Anglo American Interim Results

RNS Number : 3244L

Anglo American PLC

29 July 2011

Anglo American announces 45% increase in half year core operating profit to

$5.9 billion

Financial highlights for the six months ended 30 June 2011

· Group operating profit⁽¹⁾ of $6.0 billion ($5.9 billion from core operations⁽²⁾, up 45%)

· Underlying earnings⁽³⁾ of $3.1 billion and underlying EPS of $2.58, up 40%

· Profit attributable to equity shareholders⁽⁴⁾ of $4.0 billion, up 93%

· Net debt⁽⁵⁾ of $6.8 billion at 30 June 2011

Operational performance and strategic delivery

· Kumba sales levels maintained to take advantage of record export iron ore prices, despite Q1 rains

· Metallurgical Coal production recovered strongly from severe flooding to benefit from record pricing, while export Thermal Coal production increased by 5% in South Africa

· Nickel production enhanced by successful delivery of Barro Alto project

· Platinum refined production increased 17% to 1.2 million ounces

· $1.3 billion of benefit from asset optimisation and supply chain, having already exceeded $2 billion target in 2010

· Divestment programme of non-core businesses largely complete

- $3.3 billion of cumulative announced proceeds⁽⁶⁾

- Tarmac and Lafarge UK joint venture progressing through regulatory process

Production growth already being delivered

· Barro Alto 41 ktpa⁽⁷⁾ nickel project - delivered on schedule; ramp-up under way

· Los Bronces 278 ktpa⁽⁸⁾ copper expansion - on schedule for Q4 2011

· Kolomela 9 Mtpa iron ore project - 94% complete and on schedule to produce 4-5 Mt in 2012; hot commissioning to take place during H2 2011

· Minas-Rio 26.5 Mtpa iron ore project - on track for first ore on ship in H2 2013

· $66 billion of unapproved projects across core commodities provides growth optionality for the long term

Safety

· Continued drive towards zero harm to address disappointing safety performance

- Ten lives lost in first six months

Dividend

· Interim dividend increased by 12% to $0.28 per share

HIGHLIGHTS US$ million, except per share amounts	6 months ended 30 June 2011	6 months ended 30 June 2010	Change
Group revenue including associates⁽⁹⁾	18,294	15,015	22%

Operating profit including associates before special items and remeasurements - core operations⁽¹⁾⁽²⁾	5,923	4,071	45%

Operating profit including associates before special items and remeasurements⁽¹⁾	6,024	4,361	38%

Underlying earnings⁽³⁾	3,120	2,212	41%

EBITDA⁽¹⁰⁾	7,112	5,414	31%

Net cash inflows from operating activities	3,986	2,686	48%

Profit before tax⁽⁴⁾	6,571	3,903	68%

Profit for the financial period attributable to equity shareholders⁽⁴⁾	3,988	2,061	93%

Earnings per share (US$):
Basic earnings per share⁽⁴⁾	3.30	1.71	93%
Underlying earnings per share⁽³⁾	2.58	1.84	40%
Dividend per share	0.28	0.25	12%

⁽¹⁾Operating profit includes attributable share of associates' operating profit (before attributable share of associates' interest, tax and non-controlling interests) and is before special items and remeasurements, unless otherwise stated. See notes 2 and 3 to the Condensed financial statements. For the definition of special items and remeasurements see note 4 to the Condensed financial statements.

⁽²⁾Operations considered core to the Group are Iron Ore and Manganese (Kumba Iron Ore, Iron Ore Brazil and Samancor), Metallurgical Coal, Thermal Coal, Copper, Nickel, Platinum, Diamonds, Exploration and Corporate Activities. See the Financial review of Group results section for a reconciliation of operating profit from core operations to Group operating profit.

⁽³⁾ See note 9 to the Condensed financial statements for basis of calculation of underlying earnings.

⁽⁴⁾ Stated after special items and remeasurements.

⁽⁵⁾Net debt includes related hedges and net debt in disposals groups. See note 12 to the Condensed financial statements.

⁽⁶⁾Consideration on a debt and cash free basis, as announced.

⁽⁷⁾Additional capacity over first five years.

⁽⁸⁾Additional capacity over first three years.

⁽⁹⁾ Includes the Group's attributable share of associates' revenue of $3,057 million (six months ended 30 June 2010: $2,425 million). See note 2 to the Condensed financial statements.

⁽¹⁰⁾Earnings before interest, tax, depreciation and amortisation (EBITDA) is operating profit before special items, remeasurements, depreciation and amortisation in subsidiaries and joint ventures and includes the attributable share of EBITDA of associates. See note 5 to the Condensed financial statements.

Cynthia Carroll, Chief Executive, said: "Anglo American's strong financial performance in the first half is reflective of the operational and business improvement foundations put in place over the last three years which have enabled us to capture the maximum benefit of increased commodity prices. Furthermore, our commitment to sustain investment in our growth projects through the downturn is now paying dividends; that new production is already coming on stream and will drive very substantial incremental cash flows as the projects ramp up from this year onwards. For the first six months, we have reported a 45% increase in operating profit from our core businesses, generating $5.9 billion, with EBITDA of $7.1 billion, and underlying earnings of $3.1 billion. All of our core segments reported an increase in operating profit.

We have achieved asset optimisation and procurement benefits of $1.3 billion from our core businesses during the first six months of the year, having already exceeded our full year 2011 target of $2 billion of benefits during 2010. As we have seen across many major mining regions, there were also a number of factors that negatively affected performance, including weather conditions in Australia and South Africa, further dollar weakness, input cost pressures and lower ore grades. However, I am pleased to report that where we are able to mitigate against these factors, we have done so and we expect a stronger second half to the year to build upon the momentum of the second quarter. Our post-flood production recovery plan for our Metallurgical Coal business in Australia and the firmly embedded practices of our global supply chain have shown particular success, to name just two examples.

Anglo American's delivery of substantial near term production growth in nickel, copper and iron ore at attractive cash cost positions, clearly sets us apart. We are now in a position to take full advantage of the robust demand environment as we deliver some of the lowest capital intensity and operating cost volumes to fundamentally attractive markets. Our four major projects have all made excellent progress, Barro Alto began production on schedule in March and will more than double our Nickel business' production when it reaches full capacity in 2012. In the fourth quarter of this year, the expansion of our Los Bronces copper operation will begin production on schedule, more than doubling the mine's production over the first three years to 490,000 tonnes per year and will have highly attractive cash operating costs.

Looking to the first half of next year, 2012, the 9 million tonnes per year Kolomela iron ore project in South Africa will ramp-up production, again with a very competitive cost position. The development progress of Kolomela has been outstanding, it is 94% complete and certain elements of the plant are already being handed over for commissioning. We have also extended the life of the mine by eight years, now giving us a 28-year life of mine. In Brazil, our 26.5 million tonnes per year Minas-Rio iron ore project continues to make good progress, with civil works for the beneficiation plant and construction works for the tailings dam all getting under way since March. The project is on track to deliver first ore on ship in the second half of 2013 at a first quartile cost position and we have begun the pre-feasibility work for the project's very significant expansion potential to 80-90 million tonnes per year.

Looking further out, our $66 billion pipeline of unapproved projects presents tremendous opportunities and optionality from our world class resource base, which itself has been significantly increased due to our many exploration successes. However, while we expect to approve a number of major projects over the next 12 months, including Quellaveco (copper) and Grosvenor (metallurgical coal), we are not immune from the industry-wide challenges in delivering new supply to the market.

I have always made it clear that safety is my absolute priority and I am saddened by the disappointing safety performance in the first half of this year, following five years of consistent safety improvement. Ten employees lost their lives in work related incidents and there is another such incident under investigation. Furthermore, our lost time injury rates have plateaued following a long period of significant and sustained improvements. While there are a great many examples of continued safety excellence across our businesses, most notably in Copper, we have taken swift action to review, refocus and reprioritise our safety related initiatives to ensure we continue to move towards zero harm.

The economic outlook remains robust for the mining industry and in particular for Anglo American's well balanced and diversified portfolio. While there undoubtedly remain a number of headwinds affecting the global economy in the near term, the long term healthy demand growth from the major emerging economies, together with widespread supply constraints, continues to support highly attractive market dynamics."

Review of the six months ended 30 June 2011

Financial results

Anglo American's underlying earnings for the first half of 2011 were $3.1 billion, 41% higher than the same period in 2010, with an operating profit of $6.0 billion, up 38% from $4.4 billion. Robust demand and disruption to supply resulted in higher prices across the Group's portfolio of commodities. Copper reached a nominal record of 460 c/lb during February, while the iron ore market saw record quarterly contract and index prices. A record metallurgical coal price settlement was concluded for the second quarter at $330/t for high quality hard coking coal, reflecting reduced availability of supply. Export thermal prices also increased significantly, with export prices FOB South Africa up 39% compared with the first half of 2010.

Iron Ore and Manganese recorded an operating profit of $2,507 million, 54% higher than the corresponding period in 2010. This was supported by strong iron ore prices, which increased by 56% at Kumba Iron Ore (Kumba), offsetting the impact of higher costs as a result of increased waste removal activity, the stronger rand, and lower operating profits from the Manganese operations. Kumba generated an operating profit of $2,437 million, 66% higher than in the same period during 2010.

Metallurgical Coal delivered an operating profit of $491 million, an 87% increase on the first half of 2010, primarily due to the impact of higher realised export prices driven by weather induced supply constraints, offsetting the impact of a 22% decrease in export metallurgical sales and a stronger Australian dollar. Recovery actions initiated in the first quarter resulted in export metallurgical coal sales increasing by 79% in the second quarter compared to the first quarter.

Thermal Coal's operating profit of $521 million was 48% higher than the equivalent period in 2010 as a result of stronger realised prices more than offsetting the impact of lower railings to the Richards Bay Coal Terminal following derailments in the first quarter, and an extended maintenance shutdown between May and June. Cerrejón provided a strong financial performance, driven by higher export prices into the Atlantic markets.

Copper delivered an operating profit of $1,401 million, 18% higher than the first half of 2010, underpinned by a record average realised copper price. Sales volumes were 12% lower than the same period in 2010 owing to lower production as a result of anticipated lower grades and rain disruption, and the impact of the Patache port closure throughout the first half of the year.

Nickel reported an operating profit of $93 million, 37% higher than the equivalent period in 2010, principally as a result of a 21% increase in sales volumes from Codemin and Loma de Níquel and a higher nickel price.

Platinum generated an operating profit of $542 million, 30% higher than the corresponding period in 2010, driven by a 13% increase in sales volume and a 15% increase in the overall average realised basket price.

Diamonds recorded an attributable operating profit of $450 million, 72% higher than the first half of 2010, reflecting record rough diamond prices with production in line with the first half of 2010.

Other Mining and Industrial's operating profit was $101 million, 65% lower, attributable to the sale of Scaw International, the Skorpion Zinc mine and Tarmac European businesses in 2010, and the Lisheen and Black Mountain Zinc operations in 2011. The businesses that Anglo American has decided to retain (Peace River Coal, Copebrás and Catalão), delivered a 118% increase in operating profit, driven by higher demand and prices for fertiliser products, and higher metallurgical coal prices and sales volumes. This was offset by Tarmac's operating loss of $22 million, compared to an operating profit of $29 million in the first half of 2010, following rising input costs and difficult market conditions as well as the sale of its European businesses. Operating profit in the Scaw South Africa business was 15% lower due to difficult trading conditions in the Rolled Products operation.

Production

Production across the Group's operations was negatively affected by significant increases in rainfall relative to the same period in 2010. At Kumba's Sishen mine in South Africa, production from the Dense Medium Separation plant was down 16%, driven by the impact of feedstock availability constraints owing to rain restricting activity in the pit and wet feedstock causing blockages in the plant. Jig plant production was 2% lower than the first half of 2010, but the plant achieved a run rate in excess of design capacity during the second quarter, which offset the shortfall of the first quarter. Kumba's Sishen Mine saw an 18% increase in production during the second quarter of 2011 as operations recovered from the rain-disrupted first quarter. In Australia, the Group's Metallurgical Coal operations were affected by the widespread flooding. Metallurgical coal production was down 19% versus the first half of 2010, but in the second quarter increased by 77% against the first quarter.

Production of export thermal coal from South Africa increased by 5%, driven by the ramp up at Zibulo. The first half production for both Cerrejón and Australian thermal coal has been reduced by heavy rainfall, with production down by 3% and 17% respectively. Copper production was 8% lower than the first half of 2010 owing to the impact of heavy rains at Collahuasi, lower grades, a temporary failure in the return solutions pipeline at Los Bronces, and lower throughput and recoveries at El Soldado. Nickel production from the Nickel Business Unit in South America was 26% higher than the same period in 2010, driven by higher production at Loma de Níquel and delivery of the Barro Alto project, while nickel output from Platinum's South African mines increased by 12%.

Equivalent refined platinum production decreased by 3% from first half of 2010, as a result of safety related stoppages, both regulated and self-imposed. Platinum refined production was 17% higher than the first half of 2010.

Production at De Beers was in line with the first half of 2010.

Capital structure

Net debt, including related hedges, of $6,794 million was $590 million lower than at 31 December 2010, and $4,136 million lower than at 30 June 2010.

Cash flows from operations of $5,233 million funded capital investment of $2,328 million (net of related derivatives) principally in the Group's core assets, including combined investment of $1,083 million in the Los Bronces, Barro Alto, Minas-Rio and Kolomela growth projects during the first six months of the year. The disposal of the remaining Zinc businesses in February 2011 resulted in a net cash inflow of $499 million.

Dividends

An interim dividend of 28 US cents per share has been declared.

Significant project growth already being delivered

Anglo American has a clear strategy of deploying its capital in those commodities with strong fundamentals and the most attractive risk-return profiles that deliver long term, through-the-cycle returns for its shareholders.

Anglo American has developed a portfolio of world class operating assets and development projects with the benefits of scale, expansion potential and attractive cost position.

The Group's pipeline of projects spans its core commodities and is expected to deliver organic production growth of 35% by 2014 from approved projects alone. Beyond the near term, Anglo American has a world class pipeline of projects across its selected commodities and is progressing towards approval decisions in relation to the development of two further high quality growth projects - the 225 ktpa Quellaveco copper project in Peru and the 4.3 Mtpa Grosvenor metallurgical coal project in Australia. Submission to the Board for approval is expected for the Quellaveco project once the necessary water permits have been obtained and for the Grosvenor project in 2012. Together with a number of other medium and longer term projects, Anglo American has the potential to double production over the next decade through its $85 billion pipeline of more than 100 projects.

Anglo American's project management systems and processes ensure close collaboration between the Group's technical and project teams to execute projects effectively. The four largest near term strategic growth projects are all well placed on their respective industry cost curves, have long resource lives and the first of those projects has already entered production.

Barro Alto - delivered

The Barro Alto nickel project in Brazil, a greenfield nickel project approved for development in December 2006, delivered its first metal in March 2011. Barro Alto is ramping up towards full production capacity, which it is expected to reach in the second half of 2012. This project makes use of a proven technology and will produce an average of 36 ktpa of nickel in full production (41 ktpa over the first five years), more than doubling production from Anglo American's Nickel business, with a competitive cost position in the lower half of the cost curve.

Los Bronces - on track

The Los Bronces copper expansion project in Chile is 97% complete and is on schedule for first production in the fourth quarter of 2011. Production at Los Bronces is scheduled to more than double (increase by 278 ktpa) to 490 ktpa over the first three years of full production following project completion and to average 400 ktpa over the first 10 years. At peak production levels, Los Bronces is expected to be the fifth largest producing copper mine in the world, with highly attractive cash operating costs, reserves and resources that support a mine life of over 30 years and with further expansion potential.

Kolomela - on track

Kumba's Kolomela project in South Africa is well advanced and overall project progress reached 94% by 30 June 2011. With construction substantially complete, various systems of the plant have been handed over for cold commissioning. Hot commissioning of the plant is anticipated to commence during the third quarter of 2011. During the process, ore will be fed through the plant, resulting in work in progress stock and some saleable product being produced in 2011. Significant progress has been made by Transnet, with the construction of the direct rail link from the mine to the Sishen-Saldahna iron ore export channel likely to be finalised by the fourth quarter of 2011. Kolomela is situated 80 km to the south of Kumba's world class Sishen mine and, when full production is achieved in 2013, will produce 9 Mtpa of high quality seaborne iron ore, with further potential for expansion. Kolomela's life of mine has been extended by eight years to 28 years since the initial investment decision was made in 2008.

Minas-Rio - on track

The Minas-Rio iron ore project in Brazil continues to make progress and is expected to produce 26.5 Mtpa of iron ore in its first phase. The award of the second part of the mine, beneficiation plant and tailings dam installation licence (LI part 2) in December 2010, being the primary installation licence, enabled the start of the civil works for the beneficiation plant and tailings dam construction in March 2011, after the rainy season. This licence followed the award of the mining permit in August 2010. During the first half of 2011, licence and permit receipts continued, including securing the Mineral Easement and progressing land access, though there are still a number of other licenses and permits to be secured. At the beneficiation plant, 73% of earthworks are complete and 15% of the civil works have been concluded. The project remains on track to deliver first ore on ship during the second half of 2013.

Divestment programme largely complete

Anglo American's programme to divest of its non-core businesses is largely complete. Scaw South Africa, the remaining extent of the Scaw Metals Group, is the last such business to be sold and that sales process is under way. During 2010, Anglo American announced the sale of a number of businesses for a total consideration of $3.3 billion on a debt and cash free basis, completed in a manner and on a timetable to maximise value to Anglo American's shareholders.

On 18 February 2011, Anglo American and Lafarge announced their agreement to combine their cement, aggregates, ready-mixed concrete, asphalt and contracting businesses in the United Kingdom; Tarmac, Lafarge Cement UK, Lafarge Aggregates and Concrete UK. The 50:50 joint venture will create a leading UK construction materials company, with a portfolio of high quality assets drawing on the complementary geographical distribution of operations and assets, the skills of two experienced management teams and a portfolio of well-known and innovative brands. This transaction is progressing through the regulatory clearance processes.

As part of Anglo American's strategy to grow its Metallurgical Coal business, Anglo American has decided to retain, invest in and grow the Peace River Coal asset in British Columbia. Peace River Coal will be managed as part of Anglo American's Metallurgical Coal business.

Anglo American has decided to retain its Copebrás phosphates business in Brazil and will further assess its potential for additional investment.

Outlook

Anglo American believes that demand for commodities remains healthy, driven by the resources intensive growth in the emerging economies, particularly in China and India. However, the unfolding of sovereign debt crises in Europe and the United States, and policy tightening in the major emerging economies is expected to generate short-term volatility. In spite of that volatility, prices for commodities are expected to be robust as widespread supply constraints and the challenges producers face in bringing new supply into production will lead to tighter market fundamentals.

Costs will continue to be impacted by strong producer currencies and increasing prices for key inputs.

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 Metcalfe Tel: +44 (0)20 7968 2192
South Africa Pranill Ramchander Tel: +27 (0)11 638 2592		Leisha Wemyss Tel: +44 (0)20 7968 8607

Anglo American plc 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 precious metals and minerals - in which it is a global leader in both platinum and diamonds; base metals - copper and nickel; and bulk commodities - iron ore, metallurgical coal and thermal coal. 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 and extensive pipeline of growth projects are located in southern Africa, South America, Australia, North America and Asia.

Webcast of presentation:

A live webcast of the results presentation, starting at 9.00am UK time on 29 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; operating profit includes attributable share of associates' 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 are calculated as set out in note 9 to the Condensed financial statements. Earnings before interest, tax, depreciation and amortisation (EBITDA) is operating profit before special items and remeasurements, depreciation and amortisation in subsidiaries and joint ventures and includes attributable share of EBITDA of associates. EBITDA is reconciled to 'Total profit from operations and associates' and to 'Cash flows from operations' in note 5 to the Condensed financial statements. Tonnes are metric tons, 'Mt' denotes million tonnes and 'kt' denotes thousand tonnes unless otherwise stated.

Forward-looking statements

This announcement includes forward-looking statements. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding Anglo American's financial position, business and acquisition strategy, plans and objectives of management for future operations (including development plans and objectives relating to Anglo American's products, production forecasts and reserve and resource positions), are forward-looking statements. 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 Services Authority, the Listings Requirements of the securities exchange of the JSE Limited in South Africa, the SWX Swiss Exchange, the Botswana Stock Exchange and the Namibian Stock Exchange and any other applicable regulations) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Anglo American's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Nothing in this 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, but may not necessarily correspond to the views held by Anglo American.

Financial review of Group results

Group operating profit for the first half of 2011 was $6,024 million, with operating profit from core operations of $5,923 million, 45% higher than the first half of 2010.

Operating profit $ million	6 months ended 30 June 2011	6 months ended 30 June 2010
Iron Ore and Manganese	2,507	1,628
Metallurgical Coal	491	263
Thermal Coal	521	351
Copper	1,401	1,185
Nickel	93	68
Platinum	542	418
Diamonds	450	261
Exploration	(46)	(57)
Corporate Activities and Unallocated costs	(36)	(46)
Operating profit including associates before special items and remeasurements - core operations	5,923	4,071
Other Mining and Industrial	101	290
Operating profit including associates before special items and remeasurements	6,024	4,361
Underlying earnings - core operations⁽¹⁾	3,058	1,994

⁽¹⁾See note 3 to the Condensed financial statements

This improvement in operating profit was primarily driven by increases in realised prices of commodities. These included a 70% rise in achieved Australian export metallurgical coal prices, a 56% increase in achieved FOB iron ore prices, a 48% increase in realised South African export thermal coal prices, a 37% improvement in realised copper prices, and a 12% increase in platinum prices. Production across the Group's operations was negatively affected by heavy rainfall and flooding, adversely affecting operating profit. Lower production volumes and mining cost pressures affecting the industry resulted in higher unit costs of production across the Group.

The Group's results are influenced by a variety of currencies owing to the geographic diversity of the Group. For the first half of 2011, there was a negative exchange variance in operating profit of $527 million compared to the first half of 2010. The Group results were affected negatively by the weakening of the US dollar versus the South African rand, Chilean peso, Brazilian real, and Australian dollar relative to the first half of 2010.

Towards the beginning of this document, reference has been made to core operations. Operations considered core to the Group are Iron Ore and Manganese (Kumba Iron Ore, Iron Ore Brazil and Samancor), Metallurgical Coal, Thermal Coal, Copper, Nickel, Platinum, and Diamonds. During the first half of 2011 the Group decided to retain the Peace River Coal, Catalão and Copebrás assets (Other Mining and Industrial segment). These retained assets delivered a combined increase in operating profit of 118% compared with the same period of the prior year. This was driven by operational improvements at Peace River Coal and an increase in sales volumes and prices at Copebrás owing to high demand for fertilisers.

Group underlying earnings were $3,120 million, a 41% increase on 2010. Group underlying earnings per share were $2.58 compared with $1.84 in the first half of 2010.

Reconciliation of profit for the period to Underlying earnings $ million	6 months ended 30 June 2011	6 months ended 30 June 2010
Profit for the financial period attributable to equity shareholders of the Company	3,988	2,061
Operating special items	25	104
Operating remeasurements	(336)	41
Net (profit)/loss on disposals	(423)	88
Financing special items	-	13
Financing remeasurements	(49)	(154)
Special items and remeasurements tax	(136)	56
Non-controlling interests on special items and remeasurements	51	3
Underlying earnings	3,120	2,212
Underlying earnings per share ($)	2.58	1.84

Summary income statement $ million	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit from subsidiaries and joint ventures before special items and remeasurements	5,180	3,715
Operating special items	(25)	(93)
Operating remeasurements	328	(33)
Operating profit from subsidiaries and joint ventures	5,483	3,589
Net profit/(loss) on disposals	417	(92)
Share of net income from associates (see reconciliation below)	605	384
Total profit from operations and associates	6,505	3,881
Net finance income/(costs) before remeasurements	20	(130)
Financing remeasurements	46	152
Profit before tax	6,571	3,903
Income tax expense	(1,556)	(1,216)
Profit for the financial period	5,015	2,687
Non-controlling interests	(1,027)	(626)
Profit for the financial period attributable to equity shareholders of the Company	3,988	2,061
Basic earnings per share ($)	3.30	1.71
Group operating profit including associates before special items and remeasurements⁽¹⁾	6,024	4,361

Operating profit from associates before special items and remeasurements	844	646
Operating special items and remeasurements	8	(19)
Net profit on disposals	6	4
Net finance costs (before special items and remeasurements)	(26)	(56)
Financing special items and remeasurements	3	(11)
Income tax expense (after special items and remeasurements)	(221)	(171)
Non-controlling interests (after special items and remeasurements)	(9)	(9)
Share of net income from associates	605	384

⁽¹⁾Operating profit before special items and remeasurements from subsidiaries and joint ventures was $5,180 million (six months ended 30 June 2010: $3,715 million) and the attributable share from associates was $844 million (six months ended 30 June 2010: $646 million). For special items and remeasurements, see note 4 to the Condensed financial statements.

Special items and remeasurements

	6 months ended 30 June 2011				6 months ended 30 June 2010
$ million	Subsidiaries and joint ventures	Associates	Total		Subsidiaries and joint ventures	Associates	Total
Operating special items	(25)	-	(25)		(93)	(11)	(104)
Operating remeasurements	328	8	336		(33)	(8)	(41)
Operating special items and remeasurements	303	8	311		(126)	(19)	(145)
Net profit on disposals	417	6	423		(92)	4	(88)
Financing special items	-	-	-	-	-	(13)	(13)
Financing remeasurements	46	3	49		152	2	154
Special items and remeasurements tax	140	(4)	136		(57)	1	(56)

Operating special items and remeasurements, including associates, amounted to a gain of $311 million, principally in respect of non-hedge derivatives of capital expenditure in Iron Ore Brazil (IOB). Derivatives which have been realised during the period resulted in a net operating remeasurement gain since their inception of $224 million.

Net profit on disposals of $423 million, including associates, principally relates to the $397 million profit on the Group's disposal of its 100% interest in the Lisheen zinc mine and its 74% interest in Black Mountain Mining (Proprietary) Limited, which holds 100% of the Black Mountain mine and the Gamsberg project. These disposals were completed in February 2011 and resulted in a net cash inflow of $499 million.

Financing remeasurements, including associates, reflect a net gain of $49 million relating to gains on embedded and non-hedge derivatives and other remeasurements.

Special items and remeasurements tax, including associates, amounted to a credit of $136 million relating to a credit for one-off tax items of $154 million, a tax remeasurement credit of $126 million and a tax charge on special items and remeasurements of $144 million. One-off tax items principally relate to the recognition of deferred tax assets in IOB originally written off as part of the impairment charges which related to the Amapá iron ore system in 2009, and a capital gains tax refund which related to a prior year disposal.

Net finance income

Net finance income, before remeasurements, excluding associates, was $20 million (compared to a charge of $130 million in the six months ended 30 June 2010). This was primarily due to increased interest income on investments and an increase in interest capitalised.

Tax

	6 months ended 30 June 2011			6 months ended 30 June 2010
$ million (unless otherwise stated)	Before special items and remeasurements	Associates' tax and non-controlling interests	Including associates	Before special items and remeasurements	Associates' tax and non-controlling interests	Including associates
Profit before tax	5,793	225	6,018	3,991	184	4,175
Tax	(1,696)	(217)	(1,913)	(1,159)	(172)	(1,331)
Profit for the financial period	4,097	8	4,105	2,832	12	2,844
Effective tax rate including associates (%)			31.8			31.9

IAS 1 (Revised) Presentation of Financial Statements requires income from associates to be presented net of tax on the face of the income statement. Associates' tax is therefore not included within the Group's income tax expense. Associates' tax included within 'Share of net income from associates' for the six months ended 30 June 2011 is $221 million. Excluding special items and remeasurements, this becomes $217 million.

The effective rate of tax before special items and remeasurements including attributable share of associates' tax for the six months ended 30 June 2011 was 31.8%. This was in line with the equivalent effective rate of 31.9% in the six months ended 30 June 2010. In future periods it is expected that the effective tax rate, including associates' tax, will remain above the United Kingdom statutory tax rate.

Balance sheet

Equity attributable to equity shareholders of the Company was $37,697 million at 30 June 2011, up on the $34,239 million at 31 December 2010, mainly due to the profit for the period of $3,988 million. Investments in associates were $401 million higher than at 31 December 2010, principally as a result of a significant improvement in earnings at De Beers. Property, plant and equipment increased by $1,623 million compared to 31 December 2010, due to the ongoing progress of projects during the half year. There were no assets classified as held for sale at 30 June 2011 (compared to assets, net of associated liabilities, of $188 million at 31 December 2010) due to the sale of the remaining Zinc assets during the period. An increase of $865 million in inventories and current trade and other receivables was driven by the impact of higher commodity prices and a weaker dollar during the first half of 2011.

Cash flow

Net cash inflows from operating activities were $3,986 million compared with $2,686 million in the six months ended 30 June 2010. EBITDA was $7,112 million, an increase of 31% from $5,414 million in the prior period, reflecting strong prices across the Group's core commodities.

Net cash used in investing activities was $1,682 million compared with $2,397 million in the six months ended 30 June 2010. Purchases of property, plant and equipment, net of related derivative cash flows, amounted to $2,328 million, an increase of $335 million, reflecting major spend on the Group's strategic growth projects. In the first half of 2011, proceeds from disposals, principally of the Group's remaining Zinc portfolio (net of cash and cash equivalents disposed) were $505 million (proceeds from disposals six months ended 30 June 2010: $160 million).

Net cash used in financing activities was $1,909 million compared with $616 million in the six months ended 30 June 2010. During the period the Group paid the 2010 final dividend of $495 million to shareholders, and an additional $461 million in dividends to non-controlling interests compared with the same period in 2010.

Liquidity and funding

Net debt, including related hedges, was $6,794 million, a decrease of $590 million from $7,384 million at 31 December 2010. The decrease in net debt reflects strong operating cash flows.

Net debt at 30 June 2011 comprised $13,558 million of debt, partly offset by $6,805 million of cash and cash equivalents, and the current position of derivative liabilities related to net debt of $41 million. Net debt to total capital⁽¹⁾ at 30 June 2011 was 14.0%, compared with 16.3% at 31 December 2010.

At 30 June 2011, the Group had undrawn bank facilities of $9.0 billion.

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

⁽¹⁾ Net debt to total capital is calculated as net debt divided by total capital. Total capital is net assets excluding net debt

Group corporate cost allocation

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

Dividends

An interim dividend of 28 US cents per share has been declared.

Related party transactions

Related party transactions are disclosed in note 16 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 impact 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 2010, and remain appropriate in 2011. 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

· Reserves and 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 2010 is available on the Group's website www.angloamerican.com.

Operations review for the six months ended 30 June 2011

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

IRON ORE AND MANGANESE

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit	2,507	1,628
Kumba Iron Ore	2,437	1,470
Iron Ore Brazil	(36)	(51)
Samancor	106	209
EBITDA	2,611	1,711
Net operating assets	12,877	10,679
Capital expenditure	595	467
Share of Group operating profit	42%	37%
Share of Group net operating assets	28%	27%

Operating profit before special items and remeasurements increased by 54% from $1,628 million to $2,507 million, principally due to strong export prices, with a year-on-year weighted average price increase of 56% in export iron ore for Kumba offsetting lower export sales volumes and the impact of stronger exchange rates.

Markets

Total world crude steel production continued to grow and reached 760 Mt for the first six months of 2011, up from 717 Mt in 2010, a 6% increase. China's crude steel production during the first six months of 2011 increased 9% year-on-year to 352 Mt despite monetary tightening policies. Crude steel production in Japan has remained flat year-on-year, in spite of production disruptions caused by the earthquake and tsunami in March. Global seaborne iron ore imports rose by 5% year-on-year to 515 Mt, driven mainly by an 11% increase in demand in China. With adverse weather and logistics constraints impacting seaborne iron ore supply, the market has remained tight, which incentivised Chinese steel mills to source domestically produced iron ore. While Chinese domestic iron ore production increased, the average implied grade continued to fall.

Iron ore index prices peaked during the first quarter and, although retreating from these levels, have remained high, underpinned by high cost Chinese domestic iron ore production. On average, realised quarterly contract and index prices were aligned for the first half of 2011.

Despite global steel production rebounding above pre-Financial Crisis levels, prices for manganese ores have been held in check at the current levels on the back of an even stronger response in supply growth and a build up of port inventories in China that approached the 4.0 Mt level before dropping back to 3.6 Mt at the end of June. Alloy conversion capacity continued to grow through the year, placing additional pressure on margins for all alloys, with some higher cost producers eventually idling capacity to cut losses.

Operating performance

Kumba Iron Ore

Total tonnes mined at Sishen mine increased by 6% from 72.1 Mt in 2010 to 76.7 Mt, of which waste mined was 51.8 Mt, an increase of 12% over the first six months of 2010. This planned increase in mining activity was negatively affected by wet pit conditions resulting from excessive rainfall. As a result of the wet pit conditions, run of mine material supplied to the Dense Media Separation plant reduced, causing total production at Sishen Mine to decrease by 12% from 21.1 Mt in 2010 to 18.6 Mt. Production from the Dense Media Separation plant decreased by 2.4 Mt to 12.3 Mt, which was also reduced by maintenance downtime and wet feedstock causing blockages in the plant. The jig plant achieved a run rate in excess of design capacity during the second quarter which offset the shortfall of the first quarter. The contribution by the jig plant to Sishen mine's production decreased to 6.3 Mt in the period (30 June 2010: 6.4 Mt).

Total sales volumes for Kumba were maintained at approximately 22.0 Mt for the six months (2010: 21.9 Mt). Export sales volumes from Sishen Mine for the first six months decreased by 0.4 Mt to 18.4 Mt. Kumba's export sales volumes to China increased by 1.9 Mt to 12.7 Mt which represented 69% of total export volumes for the six months, compared with 57% in the prior period. This was driven by a 1.1 Mt reduction in export sales to Japan as a result of the earthquake and tsunami and the rescheduling of vessels from June 2011 to July 2011. 2.8 Mt of stock was used to supplement the lower production from the mine.

Iron Ore Brazil

Iron Ore Brazil generated an operating loss of $36 million, largely reflecting the pre-operational state of the Minas-Rio project.

The Amapá operation contributed an operating profit of $45 million for the period, compared with an operating loss of $7 million in the first half of 2010, reflecting a strong production performance and continued cost containment during a period of elevated prices. Production totalled 2.33 Mt in the period, a 26% increase, including 939,000 tonnes of higher priced pellet feed, a 37% increase.

Samancor

Operating profit of $106 million is $103 million lower than the prior period, driven mainly by lower prices and stronger local currencies.

Mine shutdowns in South Africa following the fatality in February 2011 resulted in lower production volumes in South Africa. In addition, production was lower at Gemco in Australia due to concentrator downtime as well as conveyor slippages, mainly due to unusually heavy rainfall. Ore production of 3.1 Mt (100% basis) is 8% lower than the prior year and alloy production of 362,000 tonnes (100% basis) is marginally lower than the prior year.

In 2010, high pricing drove a stimulation of domestic Chinese production which resulted in a stockpile build up. In 2011, the ore sales price has softened by 11% and, consequently, production levels have fallen and stockpiles have started to reduce.

Projects

The development of the 9 Mtpa Kolomela Mine continues and overall project progress reached 94%. Construction is substantially complete and various systems of the plant have been handed over for cold commissioning. Transnet has made significant progress in the construction of the direct rail link from the mine to the Sishen-Saldanha iron export channel. Hot commissioning of the plant is expected to start during the third quarter of 2011. During the process, ore will be fed through the plant, resulting in work in process stock and some saleable product being produced during 2011.

For the six months ended 30 June 2011, 15.3 Mt of material was mined at Kolomela at a cost of $73 million, bringing the total waste mined as part of the mine's development since 2008 to 37.3 Mt (Total cost - 2008 to 2010: $189 million). 600,000 tonnes of ore has been mined and stockpiled for the commissioning of the plant. The life of mine has been extended by eight years to 28 years since the initial investment decision. At this stage of the project, it is anticipated that the mine will be ramped up to produce 4 Mt to 5 Mt during 2012 and to produce at design capacity of 9 Mtpa in 2013.

At the 26.5 Mtpa Minas-Rio iron ore project, civil works commenced, on schedule, at the beneficiation plant during March. Construction is under way for the tailings dam and earthworks continue in order to support the continuation of civil works (including the completion of earthworks associated with the primary crusher). The pipeline element of the project is continuing, with 25% of pipeline construction completed. At the port, offshore works have continued, with the final piles of the iron ore pier driven in June and the access bridge and tug boat pier completed, while onshore civil works have continued in line with the schedule during the period.

Anglo American continues to work closely with the state and federal authorities towards the receipt of all relevant licences and permits. The project remains on target to deliver first ore on ship in the second half of 2013. During the first half of 2011, licence and permit receipts continued, including securing the Mineral Easement and progressing land access, though there are still a number of other licences and permits to be secured in relation to the pipeline and the beneficiation plant during the remaining period of project development.

Pre-feasibility studies for the second phase of the Minas-Rio iron ore project commenced during 2011 and, while ongoing, these studies, together with the current resource statement (total resource volume (measured, indicated and inferred)) of 5.8 billion tonnes, support the expansion of the project.

The second expansion of the GEMCO operation in the Northern Territory of Australia was recently approved. This follows the successful completion of the GEMCO Expansion Phase 1 (GEEP1) project in January 2010.

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 expansions.

The first phase expansion confirmed GEMCO's status as the world's largest and lowest cost producer of manganese ore. This second expansion will further enhance GEMCO's competitive advantages and create additional options for growth.

At the Hotazel Manganese mines, the central block development project at Wessels will increase production by between 0.5 Mtpa to 1.5 Mtpa. This will be completed in 2013 and is expected to require approximately $43 million (on a 100% basis) of investment to complete.

The High Carbon Ferro Manganese furnace M14 at the Metalloys smelter in Meyerton, South Africa will add an additional 75,000 tonnes per annum capacity to the smelter at a cost of $90 million (on a 100% basis) and will take two years to complete.

Outlook

Kumba Iron Ore

Chinese crude steel production is expected to increase by around 8% from 2010 levels. World steel production, however, is expected to ease back in the coming months owing to stock cycle turns, with global crude steel production anticipated to increase by about 6%. Crude steel production during the second half of the year is seasonally lower than the first half. This is expected to put modest downward pressure on iron ore prices in the final quarter of 2011.

Kumba has implemented focused plans to recover the majority of the first half's production shortfall by the end of 2011. Waste mining at Sishen Mine is anticipated to increase as pit conditions that hampered mining during the first six months subside. Export sales for 2011 are expected to remain in line with 2010 levels.

Samancor

Prices have held steady at current levels ($5.30/dmtu CIF China), as port inventories have declined in nine out of the last 10 weeks - however they remain well above normal levels as the market moves into the traditionally slower summer months. Alloy markets remain mixed with Asian markets below $1,200/t for silico manganese and high carbon ferro manganese, while the US market is slightly firmer at the $1,250/t to $1,275/t range. Latent capacity, power costs and strong competition from exports in Korea and India in particular may impact prices achieved for Samancor's products over the remainder of the year.

METALLURGICAL COAL

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit	491	263
EBITDA	663	416
Net operating assets	4,263	3,172
Capital expenditure	206	21
Share of Group operating profit	8%	6%
Share of Group net operating assets	9%	8%

Metallurgical Coal generated an operating profit of $491 million, an 87% increase, primarily due to higher realised export prices, which more than offset the impact of heavy rain and a strong Australian dollar. Production at the Queensland operations was affected by heavy rainfall and subsequent flooding in late 2010 and in the first quarter of 2011. In June 2011, production returned to normal operating levels as a result of proactive recovery actions put in place in the first quarter with previously announced force majeure declarations removed from the Queensland export operations.

Insurance claims are currently being prepared but recoveries are not expected to be significant in the context of the Group's results.

Markets

Anglo American weighted average achieved FOB sales prices ($/tonne)	6 months ended 30 June 2011	6 months ended 30 June 2010
Australian export metallurgical coal	251	148
Australian export thermal coal	103	83
Australian domestic thermal coal	35	29

Attributable sales volumes ('000 tonnes)	6 months ended 30 June 2011	6 months ended 30 June 2010
Australian export metallurgical coal	5,737	7,345
Australian export thermal coal	2,547	3,182
Australian domestic thermal coal	3,759	4,267

The market experienced a shortage of metallurgical coal in the first quarter due to supply disruptions resulting from the severe flooding in Queensland. Metallurgical coal sales decreased by 22% from 7.3 Mt to 5.7 Mt. The shortages resulted in record quarterly price settlements in the second quarter across all metallurgical coal products, with Metallurgical Coal being the first producer to settle quarterly pricing arrangements. Early engagement with customers allowed the business to effectively manage the impacts of the floods.

Global steel production continued to grow, but developed economies are still producing at below pre-recession levels with steel prices being supported by escalated raw material costs rather than a recovery in steel demand.

Operating performance

Attributable production

('000 tonnes)

6 months

ended

30 June 2011

6 months

ended

30 June 2010

Export metallurgical coal

5,699

7,080

Thermal coal

6,090

7,320

Saleable production across all coal products decreased by 18%. Export metallurgical coal production decreased by 19% to 5.7 Mt and thermal coal production decreased by 17% to 6.1 Mt, both owing to the weather. The recovery actions initiated in the first quarter resulted in export metallurgical coal sales increasing by 79% in the second quarter compared to the first quarter.

Projects

Studies continue at the greenfield projects of Grosvenor, Moranbah South, Dartbrook and Drayton South in order to meet expectations of growing demand for both metallurgical and thermal coal. It is expected that a Board approval decision in relation to the development of the 4.3 Mtpa Grosvenor metallurgical coal project in Australia will be taken within the next 12 months.

Outlook

Production volumes are expected to increase in the second half of the year as operations return to normal levels of activity and the recovery initiatives deliver some of the lost volumes. Significant progress has been made in embedding longwall productivity improvement. A comprehensive programme to reduce the impact of rain on the open cut operations ahead of the next wet season has been implemented.

The global market outlook for hard coking coal remains strong, driven by continued demand from India and China. A gradual price decline from record levels is expected in the second half of 2011 as Australian metallurgical coal supply recovers from the disruptions in the early part of the year. A continued focus on longwall productivity and asset optimisation programmes is expected to increase production in 2012.

THERMAL COAL

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit	521	351
South Africa	319	220
Colombia	212	143
Projects and corporate	(10)	(12)
EBITDA	611	433
Net operating assets	2,080	1,740
Capital expenditure	31	140
Share of Group operating profit	9%	8%
Share of Group net operating assets	5%	4%

Thermal Coal generated an operating profit of $521 million, a 48% increase on the equivalent period of 2010, driven by higher export thermal coal prices for both South African and Colombian coal. Profits have been put under pressure by the strong rand, lower South African export sales volumes, and above inflation cost increases.

Markets

Anglo American weighted average achieved FOB sales prices ($/tonne)	6 months ended 30 June 2011	6 months ended 30 June 2010
South Africa export thermal coal	120	81
South Africa domestic thermal coal	26	23
Colombia export thermal coal	101	68

Attributable sales volumes ('000 tonnes)	6 months ended 30 June 2011	6 months ended 30 June 2010
South Africa export thermal coal⁽¹⁾	6,781	7,689
South Africa domestic thermal coal^{(1) (2)}	2,602	2,613
Colombia export thermal coal	5,000	5,026

⁽¹⁾ Includes the capitalised sales from Zibulo mine, which is currently not in commercial production

⁽²⁾ Includes domestic metallurgical coal of 172 kt (six months ended 30 June 2010: 219 kt)

The first half of 2011 saw strong growth in US thermal coal exports to around 15 Mt, more than double the same period last year, driven by diminished domestic requirements and the attraction of strong export prices, predominantly into Europe. South African thermal coal exports were 0.9 Mt lower, mainly owing to poor performance by Transnet adversely affecting railings to the Richards Bay Coal Terminal (RBCT). Indonesian exports continued to increase during the first half of 2011 to satisfy both Chinese demand and increased imports of low calorific value thermal coal into India. Strong market fundamentals resulted in South African (RBCT) and Australian (Newcastle) FOB prices averaging $121 per tonne and $124 per tonne respectively for the period, an increase of approximately $30 per tonne (33%) over the same period in 2010.

Operating performance

Attributable production ('000 tonnes)	6 months ended 30 June 2011	6 months ended 30 June 2010
RSA thermal coal ^{(1) (2)}	10,507	10,135
RSA Eskom coal ⁽²⁾	17,058	16,487
Colombian export thermal coal	5,147	5,318

⁽¹⁾ Includes domestic metallurgical coal of 163 kt (six months ended 30 June 2010: 222 kt)

⁽²⁾ Includes the capitalised production from Zibulo mine, which is currently not in commercial production

South Africa

Operating profit from South African sourced coal increased by 45% to $319 million, driven by higher export thermal coal prices. Production for the first half of the year increased by 4% to 27.6 Mt. The ramp-up of Zibulo has proceeded well with some sections opening ahead of schedule; however, these gains have been partly offset by geological issues at some of the underground operations and heavy rainfall at the opencast operations. Costs were impacted by above-inflation increases in labour, power and fuel, as well as additional stock management costs resulting from an increase in stock levels at the operations following train derailments during the first quarter, as well as the 20-day extended maintenance stoppage during May and June 2011 on the railway line to RBCT. Export sales volumes were also similarly affected.

Colombia

At Cerrejón, operating profit of $212 million was 48% higher. This performance was principally due to higher thermal coal prices in the European and American markets arising from a gradual recovery in demand, underpinned by supply constraints following the extreme rainfall experienced globally in the fourth quarter of 2010. Production was negatively affected by the increase in rain related stoppages during the period, but this impact was mitigated by mining efficiencies and scheduling resulting in production being only 3% lower than the first six months of 2010.

Projects

The 6.6 Mtpa Zibulo project in South Africa produced its first coal in the third quarter of 2009. Full production is expected to be achieved during the fourth quarter of 2012.

The New Largo Coal Project, which is currently in feasibility stage, has two main elements: a conveyor which will run from an existing coal plant to an Eskom power station and a new opencast mine. The operation is planned to mine domestic thermal coal and Thermal Coal is currently negotiating a coal supply agreement with Eskom for delivery into its Kusile power station. Feasibility studies commenced in August 2010 and are expected to be completed by the third quarter of 2011, for the conveyor and the first quarter of 2012 for the mine. Anglo American Board approval is anticipated to be sought by the third quarter 2012. First coal on conveyor is expected in the fourth quarter of 2013 and first coal from the mine is planned for 2015. The current life of mine is approximately 50 years.

The Cerrejón P500 Phase1 expansion project, to increase production at Cerrejón by 8 Mtpa, is targeting final approval from its shareholders in the third quarter of 2011. First coal is targeted during the fourth quarter in 2013 and the project is expected to achieve full production at the end of 2015.

Outlook

The thermal coal market is expected to be tighter in the second half of 2011 as increased supply from Indonesia, Australia and Americas is not expected to satisfy stronger seaborne demand. The
Asian markets are likely to remain strong particularly in India and China. In addition, Japanese demand is expected to recover following the earthquake and tsunami. In Germany, thermal coal is expected to be a substitute for nuclear power generation, which has been reduced in response to the Fukushima disaster.

COPPER

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit	1,401	1,185
EBITDA	1,527	1,312
Net operating assets	7,050	5,152
Capital expenditure	831	601
Share of Group operating profit	23%	27%
Share of Group net operating assets	15%	13%

Copper generated an operating profit of $1,401 million, an increase of 18%, underpinned by a record average copper price. This benefit was partially offset by a weaker US dollar, which had a material impact on Chilean peso denominated input costs, and higher power and fuel related costs. The decision to incur additional logistics costs at Collahuasi to maximise sales whilst the Patache port shiploader was being repaired also had an impact on unit costs.

Markets

6 months
ended

30 June 2011

6 months
ended

30 June 2010

Average market prices (c/lb)

426

323

Average realised prices (c/lb)

422

308

Copper prices increased strongly during the first two months of the year to a new nominal record high of 460 c/lb, reflecting expectations of improving global economic conditions. Despite these positive signs, the global economic recovery began to lose momentum during the second quarter, as higher oil prices and the impact of the Japanese earthquake curtailed global manufacturing activity. An intensification of the sovereign debt crisis in Europe, further tightening of monetary policy in China and other emerging economies and concerns over the end of quantitative easing in the US, all contributed to downward pressure on many commodity prices.

The copper price ended the half year period at 422 c/lb despite such pressures, with the realised price averaging 422 c/lb over the first six months, a 37% increase compared with the same period in 2010. The negative provisional price adjustment of $36 million was 69% lower than the first half of 2010.

Operating performance

6 months
ended

30 June 2011

6 months
ended

30 June 2010

Attributable copper production (tonnes)

289,100

315,500

Total copper production of 289,100 tonnes was 8% lower than the same period in 2010.

Attributable production from Collahuasi was 12% lower at 103,200 tonnes, principally due to abnormally high rainfall in the first quarter, which affected throughput and also resulted in mining areas with lower than anticipated grades. Los Bronces' production was 9% lower at 101,700 tonnes, also due to anticipated lower grades and a temporary failure in a return-solutions pipeline impacting cathode production, partly offset by higher throughput as a result of asset optimisation and more favourable ore characteristics. El Soldado's production was 11% lower at 17,900 tonnes due to lower throughput and recoveries, although partly offset by the implementation of an asset optimisation project which allows additional copper to be recovered by processing slag from the Chagres smelter. Mantos Blancos' production was 2% lower at 36,100 tonnes as a result of lower grades.

Mantoverde's production was 2% higher than prior year at 30,200 tonnes owing to significantly higher throughput, partially offset by lower grades.

The impact on sales volumes at Collahuasi resulting from the December 2010 shiploader failure at the Patache port was largely negated by the successful implementation of a contingency plan that included shipping copper concentrate via the Arica, Iquique and Antofagasta ports. Remaining stocks of concentrate are expected to be sold in the second half with the shiploader now repaired and in use.

Projects

Construction of the $2.8 billion Los Bronces expansion project continues to progress and remains on schedule for first production in the fourth quarter of 2011. Production at Los Bronces is scheduled to increase to 490 ktpa over the first three years of full production following project completion and to average 400 ktpa over the first 10 years. Despite the current industry-wide cost pressures, Los Bronces is expected to have highly attractive cash operating costs, and reserves and resources that support a mine life of more than 30 years, with further expansion potential.

At Collahuasi, an expansion project to increase concentrator plant capacity to 150,000 tonnes of ore per day, an annual average production increment of 19,000 tonnes per year of copper over the estimated life of mine, will be commissioned in the third quarter of 2011 and a further project to increase throughput to 160,000 tonnes of ore per day, an annual average production increment of 20,000 tonnes per year of copper over the estimated life of mine, in the first half of 2013 was recently approved. A pre-feasibility study has also recently commenced to evaluate the next phases of expansion at Collahuasi, with options to ultimately increase annual production to at least 1 Mt of copper.

In Peru, Anglo American is focusing on obtaining the necessary water permits for the Quellaveco project to progress to Board approval for the construction. Also in Peru, early-stage work continues at the Michiquillay project. Drilling relating to the geological exploration programme will restart once discussions with the local communities have been completed. It is currently envisaged that the project will move to the pre-feasibility stage following the completion of drilling analysis and ore body modelling.

Activity at the Pebble project in Alaska continues with the focus on completing a pre-feasibility study by late 2012. An environmental baseline document and a project update will be released in the second half of 2011. Ongoing efforts include an independent scientific review of the project's Environmental Baseline Studies facilitated by the Keystone Center.

Outlook

Operational improvements and the scheduled commissioning of the Los Bronces expansion project in the fourth quarter are expected to lead to marginally higher full year production levels compared with 2010. Copper production is expected to increase significantly in 2012 as the Los Bronces expansion project ramps up towards full capacity.

Industry wide input cost pressures are expected to remain tight in the short term, particularly in relation to power and fuel related costs, although these will be partially mitigated by the increased production from the expanded Los Bronces operation.

Ongoing market concerns arising from uncertainties over the near-term outlook for the global economy may lead to relatively pronounced short-term volatility in commodity prices, including copper. However, the medium-to long-term fundamentals for copper remain strong, predominantly driven by robust demand from the emerging economies and the lack of new supply.

NICKEL

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit	93	68
EBITDA	106	81
Net operating assets	2,526	1,988
Capital expenditure	177	223
Share of Group operating profit	2%	2%
Share of Group net operating assets	5%	5%

Nickel generated an operating profit of $93 million, a 37% increase, driven by 21% higher sales volumes from Codemin and Loma de Níquel and a higher nickel price. Operating profit was net of $11 million project costs, a $10 million increase compared with the same period in 2010.

Markets

6 months
ended

30 June 2011

6 months
ended

30 June 2010

Average market prices (c/lb)

1,159

962

Average realised prices (c/lb)

1,105

969

The average nickel market price was 20% higher than for the same period in 2010, supported by growth in the stainless steel industry. Nickel demand growth was not matched by growth in industry supply which was affected by delays to a number of projects.

During the first half of 2011, LME nickel stocks decreased by 22% from a high of 137,766 tonnes on 14January, to 107,148 tonnes on 30 June, indicative of the underlying physical demand for nickel. After a strong beginning to the year, however, nickel prices moved downwards in the second quarter, which may be attributed to uncertainty around the European economy, softer summer demand, the arrival of production from new projects, including Barro Alto, to the market and an increase in nickel pig iron production in China.

Operating performance

	6 months ended 30 June 2011	6 months ended 30 June 2010
Attributable nickel production (tonnes)	12,700	10,100

Nickel production increased by 26% to 12,700 tonnes owing to higher output at Loma de Níquel and delivery of the Barro Alto project.

In the first half of the year there were two additional months of production from Loma de Níquel's Electric Furnace 2, which had been restarted from March 2010, while the power rationing imposed by the Venezuelan government in the first half of 2010 did not apply in the first half of 2011. However, in June, the Venezuelan government announced that power rationing would be imposed in the second half of 2011. The Loma de Níquel operation is pursuing a mitigation process and has hired on-site generators.

The newly commissioned Barro Alto operation produced 1,100 tonnes during the first half and is expected to produce around 12,000 tonnes to 14,000 tonnes in 2011.

Production levels at Codemin were in line with 2010.

Projects

First metal from the Barro Alto ferronickel project was produced on schedule in March 2011. The new nickel plant is expected to reach full production capacity in the second half of 2012. Barro Alto will have a competitive cost position and is expected to produce an average of 36 ktpa of nickel at full production, and 41 ktpa during the first five years.

Outlook

Production of nickel during the second half of the year is expected to be significantly higher, reflecting the ramp-up of Barro Alto. In Venezuela, production will be affected by power rationing, despite mitigation measures.

In the short-to mid-term, nickel prices will be heavily influenced by the successful delivery of new projects, some of which are using unproven processing technology, as well as the introduction to the market of physically backed Exchange Traded Funds (ETFs). The long term outlook for nickel, however, remains positive, underpinned by stainless steel demand growth, estimated at more than 5% per annum, driven by industrialisation and urbanisation in emerging economies.

PLATINUM

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit	542	418
EBITDA	931	785
Net operating assets	13,258	12,169
Capital expenditure	410	431
Share of Group operating profit	9%	10%
Share of Group net operating assets	29%	31%

Platinum recorded an operating profit of $542 million, a 30% increase, primarily due to higher sales volumes during a period of robust pricing.

Sales volumes of refined platinum and the overall average realised basket price increased by 13% and 15% respectively, the benefits of which were partially offset by a stronger rand on average. Cash operating costs per equivalent refined platinum ounce increased by 13% compared with the first half of 2010.

Markets

The average dollar realised price for platinum was $1,782 per ounce for the period, a 12% increase compared with $1,593 per ounce in the comparable period. The average realised prices for palladium and rhodium sales were $775 per ounce (six months ended June 2010: $462) and $2,266 per ounce (six months ended June 2010: $2,600) respectively. The average realised price on nickel sales was $11.55 per pound (six months ended June 2010: $9.52). The overall average realised dollar basket price was 15% higher at $2,927 per platinum ounce sold.

Anglo American Platinum (Platinum) maintains its view that the platinum market will remain in balance in 2011 owing to continued recovery in the autocatalyst and industrial segments and the sustained strength of the jewellery segment, particularly in China. Platinum expects primary supply to improve from 2010 levels, implying underlying growth in demand markets. Primary supply growth will be challenged by safety-related and other labour issues.

Autocatalysts

Global vehicle production in 2011 is expected to reach in excess of 75 million vehicles, implying a 3% growth from 2010 levels. The earthquake in Japan resulted in supply disruption for the Japanese auto manufacturers, with estimates that the disaster resulted in a worldwide production loss of approximately 2.8 million vehicles. Most of this loss is expected to be recovered by the second quarter of 2012. Sales volumes across all major markets, with the exception of Japan, have been higher in the period compared with 2010 levels. This trend is expected to continue as the market continues to recover towards pre-crisis levels.

Industrial

Following the recovery from the previous year, demand from the industrial sector is expected to remain strong in the near to medium term. Demand for PGM-related consumer goods, including electronics, packaging and other chemicals, continues to show strong growth, particularly in Asian markets. The fuel cell industry continues to develop in a commercial capacity, with significant fuel cell unit growth in the stationary power sector, driven by demand in residential units and off-grid mobile base stations.

Jewellery

The platinum jewellery market benefited from relative price stability and higher gold prices. The developed jewellery markets have remained healthy, with some regional variation on performance. Jewellery purchases in China have increased by almost 20% in the first half of 2011 compared with the same period in 2010. The Indian jewellery market development programme continues to show success.

Investment

Overall platinum holdings in ETFs have increased by approximately 15% in the first half of 2011. Net long speculative positions have declined by 36% over the same period, exhibiting a lack of general confidence in the markets. Despite this reduction, the platinum price remains resilient and has been supported above $1,700 per ounce.

Operating performance

Equivalent refined platinum production (equivalent ounces are mined ounces expressed as refined ounces) from the mines managed by Platinum and its joint venture partners for the first half of 2011 was 1.16 million ounces, a slight decrease of 3% when compared to the first half of 2010.

Wholly owned mines produced 763,100 equivalent refined platinum ounces, an increase of 2% compared with the first half of 2010. The majority of this increase was from Mogalakwena, Unki and Thembelani. Unki was delivered successfully, on schedule and within budget in January 2011 and contributed 22,400 additional equivalent refined platinum ounces. In addition, Mogalakwena open-pit mine continued to perform strongly providing Platinum with a flexible production source. This was however, partly offset by lower volumes from Bathopele, Khuseleka and Union mines.

Refined platinum production of 1.2 million ounces for the first half of 2011 represents an increase of 17% in comparison with the same period in 2010.

Eight employees lost their lives during the period and Platinum extends its sincere condolences to their families, friends and colleagues. Platinum had 33 safety stoppages in the first half of 2011 compared to 17 in the first half of 2010, which was in line with the rest of the industry. Platinum is continuing to work with Government and Labour towards zero harm.

Projects

Capital expenditure for the first half of 2011, excluding capitalised interest, amounted to $410 million, of which $223 million was spent on projects, $138 million on stay-in-business capital and $49 million on waste stripping at Mogalakwena Mine.

Project capital expenditure for the first half of 2011 was mostly spent on the Thembelani 2 shaft replacement project ($36 million), the Mortimer Furnace Upgrade ($35 million), the Twickenham Platinum Mine project ($34 million), the base metal refinery 33,000 tonnes nickel expansion project ($32 million), the Unki Platinum mine project ($18 million), and the Khuseleka ore replacement project ($13 million).

The Unki Platinum Mine Project was handed over to operations in January 2011 and is expected to reach steady state production of 120,000 tonnes milled per month about a year ahead of schedule. The Base Metal Refinery 33,000 tonnes nickel expansion project has produced first metal in line with expectations. It is expected to reach steady state by the end of the year, as planned.

Outlook

Platinum is expecting a stronger second half for the year and maintained an expected refined production target of 2.6 million ounces of platinum for 2011. This implies production volume of 1.4 million ounces of platinum in the second half of 2011 given that we produced 1.2 million ounces in the first half.

Platinum maintains a relentless focus on mitigating industry-wide cost pressures by improving productivity, increasing efficiency and managing supply chain and procurement costs, benefiting from Anglo American's global initiatives. These initiatives are expected to improve unit costs in the second half of the year.

Platinum's project ranking and prioritisation to focus on less capital intensive projects in the near term, is expected to reduce capital expenditure for 2011 from $1.16 billion to $1.1 billion, excluding capitalised interest.

DIAMONDS

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Share of associate's operating profit	450	261
EBITDA	517	340
Group's associate investment in De Beers⁽¹⁾	2,234	1,783
Share of Group operating profit	7%	6%

⁽¹⁾ Excludes shareholder loans of $315 million (30 June 2010: $367 million)

Anglo American's record share of operating profit from De Beers of $450 million, an increase of 72%, reflected the impact of significant price growth during the first half of 2011.

Markets

Sales during the period were driven mainly by continued growth mainly in the Middle East and Asian retail markets and their impact on rough price growth. Sales of rough diamonds by the Diamond Trading Company (DTC) in the first half of 2011 were $3.5 billion (including those through joint ventures), a 33% increase compared with 2010, driven by price growth of approximately 35%. This is the highest ever sales figure recorded by De Beers for the first half of the year since privatisation, buoyed by continued retail demand from the Indian and Chinese consumer markets and stronger than expected demand in American.

Forevermark (a diamond brand owned by the De Beers Group) continues its expansion into core retail markets of China, Hong Kong and Japan and has recently launched in India, Singapore and the Caribbean. The Forevermark brand is now available from a small number of stores in the US, with further expansion planned later this year. During the first half of the year, De Beers Diamond Jewellers (De Beers' joint venture with LVMH) announced the strategic launch of the brand in China with the opening of its first mainland China store in Beijing, its first store in Kazakhstan in Almaty and a new store in Dubai at Dubai Mall. The company will continue its expansion in 2011 with the opening of further stores in mainland China, a second store in Hong Kong.

Operating performance

De Beers has continued to focus on efficiency improvements and on maintaining a lower sustainable level of overhead base, which has resulted in a favourable impact on earnings. In the first six months of 2011, De Beers' production totalled 15.53 million carats, in line with the first half of 2010, reflecting the impact of maintenance and asset management difficulties and, to an extent, excessive rainfall in southern Africa.

Element Six recorded a good first half performance in respect of both sales and profitability, with robust demand across its product ranges. Operating performance was impacted by, inter alia, operating challenges and a weak US dollar, but Element Six is well positioned for the remainder of the year.

Commitment to safety remains De Beers' most important priority. There have been three loss of life incidents at De Beers during the first half - two at Namdeb and one at Debswana. Sincere condolences are expressed to the families of those concerned. Comprehensive safety reviews are being carried out at all De Beers operations.

Projects and restructuring

Debswana's Jwaneng mine Cut-8 extension project is progressing satisfactorily, on schedule and on budget. De Beers Canada recently completed a six month optimisation study on the Snap Lake Mine to more economically extract this complicated, but promising ore body that has a forecast 20-year life-of-mine.

Disposals of assets have continued in the period, and in January, De Beers Consolidated Mines (DBCM) announced that it had entered into an agreement with Petra Diamonds to sell Finsch mine as a going concern for a consideration of R1.425 billion ($210 million), plus assumption of rehabilitation liabilities. In May, DBCM announced that it had entered into an agreement to sell Namaqualand Mines to Trans Hex in a transaction valued at R225 million. This completes the De Beers asset disposal programme.

In May, De Beers and the Government of the Republic of Namibia (GRN) announced a new agreement which will allow GRN to increase its effective shareholding in De Beers Marine Namibia from 15% to 50% through the establishment of a new 50:50 joint venture holding company. This will not change marketing arrangements and all diamond production from Namdeb will continue to be sorted, valued and marketed exclusively by the DTC together with Namibia Diamond Trading Company, which is also a 50:50 joint venture between the GRN and De Beers.

Outlook

Despite the ongoing turmoil with the global economy, De Beers is encouraged by the continued strong growth in price and demand during the first six months of 2011 is highly encouraging. De Beers is confident that the exceptional growth in retail markets in India and Asia will continue to drive demand for diamonds. Reports from the recent Jewelers' Circular Keystone (JCK) tradeshow indicate that the all important Christmas season in the US and Diwali are expected to be strong.

OTHER MINING AND INDUSTRIAL

$ million (unless otherwise stated)	6 months ended 30 June 2011	6 months ended 30 June 2010
Operating profit	101	290
Tarmac	(22)	29
Scaw Metals	27	83
Copebrás	54	12
Catalão	21	28
Peace River Coal	10	(1)
Zinc	20	150
Other	(9)	(11)
EBITDA	210	427
Net operating assets	4,048	4,213
Capital expenditure	72	104
Share of Group operating profit	2%	7%
Share of Group net operating assets	9%	11%

Tarmac

Tarmac reported an operating loss of $22 million, compared to a profit of $29 million in the first half of 2010. However, on a directly comparable basis, taking into consideration the impact of European businesses that were sold in 2010, Tarmac's operating profit showed a reduction of $38 million. Tarmac's directly comparable EBITDA performance was 45% lower.

Quarry materials

The UK Quarry Materials business experienced strong first-half volumes, as severe weather conditions towards the end of 2010 generated significant carry-over of demand, particularly asphalt volumes on major trunk road schemes, and on Local Authority schemes. Concrete volumes decreased due to difficult trading conditions arising from the implementation of various government austerity measures. The high cost of oil, its impact on input costs, and the recovery of such costs through price increases remain the key challenges for the business.

The 2011 outlook in the UK is characterised by impending government spending cuts, rising cost inflation and fragile private sector recovery.

Building products

Housing, retail and commercial markets have all experienced a decline, affecting all products. Volumes have suffered as a result of the general market decline and a more competitive pricing environment, where customers and competitors have become more focussed on price and less on other value drivers. The Precast Solutions business, which supplies the commercial market, is in the process of closure.

Cost reduction initiatives continue to be high on the agenda.

Although a number of initiatives are in progress to improve performance, the short term market outlook remains difficult.

Scaw Metals

The sale of the Moly-Cop and AltaSteel operations of the Scaw Metals Group was completed on 31 December 2010.

Scaw Metals generated an operating profit of $27 million, a 67% decrease, largely as a result of the above disposal. Strong performances were recorded by the Grinding Media and Wire Rod Product operations, which benefited from improved demand from mining and offshore customers as well as a turnaround in business performance, partly offset by the difficult trading conditions in the Rolled Products operation. Weak demand within the construction sector has resulted in selling prices not fully reflecting rapidly rising input costs, resulting in reduced margins. However, a strong focus by management on cost saving initiatives in all operations and sales to downstream businesses has mitigated the effects of weak margins to some extent.

Total production of steel products was 356,300 tonnes.

Copebrás

Copebrás generated a $54 million operating profit, a 350% increase on the previous period. Sales volumes of low analysis fertilisers and DCP (animal feed supplement) increased, largely as a result of a very strong Brazilian 'mini crop' which generated unusually high demand for fertiliser products in the period. The strong performance was partially offset by increased input costs, particularly from the key non-controllable elements of sulphur, ammonia and energy and the strength of the Brazilian real.

Domestic soybean and grain industries continue to drive local demand and the outlook for the product markets continues to be positive, with international benchmark fertiliser products prices expected to remain strong for the balance of 2011. The fundamentals for soft commodities remain positive for the medium term, characterised by the continuing high demand for grains worldwide that is underpinning an anticipated strong demand for fertilisers.

The Goiás 2 project presents an opportunity for future expansion.

Catalão

Catalão generated an operating profit of $21 million, a 25% decrease. Sales of niobium were 7% lower, mostly attributable to the lower metallurgical recovery of niobium resulting from the treatment of refractory oxide ore remnants, ahead of the planned transition to unweathered ore in 2013. Lower sales volumes were partially offset by higher niobium prices and the market continues to show steady growth in both demand and price, particularly in the high strength, low alloy steel sector. The longer term market outlook remains strong.

Following the positive results of a drilling campaign in 2010, design and engineering work has commenced on the project for the treatment of unweathered ore. This is expected to increase production volumes substantially, with commissioning expected to start in late 2013.

Peace River Coal

Peace River Coal delivered export sales of 515,300 tonnes of hard coking coal, a 26% increase over the total coal sales tonnes in the equivalent prior year period, partly driven by operational improvements and shipping timing differences.

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