Final Results

Anglo American PLC 21 February 2007 News Release 21 February 2007 Anglo American announces record earnings of $5.5 billion, up 46% Financial results â€¢ Operating profit(1) increased to $9.8 billion, up 54% â€¢ Record underlying earnings(2) of $5.5 billion, up 46% over 2005 â€¢ Strong performances from Platinum; Base Metals; Ferrous Metals and Gold â€¢ Record production levels across most commodities â€¢ Cost savings of $583 million achieved, despite ongoing industry cost pressures â€¢ $6.9 billion of projects currently under development; projects approved in 2006 include $1.2 billion Barro Alto nickel and $1.6 billion of platinum projects Capital return/dividends â€¢ Additional buyback of $3 billion announced for 2007, following $7.5 billion announced in 2006, totalling $10.5 billion â€¢ Ongoing capital management programme â€¢ Final dividend up 21% to 75 US cents per share, bringing total normal dividends for the year to 108 US cents per share - up 20% Strategic progress â€¢ AngloGold Ashanti - interest reduced to 42% - initial $1 billion realised - phased exit strategy â€¢ Approval obtained for Dual Listed Company Structure for Mondi â€¢ Kumba restructuring completed resulting in a 64% direct interest in Kumba Iron Ore â€¢ Tarmac portfolio restructured; good progress on operational improvements â€¢ Disposal of major portion of Highveld Steel - $412 million received for 49.8% stake â€¢ Tongaat-Hulett: announces broad based BEE proposals and Hulamin demerger HIGHLIGHTS FOR THE YEAR TO 31 DECEMBER 2006 Year ended Year ended % US$ million, except per share amounts 31.12.06 31.12.05 change Group revenue including associates(3) 38,637 34,472 12% Operating profit including associates before special items and 9,832 6,376 54% remeasurements(1) Profit for the year attributable to equity shareholders 6,186 3,521 76% Underlying earnings for the year(2) 5,471 3,736 46% EBITDA(4) 12,197 8,959 36% Net cash inflows from operating activities 8,310 6,781 23% Earnings per share (US$): Basic earnings per share 4.21 2.43 73% Underlying earnings per share 3.73 2.58 45% Interim dividend (US cents per share) 33 28 18% Recommended final dividend 75 62 21% Total normal dividends for year 108 90 20% Special dividend previously paid 67 33 103% Total dividends for the year including special dividend 175 123 42% (1) Operating profit includes share of associates' operating profit (before share of associates' tax and finance charges) and is before special items and remeasurements, unless otherwise stated. See note 3 to the financial information. For definition of special items and remeasurements see note 6 to the financial information. (2) See note 9 to the financial information for basis of calculation of underlying earnings. (3) Includes the Group's share of associates' turnover of $5,565 million (2005: $5,038 million). See note 3 to the financial information. (4) EBITDA is operating profit before special items and remeasurements, depreciation and amortisation in subsidiaries and joint ventures and share of EBITDA of associates. EBITDA is reconciled to cash inflows from operations and to total profit from operations and associates in note 14 to the financial information. Tony Trahar, Chief executive, said: "In 2006, we achieved the highest ever operating profit of $9.8 billion, an increase of 54% over the prior year. Our strong performance was due to increased production across the majority of our businesses and higher prices, in particular for base metals, platinum and iron ore. The strong global growth during the year as well as constrained supply in many metals and minerals meant that commodity prices remained strong, though cost pressures continued to be a major area of focus. Strong cash generation (EBITDA) from our operations of $12.2 billion, as well as proceeds from non-core disposals, resulted in us announcing $7.5 billion being returned to our shareholders in the form of share buybacks and special dividends, one of the highest levels of capital return in the industry. A further $3 billion buyback programme will be undertaken in 2007. During 2006, excellent progress was made in developing the Group's pipeline of growth opportunities with a number of projects given the go-ahead, including the $1.2 billion Barro Alto nickel deposit in Brazil and $1.6 billion of platinum projects including the Potgietersrust expansion, the Amandelbult expansion and the Rustenburg Paardekraal 2 shaft replacement project. There are currently $6.9 billion of projects under development and we are assessing a further $10 - $15 billion of unapproved opportunities that will provide the Group with a profitable growth platform over the next decade. It was an important year for Anglo American, with the Group making progress on its strategic objectives of further focusing the business on its core mining portfolio, simplifying its structure and enhancing returns. As a more focused, cohesive group, further cost savings and synergies as well as technology and knowledge sharing will be key priorities. Global economic growth was especially rapid in the first half of 2006, with all the major regions of the world growing rapidly over this period. Commodity prices reacted positively to this environment, with new highs being recorded for a number of products. In the second half, global growth began to moderate, particularly in the US. European markets are improving and emerging markets, in particular China and India, are growing strongly. Continued growth in these regions in 2007 is likely to largely offset weaker US growth and thus the decline in global growth from the strong level achieved in 2006 should be fairly modest. This should provide a supportive climate for commodities in the near term. The Group continues to progress its strong organic project pipeline and drive operational excellence to meet ongoing demand for its commodities." Review of 2006 Financial results Anglo American's underlying earnings for the year were a record $5.5 billion as continued strong metal prices and improved volumes reflected the favourable trading environment for the Group's key commodities. Operating profit of $9.8 billion was 54% higher over the prior year, with EBITDA up 36% at a record $12.2 billion. Strong contributions came from Base Metals and Platinum as well as a significant increase in contribution from AngloGold Ashanti. Kumba's results also showed a significant increase. Coal recorded lower underlying earnings mainly due to a decline in export sales volumes and increased costs, while Paper and Packaging recorded a lower contribution and Industrial Minerals a flat contribution, owing to continuing difficult market conditions although Paper and Packaging saw some improvement in conditions in the second half of the year. Underlying earnings at De Beers were below the prior year, mainly reflecting lower preference share income due to the June 2006 redemptions, and higher minorities as a result of the Ponahalo black economic empowerment transaction which was completed in April 2006. Production volumes were up for platinum, copper, zinc and nickel, iron ore, coal and industrial minerals, despite challenging operating conditions at some of the base metals and coal mines. The mining industry globally is facing ongoing cost pressure throughout the supply chain and, against this background, the Group achieved cost savings of $583 million in synergies, efficiencies and procurement. Platinum reported record operating profit of $2,398 million (24% of Anglo American's total operating profit), up 181%, on the back of a significantly higher price achieved for the basket of metals sold, higher production and a weaker average rand/dollar exchange rate. Diamonds recorded attributable operating profit of $463 million (5% of Anglo American's total), down 21% on 2005, due in part to lower sales by the Diamond Trading Company. Base Metals generated a record operating profit of $3,876 million (39% of Anglo American's total), up 131%, due to increased copper, zinc, lead and ferroniobium production and significantly higher metals prices. Ferrous Metals and Industries' operating profit declined 7% to $1,360 million (14% of Anglo American's total), mainly as a result of the sale of non-core businesses as well as lower vanadium and manganese prices, partially offset by higher iron ore prices. Coal recorded operating profit of $864 million (9% of Anglo American's total), 15% lower, due mainly to lower export prices and export sales volumes. Industrial Minerals' operating profit was 9% lower at $336 million (3% of Anglo American's total), a robust performance in the face of challenging market conditions, with lower volumes and weaker margins in some businesses exacerbated by high energy costs for much of the year. Gold achieved a 41% increase in operating profit of $467 million (5% of Anglo American's total), on the back of a stronger gold price which was 31% higher than the average price received in 2005. Paper and Packaging reported a lower operating profit of $477 million (5% of Anglo American's total), a decrease of 4%, after a stronger second half partly offset the impact of a poor first six months. Capital structure and increased return to shareholders The Group's net debt position has reduced by $1.7 billion since the prior year end. At 31 December net debt amounted to $3.3 billion. This underlines the strong operating cash flows as well as proceeds from disposals, deconsolidation of AngloGold Ashanti debt and the conversion of $1.1 billion of the Group's convertible debt. The $2 billion share buyback, which commenced in March 2006, was completed in August 2006. The additional $4 billion share buyback announced at the interim commenced in September 2006, with around $3.2 billion of shares having been repurchased as at 20 February 2007. Dividends In line with the Group's progressive dividend policy, the final dividend has been raised 21% to 75 cents per share, to be paid on 3 May 2007 subject to shareholder approval at the Annual General Meeting to be held on 17 April 2007. Total dividends for the year (including the interim special dividend of 67 cents per share), amount to 175 cents per share (2005:123 cents per share). Significant progress on strategic objectives During 2006, significant progress was made in terms of restructuring the portfolio. In April, $1 billion worth of AngloGold Ashanti shares was sold, reducing Anglo American's shareholding from 51% to 42%. The decision to reduce and ultimately exit the Group's gold holding relates to the higher relative valuations attributable to pure-play gold companies, rather than as part of a diversified mining group. Anglo American continues to explore all available options to exit AngloGold Ashanti in an orderly manner. Regarding Mondi, plans for a full demerger are progressing. Approval in principle has been received from the regulatory authorities in South Africa for a Dual Listed Company Structure with primary listings in Johannesburg and London. Arrangements are being finalised to enable a smooth and efficient transition to a fully independent company. The senior management team is in place and a new board of directors is being established. The listing is targeted for mid 2007. Good progress was made in restructuring the Ferrous Metals and Industries business. In July 2006 the majority of the Group's stake in Highveld Steel was sold, with Russia's Evraz group and Credit Suisse each acquiring 24.9% of Highveld's share capital for an aggregate consideration of $412 million. Evraz has an option to increase its stake in Highveld, once regulatory approvals are received, entitling Evraz to purchase the remaining 29.2% shareholding. On implementation of the option arrangement, the aggregate amount that will have been received by Anglo American for its 79% interest in Highveld will be $678 million. In November, the restructuring of Kumba was completed, with the listings on the Johannesburg Stock Exchange of Kumba Iron Ore as a pure play iron ore company, in which Anglo American holds 64%, and Exxaro, which became South Africa's largest black economic empowered natural resources company. The unbundling of the Tongaat-Hulett Group's aluminium business to shareholders and simultaneous introduction of broad based black economic empowerment in both Tongaat-Hulett and Hulamin will occur during the second quarter of 2007. This will reduce Anglo American's interests in Tongaat-Hulett to 38% and in Hulamin to 39%. Tarmac's strategic review was completed in early 2006 and clearly defines the scope of its business as aggregates, together with three routes to market (asphalt, concrete and concrete products), and integration of cement where appropriate. The disposals announced in February 2006 have been largely completed and good progress is being made on delivering structural operational improvements. Tarmac is aiming to make a $50 million profit improvement on a like-for-like basis over the next three years. Strong project pipeline driving growth During 2006, excellent progress was made in developing the Group's pipeline of growth opportunities across numerous territories. Anglo American currently has $6.9 billion of approved projects under development. Anglo Platinum expects refined platinum production to be between 2.8 and 2.9 million ounces in 2007 in line with its long term growth target of 5% per annum. During 2006 the company approved several major projects, including the $692 million Potgietersrust expansion, the $224 million Amandelbult expansion and the $316 million Paardekraal 2 shaft replacement project. These new projects will contribute 456,000 platinum ounces to Anglo Platinum's production. The Townlands Ore Replacement Project at a capital cost of $139 million was approved in February 2007. This will replace 70,000 ounces of refined platinum per annum by 2014 with production from new Merensky and UG2 areas at the Rustenburg Townlands Shaft. Anglo Coal has an extensive range of growth options in the coal industry and is currently developing four major projects across three operating regions. In Australia, work is continuing on the $835 million Dawson project, which is planned to reach full production in 2007, producing an additional 12.7 million tonnes per annum for export markets. Construction has also begun on the $516 million Lake Lindsay greenfield project at the German Creek mine which will produce 3.7 million tonnes of metallurgical coal and 0.3 million tonnes of thermal coal annually by 2008, most of it for the Pacific Rim markets. In South Africa, development of the Mafube mine has started following the granting of prospecting rights, while the Isibonelo project, which supplies 5 million tonnes to Sasol per annum, reached full production in 2006. In Colombia, the first phase of the expansion to 28 million tonnes per annum at the Cerrejon mine reached completion and a second expansion to 32 million tonnes per annum is already under way. Base Metals is currently assessing a number of major projects, which will drive significant production growth well into the next decade. In December, the go-ahead was given for the $1.2 billion Barro Alto project in Brazil which will produce an average of 36,000 tonnes of nickel per year in the form of ferronickel over a minimum 26 year mine life. Construction of the Barro Alto facilities is scheduled to begin in 2007, with production commencing in 2010 and ramping up to full capacity during 2011. In addition, work is continuing on feasibility and de-bottlenecking studies at the two major Chilean copper operations, Los Bronces and Collahuasi, and a decision to proceed with these expansions is expected in 2007. Kumba Iron Ore is well advanced on the $754 million Sishen expansion project in South Africa's Northern Cape, with first output due in 2007 and full ramp-up to 13 million tonnes per annum targeted for 2009. This will take the company to 45 million tonnes per annum of iron ore production, of which 36 million tonnes per annum will be exported. Further brownfield and greenfield projects offer the potential to increase Kumba Iron Ore's annual production to over 70 million tonnes per annum by 2015. Other iron ore growth opportunities are being pursued. Progress continues on De Beers' Canadian projects at Snap Lake and Victor. Despite project costs rising, owing to higher energy costs, technological challenges and the impact of the early closure of the winter road to the sites, both developments remain on track to open in the final quarters of 2007 and 2008, respectively. In 2006, De Beers also approved two projects in South Africa: the re-opening of the dormant Voorspoed mine and the South African Sea Areas marine mining project for a total capital expenditure of $284 million. Outlook Global economic growth was especially rapid in the first half of 2006, with all the major regions of the world growing rapidly over this period. Commodity prices reacted positively to this environment, with new highs being recorded for a number of products. In the second half, global growth began to moderate, particularly in the US. European markets are improving and emerging markets, in particular China and India, are growing strongly. Continued growth in these regions in 2007 is likely to largely offset weaker US growth and thus the decline in global growth from the strong level achieved in 2006 should be fairly modest. This should provide a supportive climate for commodities in the near term. The Group continues to progress its strong organic project pipeline and drive operational excellence to meet ongoing demand for its commodities. For further information: Investor enquiries Nick von Schirnding Tel: +44 207 968 8540 Charles Gordon Tel: +44 207 968 8933 Anne Dunn Tel: +27 11 638 4730 Media enquiries Kate Aindow Tel: +44 207 968 8619 Daniel Ngwepe Tel: +27 11 638 2267 Fiona Wrench Tel : +27 11 638 Notes to editors: Anglo American plc is one of the world's largest mining and natural resource groups. With its subsidiaries, joint ventures and associates, it is a global leader in platinum group metals, gold and diamonds, with significant interests in coal, base and ferrous metals, industrial minerals and paper and packaging. The group is geographically diverse, with operations in Africa, Europe, South and North America, Australia and Asia. (www.angloamerican.co.uk) Webcast of presentation: A live webcast of the annual results presentation starting at 10.00am UK time on 21 February can be accessed through the Anglo American website at www.angloamerican.co.uk. Pictures: High resolution images can be downloaded by the media at www.vismedia.co.uk Note: Throughout this press release '$' denotes United States dollars and ' cents' refers to United States cents; operating profit includes associates' operating profit and is before special items and remeasurements unless otherwise stated; special items and remeasurements are defined in note 6 and underlying earnings are calculated as set out in note 9 to the financial information. EBITDA is operating profit before special items and remeasurements, depreciation and amortisation in subsidiaries and joint ventures and share of EBITDA of associates. EBITDA is reconciled to cash inflows from operations and to total profit from operations and associates in note 14 to the financial information. Financial review of Group results Underlying earnings per share for the year increased to $3.73 per share, an increase of 45% compared with 2005. Underlying earnings totalled $5,471 million, with strong contributions from Base Metals and Platinum as well as a significant increase in contribution from AngloGold Ashanti. Coal recorded lower underlying earnings mainly due to a decline in export sales volumes and increased costs, while Paper and Packaging recorded a lower contribution and Industrial Minerals a flat contribution, owing to continuing difficult market conditions, although Paper and Packaging saw some improvement in overall market conditions in the second half of the year. Underlying earnings at De Beers were below the prior year, principally reflecting lower sales by the Diamond Trading Company and increased exploration and development cost, as well as lower preference share income arising from the June 2006 redemptions, and higher minorities as a result of the Ponahalo black economic empowerment transaction which was completed in April 2006. Kumba's results showed a significant increase over the prior year; however, Ferrous Metals as a whole recorded a lower contribution chiefly owing to lower manganese and vanadium prices, the impact of the increased minorities as a result of the Highveld part disposal in July, as well as the full year impact of the disposal in mid-2005 of Boart Longyear and Samancor Chrome. Underlying earnings Year ended Year ended $ million 31 Dec 2006 31 Dec 2005 Profit for the financial year attributable to equity shareholders 6,186 3,521 Operating special items including associates 562 323 Operating remeasurements including associates 429 317 Net profit on disposals including associates (1,367) (185) Financing special item 4 - Financing remeasurements including associates: Fair value loss on convertible option 18 32 Exchange gain on De Beers' preference shares (40) (72) Unrealised gains and losses on non-hedge derivatives (8) (2) Tax on special items and remeasurements including associates (124) (15) Related minority interests on special items and remeasurements (189) (183) including associates Underlying earnings 5,471 3,736 Underlying earnings per share ($) 3.73 2.58 Profit for the year after special items and remeasurements increased by 76% to $6,186 million compared with $3,521 million in the prior year. This increase relates mainly to strong operational results as discussed above. There was a significant increase in net profits on disposal which, including associates, was $1,182 million higher than 2005, mainly as a result of the Group's disposal of 19.7 million ordinary shares in AngloGold Ashanti and the Group's non-participation in the issue of ordinary shares by AngloGold Ashanti ($909 million net profit on disposal) as well as the profit of $301 million on partial disposal of Highveld. This was largely offset by the $52 million loss on partial disposal of Kumba's non-iron ore assets as well as operating special items and remeasurements losses of $991 million, including the impairment and restructuring of certain Tarmac assets ($278 million), impairment and closure costs relating to the Dartbrook coal mine in Australia ($125 million), impairment mainly of certain downstream converting Packaging assets and certain Business Paper assets at Paper and Packaging ($104 million) and unrealised losses on non-hedge derivatives ($429 million), recorded principally at AngloGold Ashanti. The Group's results are influenced by a variety of currencies owing to the geographic diversity of the Group. The South African rand on average weakened slightly against the US dollar compared with the prior year, with an average exchange rate of R6.77 compared with R6.37 in 2005. Currency movements positively impacted underlying earnings by $129 million. Operating results benefited from weaker average rates for the rand and Australian dollar, although these were offset by the stronger Chilean peso and Brazilian real. There was a significant beneficial effect on underlying earnings from increased prices amounting to $3,581 million, particularly in respect of copper and platinum group metals. Summary income statement Year ended Year ended $ million 31 Dec 2006 31 Dec 2005 Operating profit before special items and remeasurements 8,742 5,344 Operating special items (524) (186) Operating remeasurements (344) (301) Operating profit from subsidiaries and joint ventures 7,874 4,857 Net profit on disposals 1,168 87 Share of net income from associates (1) 685 657 Total profit from operations and associates 9,727 5,601 Net finance costs before special items and remeasurements (165) (428) Financing special items and remeasurements - 35 Profit before tax 9,562 5,208 Income tax expense (2,640) (1,275) Profit for the financial year 6,922 3,933 Minority interests (736) (412) Profit for the financial year attributable to equity shareholders 6,186 3,521 Basic earnings per share ($) 4.21 2.43 Group operating profit including associates before special items and 9,832 6,376 remeasurements (1) Operating profit from associates before special items and 1,090 1,032 remeasurements Operating special items and remeasurements (2) (123) (153) Net profit on disposals (2) 199 98 Financing remeasurements (2) 26 7 Net finance costs (before remeasurements) (101) (51) Income tax expense (after special items and remeasurements) (368) (274) Underlying minority interest (after special items and (38) (2) remeasurements) Share of net income from associates 685 657 (2) See note 3 to the financial information. Special items and remeasurement charges 31 December 2006 31 December 2005 Excluding Excluding associates Associates Total associates Associates Total $ million Operating special (524) (38) (562) (186) (137) (323) items Operating (344) (85) (429) (301) (16) (317) remeasurements Operating special items and remeasurements (868) (123) (991) (487) (153) (640) Operating special items and remeasurements, including associates, amounted to $991 million, with $562 million operating special charges in respect of impairments, restructurings and mine and operation closures, including a $278 million combined impairment and restructuring charge relating to certain non-core assets to be sold and other assets to be restructured at Industrial Minerals following the conclusion of the strategic review, an impairment and related closure costs of $125 million at AngloCoal Australia's Dartbrook mine, and a $104 million impairment at Paper and Packaging mainly of certain downstream converting Packaging assets. Operating remeasurements, including associates, of $429 million principally relates to unrealised losses on non-hedge commodity derivatives at AngloGold Ashanti. The loss in 2006 relates to the revaluation of non-hedge derivatives resulting from changes in the prevailing spot gold price, exchange rates and interest rates compared with the equivalent period in 2005. Net profit on sale of operations, including associates, amounted to $1,367 million. This included the profit on sale of 19.7 million ordinary shares in AngloGold Ashanti, which resulted in $737 million profit on disposal as well as $172 million profit on the deemed disposal of AngloGold Ashanti arising from the non-participation in the issue of ordinary shares by AngloGold Ashanti. A gain of $301 million also arose on the part disposal of Highveld, offset by a loss of $52 million on the part disposal of Kumba's non-iron ore assets. The Group also realised a $103 million profit on the sale of an indirect 26% equity interest in De Beers Consolidated Mines Limited to Ponahalo Holdings (Proprietary) Limited. Financing remeasurements, including associates, are made up of a $18 million fair value loss on the AngloGold Ashanti convertible bond option, unrealised net gains of $8 million on non-hedge derivatives and a $40 million foreign exchange gain on De Beers dollar preference shares held by a rand denominated entity. In line with IFRIC guidance, the option component of the AngloGold Ashanti convertible bond is fair valued at each reporting period and held as a liability. Changes in fair value of the liability are taken to the income statement. The US dollar preference shares held by De Beers (a rand functional currency entity) are classified as 'financial asset investments' and are retranslated at each period end. The resulting rand:US dollar foreign exchange gains and losses are reported through the income statement as a remeasurement charge. Net finance costs Net finance costs, excluding special items and remeasurements of nil (2005: gain of $35 million), decreased from $428 million in 2005 to $165 million. The decrease reflects lower interest costs due to the reduction in net debt. Taxation 31 December 2006 31 December 2005 $ million Before special Associates' Including Before special Associates' tax Including items and tax and associates items and and minority associates remeasurements minority remeasurements interests interests Profit before tax 9,159 407 9,566 5,612 285 5,897 Tax (2,763) (369) (3,132) (1,283) (281) (1,564) Profit for 6,396 38 6,434 4,329 4 4,333 financial period Effective tax 32.7 26.5 rate including associates % IAS 1 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 total tax charge on the face of the income statement. Associates' tax before special items and remeasurements included within 'Share of net income from associates' for the year ended 31 December 2006 was $369 million (2005: $281 million). The effective rate of taxation before special items and remeasurements including share of associates' tax before special items and remeasurements was 32.7%. This was an increase from the effective rate on the same basis of 26.5% in the year ended 31 December 2005. The December 2005 tax rate benefited from the one-off impact of a reduction in the statutory tax rates in South Africa and Ghana. Without this one-off benefit the effective tax rate for the prior year would have been 29.7%. The December 2006 tax rate reflects the relative impact of the statutory tax rates, on a fully distributed basis where appropriate, of the countries in which the Group's operations are based. In future periods it is expected that the effective tax rate, including associates' tax, will remain at or above the UK statutory tax rate of 30%. Balance sheet Equity attributable to equity shareholders of the Company was $24,271 million compared with $23,621 million as at 31 December 2005. During the year, the Group announced a share buyback programme totalling $6 billion. By the end of 2006, $3.9 billion of this programme had been completed, with the programme due to complete fully in the first half of 2007. A further $3 billion share buyback has been announced for 2007. Net debt, excluding hedges but including balances that have been reclassified as held for sale ($80 million) was $3,324 million, a decrease of $1,669 million from 31 December 2005. The reduction was principally due to reduction of debt from cash flows from operations and disposals, deconsolidation of AngloGold Ashanti debt and conversion of $1.1 billion of the Group's convertible debt, although this was partially offset by $3.9 billion of share buyback and $1.5 billion special dividend as at 31 December 2006. Net debt at 31 December 2006 comprised $6,304 million of debt, offset by $2,980 million of cash, cash equivalents and current financial asset investments. Net debt to total capital(1) as at 31 December 2006 was 12.9%, compared with 17.0% at 31 December 2005. Cash flow Net cash inflows from operating activities was $8,310 million compared with $6,781 million in 2005. EBITDA was $12,197 million, a substantial increase of 36% from $8,959 million in 2005. Depreciation and amortisation decreased by $405 million to $2,036 million. Acquisition expenditure accounted for an outflow of $344 million compared with $530 million in 2005. This included $76 million, net of cash acquired, in respect of the Group's investment in AltaSteel (Ferrous Metals and Industries) and $65 million in respect of the Group's investment in Akrosil and Stambolijski (Paper and Packaging). Proceeds from disposals totalled $1,642 million, with net proceeds on the sale of 19.7 million ordinary shares of AngloGold Ashanti of $839 million and net proceeds of $412 million received on disposal of 49.8% of Anglo American's shareholding in Highveld Steel. Repayment of loans and capital from associates amounted to $394 million and is attributable to capital redemptions by De Beers, comprising the redemption of $175 million of preference shares and a further $219 million in respect of a share premium redemption following the Ponahalo black economic empowerment transaction. Purchases of tangible assets amounted to $3,686 million, an increase of $380 million. Increased capital expenditure by Platinum, Coal, Ferrous Metals and Industries, Industrial Minerals and Base Metals was partially offset by a reduction in capital expenditure at Paper and Packaging, as well as the impact of including AngloGold Ashanti's capital expenditure up to 20 April 2006, after which it is accounted for as an associate. Dividends A final dividend of 75 US cents per share to be paid on 3 May 2007 has been recommended. Analysis of dividends US cents per share 2006 2005 Interim dividend (US cents per share) 33 28 Recommended final dividend 75 62 Normal dividend for year 108 90 Special dividend previously paid 67 33 Total dividends 175 123 (1) Net debt to total capital is calculated as net debt divided by total capital less investments in associates. Total capital is net assets excluding net debt. Operations review In the operations review on the following pages, operating profit includes associates' operating profit and is before special items and remeasurements unless otherwise stated. Capital expenditure relates to cash expenditure on fixed assets. PLATINUM $ million Year ended Year ended 31 Dec 2006 31 Dec 2005 Operating profit 2,398 854 EBITDA 2,845 1,282 Net operating assets 7,078 7,018 Capital expenditure 923 616 Share of Group operating profit 24% 13% Share of Group net operating assets 25% 20% Anglo Platinum's operating profit reached a record $2,398 million, increasing 181% on 2005's operating profit of $854 million. This was achieved on the back of a significantly higher price achieved for the basket of metals sold, increased production and a weaker average rand/US dollar exchange rate. Markets The average dollar price realised for the basket of metals sold equated to $2,030 per platinum ounce, 46% higher than in 2005, with firmer platinum, rhodium and nickel prices making the largest contribution to the increase. The average realised price for platinum of $1,140 per ounce was $246 higher than in 2005, while nickel averaged $10.74 per pound against $6.77 in 2005. The price achieved for rhodium averaged $3,542 per ounce, an increase of $1,576 per ounce over 2005, and includes the effect of existing long term contractual arrangements with some customers entered into to support and develop the rhodium market. Technological development continues to drive industrial demand for platinum and ongoing research into new applications will create further growth in this sector. With the rapid spread of exhaust emissions legislation, over 91% of new vehicles sold in the world now have autocatalysts fitted. The intensifying stringency of emissions legislation will drive growth in PGM demand for autocatalysts as new legislation is applied to trucks and off road vehicles in the USA. The increasing popularity of diesel-powered vehicles in Europe continues and this has also intensified the demand for platinum, as diesel-powered cars can only use autocatalysts that are predominantly platinum-based. Operating performance Refined platinum production for the year rose by 15% to 2,816,500 ounces, primarily due to increased production at mining operations and the release of metal from pipeline stocks, including the processing of concentrate built up at the Polokwane Smelter in 2005. Platinum production from mining operations, expressed in equivalent refined ounces (metal contained in concentrate net of smelting and refining losses), increased by 5% to 2,638,600 ounces. The increase was mainly attributable to improved production volumes at the Amandelbult, Kroondal, Modikwa, Bafokeng-Rasimone and Rustenburg operations as well as new output from the Marikana and Mototolo operations. However, this was partly offset by lower output from Potgietersrust and the Western Limb Tailings Retreatment plant. The cash operating cost per equivalent refined platinum ounce in rand terms increased by 10.7%. Once-off additional ground support work during 2006 at Union, equipping and development programmes to establish a sustainable base for future production at Amandelbult and Rustenburg, cost increases in diesel, steel, tyres and labour and the effect of lower grades as a consequence of a higher percentage of UG2 ore mined, were the principal reasons for the above inflation unit cost increase. Projects Anglo Platinum remains confident of the robustness of demand for platinum and is continuing with its expansion programme and expects to meet its stated average compound growth target of 5% per annum by exploiting its own reserves through direct investment in projects as well as with joint venture partners. This growth profile requires projects that will create incremental new production as well as maintain existing production levels due to reserve depletion from current mining activities. The implementation of Anglo Platinum's extensive suite of mining and processing projects to expand and maintain production continues on schedule. Projects that have increased production include Modikwa, Kroondal and for the first time in 2006, the Marikana and Mototolo ventures which have both added equivalent refined platinum ounces of 12,800 for 2006. Marikana, approved in 2005, will produce 74,000 refined platinum ounces a year by 2009. Mototolo is set to reach steady state production by the end of 2007, producing refined platinum production of 130,000 ounces per annum at steady state. In 2006 the company approved capital expenditure totalling $1.6 billion, which included the Potgietersrust North expansion project. Work on this project, which aims to mill an additional 600,000 tonnes of ore per month, producing an additional 230,000 refined platinum ounces per annum from 2009, has commenced. Projects that contribute towards maintaining production levels include the Amandelbult 1 shaft optimisation project, which was successfully completed during the year with the 75,000 tonnes per month UG2 concentrator being fully commissioned and running at capacity. This concentrator processes UG2 ore as Merensky production declines due to the depletion of Merensky ore reserves. The Amandelbult East Upper UG2 project, which was approved in 2006, will conventionally mine the UG2 reef, using existing mining infrastructure previously employed to extract Merensky reef, at the vertical number 2 shaft and at three decline shafts. The 75,000 tpm UG2 concentrator will be expanded to 210,000 tpm and by 2012 the project will contribute an additional 106,000 ounces of refined platinum per annum. The Rustenburg Paardekraal 2 shaft replacement project will access deeper Merensky reserves at a rate of 100,000 tpm. The project is expected to produce 120,000 ounces of refined platinum per annum by 2015, replacing decreasing production as a result of reserve depletion. The Townlands Ore Replacement project at a capital cost of $139 million was approved in February 2007 and will replace 70,000 ounces of refined platinum per annum by 2014 with production from new Merensky and UG2 areas at the Rustenburg Townlands Shaft. In December, Anglo Platinum concluded a black economic empowerment transaction with the Bakgatla-Ba-Kgafela traditional community, under which the community acquired a 15% interest in Anglo Platinum's Union Section mining and concentrating business as well as interests in the prospecting rights of certain properties in the vicinity of Union Section. Outlook The demand for newly-mined platinum continues to grow from the autocatalyst and industrial sectors offsetting the decline in demand from the jewellery sector. Autocatalyst demand is expected to continue growing in response to growth in the sales of diesel vehicles worldwide coupled with the advances in emission legislation requiring the fitment of catalyst systems and particulate filters containing platinum. The application of platinum in a wide variety of uses in industry remains robust. In the jewellery sector, the high price of platinum, but more importantly the volatility in the price, is limiting the levels of stock held within the trade and hence demand is down. Additional development projects to support the "Platinum" brand and the industry are being implemented in China, Japan and the USA. These initiatives are expected to sustain interest and assist in restoring demand even at current price levels. The recovery of palladium demand in the industrial market continues particularly in the autocatalyst and electronics sectors. Substitution of palladium for platinum in gasoline engine emission control catalysts is a continuing feature. The demand for palladium in the Chinese jewellery trade reduced from the exceptional peak last year as the manufacturing and retail pipelines were established. Sustained demand will be dependent on creating consumer desire for the product. The development of a differentiating image for palladium is in its infancy, but being pursued. The market for palladium is also being supported by investor interest in the metal which absorbs additional supply from Russian stocks. The markets for rhodium and ruthenium are supported by strong industrial demand and are expected to be buoyant in the medium term. Refined platinum production for 2007 is expected to be between 2.8 million and 2.9 million ounces. While production and sales volumes will increase in 2007, the most significant variable affecting earnings will be metal prices and the rand/US dollar exchange rate. DIAMONDS $ million Year ended Year ended 31 Dec 2006 31 Dec 2005 Share of associate's operating profit 463 583 EBITDA 541 655 Group's share of De Beers' net assets (1) 2,062 2,056 Share of Group operating profit 5% 9% (1) De Beers is an independently managed associate of the Group. The Group's share of De Beers' net assets is disclosed. The Group's share of operating profit from De Beers declined by 21% to $463 million from the 2005 figure of $583 million. This was largely attributable to lower sales by the Diamond Trading Company (DTC), the marketing arm of De Beers, increased exploration and development costs, reduced earnings in the diamond account, the impact of increased finance charges, and the dilution in earnings as a consequence of the sale of 26% of De Beers Consolidated Mines to a black economic empowerment consortium. Markets Solid consumer demand for diamond jewellery continued in 2006, with the US, and particularly China and India, reporting strong sales growth. Sales by the DTC were $6.2 billion, slightly below the previous year (2005: $6.5 billion), though still the second-highest on record. The decline reflected the reduced supply available to the DTC and the continuing challenging environment in the wholesale market for rough diamonds, where a lack of liquidity, margin pressure and increasing financing costs impacted pipeline demand. DTC marketing initiatives continue to effectively drive demand for diamond jewellery. Preliminary reports point to global retail sales for 2006 rising by about 4%-5%, with India and China achieving double-digit growth. DTC marketing programmes such as 'Journey Diamond Jewellery' and 'Trilogy' were strong growth drivers in 2006. Independently managed De Beers Diamond Jewellers (DBDJ), the De Beers retail joint venture with Louis Vuitton Moet Hennessy (LVMH), had an excellent year, with an encouraging performance in the United States, which accounts for around 50% of world jewellery sales by value. In 2007 DBDJ will introduce its first wristwatch collection and increase its presence in the US, the Middle East, Japan, Hong Kong and South Korea. Operating performance In 2006 the De Beers group achieved its highest ever production of 51 million carats (2005: 49 million carats). This was attributable mainly to Debswana raising output in Botswana from 31.9 million carats to 34.3 million carats. In Namibia, Namdeb lifted production by 18% to just over 2 million carats. Production from the South African operations totalled 14.6 million carats. Element Six, De Beers industrial diamond business, continues to achieve sustained growth, recording a satisfactory profit for the year. In Canada, De Beers is on target to start production at Snap Lake in the Northwest Territories in October, 2007, while the Victor mine in Ontario is scheduled to come on stream in the last quarter of 2008. In June 2006 De Beers announced that it had been granted a right to mine for diamonds at the long-closed Voorspoed mine in South Africa's Free State province. As part of its $145 million South African Sea Areas marine mining project, a mining vessel, now undergoing commissioning, will commence operations off the west coast of South Africa in the third quarter of 2007. When all of these operations are in full production they will contribute 3.3 million carats, valued at $700 million, to De Beers' production capacity. In 2006 De Beers positioned itself well to take advantage of exploration opportunities. The company has been granted three new concessions in Angola, prospecting licences have been granted in Botswana around the Jwaneng and Orapa areas, while De Beers is involved in a number of joint ventures to access promising ground in the Democratic Republic of Congo. In Canada, De Beers has sold its 42% stake in the Fort a la Corne project in Saskatchewan. In September 2006 De Beers and Alrosa, the leading Russian diamond mining company, signed a Memorandum of Understanding which should lead to joint diamond prospecting and exploration activities in Russia. A groundbreaking empowerment transaction was concluded in April 2006, resulting in the sale of 26% of De Beers Consolidated Mines, the South African mining arm of De Beers, to a black economic empowerment consortium. In May 2006 the Government of Botswana and De Beers signed the renewal of the mining licence for Jwaneng, the world's most valuable diamond mine. The licence will run for 25 years (effective from 1 August 2004), while the currently held licences for the Orapa, Lethlakane and Damtshaa mines were also extended to 2029. The agreement also covered the sale of diamond production from Debswana (held 50:50 by the Government of Botswana and De Beers) to the DTC for a further five years, and the establishment of Diamond Trading Company Botswana (also equally owned by the two parties) to sort and value all Debswana's diamond production. On 30 January 2007, the Government of Namibia and De Beers announced the extension of the DTC sales contract for a further eight years (effective 1 January 2006), and the establishment of Namibia Diamond Trading Company to sort, value and market Namibia's diamond output. Following the announcement in 2004 that De Beers had reached a settlement with the US Department of Justice, De Beers announced a provisional agreement in March 2006 to settle and consolidate all of the remaining class actions against De Beers for a total sum of $295 million. Proceedings to obtain final judicial approval of the settlement of the class actions are continuing. On 31 January 2007 the European Commission formally announced that it had decided to reject all of the outstanding complaints against De Beers and the DTC in respect of the DTC Sales and Marketing policy, and the Russian Trade agreement. Outlook The outlook for further growth in retail diamond jewellery sales remains positive, with India and China likely to be the leading growth markets, and the US continuing its five year growth trend. While DTC sales are likely to be constrained by availability in 2007, due to the reduction in Russian purchases as agreed with the European Commission, De Beers will benefit from bringing new production on stream towards the end of the third quarter of 2007. De Beers will focus on implementing its new vision of 'maximising the value of its leadership position'. This includes, in addition to new production, reviewing assets that do not fit the De Beers portfolio criteria, focusing exploration on the most prospective areas, continuing to improve cost efficiency and investing in DBDJ and the 'Forevermark' marketing programmes. BASE METALS $ million Year ended Year ended 31 Dec 2006 31 Dec 2005 Operating profit 3,876 1,678 Copper 3,019 1,381 Nickel, Niobium, Mineral Sands 405 249 Zinc 516 102 Other (64) (54) EBITDA 4,214 1,990 Net operating assets 4,268 4,785 Capital expenditure 298 271 Share of Group operating profit 39% 26% Share of Group net operating assets 15% 13% Anglo Base Metals generated a record operating profit of $3,876 million (2005: $1,678 million) on the back of increased copper, zinc, lead and ferroniobium production and significantly higher metal prices, partially offset by significant rises in the costs of energy and most key consumables. Although copper and zinc treatment and refining charges eased, increases in metal price linked smelter deductions and price participation saw a significant increase in this component of costs. The strength of the Chilean and Brazilian currencies against the dollar also adversely impacted operating profits. Markets Average LME prices (c/lb) 2006 2005 Copper 305 167 Nickel 1,095 668 Zinc 148 63 Lead 58 44 With global GDP growth remaining strong, average base metal prices moved significantly upwards in 2006. Although copper demand was slightly weaker than expected (with destocking by the Chinese and other manufacturers) and price-induced substitution (particularly in respect of copper and nickel) was also a feature, aggregate demand growth for base metals was largely as expected at 5%-6%. The primary drivers of the dramatic increase in prices were tight metal inventories (in turn, a reflection of weak mine supply growth arising from a lack of investment in new capacity and further supply side disruptions, particularly in the case of copper) and the significant and rapid inflow of speculative and investor funds into commodities markets. Operating performance Copper Division 2006 2005 Operating profit ($m) 3,019 1,381 Attributable production (tonnes) 643,800 634,600 Los Bronces copper mine implemented measures to overcome the lower throughput experienced in the first half arising from unexpectedly hard ore encountered in the Donoso Este area. Production, which included a record amount of cathode, was marginally lower at 226,000 tonnes (2005: 227,300 tonnes). El Soldado saw increasing mining flexibility and grade as the year progressed and delivered 68,700 tonnes (2005: 66,500 tonnes). Mantoverde suffered some delays in dump construction early in the year and output decreased by 3% to 60,300 tonnes. Mantos Blancos reduced the dump leach area under irrigation but this was more than offset by improved grades and recoveries in both the vat leach and sulphide ore circuits, resulting in a 5% rise in production to 91,700 tonnes. Notwithstanding intermittent production interruptions arising from the Rosario crushing and conveying system and SAG Mill No. 3, Collahuasi lifted output to 440,000 tonnes (2005: 427,100 tonnes) largely as a result of a 13% improvement in sulphide mill throughput. Molybdenum production rose materially to 3,400 tonnes (2005: 300 tonnes) in the first full year of molybdenum plant production. Chagres increased production by 26% to 173,400 tonnes following the completion of the expansion project at the end of 2005. The $80 million El Soldado pit extension project was completed on time and under budget. The Los Bronces feasibility study, which contemplates increasing copper production by 75% at a cost of approximately $1.2 billion, will be completed in mid-2007, while the Quellaveco revised feasibility study, examining a project with production of copper of around 200,000 tonnes per annum at a capital cost of approximately $1.2 billion, will be complete in 2008. Evaluation of the progressive de-bottlenecking project at Collahuasi will be undertaken this year. The new Chilean mining tax was paid with effect from January 2006. Nickel, Niobium and Mineral Sands Divisions 2006 2005 Operating profit ($m) 405 249 Attributable nickel production (tonnes) 26,400 26,500 Production of 16,600 tonnes at Loma de Niquel was marginally down for the year. Codemin output rose to 9,800 tonnes (2005: 9,600 tonnes), but sales volumes were 11% higher owing to the timing of shipments. In the first full year of production following the completion of the scalping project, niobium output increased a further 18% to a record 4,700 tonnes. Namakwa Sands' zircon and rutile production was very similar to 2005 at 128,400 tonnes and 28,200 tonnes respectively, while slag tonnage, which had been at similar levels until a major furnace burn-out occurred in August, was 19% lower at 133,900 tonnes. In December the $1.2 billion Barro Alto project, which will see the construction of a 36,000 tonnes per annum ferronickel operation in Brazil, was approved. First production is scheduled for 2010. Zinc Division 2006 2005 Operating profit ($m) 516 102 Attributable zinc production (tonnes) 334,700 324,200 Attributable lead production (tonnes) 71,400 63,000 Skorpion operated at design capacity until August when impurities in the electrowinning circuit caused a hydrogen fire, necessitating a 20 day shutdown. Although operations were again running at design capacity by December, production for the year eased to 129,900 tonnes (2005: 132,800 tonnes). Increased production from secondary mining (released by the backfill programme), improved grades (arising from the start-up of mining in the Bog Zone) and improved mill throughput and recoveries resulted in Lisheen producing 170,700 tonnes of zinc and 23,100 tonnes of lead (2005: 159,300 tonnes and 20,800 tonnes, respectively). At Black Mountain the commissioning at the Deeps shaft and the phased redeployment from the Broken Hill and Swartberg orebodies to, and the opening up of, the Deeps orebody has led to a gradual improvement in grade. This, together with a modest improvement in mill throughput, saw an increase of 6% in zinc production and 14% in lead output to 34,100 tonnes and 48,300 tonnes, respectively. In January 2007 it was announced that black economic empowerment company Exxaro Resources Limited had exercised an option under which it had, subject to the satisfaction of conditions precedent and contractual price adjustments, agreed to acquire Namakwa Sands (for R2.0 billion) and 26% of each of Black Mountain and Gamsberg (for a combined figure of R180 million). Anglo Base Metals continues to focus on operational excellence and delivering on the value-additive growth options that it is creating. Increases in zinc and ferroniobium production are forecast in 2007 while nickel output should be maintained. Copper production, excluding Collahuasi, is forecast to increase modestly. Collahuasi had forecast a rise in production of some 5%, but the taking down of a SAG mill for 65 days to replace its stator motor (which is covered by insurance) will result in an attributable shortfall of approximately 13,000 tonnes and a level of production in line with 2006. Outlook After four consecutive years of particularly strong growth in the world economy, the current consensus is one of slightly lower growth in 2007 without undue pressure on inflation rates and thus the level of interest rates. Although fundamentals will continue to be positive and overall stock levels below 'normal', both the zinc and the copper markets are likely to see some stock build up as they move into a surplus in 2007, the extent of which (particularly in copper) will depend on supply side disruptions. Nickel markets will remain very tight in 2007, but nickel and zinc markets will see further increases in supply in 2008. Fundamentals are therefore supportive, but suggest an easing of prices. The full extent of any price moves and the pace of such change will be dictated by fluctuations in speculative and investment funds sentiment in what is likely to be a volatile pricing environment. FERROUS METALS AND INDUSTRIES $ million Year ended Year ended 31 Dec 2006 31 Dec 2005 Operating profit 1,360 1,456 Kumba 778 568 Highveld Steel 230 436 Scaw Metals 160 121 Samancor Group 52 144 Tongaat-Hulett 154 131 Boart Longyear - 67 Other (14) (11) EBITDA 1,560 1,779 Net operating assets 2,796 4,439 Capital expenditure (including biological assets) 582 373 Share of Group operating profit 14% 23% Share of Group net operating assets 10% 12% Ferrous Metals and Industries' operating profit declined by 7% to $1,360 million (2005: $1,456 million), mainly as a result of the sale of non-core businesses that contributed $94 million in 2005, as well as lower vanadium and manganese prices, partially offset by higher iron ore prices. Markets World crude steel production increased by 9% in 2006, to reach a total of 1.2 billion tonnes. China accounted for most of the increase, with its share of global output rising to 34% in 2006. The South African steel market was characterised by strong demand, attributable to numerous major projects, among them infrastructural preparations for the 2010 Soccer World Cup, as well as expansion by utilities and the mining and chemical industries. Operating performance Kumba achieved an operating profit of $778 million (2005: $568 million). Global iron ore demand remained strong in 2006, fuelled by the continuing expansion of the steel industry in China. In addition to the 71.5% annual iron ore price increase achieved in April 2005, an annual increase of 19% was achieved with effect from April 2006. Export sales volumes for the period grew in line with production improvements. Kumba Iron Ore produced a record 31 million tonnes of iron ore for the period, exporting 21 million tonnes. A $754 million, three-year expansion programme is currently under way at the Sishen mine which will increase sales volumes by 40% to 45 million tonnes per annum. Ramp-up will commence in 2007, with full production expected in early 2009. Scaw produced a record operating profit of $160 million (2005: $121 million). The acquisition in February of AltaSteel, a manufacturer of steel and value-added steel products in Canada, together with the acquisition of the remaining 50% of Moly-Cop Canada, contributed $32 million for the year. Strong demand for rolled, cast and wire rod products contributed to higher profits. The international grinding media operations achieved higher sales volumes, although this benefit was more than offset by negative exchange rate movements. Anglo American's attributable share of Samancor's operating profit was $52 million (2005: $144 million). The 2005 operating profit included a $16 million contribution from Samancor's chrome business, which was disposed of in June 2005. Although higher manganese ore sales volumes were achieved, lower alloy volumes and lower selling prices negatively impacted profits. In 2006, the average manganese ore price achieved was $2.2 per metric tonne unit (mtu), compared with the 2005 average price of $2.9/mtu. Highveld reported a lower operating profit of $230 million (2005: $436 million), although this performance was still the second best in its history. An increased contribution from the steel business, driven by strong South African steel demand, was more than counteracted by the easing of vanadium prices from the record levels achieved in 2005. In 2006, the average ferrovanadium price achieved was $39 per kilogram of vanadium (kgV) compared with the 2005 average of $66/kgV. Tongaat-Hulett's operating profit grew to $154 million (2005: $131 million). The sugar operations benefited from a higher world sugar price of 12.8 USc/lb in 2006, compared with 9.0 USc/lb in 2005, while the 2006 South African sugar crop was the second lowest in 10 years. Hulamin continued its progress in increasing sales volumes, with record rolled product sales of 183,000 tonnes (2005: 173,000 tonnes). African Products' margins were affected by pricing pressures on starch and glucose and increasing maize input costs. Moreland benefited from increased contributions from its commercial, industrial and resorts property development portfolios. Strategic review Further progress was made on optimising the division's asset base during the year. In July, Anglo American announced the sale of its 79% shareholding in Highveld Steel to Evraz, an international steel producer, and Credit Suisse, for an aggregate consideration of $678 million. Following the disposal of the initial 49.8%, for which Anglo American received $412 million, Evraz has an option to acquire Anglo American's remaining 29.2% stake in Highveld Steel for $266 million once regulatory approvals are received. This amount will be reduced by any dividends paid by Highveld Steel prior to Anglo American selling its remaining shares. The deal represents a substantial foreign direct investment in South Africa. In November the Kumba empowerment transaction was completed. This resulted in the listings on the Johannesburg Stock Exchange of Kumba Iron Ore, as a pure play iron ore company in which Anglo American holds 64%, and Exxaro, which became South Africa's largest black economic empowered natural resources company. In December the Tongaat-Hulett Group announced the proposed unbundling and listing of Hulamin and simultaneous introduction of broad based black economic empowerment into both companies. This transaction, which is anticipated to be completed by mid 2007, will result in broad based black economic empowerment groups acquiring 25% and 15% interests in Tongaat-Hulett and Hulamin, respectively. Anglo American's shareholding in Tongaat-Hulett will reduce from 50% to 38% and its shareholding in Hulamin from an effective 45% to 39%. In line with Anglo American's objective of consolidating its agri-processing businesses within Tongaat-Hulett, it was announced in December that Tongaat-Hulett had acquired Anglo American's 50% shareholding in the Zimbabwe Stock Exchange listed sugar producer, Hippo Valley Estates, for $36 million. Outlook Scaw's volumes in the South African market are expected to grow, driven by infrastructural expansion and construction and mining industry activity. Demand for Scaw's products internationally is forecast to remain strong, driven by mining demand in Latin America and buoyant economic growth in Alberta, Canada. Samancor should benefit from volume improvements and higher prices. Highveld's performance in 2007 should be similar to that of 2006, depending largely on vanadium prices and continued strength in the South African steel demand. Tongaat-Hulett is expected to benefit from higher sugar production and sales revenue, while Hulamin plans to continue to grow its rolled product volumes and optimise its sales mix. Global economic growth looks set to continue in 2007, albeit at a slightly softer pace, with global steel output forecast to rise by over 6% in 2007. The outlook for the division remains broadly positive, given the benchmark annual iron ore price increase of 9.5% effective 1 April 2007 and a stable rand. Earnings in 2007 will be influenced by the timing of the sale of Anglo American's remaining Highveld stake and the transaction unbundling the Tongaat-Hulett aluminium business. COAL $ million Year ended Year ended 31 Dec 2006 31 Dec 2005 Operating profit 864 1,019 South Africa 380 470 Australia 279 323 South America 227 240 Projects and corporate (22) (14) EBITDA 1,082 1,243 Net operating assets 2,862 2,244 Capital expenditure 780 331 Share of Group operating profit 9% 16% Share of Group net operating assets 10% 6% Anglo Coal's operating profit decreased by 15% to $864 million. Coal production and sales for the first half of the year were adversely affected by a combination of poor weather in South Africa and rail and port constraints in Australia. In the second half production and sales volumes recovered and were markedly higher. Nevertheless for the year, operating profit was lower due to an overall decline in export volumes and a pull back in export prices from the very high levels of the year before. South Africa, Australia and South America contributed 44%, 32% and 26% respectively, to operating profit. Markets Global demand and supply for thermal coal remained well balanced during 2006. The dampening effect of mild winter temperatures in Europe and the US was mitigated by a series of worldwide logistical and production constraints and a buoyant European energy market, bolstered by high oil and gas prices. The combination of these factors maintained thermal coal prices at historically high levels. Metallurgical coal prices softened in 2006 from the highs of 2005, particularly the semi soft coking and pulverised injection (PCI) coals. During 2006 geopolitical events demonstrated coal's strategic importance to the overall energy mix. Compared to oil and gas, coal's security of supply from widely distributed reserves makes it one of the world's most reliable energy sources. This together with the development and implementation of clean coal technologies will, over time, position coal to make a significant contribution towards satisfying future global energy demand while addressing environmental concerns. Operating performance Operating profit for South African sourced coal, at $380 million, was 19% lower than the previous year's $470 million, reflecting average realised export prices which were 6% lower in 2006 and a 1% decline in export sales volumes. The rand continued to weaken in 2006, with a positive impact on operating profit of $28 million. Production for the year increased by 2.5 million tonnes, or 4.3%, to 59.3 million tonnes, as Isibonelo went into full production and output from Landau and New Denmark grew. Landau benefited from improved yields arising from plant efficiency improvements and favourable contractor performance, whilst New Denmark benefited from strong longwall performance. Excessive rainfall during the first quarter hampered production at several operations in particular New Vaal and Kleinkopje. Total sales, bolstered by Isibonelo, reached 59.3 million tonnes, 4.5% higher than prior year. Export sales decreased by 0.2 million tonnes or 1%. Sales to Eskom rose by 2.5% as increased economic activity continued to spur electricity demand. Operating profit for the Australian operations reduced by 14% to $279 million (although the 2005 results included $27 million from insurance proceeds pertaining to a roof fall at Moranbah North the previous year). The decline in operating profit was chiefly on account of lower production volumes arising from the cessation of mining at Dartbrook owing to difficult geological conditions, combined with commissioning delays to the Grasstree longwall operation. These reductions were partly compensated by the staged expansion at Dawson, resulting in an overall reduction of 0.9 million tonnes for Anglo Coal Australia. Site costs rose, with industry inflation statistics reporting 11.7% increases year on year on the back of rising prices of commodities globally and often poor local availability of scarce resources. Other cost increases came with the expanding Dawson mine and the purchase of third party coal during the Grasstree transition phase at Capcoal. Port and rail constraints impeded final sales volumes and resulted in higher closing stock on hand at all export mine sites. Callide's output increased by 0.3 million tonnes to 9.8 million tonnes. Dawson mine received additional heavy mining equipment as part of its incremental expansion and increased production by 11%, with the coking coal proportion of its coal mix rising to 45% from 30% in 2005. Drayton maintained output, although port constraints resulted in the mine being stock bound at year end. During the year Capcoal moved its main underground operations to the Grasstree mine, which experienced delays owing to conveyor and longwall commissioning problems, resulting in an 11% reduction in production. In 2006 work got under way on the Lake Lindsay project, which will extend open cut mining from the Capcoal operation. Moranbah North's production was 0.5 million tonnes lower, primarily as a result of difficult geological challenges being experienced during the first half of 2006. In South America, operating profit was 5% lower than 2005 at $227 million following a decline in export selling prices, higher operating costs, particularly in respect of fuel prices, and a stronger Colombian peso. The decrease in operating profit was partly offset by an increase in production at Cerrejon of 9% to 28.4 million tonnes as the first expansion project was completed. Sales volumes at Carbones del Guasare in Venezuela were marginally below 2005 because of transportation difficulties between the mine and the port. In Australia, capital expenditure for the year was 190% higher at $537 million, principally attributable to the ramp-up of the $426 million Dawson and $361 million Lake Lindsay projects. Dawson is expected to reach full production of 5.7 million tonnes per annum in 2007. Lake Lindsay is proceeding to plan, with first coal scheduled for 2008. In South Africa, the start of work at the $132 million Mafube mine, wash plant enhancements at Goedehoop and completion of the Isibonelo mine represent the majority of the capital expenditure. Mafube will increase Anglo Coal's thermal coal production by 5 million tonnes per annum. The coal projects which have been identified as part of Project Eureka will continue to enhance Anglo Coal's participation in the South African coal sector. In South America the expansion of Cerrejon to 32 million tonnes per annum is continuing and full production is scheduled for 2008. A pre-feasibility study is investigating additional capacity beyond 32 million tonnes per annum. Outlook The rand exchange rates and coal prices will continue to be the two main variables in 2007, with export prices expected to be more stable in 2007, though with a somewhat softer bias. Thermal coal prices for 2007 will continue to be subject to volatility, resulting from anticipated growth in India and the Asian economies, increased incremental supply from major producing regions, unpredictable fluctuations in seasonal temperatures and the price of competing energy fuels. Hard coking coal prices have decreased by up to 20% for 2007 contracts beginning in April. Early negotiations in thermal coal are showing that the market is remaining strong, with similar prices set to be realised in 2007. Substantial capital will continue to be invested in all regions, with accompanying increases in production, particularly in South Africa and Australia. In November 2006, Anglo Coal, Hillsborough Resources and North Energy Mining Incorporated created Peace River Coal, of which Anglo Coal owns 60%. Peace River Coal is a metallurgical coal mine in Canada that is expected to produce around 2.0 mt in 2007. The agreement between Anglo Coal and Shell with respect to the joint development of Monash Energy (coal-to-liquids projects) advances and the conclusion of the concept study is anticipated in 2007. In February 2007, Anglo Coal announced the creation of Anglo Inyosi Coal, an empowered coal company housing key current and future domestic and export focused coal operations. Anglo Coal has signed a Heads of Agreement with Inyosi, a newly formed broad based black economic empowerment company. Inyosi will acquire 27% of Anglo Inyosi Coal, creating a company valued at R7 billion and incorporating several key Anglo Coal assets, namely Kriel Colliery an existing mine, and Elders, Zondagsfontein, New Largo and Heidelberg projects. INDUSTRIAL MINERALS $ million Year ended Year ended 31 Dec 2006 31 Dec 2005 Operating profit 336 370 Tarmac 315 340 Copebras 21 30 EBITDA 580 618 Net operating assets 4,524 3,982 Capital expenditure 298 274 Share of Group operating profit 3% 6% Share of Group net operating assets 16% 11% Anglo Industrial Minerals generated an operating profit of $336 million. Tarmac Group's operating profit was 7% lower than 2005 at $315 million. The UK profit was down 10%, considered a robust performance in the face of challenging market conditions, with lower volumes and weaker margins in some businesses exacerbated by high energy costs for much of the year. Input cost pressures were partly mitigated by cost savings of some $63 million as a result of operational efficiencies, including Tarmac's ongoing supply chain management programme. Markets and operating performance Tarmac's contribution from its international businesses increased by 5%, reflecting strong performances by the Middle East and improvements by Poland and Germany, offset by weaker demand in Spain. Copebras' operating profit was down 30% from the prior year owing to the combined effects of the 11% strengthening of the Brazilian real against the US dollar and weak demand from the agricultural sector. In 2006 Tarmac completed its operational, commercial and organisational restructuring. The new business structure facilitates continuous improvement both operationally and commercially. The scope of its activities are also now clearly defined as aggregates, together with the three routes to market (asphalt, concrete and concrete products), and integration of cement where appropriate. This strengthens Tarmac's ability to improve its results and grow. A special charge for impairment and restructuring costs of $278 million was taken. This related to businesses sold ($46 million), businesses retained and restructured ($212 million) and closure and other items ($20 million). In addition to bolt-on acquisitions in France, the Czech Republic and Poland, Tarmac successfully entered Turkey and acquired a developing business in Romania, involving interests in quarries and ready mixed concrete. These acquisitions enhance Tarmac's ability to develop its business in Central and eastern Europe, identified as a key focus of the company's growth strategy. 2006 saw increased focus on improving the profitability of underperforming businesses and on disposing of 'non-core' businesses including the UK based Minerals and Materials business and the underperforming TopPave business. Previously announced disposals of assets in Hong Kong and Germany were completed in the second half of the year. Tarmac's operating profit in the UK declined owing largely to general market weakness, which caused demand to fall, and to high and volatile energy related costs for much of the year. The Aggregate Products business was impacted by weak demand and a highly competitive marketplace, with demand for coated stone being 8% down on the previous year. During 2006, additional resources were directed at improving commercial and operational processes in Aggregate Products, and early results are encouraging. Work has started on Tarmac's largest ever contract, resurfacing England's M1 motorway - an example of new, long term, framework agreements that now prevail in the marketplace. Tarmac's Building Products and International businesses experienced improved results compared with the previous year. However this gain was offset by weak demand for aggregate products, particularly in the road and housing sectors. Despite a substantial decline in demand from the housing sector for blocks, underlying profits in Building Products were 23% better than 2005. This reflects the benefits of operational improvements in the Topblock and Precast businesses and the disposal of the underperforming TopPave business. The Precast business also benefited from the work related to the construction programme for the 2012 London Olympic games. Operating profits for Tarmac International improved 5% over the previous year owing to stronger markets in France and benefits accruing from acquisitions and re-organisation and improved performance in Poland, the first full-year benefit of the Shawkah quarry in the Middle East (one of the largest in the Tarmac Group) and high demand in the Czech Republic and Germany. Profits in Spain were lower, largely reflecting the impact of higher cement costs despite strong demand in the Central Region. Outlook Market conditions in the UK are expected to remain challenging with weak demand in some sectors and high cost pressures. The uncertainty of government spending on infrastructure is also a cause for concern, as is the increasing impact of different types of construction materials such as steel and timber on the industry. Volatility of energy prices and the impact that they have on Tarmac's business in terms of cement and distribution costs will also continue to affect performance and demand commensurate efforts to drive further efficiencies. GOLD $ million Year ended Year ended 31 Dec 2006(1) 31 Dec 2005 Operating profit 467 332 EBITDA 843 871 Net operating assets - 6,982 Capital expenditure 196 722 Group's aggregate investment in AngloGold Ashanti 1,623 - Share of Group operating profit 5% 5% Share of Group net operating assets - 20% (1) The results for 2006 are reported as a subsidiary up to 20 April and thereafter as an associate at 42% attributable (see note 3 to the financial information). The Group's share of AngloGold Ashanti's net assets is disclosed. Attributable operating profit in 2006 climbed to $467 million, 41% higher than the figure for the previous year (2005: $332 million), mainly due to impact of a stronger gold price, partially offset by the Group accounting for AngloGold Ashanti as an associate from 20 April 2006. At the end of 2006 the gold price ($604 per ounce) was more than 36% higher than at the beginning of the year ($445 per ounce), while the average price received for the year was 31% higher than the prior year. Total cash costs were $27 per ounce higher, at $308 per ounce, mainly resulting from stronger operating currencies, inflation and lower grades. Markets Investor interest in gold continued throughout 2006. The average gold price received increased by $138 per ounce to $577. This momentum has continued into 2007, with the spot gold price currently well above the $600 per ounce mark. Operating performance In 2006, AngloGold Ashanti's production from ongoing operations declined by 9% to 5.64 million ounces and was largely attributable to reductions of 305,000 ounces in Tanzania, 122,000 ounces in South Africa and 88,000 ounces in Ghana. These decreases were only partly compensated by small increases in output from assets in Australia, Argentina and Mali. The review of AngloGold Ashanti's assets has resulted in management implementing programmes to ensure that these operations better their ore reserve, profit margin and growth potential. During the year AngloGold Ashanti successfully raised $500 million of equity at a negligible discount to the prevailing market price. AngloGold Ashanti is focusing on growing the reserve and resource base, both through exploration and through a disciplined, value adding mergers and acquisitions programme. In respect of both of these activities, the company is now looking outside of the world's mature gold regions and has exploration projects in Africa in the Democratic Republic of Congo and in South America in Colombia. In Russia, AngloGold Ashanti has announced the formation of a strategic alliance with Polymetal. Strategic alliances are being pursued in China to allow the company to successfully extract value from a region undergoing significant regulatory change. Exploration partnerships in the Philippines, Laos and Mongolia have resulted in land positions being acquired in several prospective areas. Outlook The gold price has now risen for six years in succession, which has not been seen since the deregulation of the gold market in the developed markets in 1971. Ongoing strong demand from the growing economies of China and India as well as continued investor speculation and official sector activities are seen as being supportive of the gold price. PAPER AND PACKAGING $ million Year ended Year ended 31 Dec 2006 31 Dec 2005 Operating profit 477 495 Packaging 287 293 Business Paper 130 163 Other 60 39 EBITDA 923 916 Net operating assets 7,019 6,365 Capital expenditure (including biological assets) 644 746 Share of Group operating profit 5% 8% Share of Group net operating assets 25% 18% In the second half of the year there was some improvement in overall market conditions. Operating profit for the second half of 2006 at $265 million was up on the comparable period for 2005. The second half performance partially offset the impact of a poor first six months with full year profits of $477 million, 4% down on 2005. Although operating rates for Mondi's European upstream paper markets appear to have improved allowing for some price increases, input cost pressures (fibre, chemicals and energy) and tough trading conditions in downstream converting activities have continued to put margins under pressure. In response Mondi has focused on cost saving and profit improvement initiatives delivering $224 million of benefits for the full year. Markets and operating performance Mondi Packaging's operating profit of $287 million was 2% below the previous year's $293 million, the strong upturn in packaging paper pricing was more than offset by higher input costs and continued margin pressure in the converting operations. Mondi has been active in restructuring its converting operations to improve efficiencies and focus on high growth niche areas, with ten sites divested and one closed during the year. In addition Mondi closed down two corrugators amounting to 8% of its capacity. The results of these actions can be seen in productivity, measured in output per employee which has improved by 9% across the business. There were several small acquisitions in the period with Mondi further strengthening its position in the higher growth niche release liner segment through the acquisition of Akrosil (mainly US and European based), Schleipen and Erkens and NBG Special Coatings (both European based). The acquisition of Peterson Barriere in Norway adds to the extrusion coating segment. The acquisition of the Bulgarian Kraft Paper Factory Stambolijski was finalised during June. Agreement to dispose of Mondi's stake in Bischof + Klein, an associate company specialising in polymer films and flexible packaging, was reached in December with completion expected during the first quarter of 2007. Mondi is considering an investment in Poland or the Czech Republic in a new paper machine to produce lightweight testliner and fluting. This is a market which is growing rapidly and where there is a shortage of product in Eastern Europe. The cost of this investment is estimated at $365 million and will provide capacity of 470,000 tonnes with first production expected in the second half of 2009. Mondi Business Paper's operating profit of $130 million was 20% down on the $163 million recorded in 2005. Tough trading conditions contributed to the decline in profits (particularly in the first half), and were compounded by the slow start up at the Merebank South Africa operation, of the paper machine PM31 following a major rebuild, and expenses related to project development. PM31 is now operating at a much improved run rate and is producing better grades of paper. Further improvement is required which may include some modifications to the machine in order that it can produce at its designed potential. In addition the South African operation is undergoing a major restructuring programme to improve efficiencies and lower costs. As a result of this restructuring and the improvement in PM31 performance a better result is expected in 2007 from the South Africa. Within the rest of the business the non-integrated mills saw profitability significantly eroded by rising pulp costs but both Syktyvkar and Ruzomberok recorded strong results on the back of increased sales volumes and good cost control. In response to weak European market conditions Mondi took 110,000 tonnes at annual production capacity out of the business papers market in 2006 by irreversibly converting the Dunaujvaros mill in Hungary to a speciality paper plant and selling the assets. Overall product demand was positive with uncoated woodfree sales volumes up 10% also helped by increased production from PM31. The increased demand has led to improved operating rates and some improvement in pricing towards the end of the year (an average price increase of 4% was announced across Mondi business paper's key paper grades in January 2007). However pricing is still well below historic mid cycle levels and margins continue to be impacted by rising input costs, particularly for fibre and energy. Consideration is being given to a major modernisation programme for the Russian operation which could see substantial investment over the next five years in improving infrastructure, increasing capacity and reducing cost through enhanced efficiencies. This capital expenditure programme includes some elements that would have been part of the previously announced major pulp expansion project (initial cost estimate of $1.5 billion) and will allow the mill to be in a good position to reconsider this project once the modernisation programme is complete. Mondi Packaging South Africa had a better year with improved agricultural packaging volumes and good cost control. Other operations which comprise the Newsprint and Merchant activities as well as corporate costs saw net operating profits well up on the comparable period. All major trading operations recorded improved results with both newsprint operations performing well as a result of an improved pricing environment. Outlook The company enjoyed a strong finish to 2006 which will provide a good platform going into 2007 and whilst the trading environment has undoubtedly improved, concerns remain about the strength of the recovery and the level of overcapacity in some of the markets in which Mondi operates. Mondi is encouraged by the number and scale of recent industry announcements regarding capacity closures and this bodes well for the future. Overall, Mondi expects a better financial performance in 2007, despite rising corporate costs (in anticipation of the demerger from Anglo American plc), as a result of improved pricing for its key products, focus on cost saving and the benefits of a better PM31 performance. For full financial accounts please find attached pdf document. http://www.rns-pdf.londonstockexchange.com/rns/5923r_-2007-2-20.pdf This information is provided by RNS The company news service from the London Stock Exchange

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