Annual Financial Report and Notice of AGM

RNS Number : 3712R

Anglo American PLC

08 March 2021

 

Anglo American plc

(the "Company")

Registered office: 20 Carlton House Terrace, London SW1Y 5AN

Registered number: 3564138 (incorporated in England and Wales)

Legal Entity Identifier: 549300S9XF92D1X8ME43

8 March 2021

ANNUAL FINANCIAL REPORT AND NOTICE OF AGM

In accordance with Listing Rule 9.6 and Disclosure Guidance and Transparency Rule ("DTR") 4.1, the Company announces that the following documents are today published on its website: www.angloamerican.com

· Integrated Annual Report for the year ended 31 December 2020 (the "2020 Annual Report")

· Notice of the 2021 Annual General Meeting ("AGM") to be held on 5 May 2021

· Sustainability Report 2020

The 2020 Annual Report, Notice of the 2021 AGM and the 2021 AGM proxy form ("Proxy Form") have been submitted to the Financial Conduct Authority via the National Storage Mechanism and will shortly be made available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The above mentioned documents (except for the Proxy Form) are available on our website at www.angloamerican.com/investors/annual-reporting and www.angloamerican.com/investors/shareholder-information/agm/agm2021 respectively, and will be posted to shareholders on 22 March 2021. Shareholders can obtain additional copies of the Proxy Form from our Registrar, Equiniti Limited at Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA or view online at www.shareview.co.uk .

This announcement should be read in conjunction with the Company's Preliminary Results announcement issued on 25 February 2021. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the Company's 2020 Annual Report. Page references and references to notes to the financial statements, refer to those contained in the 2020 Annual Report.

An indication of the important events that occurred in 2020 and their impact on the consolidated financial statements and the consolidated financial statements themselves were announced to the London Stock Exchange on 25 February 2021, forming part of the Preliminary Results announcement for the year ended 31 December 2020. Additional content forming part of the management report are set out in the appendices to this announcement.

Clare Davage

Deputy Company Secretary

Anglo American is a leading global mining company and our products are the essential ingredients in almost every aspect of modern life. Our portfolio of world-class competitive operations, development projects and undeveloped resources, provides many of the metals and minerals that enable a cleaner, greener, more sustainable world and that meet the fast growing consumer-driven demands of developed and maturing economies. With our people at the heart of our business, we use innovative practices and the latest technologies to mine, process, move and market our products to our customers - and to discover new resources - safely and sustainably.

As a responsible producer of diamonds (through De Beers), copper, platinum group metals, the steelmaking ingredients of iron ore and metallurgical coal, and nickel - with crop nutrients in development and thermal coal operations planned for divestment - we are committed to being carbon neutral across our operations by 2040. We work together with our business partners and diverse stakeholders to unlock sustainable value from precious natural resources for the benefit of the communities and countries in which we operate, for society as a whole, and for our shareholders. Anglo American is re-imagining mining to improve people's lives.

www.angloamerican.com

Forward-looking statements and third-party information

This announcement includes forward-looking statements. All statements other than statements of historical facts included in this document, including, without limitation, those regarding Anglo American's financial position, business, acquisition and divestment strategy, dividend policy, plans and objectives of management for future operations (including development plans and objectives relating to Anglo American's products, production forecasts and Ore Reserves and Mineral Resource estimates) and environmental, social and corporate governance goals and aspirations, are forward-looking statements. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Anglo American, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such forward-looking statements are based on numerous assumptions regarding Anglo American's present and future business strategies and the environment in which Anglo American will operate in the future. Important factors that could cause Anglo American's actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of global demand and commodity market prices, mineral resource exploration and development capabilities, recovery rates and other operational capabilities, safety, health or environmental incidents, the effects of global pandemics and outbreaks of infectious diseases, the outcome of litigation or regulatory proceedings, the availability of mining and processing equipment, the ability to produce and transport products profitably, the availability of transportation infrastructure, the impact of foreign currency exchange rates on market prices and operating costs, the availability of sufficient credit, the effects of inflation, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by courts, regulators and governmental authorities such as in relation to permitting or forcing closure of mines and ceasing of operations or maintenance of Anglo American's assets and changes in taxation or safety, health, environmental or other types of regulation in the countries where Anglo American operates, conflicts over land and resource ownership rights and such other risk factors identified in the section of this document titled 'Managing Risk Effectively'. 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 document. Anglo American expressly disclaims any obligation or undertaking (except as required by applicable law, the City Code on Takeovers and Mergers, the UK Listing Rules, the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the Listings Requirements of the securities exchange of the JSE Limited in South Africa, the SIX Swiss Exchange, the Botswana Stock Exchange and the Namibian Stock Exchange and any other applicable regulations) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Anglo American's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in this document 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 document is sourced from publicly available third-party sources. As such, it has not been independently verified and presents the views of those third parties, though these may not necessarily correspond to the views held by Anglo American and Anglo American expressly disclaims any responsibility for, or liability in respect of, such information.

APPENDIX A - Principal risks

We define a principal risk as a risk or combination of risks that would threaten the business model, future performance, solvency or liquidity of Anglo American. In addition to these principal risks, we continue to be exposed to other risks related to currency, inflation, community relations, environment, litigation and regulatory proceedings, changing social expectations, infrastructure and human resources. These risks are subject to our normal procedures to identify, implement and oversee appropriate mitigation actions, supported by internal audit work to provide assurance over the status of controls or mitigating actions. These principal risks are considered over the next three years as a minimum, but we recognise that many of them will be relevant for a longer period.

For more on Principal risks see pages 54 - 57

Catastrophic risks

We also face certain risks that we deem catastrophic risks. These are very high severity, very low likelihood events that could result in multiple fatalities or injuries, an unplanned fundamental change to strategy or the way we operate and have significant financial consequences. We do not consider likelihood when assessing these risks, as the potential impacts mean these risks must be treated as a priority. Catastrophic risks are included as principal risks.

For more on catastrophic risks seepage 54

Risk appetite

We define risk appetite as 'the nature and extent of risk Anglo American is willing to accept in relation to the pursuit of its objectives'. We look at risk appetite from the context of severity of the consequences should the risk materialise, any relevant internal or external factors influencing the risk, and the status of management actions to mitigate or control the risk. A scale is used to help determine the limit of appetite for each risk, recognising that risk appetite will change over time.

If a risk exceeds appetite, it will threaten the achievement of objectives and may require a change to strategy. Risks that are approaching the limit of the Group's risk appetite may require management actions to be accelerated or enhanced to ensure the risks remain within appetite levels.

For catastrophic and operational risks, our risk appetite for exceptions or deficiencies in the status of our controls that have safety implications is very low. Our internal audit programme evaluates these controls with technical experts at operations and the results of that audit work will determine the risk appetite evaluation, along with the management response to any issues identified.

For more on the risk management and internal control systems and the review of their effectiveness See pages 121-122

Summary

Our risk profile evolved in 2020, largely as a result of the Covid-19 pandemic, which continues to have a significant impact on global society. No new significant risks were identified as a result of the pandemic; however, the likelihood and/or severity of a number of existing unwanted events that could impact Anglo American was reassessed. We elevated pandemic health risk to a principal risk in early 2020 as a result of the emerging Covid-19 threat.

Our catastrophic risks are the highest priority risks, given the potential consequences.

1. Catastrophic risks
We are exposed to the following risks we deem as potentially catastrophic: tailings dam failure; slope wall failure; mineshaft failure; and fire and explosion. Root cause: Any of these risks may result from inadequate design or construction, adverse geological conditions, shortcomings in operational performance, natural events such as seismic activity or flooding, and failure of structures or machinery and equipment.	Impact: Multiple fatalities and injuries, damage to assets, environmental damage, production loss, reputational damage and loss of licence to operate. Financial costs associated with recovery and liability claims may be significant. Regulatory issues may result and community relations may be affected. Mitigation: Technical standards exist that provide minimum criteria for design and operational performance requirements, the implementation of which is regularly inspected by technical experts. Additional assurance work is conducted to assess the adequacy of controls associated with these risks.	Risk movement: No change.
		Risk appetite: Operating within the limits of our appetite. Commentary: These very high impact but very low frequency risks are treated with the highest priority.
2. Product prices
Global macro-economic conditions leading to sustained low product prices and/or volatility. Root cause: The most significant factors contributing to this risk at present are the impacts of government imposed lockdowns to manage the Covid-19 pandemic and associated increased levels of public debt; a future global pandemic or major health crisis; a fiscal crisis in a key economy or economic bloc; and armed conflict or terrorist event.	Impact : Low product prices can result in lower levels of cash flow, profitability and valuation. Debt costs may rise owing to ratings agency downgrades and the possibility of restricted access to funding. The Group may be unable to complete any divestment programme within the desired timescales or achieve expected values. The capacity to invest in growth projects is constrained during periods of low product prices - which may, in turn, affect future performance. Mitigation : Maintaining a conservative balance sheet and proactive management of debt facilities and the delivery of cash improvement and operational performance targets are the key mitigation strategies for this risk. Regular updates of economic analysis and product price assumptions are discussed with executive management and the Board.	Risk movement: Increased since 2019.
		Risk appetite: Operating within the limits of our appetite. Commentary: We believe macro-economic uncertainty has increased, primarily as a result of the Covid-19 pandemic. This may result in price volatility in the products mined, and marketed, by Anglo American.
3. Cyber security
Loss or harm to our technical infrastructure and the use of technology within the organisation from malicious or unintentional sources. Root cause: The frequency and sophistication of attempted criminally motivated cyber attacks is increasing.	Impact: Theft or loss of intellectual property, financial losses, increased costs, reputational damage and operational disruption. Mitigation: We have a dedicated Global Information Management Security team with appropriate specialist third-party support to oversee our network security. We have achieved UK Cyber Essentials Certification and an ongoing cyber awareness programme is in place across the Group.	Risk movement: Increased since 2019.
		Risk appetite: Operating within the limits of our appetite. Commentary: Cyber security risk was reassessed and was deemed to have increased in 2020, owing to the greater sophistication and frequency of attempted cyber attacks. During 2020, we further strengthened our control environment. Our controls responded as planned and no cyber attack attempt resulted in negative impacts for Anglo American.
4. Safety
Failure to eliminate fatalities. Root cause: Fatalities may result from operational leaders, employees and contractors failing to apply safety rules and hazard identification, including non-compliance with critical controls.	Impact: A fatal incident is devastating for the bereaved family, friends and colleagues. Over the longer term, failure to provide a safe working environment will threaten our licence to operate. Mitigation: All operations continue to implement safety improvement plans, with a focus on: effective management of critical controls required to manage significant safety risks; learning from high potential incidents and hazards; embedding a safety culture; and leadership engagement and accountability. Our Elimination of Fatalities Taskforce oversees targeted improvement initiatives to further improve safety performance.	Risk movement: No change.
		Risk appetite: Operating within the limits of our appetite. Commentary: While we continue to see an overall improvement in our safety performance, during 2020 there were two work-related fatalities in our managed operations, compared with four in 2019. This is still an unacceptable level and management remains fully committed to the elimination of fatalities.
5. Climate change
Climate change is one of the defining challenges of our era and our commitment to being part of the global response presents both risks and opportunities. Root cause: We are committed to the ongoing realignment of our portfolio in a responsible manner; however, different stakeholder expectations continue to evolve and are not always aligned. Long term demand for the metals and minerals produced and marketed by Anglo American may deviate from current assumptions. Changing weather patterns and an increase in extreme weather events may impact operational stability and our local communities. Our carbon emission reduction targets are partly reliant on new technologies that are at various stages of development.	Impact: Potential loss of stakeholder confidence leading to negative impact on value, cash flow and profitability. Operational disruption in the event of extreme weather events. Long term demand for metals and minerals mined and marketed by Anglo American may deviate from assumptions based on societal demands for climate change abatement. We may fail to achieve carbon reduction targets in the event that new technologies are not effective or embedded in our operations. Mitigation: We have articulated our climate change plans, policies and progress and engage with key stakeholders to ensure they understand them. Our Sustainable Mining Plan includes operation-specific and Group targets for reductions in carbon emissions, power and water usage.	Risk movement: Increased since 2019
		Risk appetite: Operating within the limits of our appetite. Commentary: For more information on our Sustainable Mining Plan and climate change policy, see pages 35-37, and for further information on how we engage with key stakeholders, see page 13.
6. Operational stability
Unplanned operational stoppages impacting production and profitability. Root cause: Failure to implement and embed our Operating Model, maintain critical plant, machinery and infrastructure and operate in compliance with Anglo American's Technical Standards will affect our performance levels. We are also exposed to risks of interruptions of power supply and the failure of third-party owned and operated infrastructure, e.g. rail networks and ports. Our operations may also be exposed to natural catastrophes and extreme weather events.	Impact: Inability to achieve production, cash flow or profitability targets. There are potential safety-related matters associated with unplanned operational stoppages, along with a loss of investor confidence. Mitigation: Implementation of our Operating Model and compliance with Technical Standards, supported by operational risk management and assurance processes, is the key mitigation against this risk. Regular tracking and monitoring of progress against the underlying EBITDA targets is undertaken.	Risk movement: Increased since 2019.
		Risk appetite: Operating within the limits of our appetite. Commentary: During 2020, there were two material unplanned operational incidents in our Metallurgical Coal business in Australia and one material unplanned operational incident in our PGMs business in South Africa.
7. Pandemic
Large scale outbreak of infectious disease increasing morbidity and mortality over a wide geographic area. Root cause: Human population growth, urbanisation, changes in land use, loss of biodiversity, exploitation of the natural environment, viral disease from animals and increased global travel and integration are all contributory causes of health pandemics.	Impact: As has been witnessed by the Covid-19 pandemic, widespread consequences include the physical and mental health and well-being of our people and local communities; economic shocks and disruption; social unrest; an increase in political stresses and tensions, a rise in criminal acts that could impact Anglo American and the potential for increased resource nationalism. Mitigation: Anglo American actively monitors global pandemic-potential diseases. In the event of a pandemic, our Group Crisis Management Team is activated at an early stage to direct the Group's response, prioritising the well-being of our people, their families and host communities, and ensuring the continuity of the operations.	Risk movement: Increased since 2019.
		Risk appetite: Operating within the limits of our appetite. Commentary: In light of the Covid-19 pandemic, this risk was reclassified as a principal risk in 2020.
8. Political and regulatory
Uncertainty and adverse changes to mining industry regulation, legislation or tax regimes can occur in any country in which we operate. Root cause: The Group has no control over political acts, actions of regulators, or changes in local tax regimes. Our licence to operate through mining rights is dependent on a number of factors, including compliance with regulations.	Impact: Uncertainty over future business conditions leads to a lack of confidence in making investment decisions, which can influence future financial performance. Increased costs can be incurred through additional regulations or resource taxes, while the ability to execute strategic initiatives that reduce costs or divest assets may also be restricted, all of which may reduce profitability and affect future performance. Political instability can also result in civil unrest and nullification or non-renewal of existing agreements, mining permits, sales agreements or leases. These may adversely affect the Group's operations or performance of those operations. Mitigation: Anglo American has an active engagement strategy with governments, regulators and other stakeholders within the countries in which we operate, or plan to operate, as well as at an international level. We assess portfolio capital investments against political risks and avoid or minimise exposure to jurisdictions with unacceptable risk levels. We actively monitor regulatory and political developments at a national level, as well as global themes and international policy trends, on a continuous basis. See page 13 for more detail on how we engage with our key stakeholders.	Risk movement: No change.
		Risk appetite: Operating within the limits of our appetite. Commentary: Global economic conditions can have a significant impact on countries whose economies are exposed to commodities, placing greater pressure on governments to find alternative means of raising revenues, and increasing the risk of social and labour unrest. These factors could increase the political risks faced by the Group.
9. Corruption
Bribery or other forms of corruption committed by an employee or agent of Anglo American. Root cause: Anglo American has operations in some countries where there is a relatively high risk of corruption.	Impact: Potential criminal investigations, adverse media attention and reputational damage. A possible negative impact on licensing processes and valuation. Mitigation: A comprehensive anti-bribery and corruption policy and programme, including risk assessment, training and awareness, with active monitoring, are in place.	Risk movement: No change.
		Risk appetite: Operating within the limits of our appetite. Commentary: A Group Compliance Committee was established in 2020. Its responsibilities include oversight of the organisation's anti-bribery management system to ensure its continuing suitability, adequacy and effectiveness.
10. Water
Inability to obtain or sustain the level of water security needed to support operations over the current life of mine plan or future growth options. Root cause: Poor water resource management or inadequate onsite storage, combined with reduced water supply at some operations as weather patterns change, can affect production. Water is a shared resource with local communities and permits to use water in our operations are at risk if we do not manage the resource in a sustainable manner.	Impact: Loss of production and inability to achieve cash flow or volume improvement targets. Damage to stakeholder relationships or reputational damage can result from failure to manage this critical resource. Mitigation: Various projects have been implemented at operations most exposed to this risk, focused on: water efficiency; water security; water treatment; and discharge management; as well as alternative supplies. New technologies are being developed that will reduce water demand.	Risk movement: No change.
		Risk appetite: Operating within the limits of our appetite. Commentary: This continues to be a risk to the majority of our operations. For more information on our Sustainable Mining Plan, see pages 35-36.
11. Future demand
Demand for metals and minerals produced and marketed by Anglo American may deviate from our assumptions. Root cause: Technological developments and/or product substitution leading to reduced demand, growth in the circular economy and shifts in consumer preferences.	Impact: Potential for negative impact on revenue, cash flow, profitability and value. Mitigation: Regular reviews of production and financial plans, as well as longer term portfolio decisions, are based on extensive research. We monitor new business opportunities in line with our strategy to secure, develop and operate a portfolio of high quality and long life resource assets, from which we will deliver leading shareholder returns. Our businesses invest in marketing and other activities to enhance the inherent value of the products we produce, including building consumer confidence in the ethical provenance of our products.	Risk movement: No change.
		Risk appetite: Operating within the limits of our appetite. Commentary: Anglo American has committed to continuing to transition our portfolio towards those metals and minerals that enable a greener, cleaner, more sustainable world.

APPENDIX B - Related party transactions

The Group has related party relationships with its subsidiaries, joint operations, associates and joint ventures (see notes 34 and 35). Members of the Board and the Group Management Committee are considered to be related parties.

The Company and its subsidiaries, in the ordinary course of business, enter into various sale, purchase and service transactions with joint operations, associates, joint ventures and others in which the Group has a material interest. These transactions are under terms that are no less favourable to the Group than those arranged with third parties.

	Associates		Joint ventures		Joint operations
US$ million	2020	2019	2020	2019	2020	2019
Transactions with related parties
Sale of goods and services	-	-	-	-	87	163
Purchase of goods and services	(28)	(20)	(197)	(170)	(1,985)	(2,893)
Balances with related parties
Trade and other receivables from related parties	-	3	1	-	21	17
Trade and other payables to related parties	(38)	(5)	(31)	(31)	(157)	(128)
Loans receivable from related parties	-	-	154	230	-	-

Balances and transactions with joint operations or joint operation partners represent the portion that the Group does not have the right to offset against the corresponding amount recorded by the respective joint operations. These amounts primarily relate to purchases by De Beers and Platinum Group Metals from their joint operations in excess of the Group's attributable share of their production.

Loans receivable from related parties are included in Financial asset investments on the Consolidated balance sheet.

Remuneration and benefits received by directors are disclosed in the Remuneration report. Remuneration and benefits of key management personnel, including directors, are disclosed in note 26. Information relating to pension fund arrangements is disclosed in note 27.

APPENDIX C - Statement of directors' responsibilities in respect of the financial statements

The directors are responsible for preparing the Integrated Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. Additionally, the Financial Conduct Authority's Disclosure Guidance and Transparency Rules require the directors to prepare the Group financial statements in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework', and applicable law).

Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent Company and of the profit or loss of the Group for that period.

In preparing the financial statements, the directors are required to:

•	Select suitable accounting policies and then apply them consistently
•	State whether International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed for the Group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the parent Company financial statements, subject to any material departures disclosed and explained in the financial statements
•	Make judgements and accounting estimates that are reasonable and prudent
•	Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and parent Company will continue in business.

The directors are also responsible for safeguarding the assets of the Group and parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent Company and enable them to ensure that the financial statements and the directors' remuneration report comply with the Companies Act 2006.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions, disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' responsibility statement

for the year ended 31 December 2020

The directors consider that the annual report and accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's and parent Company's position and performance, business model and strategy.

We confirm that to the best of our knowledge:

•	The Group financial statements, which have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group
•	The parent Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities, financial position and profit of the parent Company
•	The Strategic Report includes a fair review of the development and performance of the business and the position of the Group and parent Company, together with a description of the principal risks and uncertainties that it faces.

By order of the Board

Mark Cutifani	Stephen Pearce
Chief Executive	Finance Director

 

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