.9 Mt), of which waste mined was 82.1 Mt (six months to 30 June 2012: 68.8 Mt), an increase of 19%. Total iron ore production at Sishen mine decreased by 10% to 16.1 Mt (six months to 30 June 2012: 17.9 Mt). Production rates at the mine continued to improve quarter on quarter according to the plan following the unprotected strike in the fourth quarter of 2012. Production was also impacted by the availability of material supplied to the mine's dense media separation (DMS) and jig plants. This was expected, as the pit is currently constrained, and is being addressed through the planned increase in waste stripping. This additional waste mining is expected to have an upward cost impact at Sishen mine over the next few years but will eventually result in increased flexibility in the pit.

Kolomela continued to perform strongly, as the mine produced 5.3 Mt, 62% higher than the corresponding half year. Total tonnes mined rose by 55% to 29.7 Mt (six months to 30 June 2012: 19.1 Mt), of which waste mined was 23.2 Mt (six months to 30 June 2012: 15.6 Mt), an increase of 49%. Kolomela remains well on track to produce around 9 Mt in 2013.

Total sales for Kumba for the half year were 22.1 Mt, a 5% decrease compared to the record sales of 23.4 Mt in the first half of 2012. Export sales volumes declined by 3% to 20.1 Mt (30 June 2012: 20.7 Mt), as a result of Sishen's lower production volumes offset by Kolomela production growth.

Iron Ore Brazil

Iron Ore Brazil generated an underlying operating loss of $12 million, largely reflecting the non-capitalised costs for the construction of the Minas-Rio project.

Samancor

Underlying operating profit of $116 million was $96 million or six times higher than prior period. This was driven by higher prices and sales volumes, together with a strong focus on cost control.

Production of manganese ore increased by 2% from 1.6 Mt to a record 1.7 Mt (attributable basis) owing to improved concentrator performance at GEMCO in Australia and strong operational performance from Hotazel in South Africa.

Production of alloy increased by 53% from 85,200 tonnes to 130,100 tonnes (attributable basis) due to the reinstatement of production at TEMCO in Australia which was temporarily suspended during the first quarter of 2012.

A gradual market recovery was seen over the period supported by normalised port stock levels in China and supply-side responses to the muted demand outlook.

Projects

Iron Ore Brazil

Construction continues at the 26.5 Mtpa (with optimisation to 29.8 Mtpa) Minas-Rio iron ore project, with significant progress made towards delivering first ore on ship by the end of 2014. During the first six months of 2013, key development milestones identified in the January 2013 announcement were addressed. At the mine site, the environmental licence for mine access was granted and pre-stripping activities are continuing. At the beneficiation plant, the tailings dam environmental licence was granted and reservoir filling commenced in May as planned. The residual land access constraints associated with the transmission line to the beneficiation plant are being resolved and at the end of June, 90% of the power transmission line towers were released for construction. More than 55% of the 529 km pipeline has been laid, with more than 99% of the land access released. At the port, construction is continuing as scheduled with good progress on both the onshore and offshore installations including the breakwater.

While good progress is being made, high turnover, absenteeism and issues concerning workforce availability in general are affecting construction activities. The impact is being mitigated through a number of initiatives, including the use of additional contractors, refocusing existing resources to critical areas and extending contractors' working hours.

Project capital expenditure remains in line with the estimate provided in January 2013 of $8.8 billion if a centrally held risk contingency of $600 million is utilised in full.

Samancor

Following on from its approval in 2011, the $279 million GEEP2 project (Anglo American's 40% share: $112 million) will increase GEMCO's beneficiated product capacity from 4.2 Mtpa to 4.8 Mtpa through the introduction of a dense media circuit by-pass facility. The project is expected to be completed in late 2013. The expansion will also address infrastructure constraints by increasing road and port capacity to 5.9 Mtpa, creating 1.1 Mtpa of latent capacity for future expansion.

The 130,000 tpa high-carbon ferromanganese furnace M14 at the Metalloys plant in South Africa was completed in March 2013 with a total cost of $99 million (Anglo American's 40% share: $40 million).

During 2013, Manganese withdrew from the Samancor Gabon Manganese project following the completion of the feasibility study. The rehabilitation of the project site has been completed.

Outlook

Kumba Iron Ore

Steel fundamentals remain under pressure as the Chinese economy slows down, with manufacturing activity receding as a result of declining export orders. Iron ore prices are expected to remain under pressure as supply exceeds demand in the second half of the year, though restocking by steel mills may support prices in the near term.

Kumba's main objectives remain to satisfy domestic demand and to fill the iron ore export channel to optimise exports. The export capacity on the rail line is approximately 42 Mt and will remain so in the near future. With two operating mines in the Northern Cape, following Kolomela's successful ramp-up in 2012, it brings the benefit of flexibility. Kumba has conducted a technical and strategic review of these assets over the past few months aimed at optimising production.

The production outlook for Sishen mine in 2013 remains at around 37 Mt, reflecting the knock-on effect of the 2012 strike. Sishen mine's pit, however, remains constrained and therefore the planned waste ramp-up is continuing as part of the strategy to improve mining flexibility for the longer term. Waste levels at the mine are planned to increase to between 240 Mt and 270 Mt by 2016. The estimated production level for Sishen mine is around 37 Mtpa going forward. The production outlook for Kolomela mine remains at approximately 9 Mt for 2013. Export sales volumes for the year as a whole are expected to be around 40 Mt.

Samancor

The gradual recovery in manganese pricing is expected to slow owing to more muted demand from the underlying steel industry.

METALLURGICAL COAL

$ million (unless otherwise stated)	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Underlying operating profit	98	159
Underlying EBITDA	383	379
Net operating assets	4,816	4,796
Capital expenditure	420	370
Share of Group underlying operating profit	3%	4%
Share of Group net operating assets	10%	11%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

The underlying operating profit of $98 million was impacted by depreciation as a result of increased production, offset by an insurance gain of $73 million relating to the 2011 flood events. Underlying EBITDA of $383 million was in line with the prior year despite lower export prices, with the average realised metallurgical coal price reducing by 21%. The price decline has been mitigated by lower unit costs, 7% higher export production volumes and a favourable product mix towards higher quality coking coal with the proportion of sales of hard coking coal (HCC) to pulverised coal injection (PCI) increasing by 9%. Metallurgical Coal continued its cost-reduction programme, reducing FOB cash unit costs by 18% at the Australian export operations.

Markets

Anglo American weighted average achieved sales prices ($/tonne)	6 months ended 30 June 2013	6 months ended 30 June 2012
Export metallurgical coal (FOB)	151	191
Export thermal coal (FOB Australia)	87	104
Domestic thermal coal	39	37

Attributable sales volumes ('000 tonnes)	6 months ended 30 June 2013	6 months ended 30 June 2012
Export metallurgical coal	9,003	8,602
Export thermal coal	3,012	2,748
Domestic thermal coal	2,809	3,183

Subdued demand continued into 2013 in the seaborne metallurgical coal market despite some price improvement in the Q2 quarterly HCC benchmark price. Strong Australian production and sustained US supply into Asia resulted in an oversupply of metallurgical coal. The average quarterly HCC benchmark price fell by 24% from $223/t in H1 2012 to $169/t in H1 2013. Semi-soft and PCI prices, however, experienced some relief with a narrowing of the price differential between premium quality and lower grade coking coals.

Operating performance

Attributable production ('000 tonnes)	6 months ended 30 June 2013	6 months ended 30 June 2012
Export metallurgical coal	9,010	8,589
Export thermal coal	3,007	2,683
Domestic thermal coal	2,798	3,174

Export metallurgical coal production increased by 5% to 9.0 Mt, a record first half year performance, despite adverse weather conditions in Australia. Moranbah, Foxleigh and Peace River Coal operations all achieved record first-half production driven by increased productivity. The underground operations delivered a 32% increase in production as a result of the Moranbah longwall consistently achieving industry benchmark production rates. Adverse weather conditions in Queensland during the first quarter affected both metallurgical and thermal open cut production, primarily at Callide (domestic thermal coal) and Dawson, with a 43-day closure of the Moura rail line. Moranbah successfully completed a planned longwall move in record time during the second quarter, with production back to planned capacity by the last week of June.

Aquila, a bord and pillar operation producing around 0.5 Mtpa of hard coking coal, will be placed under care and maintenance from 30 July 2013, as a result of weaker prices.

Projects

The greenfield Grosvenor metallurgical coal project in Queensland continues to progress, with all permits and licences in place. Construction is well under way at site, with bulk earthworks near completion. Longwall production is forecast to commence in 2016. The capital costs has increased by $0.25 billion to $1.95 billion. The capital cost increase is due to scope changes relating to the investigation into Moranbah North drift failure and promoted a complete redesign of the Grosvenor drift and construction method. Foreign exchange has been adversely impacted by weakening of the US dollar during the construction phase and deferment of capital in light of current challenging pricing environment and our disciplined capital allocation process.

Outlook

Strong production from Australia and high US exports have generated an oversupply of metallurgical coal. The market is expected to remain subdued for the remainder of 2013.

The seaborne metallurgical coal market continues to evolve, with some market segments, including European, Chinese and South American steel mills, moving to shorter term pricing arrangements. However, North Asian steel companies have continued to express a preference for ongoing quarterly price setting negotiations. In line with customer demand, Anglo American will continue to focus on high-margin export products supported by quarterly negotiated price settlements and shorter term pricing.

THERMAL COAL

$ million (unless otherwise stated)	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Underlying operating profit	247	433
South Africa	171	243
Colombia	96	214
Projects and corporate	(20)	(24)
EBITDA	343	522
Net operating assets	1,374	1,742
Capital expenditure	56	101
Share of Group underlying operating profit	8%	11%
Share of Group net operating assets	3%	4%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Thermal Coal's underlying operating profit was $247 million, a 43% decrease, driven by lower average export thermal coal prices and the impact of a strike at Cerrejón, partially offset by the weaker South African rand.

Markets

Anglo American weighted average achieved sales prices ($/tonne)	6 months ended 30 June 2013	6 months ended 30 June 2012
South Africa export thermal coal (FOB)	81	99
South Africa domestic thermal coal	20	21
Colombia export thermal coal (FOB)	76	92

Attributable sales volumes ('000 tonnes)	6 months ended 30 June 2013	6 months ended 30 June 2012
South Africa export thermal coal⁽¹⁾	7,964	8,239
South Africa domestic thermal coal⁽²⁾	19,809	19,357
Colombia export thermal coal	4,931	5,594

⁽¹⁾ Excludes traded coal sales of 145,000 tonnes (30 June 2012: 48,000 tonnes).

⁽²⁾ Excludes domestic metallurgical coal of 92,000 tonnes for the six months ended 30 June 2012.

Despite industrial action affecting supplies from Colombia, seaborne thermal coal prices have continued a steady decline during 2013 against a background of uninterrupted supply from other major producing basins and robust US export volumes. In the first six months, global seaborne prices fell on average by 11%. Delivered prices into Europe (API2) fell below $75/t in June, the lowest in three years. Although demand from China waned at the beginning of 2013, current lower prices have increased interest from both China and India for South African thermal coal.

In addition, countries exporting thermal coal, have seen significant depreciation in local currencies in the first six months, with the South African rand and Australian dollar falling 12.5% and 10% respectively against the US dollar. This currency depreciation has mitigated the fall in thermal coal prices, providing a buffer for marginal mines.

Within South Africa, Transnet Freight and Rail (TFR) experienced a slower than expected recovery from its annual maintenance shutdown in May, after maintaining a steady performance for the first four months of the year. TFR is forecast to rail 69.2 Mt (annualised) to Richards Bay Coal Terminal at current performance levels (2012: 68.5 Mt). South African thermal coal exports, at 33.05 Mt, were 3% higher for the first six months of 2013 (30 June 2012: 32.05 Mt).

Operating performance

Attributable production ('000 tonnes)	6 months ended 30 June 2013	6 months ended 30 June 2012
South Africa export thermal coal	7,924	7,918
Colombia export thermal coal	4,526	6,058
South Africa Eskom coal	16,896	16,089
South Africa domestic other⁽¹⁾	3,093	3,168

⁽¹⁾ Includes domestic metallurgical coal of 74,100 tonnes for the six months ended 30 June 2012.

South Africa

Underlying operating profit from South African operations decreased by 30% to $171 million, largely as a result of lower average export thermal coal prices. Annual FOB cash cost increases were contained at 6.6% in a high mining cost inflation environment thereby mitigating further operating profit decline. The weaker South African rand also partly offset weaker prices.

Production for the first half was 3% higher owing to the introduction of new machines at continuous-miner sections as well as improved longwall production at New Denmark, partly offset by stoppages due to fatalities in the first quarter at Goedehoop, Greenside and New Denmark.

Colombia

At Cerrejón, underlying operating profit of $96 million was 55% down on the prior period, driven by lower thermal coal prices and the impact of the strike from 7 February to 12 March. The profit impact was alleviated by operating cost savings resulting from the mine being shut down during the strike period.

Projects

In South Africa, the 12 Mtpa New Largo project has reached the feasibility stage gate and negotiations with Eskom to finalise the coal supply agreement continue.

In Colombia, the 8 Mtpa Cerrejón P40 expansion project ramp-up to 40 Mtpa is progressing on schedule and budget, with first coal delivered as expected in 2013.

Outlook

Pricing pressure resulting from industry oversupply looks set to continue in the short term. US coal is generally cash-negative when sold into the export markets which may offer some respite in the medium to long term. In addition, should current domestic US gas prices remain at elevated levels, we expect to see continued switching of US coal back into the domestic market.

Demand from India is expected to remain robust at current pricing levels as new buyers seek to substitute lower grade Indonesian coal with higher grade South African coal. Although demand will continue to be strong from China, increased competition between domestic production and imported coal is likely to lead to imported coal growth rates being weaker than previous years.

COPPER

$ million (unless otherwise stated)	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Underlying operating profit	635	1,022
Underlying EBITDA	942	1,280
Net operating assets	8,596	7,951
Capital expenditure	472	606
Share of Group underlying operating profit	19%	27%
Share of Group net operating assets	18%	18%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Copper generated an operating profit of $635 million, a decrease of 38%, as a result of a lower realised copper price more than offsetting the increased sales volume from the expanded Los Bronces operation. Management of operating costs continues to be a key focus. Despite higher expenditure on mine development, improved operating efficiencies, higher production and lower power costs led to a 9% reduction in unit production costs versus the second half of 2012.

Markets

6 months
ended

30 June 2013

6 months
ended

30 June 2012

Average market prices (c/lb)

342

367

Average realised prices (c/lb)

318

370

The copper price rose at the beginning of the year before falling away from March on the back of global macro-economic uncertainty impacting demand. Despite recent supply disruptions, strong mine supply growth is expected to result in a market surplus for the year.

The London Metal Exchange (LME) copper price ended the half year at 306 c/lb, averaging 342c/lb, the average was 7% lower compared with the same period in 2012. A negative provisional pricing adjustment of $189 million was recorded compared to a positive price adjustment of $20 million in June 2012, resulting in a realised price of 318 c/lb versus 370 c/lb for the prior period.

Operating performance

6 months
ended

30 June 2013

6 months
ended

30 June 2012

Attributable copper production (tonnes)

353,300

329,500

Attributable copper production of 353,300 tonnes was 7% higher than for the same period in 2012.

Production at Los Bronces was 9% higher at 200,000 tonnes following the full ramp-up of the Los Bronces expansion project, which contributed 114,200 tonnes. Mine development progressed during the period leading to reduced congestion and improved continuity of ore feed to the two processing plants.

Production at El Soldado increased 13% owing to higher grades and Mantos Blancos increased 5% as a result of increased cathode production from dump leaching. Mantoverde's production of 29,100 tonnes was 4% lower than the prior year due to lower ore grades.

Anglo American's share of Collahuasi's production of 67,100 tonnes was 5% higher than the first half of 2012. Although the expected return to higher grades was achieved, production was affected by lower throughput, with the SAG 3 mill out of operation for 49 days for a planned stator motor replacement and repowering project which was successfully completed during May. Following the re-commissioning of SAG 3, Collahuasi mill throughput has improved in line with expectations.

Projects

At the Quellaveco project in Peru, the construction of initial water ponds has been completed and water storage required to date has been achieved. Work is progressing on the Asana River diversion tunnel and social programmes are also continuing. Work continues on the engineering and financial evaluation of the business case in preparation for the project to be taken forward for Board consideration.

At Collahuasi, the pre-feasibility study on the further expansion potential beyond the three current milling lines remains on hold pending restoring operational stability of current operations.

Outlook

Production guidance for 2013 is maintained at 680,000 tonnes, against a backdrop of continued caution around the operating performance recovery and stability, particularly at Collahuasi.

Ongoing market concerns arising from uncertainties over the near-term outlook for the global economy may lead to short term volatility in the copper price. However, the medium to long term fundamentals for copper remain strong, predominantly driven by robust demand from the emerging economies, ageing mines with declining grades, and a lack of new supply.

NICKEL

$ million (unless otherwise stated)	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Underlying operating (loss)/profit	(11)	58
Underlying EBITDA	(7)	72
Net operating assets	2,533	2,642
Capital expenditure⁽²⁾	(18)	89
Share of Group underlying operating profit	(0.3)%	2%
Share of Group net operating assets	5%	6%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

⁽²⁾Cash capex for Nickel of $19 million was offset by the capitalisation of $37 million of net operating cash flows generated at Barro Alto which has not yet reached commercial production.

Nickel reported an underlying operating loss of $11 million. The first half of 2012 underlying operating profit of $58 million included a self-insurance recovery of $57 million, in addition to which 2013 underlying operating profit for the half year was affected by a 26% decline in the LME nickel price and exchange rate translation impacts, compensated in part by reduced corporate and project spend. The underlying operating result for Barro Alto continues to be capitalised.

Markets

6 months
ended

30 June 2013

6 months
ended

30 June 2012

Average market prices (c/lb)

732

836

Average realised prices (c/lb)

711

798

Despite the LME nickel price strengthening in the first quarter of the year, it subsequently declined, reaching 619 c/lb at the end of June. The average LME nickel price was 12% lower than that for the first six months of 2012. This reflected softening demand as the economic outlook continued to remain uncertain, as well as the impact of increasing new nickel supply, most notably nickel pig iron from China.

Operating performance

	6 months ended 30 June 2013	6 months ended 30 June 2012
Attributable nickel production (tonnes)	14,700	22,900

Nickel production decreased by 36% to 14,700 tonnes, primarily as a consequence of the cessation of mining and production activities at Loma de Níquel with effect from 10 November 2012.

Barro Alto produced 10,200 tonnes during the first half of 2013. This was slightly below the figure for the first six months of 2012 owing to a previously announced planned stoppage of line 2 for the rebuild of the electric furnace sidewall and the subsequent heat-up being affected by a metal run-out.

Outlook

At Barro Alto the operation's ramp-up has been significantly impacted by design flaws in both the kilns and the furnaces. Having addressed many of these issues, attempts have continued in order to achieve nominal capacity, with some success including Line 1 achieving approximately 80% of average feed rate design capacity in the first half (97% of design capacity in the period from mid-June until mid-July). However, to eliminate uncertainties and the instability in the operation, certain faults will only be corrected by furnace redesign and rebuild and, to this end, the decision has been taken to start on the planning process for such work immediately. The outcome of this study will be communicated to the market in due course.

Barro Alto's production for the full year 2013 is expected to be between 20,000 to 25,000 tonnes.

Short term prices are expected to remain under pressure. If the Indonesian government carries out its plan to ban nickel ore exports in 2014, however, this will have a positive impact on prices. In any event, medium to longer term nickel prices are expected to improve owing to forecast demand growth outstripping that of supply.

PLATINUM

$ million (unless otherwise stated)	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Underlying operating profit	187	84
Underlying EBITDA	497	439
Net operating assets	9,353	11,668
Capital expenditure	235	356
Share of Group underlying operating profit	6%	2%
Share of Group net operating assets	19%	26%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

Anglo American Platinum (Platinum) recorded an underlying operating profit of $187 million, a 123% increase. This performance reflected higher sales volumes and a weaker average rand against the dollar, with Platinum's earnings being highly geared to the South African rand/US dollar exchange rate. It was partially offset by the impact of higher mining inflation on costs and lower realised metal prices. Operating profit of $187 million also reflected the recognition of an inventory revaluation following the annual physical inventory count. In line with industry practice Platinum's metal inventory is estimated on a month-to-month basis, with an annual physical stocktake being undertaken to validate theoretical inventory levels. Platinum recorded a pre-tax gain of $38 million compared to theoretical inventory levels, in contrast to a gain of $172 million in 2012.

Refined platinum sales for the first six months were 11% higher at 1.07 million ounces (30 June 2012: 967,000 ounces), which exceeded refined production as refined stocks were reduced. The average dollar basket price achieved, however, declined by 5% from $2,532 per ounce in the first half of 2012, to $2,416 per ounce.

Cash operating costs per equivalent refined platinum ounce increased by 12%, mainly owing to increases in the costs of labour, electricity, diesel and explosives.

Markets

Supply concerns and US macro-economic weakness during the first quarter of 2013 supported platinum prices above $1,600 per ounce. During the second quarter, however, the platinum price was impacted by dramatic sell-offs in gold Exchange Traded Fund (ETF) investment holdings which saw the platinum price fall in tandem to below $1,400 per ounce to a low of $1,317 per ounce at the end of June 2013, a level not seen since the global economic crisis in 2009.

Global demand for platinum during the first half of 2013 was higher than expected owing to continued stimulation of jewellery demand by current low price levels, increased platinum ETF investment holdings and firmer industrial demand though demand from the autocatalyst sector was flat. Supply of refined platinum from South Africa in the first half of 2013 continued to be impacted by intermittent illegal industrial actions.

Palladium demand remained firm, dominated by continued growth in demand for gasoline vehicles in developing markets. Market expectations of a deficit market continue, providing a firm underpinning to price.

Rhodium demand remains weak owing to substitution implemented during a period of significant price increases for the metal in 2007/08.

Autocatalysts

Gross autocatalyst demand remained largely flat. Heightened economic uncertainty in Europe reduced demand for new vehicles in the first half of 2013 with sales approximately 7% below those in the first half of 2012. Lower sales in Europe are being somewhat offset by increased loadings as Euro 6 emissions levels are implemented in 2013 and 2014.

Industrial

Gross platinum demand for industrial applications remained firm in the first half of 2013, with some evidence that purchases in the glass and electrical sectors, delayed in 2012, had recommenced.

Jewellery

Despite platinum returning to trading at a premium to gold during the first half of 2013, jewellery demand remained firm with China benefiting most from increased consumer and manufacturer interest at current low price levels. Confidence in platinum jewellery by Chinese and Hong Kong retail brands remains high with increased platinum stock levels in existing and newly opened stores.

Investment

Platinum investment demand in the first half of 2013 increased primarily as a result of the launch of a new South African rand-based ETF. South African investors used this as an opportunity largely to move offshore holdings onshore, though new entrants also contributed to the fund's rapid growth to exceed 400,000 ounces at the end of June. Global investment sentiment, however, remains poor, driven by limited liquidity and supply uncertainty. Downward pressure on price also materialised as poor sentiment around gold impacted platinum holdings that track the gold price.

Operating performance

	6 months ended 30 June 2013	6 months ended 30 June 2012
Attributable equivalent refined platinum production (koz)	1,177	1,177

Equivalent refined platinum production (equivalent ounces are mined ounces expressed as refined ounces) from the mines managed by Anglo American Platinum and its joint venture partners for the first half of 2013 at 1.18 million ounces was in line with the first half of 2012 despite the impact of intermittent illegal industrial actions.

Underground mining performance at Platinum's own mines was principally impacted by illegal industrial actions, a national bus driver strike which impacted employees' ability to commute to work and labour shortages. This was exacerbated by the lack of flexibility, in the current labour environment, to redeploy employees to operations where there are staff shortages. Tonnes milled from underground sources were down 6% at 9.3 million tonnes while head grade improved by 3% to 3.25 grams 4E per tonne. As a result, equivalent refined platinum production from own mines and the Western Limb Tailings Retreatment plant decreased by 15,300 ounces or 2% year on year to 787,300 ounces in the first half of 2013. The own mines lost 20,300 ounces as a result of the intermittent illegal industrial action during the first half of 2013.

In spite of these challenges, equivalent refined platinum production at the Rustenburg mines (Bathopele, Khuseleka, Khomanani, Siphumelele and Thembelani) increased by 5,500 ounces, or 2% year on year to 293,600 ounces. Mogalakwena mine increased production by 4,200 ounces to 164,400 ounces as a result of improved concentrator recoveries. New production from Twickenham mine added 1,500 ounces while the Western Limb Tailings Retreatment plant increased output by 30% or 7,200 ounces following an improved 4E built-up head grade and improved concentrator recoveries.

The increased performances were offset by lower production at Amandelbult and Union mines which were more affected by strikes. Amandelbult mines' (Tumela and Dishaba) output was 170,900 ounces, lower by 9,500 ounces or 5% lower than the corresponding period, while Union (North and South) mines recorded a year on year decrease of 20,900 ounces or 18%, ending the first half on 96,400 ounces. Unki mine produced 3,300 ounces or 10% less compared to the first half of 2012 due to decreased concentrator recoveries ending the period with 29,300 ounces.

Equivalent refined platinum production from associates and joint ventures, inclusive of both mined and purchased production increased by 2% year on year to 356,000 ounces. Equivalent refined platinum production in the first half of 2012 included 26,000 ounces from Marikana which was placed on care and maintenance in June 2012; on a comparative basis, excluding Marikana, operating mines improved production by 35,000 or 11% year on year. This was due to higher production volumes across all mines, most notably at Kroondal (20%) and Bokoni (26%), following productivity improvement initiatives.

Equivalent refined platinum ounces purchased from third parties increased by 29% year on year from 26,600 to 34,200 ounces in the first half of 2013.

Refined platinum production at 1.02 million ounces was unchanged compared to the same period in 2012. This largely reflected maintenance work at the processing plants, which is always scheduled for the first half of the year. Refined production of palladium and rhodium decreased by 1% and 2% year on year respectively. Palladium and rhodium variances were a result of the intermittent illegal industrial action, a different ore source mix from operations and different pipeline processing times for each metal.

Refined platinum sales volume increased by 11% year on year to 1.07 million ounces from 967,000 ounces in the first half of 2012. Platinum sales were marginally higher than refined production of 1.02 million ounces.

Nickel production at the base metals refinery was adversely affected by delays to the ramp up of the new automated tank house. The main reason for constructing a new nickel tank house was to address the occupational exposure to nickel aerosols. New technical features found in the tank house include closer anode cathode spacing, anode bags and hoods to address aerosol capture at source and plating on titanium blanks as opposed to starter sheets to allow for automatic harvesting in a further attempt to reduce occupational exposure.

Since the commissioning, it has become evident that electrical short circuiting between anodes and cathodes in the electro-winning cells is the major impediment to the tank house reaching design capacity. The frequency of short circuiting is significantly greater than that experienced in the conventional nickel electro-winning tank house and has been mainly ascribed to new features like anode bags, crystal growth associated with cell hoods and a reduction in anode cathode distances. Significant work has gone into resolving these technical challenges and progress has been made to achieve the design intent of the project. The tank house is expected to be back to steady state operating level in the third quarter of 2013.

Platinum is committed to the highest standards of safety and continues to make a meaningful and sustainable difference in the development of the communities around its operations.

Projects

Capital expenditure for the first half of 2013 amounted to $235 million, a 34% decrease on the comparable period in 2012. Following a review to ensure effective capital allocation, a significant reduction in capital expenditure is expected in the next three years.

The majority of project capital expenditure for the first half of 2013 was invested at the Unki mine ($29 million), Twickenham mine ($18 million) and the Bathopele Phase 5 project ($6 million).

Portfolio restructuring

Recommendations of the Platinum portfolio review were announced on 15 January 2013. Platinum and the DMR engaged extensively following the announcement and as a result a revised plan was announced on 10 May 2013. Following the announcement of the revised proposals, Platinum, its recognised unions and the DMR agreed to delay the resumption of the section 189 consultations to provide feedback to labour unions on the bilateral engagements. The tripartite engagements and feedback sessions with the DMR and unions have now been completed and the section 189 consultations resumed on 10 June 2013. Platinum expects to conclude this 60-day process on 10 August 2013. The company's revised proposals remain focused on ensuring the long term sustainability of the business and restoring profitability, while being cognisant of the local and national social and economic challenges. The focus remains on cost reductions, revenue enhancement from the implementation of the revised commercial strategy, operational efficiency improvements and the prioritisation of capital allocation in line with the revised portfolio.

The revised portfolio restructuring proposals plan to reduce Platinum's baseline production to between 2.2 and 2.4 million ounces per annum in the short to medium term to more closely align output with expected demand while retaining the flexibility to meet potential demand upside. This will be achieved through consolidating Rustenburg into three operating mines by integrating and optimising Khuseleka 2 and Khomanani 1 and 2 shafts into the surrounding mines. Khuseleka 1 will remain operational, which is a principal revision to the previous proposal. Platinum's Rustenburg operations will be reconfigured as a sustainable 320,000 to 350,000 ounces per annum platinum producer in the medium term. The proposals will result in a reduction of production capacity of approximately 250,000 ounces per annum in 2013 and by an additional approximately 100,000 ounces per annum in the medium term. While Platinum plans to keep its production profile flat, it seeks to progressively replace production from high-cost and capital intensive assets with production from low-cost and high-quality assets over the next decade.

The company has continued with the process of reducing overhead costs and improving efficiencies so as to align its cost base with the proposed footprint. Platinum intends to right-size and simplify its overhead structure to support the revised portfolio review proposals. Processing operations will be aligned to the revised long term production plans. It remains committed to delivering R3.8 billion of annual savings by 2015 from the indirect and direct cost savings. The revised proposals continue to require extensive consultation with government, organised labour and other stakeholders prior to implementation.

Outlook

The global platinum market continues to suffer supply disruptions, production curtailment and capital rationing in the current economic environment, while net platinum demand is expected to remain relatively flat in 2013. This is despite higher than expected demand in the first half of 2013. Vehicle sales in Europe remain depressed with price sensitive jewellery and investment demand vulnerable to any platinum price improvement from the current depressed levels.

Primary supply challenges are expected to continue during 2013 with higher mining inflation putting pressure on margins and increased risk of supply disruptions from industrial action in South Africa. Supplies of metal from the recycling of spent autocatalysts are expected to rise as pipeline stocks are processed.

The palladium market is expected to remain in deficit in 2013, supported by gasoline vehicle production growth in developing markets. Primary supply is constrained by the same factors impacting platinum production.

The Rhodium market is expected to remain depressed in 2013, although autocatalyst and new industrial demand is expected to increase.

Platinum is increasing its refined production target for 2013 to 2.3 million platinum ounces owing to the delayed implementation of the portfolio restructuring proposals. The company remains committed to progress with the consultations and implementation of the portfolio restructuring proposals to reduce its baseline production to between 2.2 and 2.4 million ounces per annum to more closely align output with expected demand while retaining the flexibility to meet potential upside demand.

Cost inflation, however, will continue to present the company with challenges this year. During the first half Eskom raised electricity tariffs a further effective 13% and during the second six months, the industry is expected to see an increase in wages. Platinum now estimates that cash unit costs will increase to around R17,000 per equivalent refined platinum ounce for 2013.

Platinum remains on track to incur capital expenditure of between R6 billion and R7 billion for the year. Capital expenditure planned for the period 2013 to 2015 also remains unchanged at between R6 billion and R7 billion per annum, excluding capitalised interest. The company will continue to optimise capital allocation to focus on the highest return and lowest risk opportunities while remaining nimble in order to respond to cash compression.

DIAMONDS

$ million (unless otherwise stated)	6 months ended 30 June 2013⁽¹⁾	6 months ended 30 June 2012⁽¹⁾⁽³⁾
Underlying operating profit	571	249
Underlying EBITDA	788	302
Net operating assets	11,738	n/a
Capital expenditure	255	n/a
Share of Group underlying operating profit	18%	7%
Share of Group net operating assets	24%	n/a
Group's associate investment in De Beers⁽²⁾	-	2,380

⁽¹⁾Results for the six months ended 30 June 2012 reflect Anglo American's 45% share of De Beers' results. On 16 August 2012, Anglo American completed the acquisition of an additional 40% shareholding, and thus consolidated the results of De Beers from that date. Results for the six months ended 30 June 2013 therefore reflect 100% of De Beers' results, and include the impact of fair value adjustments recorded as at the date of the acquisition.

⁽²⁾ Excludes outstanding shareholder loans owed by De Beers to Anglo American, including accrued interest, of $309 million for the six months ended 30 June 2012.

⁽³⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

De Beers' underlying operating profit increased by $322 million to $571 million, driven primarily by Anglo American's increased shareholding from August 2012. In addition, there was a favourable exchange variance and slightly higher realised prices, partially offset by acquisition depreciation of $80 million.

Markets

Retailer results for the early part of 2013 were mixed in the key consumer markets. The US exhibited encouraging growth. Growth in China continued though at a slower pace and was somewhat patchy. Polished prices edged up on the back of moderate retailer re-stocking, but high cutting centre stock, tight midstream liquidity and a weakening rupee continued to create challenges for the rough market.

Mining and Manufacturing

	6 months ended 30 June 2013	6 months ended 30 June 2012
Total diamond production (thousand carats)⁽¹⁾	14,295	13,449

⁽¹⁾Includes 100% of production from joint ventures.

De Beers has continued to improve its safety performance year on year, with a further reduction in the lost time injury frequency rate to 0.24 (30 June 2012: 0.45). The company is benefiting from an increasingly integrated approach with Anglo American in the management of environment, community, occupational health and safety matters.

De Beers' half year production increased by nearly one million carats to 14.3 Mct (30 June 2012: 13.4 Mct) owing to improved ore grades at Orapa and Jwaneng Mines. Progress on the remediation programme following the Jwaneng mine slope failure that occurred in June 2012 continues, with full resolution expected in the third quarter of 2013.

In South Africa, Venetia mine was impacted by the heavy flooding in the Limpopo province in January, but ore mining shortfalls were mitigated through the processing of ore stockpiles. Restoration of full operations is expected during the second half of 2013.

In Canada, work continues on optimising the Snap Lake mine to enable economic access to the promising, though challenging, ore body. A 16-day winter road blockade during February 2013 near Victor mine was eventually removed when an interlocutory court injunction was granted. The mine continued to operate at full production during the blockade.

In Namibia, production has increased at both Namdeb and Debmarine Namibia operations.

After a challenging start to 2013, Element Six experienced slightly stronger sales momentum in the second quarter with improved market conditions across the Abrasives and Technologies business areas, combined with the introduction of new Element Six product innovations, and new Technologies' capacity coming online.

Sales

Sales remained steady during the first half, with total sales of $3.3 billion (30 June 2012: $3.3 billion) and rough diamond sales of $3.0 billion (30 June 2012: 3.0 billion). After a 12% decline in De Beers' rough diamond prices during the second half of 2012, prices increased by 6% in the first six months of 2013. The realised average price to June 2013 was 2% higher than for the same period of 2012, driven by an improved product mix, more than offsetting the lower price index.

Brands

Forevermark continued to grow, particularly in the core markets of China, Japan, India and the US, and is now available in more than 1,000 authorised jewellery stores around the world.

Despite an adverse exchange rate impact from the Japanese yen, De Beers Diamond Jewellers delivered sales growth compared with the first six months of 2012, with strong growth in Europe and most Asian markets. During the period, two new franchise stores were opened, in Kuala Lumpur and Baku.

Projects

In Botswana, infrastructure at the Jwaneng mine Cut-8 extension project is now complete. Within the current life of mine plan, Cut 8 will provide access to an estimated 86 Mt of ore to be treated yielding 102 Mct of high quality diamonds, and extend the life of mine of the world's richest diamond mine to at least 2028.

In South Africa, final outstanding regulatory clearances for the Venetia underground project were received in February 2013. The project team has been established and early earthworks have already commenced. The project will extend the life of Venetia Mine beyond 2040, and contains an estimated 96 Mct in approximately 130 Mt to be treated.

In Canada, permitting on the Gahcho Kué Project is in progress and a Socio Economic Agreement has been entered into between De Beers and the Government of the Northwest Territories. The Gahcho KuéProject is currently planned to treat approximately 31 Mt containing an estimated 47.6 Mct.

Outlook

With full recovery from the Jwaneng slope failure and Venetia mine flooding expected during the second half, De Beers continues to anticipate full-year production will recover to be broadly in line with 2012 subject to market conditions.

De Beers expects moderate growth in diamond jewellery demand in the remaining six months of 2013, supported by improving sentiment in the US market and continued growth in China, albeit at a lower rate. Conditions in India and Japan remain more uncertain due, in part, to the continuing volatility of their currencies, which is expected to affect growth in US dollar terms. Overall, despite the fragility of the global economic recovery, macro-economic conditions are generally supportive of global growth in the polished diamond market in 2013 at levels slightly above 2012.

OTHER MINING AND INDUSTRIAL

$ million (unless otherwise stated)	6 months ended 30 June 2013	6 months ended 30 June 2012⁽¹⁾
Underlying operating profit	60	180
Niobium	43	45
Phosphates	49	29
Amapá	-	110
Tarmac	(22)	(25)
Scaw Metals⁽²⁾	-	27
Corporate	(10)	(6)
Underlying EBITDA	121	278
Net operating assets	827	3,466
Capital expenditure	90	109
Share of Group underlying operating profit	2%	5%
Share of Group net operating assets	2%	8%

⁽¹⁾ Certain balances related to 2012 have been restated to reflect the adoption of new accounting pronouncements. See note 1 to the Condensed financial statements.

⁽²⁾ Scaw South Africa was disposed of in the second half of 2012.

Other Mining and Industrial - Niobium and Phosphates

Markets

Niobium

In spite of continuing macro-economic uncertainty in Europe and China, all contracts have been honoured for the period, with additional discounted spot sales in the regions. Lower demand from these countries has transferred bargaining power to steel mills thus impacting price margins. Sales volume to the US remained stable, while India, Korea and the Middle East have used opportunities in the spot market to absorb surplus niobium.

Phosphates

Strong prices for grain encouraged farmers to bring forward fertiliser purchases during the first quarter of the year. However, in the second quarter as grain prices fell so did the demand for fertiliser. In Brazil strong demand for the summer crop is expected despite the expectation of lower consumption in India and US markets.

Operating performance

	6 months ended 30 June 2013	6 months ended 30 June 2012
Attributable niobium production (tonnes)	2,200	2,300
Attributable phosphates production (tonnes)	596,700	518,400

Niobium

Catalão generated an underlying operating profit of $43 million, 4% lower than the previous year. This performance reflected lower sales prices.

Phosphates

Underlying operating profit increased to $49 million, 69% higher than for the equivalent period in 2012. This was the result of lower cash costs, driven by reduced labour costs and sulphur price decreases, higher sales prices and volumes, and the devaluation of the Brazilian real.

Projects

Niobium

The Boa Vista Fresh Rock project received Board approval in February 2013. The existing plant will be adapted to process new rock in place of oxide ore, leading to production capacity of approximately 6,500 tonnes of niobium per year, from 4,400 tonnes in 2012. By the end of June, the project had 92% of its detailed engineering completed, piling works had already reached 80% and some of the key pieces of equipment had already arrived.

Outlook

Niobium

Prices are likely to remain under pressure for the rest of the year owing to the weak economic environment in Europe and lower growth in China.

Phosphates

Brazilian fertiliser demand is expected to increase slightly in 2013, reflecting pent-up demand created by a strong pricing environment, robust agricultural commodity prices and stable fertiliser use. According to ANDA (Brazilian Fertiliser Association) fertiliser demand is expected to increase by 2% over the previous year, from 29.5 Mt in 2012 to 30 Mt in 2013.

Other Mining and Industrial - Amapá and Tarmac

Amapá

Amapá operation generated an underlying operating profit of $27 million. This is a decrease of $83 million compared to the first half of 2012. The lower profit was primarily due to the reversal of penalty provisions in 2012, as a result of contract renegotiations, which was not repeated in 2013. In addition, on 28 March 2013, a major geological event at the Santana port, the cause of which remains under investigation, resulted in the destruction of the port shiploader infrastructure and sampling tower. Extensive damage has been caused to the port operation, and all export shipments have been suspended. Plans for the recovery of the port are being assessed by a project team. The impact of lower sales has been partly offset by improved iron ore prices earlier in the year, as well as there being no recorded depreciation owing to the operation being treated as "held for sale" from the end of 2012. However, the underlying operating profit is for the benefit of the purchaser and has been excluded from the Group results. Further details of the divestment of the operation are shown under note 13 to the Condensed financial statements.

Production has decreased by 17%, mainly due to the lower sales and stockpile constraints. Increased stockpile capacity at both the mine and the port is being investigated, and the railway line between the mine and port is continuing to operate.

Tarmac

Tarmac reported an underlying operating loss of $22 million, compared to a loss of $25 million in the first half of 2012. Tarmac's EBITDA was $26 million, $10 million lower than for the same period last year. The results of 2012 included the contribution from Tarmac Quarry Materials which became part of the Lafarge Tarmac joint venture with effect from 7 January 2013.

Building Products

Improved performance was driven by better sales volumes, while the company continued to manage its cost base in order to maintain margins. The general market is starting to show signs of confidence returning in certain sectors, although it remains a competitive pricing environment in which to secure new contracts.
Cost-reduction projects and improvements in operating efficiencies remain high on the company's turnaround strategy agenda. Compared to the same period last year, there is some optimism that market conditions are starting to improve as demand for certain products is relatively strong.

Middle East

The Middle East operations experienced a decline in profitability compared with the first half of 2012 because of continuing difficult market conditions and tightening margins. There was some upside from strong trading at Abu Dhabi and Al Dhahira quarry, but trading in Dubai and Oman was impacted by sales volume shortfalls arising from client delays on certain major contracts.

Ongoing weaker margins in Oman and pressure on Shawkah quarry sales volumes and prices are anticipated, offset by a continued favourable trading position at Abu Dhabi and improved profitability in Dubai.

Lafarge Tarmac joint venture

On 7 January 2013, following final clearance from the UK Competition Commission, Anglo American and Lafarge announced the completion of the transaction to create an incorporated joint venture known as Lafarge Tarmac. Due to poor UK market conditions, the Group's share in the underlying operating loss for the newly formed joint venture was $16 million. The loss was caused by lower pricing in all lines other than aggregates partly compensated by increased sales volumes across all product lines. The integration of the businesses, delivery of cost savings and synergies have progressed well. The market outlook remains weak for the remainder of the year, based on low levels of private and public sector construction and infrastructure spend.

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