Anglo American Preliminary Results 2020

RNS Number : 2664Q

Anglo American PLC

25 February 2021

 

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YEAR END FINANCIAL REPORT

for the year ended 31 December 2020

25 February 2021

Anglo American Preliminary Results 2020

Business resilience and robust demand deliver underlying EBITDA of $9.8 billion

Financial highlights

Year ended 31 December 2020

• Generated underlying EBITDA* of $9.8 billion (2019: $10.0 billion)

• Profit attributable to equity shareholders of $2.1 billion (2019: $3.5 billion)

• Net debt* of $5.6 billion (0.6x underlying EBITDA), reflecting investment in growth, largely offset by H2 cash flow

• Final dividend of $0.72 per share, consistent with our 40% payout policy

• Investing in high quality growth, including Quellaveco (copper) and Woodsmith (low carbon fertiliser)

• Good progress towards exiting remaining thermal coal operations in South Africa

• Committed to 30% net GHG reduction by 2030 and carbon neutrality across operations by 2040

Mark Cutifani, Chief Executive of Anglo American, said:

"In 2020 we saw much of the world tested to its limits by Covid-19. I am immensely proud of how our team of more than 95,000 people across Anglo American pulled together to do what's right for each other, for our many stakeholders across society and the business. We showed considerable speed and agility to help keep people and communities safe while supporting business continuity.

"Making sure every employee returns home safely at the end of each day drives our thinking and behaviours and it is with this mindset that we achieved our best ever safety performance. However, it remains our most pressing challenge that we still experience serious and fatal safety incidents. In 2020, and after eight fatality-free months at our managed operations, two people lost their lives at work, one in each of our PGMs and thermal coal businesses. While we have made such progress, we can never say we have had a good year unless we have zero fatal incidents.

"The resilience of our diversified business, following the operational disruptions of the first half and benefiting from strong metals prices in the latter months, generated underlying EBITDA of $9.8 billion, with an increased mining EBITDA margin of 43%. We are delivering strong cash returns, investing in value-adding growth and maintaining our strong balance sheet, resulting in a 17% ROCE and an attractive Total Shareholder Return of 16.2% for the year.

"Our balanced investment programme is driving material business improvement, while also delivering margin-enhancing and sector leading volume growth of 20-25% over the next three to five years, that includes first copper production from Quellaveco in 2022. Together with our P101 and technology work, we are on track to deliver our targeted $3-4 billion annual run-rate of incremental improvement by the end of 2022, also taking us towards our longer term target of a 45-50% mining EBITDA margin.

"Looking further out, we benefit from a sequence of high returning growth options, mainly in copper, PGMs, and now also crop nutrients. Our business is increasingly positioned to supply those products that are fundamental to enabling a low carbon economy and catering to global consumer demand trends. Combined with our integrated approach to technology and sustainability - also helping us reach carbon neutrality across our operations by 2040 - we are well positioned to meet the expectations of our full breadth of stakeholders."

Year ended	2020		2019		Change
US$ million, unless otherwise stated
Revenue	30,902		29,870		3	%
Underlying EBITDA*	9,802		10,006		(2)	%
Mining EBITDA margin*	43	%	42	%
Attributable free cash flow*	1,209		2,287		(47)	%
Profit attributable to equity shareholders of the Company	2,089		3,547		(41)	%
Basic underlying earnings per share* ($)	2.53		2.75		(8)	%
Basic earnings per share ($)	1.69		2.81		(40)	%
Final dividend per share ($)	0.72		0.47		53	%
Group attributable ROCE*	17	%	19	%

Terms with this symbol * are defined as Alternative Performance Measures (APMs). For more information on the APMs used by the Group, including definitions, please refer to page 78.

SUSTAINABILITY PERFORMANCE

Key sustainability performance indicators

Anglo American tracks its strategic progress using KPIs that are based on our seven pillars of value: safety & health, environment, socio-political, people, production, cost, and financial. In addition to the financial performance set out above, our 2020 performance for the first four pillars is set out below:

Pillar of Value	Metric	2020		2019		Target	Target achieved
Safety & Health	Work-related fatal injuries	2		4		Zero	Not achieved
	Total recordable case frequency rate	2.14		2.21		Year-on-year reduction	Achieved
	New case of occupational disease	30		39		Year-on-year reduction	Achieved
Environment	Energy consumption (million GJ)(1)	81		87		8% saving by 2020	Achieved
	GHG emissions - Scope 1&2 (Mt CO2e)(1)	16.1		17.7		22% saving by 2020	Achieved
	Water withdrawals (million m3)(2)	209		n/a		20% saving by 2020	Not achieved
	Level 4-5 environmental incidents	0		0		Zero	Achieved
Socio-political	Social Way implementation (based on updated Social Way 3.0 for 2020(3))	80% / 23%		96%		Full compliance with Social Way 3.0 by end 2022	On track
	Local procurement spend ($bn)(4)	10.0		9.1
	Taxes borne ($m)	2,843		3,035
	Jobs supported by EDI	137,777		132,082
	Businesses supported by EDI	66,625		65,548
People	Women in senior management	27%		24%		33% by 2023	On track
	Women in the workforce	23%		21%

⁽¹⁾  Energy and GHG savings are calculated relative to the 2016 projected business as usual consumption levels.

⁽²⁾   Given the scale of the changes to the Group's water definitions, in 2020 the focus has been to restate the 2015 and 2020 water withdrawal data. In 2021, the restatement of the 2016-19 data will be completed. For this reason, water data is not included for 2019. Water target is relative to the 2015 baseline.

⁽³⁾  In 2020, we launched a new integrated social performance management system (Social Way 3.0) which has raised performance expectations and has resulted in continued improvement in our social performance. Prior to 2020, our target was full compliance against our previous standard. As we implement the new standard, sites have been required to set milestone targets on the way to the requirement of full compliance by end 2022. Data for 2020 and 2019 are, therefore, not comparable. In 2020, 80% of our year-end roll-out milestone targets were met and 23% of the Social Way 3.0 requirements were fulfilled in the first year of the transition to the new standard.  Sites are expected to have fully implemented the Social Way 3.0 by the end of 2022.

⁽⁴⁾   Local procurement spend relates to spend within the country where an operation is located.

Safety

While our safety performance has been completely transformed over the last seven years, we are not yet where we need to be. Our determination to achieve zero harm is our most pressing challenge. Making sure every employee returns home safely at the end of each day drives our thinking and behaviours across the business.

It is with this mindset that we have reduced fatal incidents by 87% since 2013. However, we still experience serious safety incidents - such as the gas ignition at Grosvenor in May in which five colleagues were seriously injured - as well as fatal incidents. In 2020, and after eight fatality-free months at our managed operations, two people lost their lives at work, one in each of our PGMs and thermal coal businesses in South Africa.

We are unconditional about safety and every loss of life is tragic. We will not rest until zero harm is achieved and sustained across our business. We have shown it can be done for long stretches of time and now we must make it permanent. Our focus on elimination of fatal incidents is also extended to our non-managed operations, where three losses of life in PGMs joint operations were reported.

In recognising material progress, the Elimination of Fatalities Taskforce that we launched in 2018 has been central to our improvement and is being stepped up in our quest for zero harm. In 2020, we recorded another important step with an all-time-low total recordable safety rate, being a 60% improvement since 2013.

Environment

Our environmental performance continued to improve in 2020, with no Level 5 or 4 incidents. We did record one Level 3 environmental incident at PGMs' base metals refinery in South Africa in the first half of the year, relating to an overflow from a storage pond due to excessive rainfall. Appropriate short term corrective and remedial actions were completed and we are implementing further actions to prevent repeat incidents of this nature across the Group.

Our Sustainable Mining Plan includes commitments to be a leader in environmental stewardship. By 2030, we aim to: reduce GHG emissions (Scope 1 and 2 emissions) by 30% against a 2016 baseline; improve energy efficiency by 30%; achieve a 50% net reduction in freshwater abstraction; and deliver net-positive impacts in biodiversity wherever we operate. And by 2040, we are aiming to be carbon neutral across our operations (Scope 1 and 2 emissions), including by using 100% renewables in Chile by 2021 and Brazil by 2022.

WeCare - our global response to the pandemic

Anglo American acted quickly at the onset of the pandemic to support the lives and livelihoods of our workforce and host communities through the health, social and economic effects of the Covid-19 pandemic - through our global "WeCare" response programme. Our mines and host communities, which are also often home to much of our workforce, operate as an ecosystem and both must be healthy to prosper. Across our operational footprint and in those communities that are local to our operations, our "WeCare" programme provides information and extensive practical support across four pillars of: physical health, mental health, living with dignity, and community response:

Physical health - education and behavioural change to support personal health and hygiene; health screening and testing; PPE and medical equipment and facilities; vaccination information programme.

Mental health - employee support programmes to assist with mental health management, including via our employee app and online events and other digital materials.

Living with dignity - direct employee and community support to combat gender-based and domestic violence; work with health authorities to identify abuse cases and referrals to support mechanisms.

Community response - wide-ranging livelihoods programme to support communities through the social and economic effects of the pandemic, including: public information campaigns aimed at health and hygiene; health screening and Covid-19 testing; support for health service provision; continuation of essential services (e.g. water, energy, accommodation); food package distribution; employee match-giving programme; support for SMEs and entrepreneurs; support for teachers and students; job training for post-pandemic employability; regional development planning to enhance local economic activity for the long term.

Operational and financial review of Group results for the year ended 31 December 2020

OPERATIONAL PERFORMANCE

Continued strong performances from our Minas-Rio iron ore operation in Brazil and the Collahuasi copper joint operation in Chile helped partly offset the impacts of Covid-19, leading to an overall decrease in production of 10%, on a copper equivalent basis. Covid-19 lockdowns across southern Africa in the first half of the year impacted production at PGMs, Kumba, De Beers and Thermal Coal. In response to the pandemic, comprehensive safeguarding measures were put in place at operations and in partnership with local communities across the business, enabling a return to more normal operating levels in the second half of the year. Production was also affected by operational issues at Metallurgical Coal and strike action at the Cerrejón thermal coal operation. Refined production of PGMs was impacted by an outage at the converter plant in the first half. Consequently, in the second half of the year, copper equivalent production improved by 13% compared with the first half, as lockdowns and restrictions eased and operations were able to sustain around 95% of normal capacity while maintaining Covid-19-related safeguarding measures.

De Beers' rough diamond production decreased by 18% to 25.1 million carats (2019: 30.8 million carats), in response to lower demand due to the pandemic and Covid-19 restrictions in southern Africa during the first half of the year. Diamond demand from the midstream (cutters and polishers of rough diamonds) was affected throughout the year by Covid-19 lockdowns, travel restrictions and retail store closures.

Copper production increased by 1% to 647,400 tonnes (2019: 638,000 tonnes), driven by an 11% increase in attributable production from Collahuasi to a record 276,900 tonnes (2019: 248,800 tonnes) on the back of strong plant performance, reflecting improvement projects implemented in 2019. At Los Bronces, production decreased by 3% to 324,700 tonnes (2019: 335,000 tonnes) due to planned lower grades.

PGMs' production (metal in concentrate) decreased by 14% to 3,808,900 ounces (2019: 4,440,900 ounces), due to Covid-19 restrictions, which reduced operating capacity for most of the second quarter, particularly at underground operations. PGM production was 35% higher in the second half of the year compared with the first, as the operations recovered well from the initial disruption caused by the pandemic. Refining performance had also returned to normal levels by the end of the year with the restart of the rebuilt converter plant (ACP).

At Kumba, iron ore production decreased by 13% to 37.0 Mt (2019: 42.4 Mt), owing to lower workforce levels and logistics constraints due to Covid-19 restrictions, as well as above average rainfall and operational issues at the Sishen crusher and Kolomela plant.

Minas-Rio production increased by 4% to 24.1 Mt (2019: 23.1 Mt), despite a planned one-month suspension for a pipeline inspection. This reflects a strong operational performance as the asset builds towards full capacity, with productivity initiatives supported by robust operational stability.

Metallurgical coal production decreased by 26% to 16.8 Mt (2019: 22.9 Mt), principally owing to the suspension of operations at Grosvenor following a gas ignition incident in May, and challenges at Moranbah North, where a fall of ground in the first quarter and geotechnical challenges towards the end of the year limited longwall progress. Open cut operations were scaled back at Dawson and Capcoal in response to reduced demand for lower quality metallurgical coal.

Thermal coal export production decreased by 22% to 20.6 Mt (2019: 26.4 Mt), primarily due to Covid-19 operational restrictions and a three-month industrial action at Cerrejón, which ended in the first week of December.

Nickel's production increased by 2% to 43,500 tonnes (2019: 42,600 tonnes) owing to improved operational stability, while manganese ore production was in line with the prior year at 3.5 Mt.

Group copper equivalent unit costs decreased by 2% in US dollar terms, despite lower production, due to weaker producer currencies and cost saving measures.

FINANCIAL PERFORMANCE

Anglo American's profit attributable to equity shareholders decreased by 41% to $2.1 billion (2019: $3.5 billion). Underlying earnings were $3.1 billion (2019: $3.5 billion), while operating profit was $5.6 billion (2019: $6.2 billion).

UNDERLYING EBITDA*

Despite the impact of the Covid-19 pandemic, as well as operational challenges, Group underlying EBITDA decreased by just 2% to $9.8 billion (2019: $10.0 billion). The Group Mining EBITDA margin* was higher than the prior year at 43% (2019: 42%), due to the increase in the price for the Group's basket of products, favourable exchange rates and cost saving initiatives. A reconciliation of 'Profit before net finance costs and tax', the closest equivalent IFRS measure to underlying EBITDA, is provided within note 3 to the Condensed financial statements.

Underlying EBITDA* by segment

$ million	2020		2019
De Beers	417		558
Copper	1,864		1,618
PGMs	2,555		2,000
Iron Ore	4,565		3,407
Coal	35		1,832
Nickel and Manganese	510		634
Crop Nutrients	1		-
Corporate and other	(145)		(43)
Total	9,802		10,006

Underlying EBITDA* reconciliation for the year ended 31 December 2019 to year ended 31 December 2020

The reconciliation of underlying EBITDA from $10.0 billion in the year ended 31 December 2019, to $9.8 billion in the year ended 31 December 2020, shows the controllable factors (e.g. cost and volume), as well as those outside of management control (e.g. price, foreign exchange, inflation and the impact of the pandemic), that drive the Group's performance.

$ billion
2019 underlying EBITDA*	10.0
Price	2.2
Foreign exchange	0.9
Inflation	(0.4)
Covid-19 volume impact	(1.1)
Net cost and volume	(1.3)
Other	(0.5)
2020 underlying EBITDA*	9.8

Price

Average market prices for the Group's basket of products increased by 7% compared to 2019, which served to increase underlying EBITDA by $2.2 billion. The price achieved for the PGMs basket increased by 51%, largely due to rhodium and palladium, which increased by 179% and 46% respectively, while the realised price for iron ore and copper increased by 23% and 10%, respectively. These were partly offset by a 34% reduction in the weighted average realised price for metallurgical coal.

Foreign exchange

The favourable foreign exchange impact on underlying EBITDA of $0.9 billion was due to weaker local currencies in our countries of operation, principally the South African rand, Brazilian real and Chilean peso.

Inflation

The Group's weighted average CPI for 2020 was 2.9%, compared with 3.3% in 2019. This was principally influenced by a decrease in inflation in South Africa. The impact of inflation on costs reduced underlying EBITDA by $0.4 billion.

Covid-19 volume impact

The volume impact of Covid-19-related disruption to production, the supply chain and the impact of reduced diamond demand throughout the year decreased underlying EBITDA by $1.1 billion.

Operational disruptions as a result of the pandemic due to national lockdowns in South Africa and Botswana in the first half of the year, resulted in production levels decreasing to 60% of total capacity in April. The Group's operating assets recovered strongly, however, reaching approximately 90% of capacity by the end of June, and sustaining a consistent level of 95% of normal capacity throughout the second half of the year, while maintaining comprehensive safety measures to help safeguard the lives and livelihoods of our workforce and host communities.

The pandemic also had a major impact on the diamond industry, driving a 45% decrease in rough diamond sales volumes at De Beers in the first half of the year, followed by significant improvement in the second half, as lockdown restrictions eased in many countries, resulting in an overall 27% decrease in rough diamond sales volumes for the year.

Net cost and volume

The net impact of cost and volume was a $1.3 billion reduction in underlying EBITDA, as the benefit of cost saving initiatives at De Beers, Copper and Thermal Coal and higher volumes at Minas-Rio and Collahuasi were more than offset by operational issues at PGMs and Metallurgical Coal.

Refined production at PGMs was impacted by an outage at the ACP, which reduced refined production by 42% in the year. The rebuilt converter plant was put back into operation ahead of schedule on 24 November 2020.

Metallurgical coal operations were affected by an underground incident at Moranbah North, as well as at Grosvenor, where operations have been suspended since the beginning of May, with the mine currently expected to return to operation in the second half of 2021.

Other

The $0.5 billion decrease in underlying EBITDA was driven by lower earnings at Cerrejón due to lower prices and a three month strike, as well as Victor mine (De Beers) reaching the end of mine life in 2019. Also included are costs of $0.2 billion related to increased rehabilitation provisions across the Group due to lower discount rates, reflecting lower interest rates, principally at Copper.

UNDERLYING EARNINGS*

Group underlying earnings decreased to $3.1 billion (2019: $3.5 billion), driven by an increase in net finance costs, as well as a 2% decrease in underlying EBITDA and a higher proportion of earnings attributable to non-controlling interests.

Reconciliation from underlying EBITDA* to underlying earnings*

$ million	2020		2019
Underlying EBITDA*	9,802		10,006
Depreciation and amortisation	(2,752)		(2,996)
Net finance costs and income tax expense	(2,745)		(2,469)
Non-controlling interests	(1,170)		(1,073)
Underlying earnings*	3,135		3,468

Depreciation and amortisation

Depreciation and amortisation decreased by 8% to $2.8 billion (2019: $3.0 billion), reflecting the effect of weaker local currencies and lower production at Metallurgical Coal as a result of the operational issues at Moranbah North and Grosvenor.

Net finance costs and income tax expense

Net finance costs, before special items and remeasurements, were $0.8 billion (2019: $0.4 billion). The increase was principally driven by fair value losses on the revaluation of deferred consideration balances at PGMs relating to the Mototolo acquisition.

The underlying effective tax rate was 31.2% (2019: 30.8%). The underlying effective tax rate in 2020 was impacted by the relative levels of profits arising in the Group's operating jurisdictions. In future periods, the underlying effective tax rate is expected to be in the range of 30% to 33%. The tax charge for the year, before special items and remeasurements, was $1.8 billion (2019: $1.8 billion).

Non-controlling interests

The share of underlying earnings attributable to non-controlling interests of $1.2 billion (2019: $1.1 billion) principally relates to minority shareholdings in Kumba, PGMs and Copper.

SPECIAL ITEMS AND REMEASUREMENTS

Special items and remeasurements are a net charge of $1.0 billion (2019: net gain of $0.1 billion) and include impairment charges of $0.6 billion at Nickel following a revision of the Group's medium and long term nickel price forecast and $0.1 billion at Coal, as well as deferred tax remeasurements of $0.4 billion, driven by the weaker Brazilian real.

Full details of the special items and remeasurements recorded are included in note 9 to the Condensed financial statements.

NET DEBT*

$ million	2020		2019
Opening net debt* at 1 January	(4,626)		(2,848)
Underlying EBITDA* from subsidiaries and joint operations	9,284		9,139
Working capital movements	(1,534)		(50)
Other cash flows from operations	248		171
Cash flows from operations	7,998		9,260
Capital repayments of lease obligations	(195)		(272)
Cash tax paid	(1,606)		(2,116)
Dividends from associates and joint ventures	226		520
Net interest(1)	(358)		(334)
Dividends paid to non-controlling interests	(668)		(894)
Sustaining capital expenditure(2)	(2,675)		(2,993)
Sustaining attributable free cash flow*	2,722		3,171
Growth capital expenditure and other(2)	(1,513)		(884)
Attributable free cash flow*	1,209		2,287
Dividends to Anglo American plc shareholders	(904)		(1,422)
Acquisitions	(520)		(13)
Disposals	384		24
Foreign exchange and fair value movements	17		(34)
Other net debt movements(3)	(1,135)		(2,620)
Total movement in net debt*	(949)		(1,778)
Closing net debt* at 31 December	(5,575)		(4,626)

⁽¹⁾  Includes cash inflows of $29 million (2019: outflows of $124 million), relating to interest receipts (2019: interest payments) on derivatives hedging net debt, which are included in cash flows from derivatives related to financing activities.

⁽²⁾  Included within sustaining capital expenditure is $51 million (2019: $11 million) of capitalised operating cash flows relating to life-extension projects. In addition to Growth capex, 'Growth capital expenditure and other' includes $12 million (2019: nil) of capitalised operating cash flows relating to growth projects and $63 million (2019: $37 million) of expenditure on non-current intangible assets.

⁽³⁾  Includes Mitsubishi's share of Quellaveco capital expenditure of $526 million; debt recognised on the acquisition of Sirius Minerals Plc of  $253 million; the purchase of shares under the buyback of $223 million; and the purchase of shares for other purposes (including for employee share schemes) of $162 million. 2019 includes the IFRS 16 Leases transition adjustment of $469 million; capital expenditure on the Quellaveco project funded from the 2018 syndication transaction of $515 million; Mitsubishi's subsequent share of Quellaveco capital expenditure of $329 million; the purchase of shares under the buyback of $777 million; and the purchase of shares for other purposes (including for employee share schemes) of $266 million.

Net debt (including related derivatives) of $5.6 billion has increased by $0.9 billion since 31 December 2019, led by inventory cash outflows of $1.6 billion following ACP repairs at PGMs affecting refining activity during the year, as well as the impact of Covid-19 on demand for diamonds, particularly during the first half. Both inventory increases are expected to be released during 2021 and 2022.

The Group generated strong sustaining attributable free cash inflows of $2.7 billion, principally used towards growth capital expenditure of $1.4 billion, dividends paid to Anglo American plc shareholders of $0.9 billion, the acquisition of Sirius Minerals Plc (including debt acquired) of $0.7 billion and completion of the share buyback programme announced in July 2019 of $0.2 billion. Net debt at 31 December 2020 represented gearing of 15% (2019: 13%), comprising cash and cash equivalents of $7.5 billion (2019: $6.3 billion) and gross debt (including related derivatives) of $13.1 billion (2019: $11.0 billion).

On 26 February 2020, South Africa's Minister of Finance announced in his Budget Speech that the country would shift from a policy of exchange controls to a risk-based capital flow management system, in line with international best practice and in order to facilitate cross-border financial transactions in support of trade and investment. This change aligns South Africa with the foreign direct investment criteria implemented by other OECD nations and removes the previous restrictions on the Group's ability to permanently remit cash earned from operating activities in South Africa, aligning the Group with other global companies that operate in South Africa.

Subsequently, on 24 February 2021, South Africa's Minister of Finance announced that from 1 March 2021, specific rules for companies with a primary listing offshore will be automatically aligned to current foreign direct investment rules. Separate disclosure of the Group's South African cash and debt balances will therefore no longer be relevant.

During 2021, the South African National Treasury and the Reserve Bank will continue to develop the legislative framework for the new capital flow management system announced in the 2020 Budget. This framework is expected to be substantively completed in 2021.

CASH FLOW

Cash flows from operations

Cash flows from operations decreased to $8.0 billion (2019: $9.3 billion), reflecting a build-up in working capital partially offset by an increase in underlying EBITDA from subsidiaries and joint operations.

Cash outflows on working capital were $1.5 billion (2019: outflows of $0.1 billion), led by $1.6 billion of cash outflows on inventories at PGMs and De Beers, as described on the previous page. Receivables increased by $1.0 billion, mainly owing to increased iron ore, base metals and PGMs prices, offset by payables increases of $1.1 billion, driven by an increase in a customer pre-payment and purchase of concentrate payables within PGMs, both reflecting increased metal prices.

Capital expenditure*

$ million	2020		2019
Stay-in-business	1,566		1,656
Development and stripping	769		976
Life-extension projects	296		358
Proceeds from disposal of property, plant and equipment	(7)		(8)
Sustaining capital	2,624		2,982
Growth projects	1,438		847
Total	4,062		3,829
Capitalised operating cash flows	63		11
Total capital expenditure	4,125		3,840

Capital expenditure increased to $4.1 billion for the year (2019: $3.8 billion), with rigorous capital discipline continuing to underpin the planning and execution of all projects.

Sustaining capital expenditure decreased to $2.6 billion (2019: $3.0 billion), driven by reduced stripping and development expenditure, principally at De Beers and Metallurgical Coal, completion of the life-extension investment at the Khwezela thermal coal mine in South Africa, favourable foreign exchange rates, and deferrals as a result of Covid-19-related restrictions.

Growth capital expenditure increased to $1.4 billion (2019: $0.8 billion), owing to increased expenditure at Quellaveco of $0.8 billion, net of Mitsubishi funding (capital expenditure on a 100% basis at Quellaveco was $1.3 billion), and at the Woodsmith polyhalite project (acquired in March 2020) of $0.3 billion.

Attributable free cash flow*

The Group's attributable free cash flow decreased to an inflow of $1.2 billion (2019: inflow of $2.3 billion) due to lower cash flows from operations of $8.0 billion (2019: $9.3 billion) and increased capital expenditure of $4.1 billion (2019: $3.8 billion), partially offset by lower tax payments of $1.6 billion (2019: $2.1 billion), principally at Metallurgical Coal.

Dividends

In line with the Group's established dividend policy to pay out 40% of underlying earnings, the Board has proposed a dividend of $ 0.72 per share (2019: $0.47 per share), bringing the total dividends paid and proposed in respect of 2020 to $1.00 per share (2019: $1.09 per share).

Acquisition of Sirius Minerals

On 17 March 2020, the Group completed the acquisition of Sirius Minerals Plc for a cash consideration of $0.5 billion. As part of the acquisition, the Group also acquired borrowing and lease liabilities, taking the total impact on net debt to $0.7 billion on the date of acquisition.

Disposals

On 18 December 2020, the Group completed the sale of a 12% interest in the Grosvenor mine (Metallurgical Coal) for $0.2 billion, equalising the ownership across its integrated operations at Moranbah North and Grosvenor. During 2020, the Group received $0.2 billion of deferred consideration in respect of previous divestments by PGMs.

Share buyback

In July 2019, the Board approved an additional return of $1 billion to shareholders via an on-market share buyback programme. This additional return recognised the resilience of our balance sheet, and our confidence in funding our portfolio of highly attractive near and medium term growth opportunities. Following the return of $0.8 billion to shareholders in 2019, the remaining $0.2 billion of the buyback programme was completed by March 2020. The programme was executed at a weighted average price of £18.96.

BALANCE SHEET

Net assets increased by $1.4 billion to $32.8 billion (2019: $31.4 billion), reflecting the profit for the year, offset by dividend payments to Company shareholders and non-controlling interests.

ATTRIBUTABLE ROCE*

Attributable ROCE decreased to 17% (2019: 19%). Attributable underlying EBIT was marginally lower at $5.3 billion (2019: $5.5 billion), reflecting the impact of Covid-19-related disruptions and operational issues at PGMs and Metallurgical Coal, largely offset by higher realised prices for many of the Group's products and favourable exchange rate movements. Average attributable capital employed increased to $30.5 billion (2019: $28.4 billion), primarily due to increased growth capital expenditure, largely at Quellaveco (Copper), working capital build and the acquisition of Sirius Minerals Plc.

LIQUIDITY AND FUNDING

Group liquidity remains conservative at $17.5 billion (2019: $15.0 billion), comprising $7.5 billion of cash (2019: $6.3 billion) and $10.0 billion of undrawn committed facilities (2019: $8.7 billion).

In April 2020, the Group signed a new $2.0 billion revolving credit facility with an initial maturity date of April 2021. The Group has, at its sole discretion, two options to extend the facility for a further six months to October 2021 and April 2022.

During 2020, the Group issued $3.0 billion of bond debt. In April 2020, the Group issued $750 million of 5.375% Senior Notes due 2025 and $750 million of 5.625% Senior Notes due 2030. In September 2020, the Group issued $1.0 billion of 2.625% Senior Notes due 2030 and $500 million 3.950% Senior Notes due 2050, which were used to fund a liability management exercise to redeem $0.5 billion of bonds maturing in 2021 and $1.0 billion of bonds maturing in 2022. In March 2020, as part of the acquisition of Sirius Minerals Plc, the Group recognised borrowings and lease liabilities of Sirius Minerals Plc with a fair value of $0.3 billion. In July 2020, the Sirius Minerals Finance Limited 8.5% 2023 convertible bond was fully redeemed at a cash cost of $138 million. The bond issuance and the liability management exercises increased the weighted average maturity on the Group's bonds to 6.3 years (2019: 4.5 years).

On 24 April 2020, Moody's Investors Service affirmed the Group's Baa2 rating and updated the outlook from stable to negative. Moody's Investors Service re-affirmed this rating on 24 November 2020. During 2020, Standard and Poor's reaffirmed the Group's BBB rating with a stable outlook.

PORTFOLIO UPGRADE

Anglo American continues to grow and evolve its portfolio of competitive, world class assets towards those products that are fundamental to enabling a low carbon economy and that cater to global consumer demand trends. Aligned to this strategy, in 2020, the Group commenced, or completed, a number of transactions.

In the first half of 2020, we completed the acquisition of Sirius Minerals Plc which has been developing a major new polyhalite project in the UK. Anglo American is continuing to develop what is known as the Woodsmith project in the north east of England to access the world's largest known deposit of polyhalite, a natural mineral fertiliser product containing potassium, sulphur, magnesium and calcium - four of the six nutrients that every plant needs to grow. The mine is being constructed approximately five kilometres south of Whitby and the entire operation is designed to be sympathetic to its natural surroundings. Ore will be extracted via two 1.6 kilometre deep mine shafts and transported to the port at Teesside on a conveyor belt in a 37 kilometre underground tunnel, thereby minimising impact on the surface above. The ore will then be granulated at a materials handling facility to produce a fertiliser product - known as POLY4 - that will be exported to a network of customers in overseas markets from our dedicated port facilities. The Woodsmith project, part of our Crop Nutrients business which also incorporates the further development of the global market for POLY4, will be a world class supplier of premium quality fertiliser certified for organic use and with a low carbon footprint, expected to help meet ever-growing demand for food. The integration of the project into Anglo American is ongoing, with a technical review expected to be completed by mid-2021.

In May 2020, we confirmed our plans to work towards an exit from our remaining thermal coal operations in South Africa, with a demerger being our likely preferred exit option, with a primary listing on the Johannesburg Stock Exchange for the demerged business. We are making good progress to prepare the operations as a standalone business. We will continue to consider other exit options as we engage with stakeholders as part of our commitment to a responsible transition.

In December 2020, we completed the transaction to provide for the equalisation of ownership across our integrated metallurgical coal operations at Moranbah North and Grosvenor in Australia, through the sale of a 12% interest in Grosvenor mine to the minority joint venture participants in Moranbah North. The Grosvenor mine uses Moranbah North's coal processing infrastructure, where numerous debottlenecking, expansion and product blending options offer considerable cost, productivity and margin benefits for the integrated operation that produces high quality metallurgical coal well-suited to the transition to more sustainable steelmaking.

These transactions complement Anglo American's portfolio upgrade programme which includes a sequence of value-adding greenfield, brownfield and technology projects that are expected to contribute to 20% production growth by 2023, and 25% by 2025, both relative to 2018 production levels.

Growth Projects (metrics presented on a 100% basis unless otherwise indicated)

Operation	Scope	Capex $bn	Remaining Capex $bn	First production	Progress
Copper
Quellaveco	New copper mine in Moquegua, Peru producing 300ktpa (100% basis, 180ktpa our share) over the first 10 years in Q1 cost curve position.	2.7 - 2.8 (Anglo American 60% share)	1.4 - 1.5 (Anglo American 60% share)	2022	Construction began in 2018. Strong progress continues, with the project currently tracking against its original schedule, despite the impact of Covid-19 related disruptions, as execution  was ahead of schedule prior to the pandemic with all applicable milestones achieved. Refer to page 21 for a full update on progress and 2021 priorities and refer to the Technology table below for Coarse Particle Recovery at Quellaveco.
Collahuasi	Phase 1 expansion of the existing plant infrastructure to ~50ktpa (44% basis). Potential works include: fifth ball mill, upgraded tailings distribution system, additional primary crushing facilities pebble plant, flotation cells and water supply. Further phase expansions are also in early stage study to increase production by up to an additional 100ktpa (44% basis).	Studies ongoing	Not yet approved	2023/4	Remains subject to Board approval. As part of the routine environmental approval (EIA) cycle a nominal expansion of throughput to 210ktpd has been submitted as part of this application. EIA approval is expected in 2021. In parallel to this, feasibility study work is ongoing to determine the optimum configuration.
Diamonds
Marine Namibia	New mining vessel, adding 0.5 Mctpa of some of the highest value diamonds in the portfolio.	c. 0.2	0.1	2022	Construction began in 2019 and is progressing to schedule with the vessel platform expected in Cape Town in Q3 2021 for the fitting of the mining and plant equipment.

Crop Nutrients
Woodsmith	New polyhalite (natural mineral fertiliser) mine being developed in Yorkshire, UK. Expected to produce up to 10Mtpa of POLY4 - a premium quality, low carbon fertiliser certified for organic use.	Subject to development timeline review	Subject to development timeline review	Subject to development timeline review	Despite the impacts of Covid-19, the planned works for 2020, amounting to $0.3bn, were delivered safely and on schedule. c.$0.5bn to be spent in 2021 while a project review is ongoing to optimise development timeline and design and due to complete mid-2021. Refer to page 32 for a full update on progress and 2021 priorities.
Iron Ore
Sishen	Implementation of Ultra High Dense Media Separation ("UHDMS") technology at Kumba's Sishen operation will enable an increase in premium product production and the beneficiation of lower grade materials by reducing the current cut-off grade of <48% Fe to <40% Fe. In addition, the project contributes an additional 3-4 years to Sishen's life of mine to 2039.	0.2	0.2	2023	Project execution approved in Feb 2021.
PGMs
Mogalakwena	Evaluating various options to expand PGM production of the mine by 0.3 - 0.6moz, through technology development and deployment and the optimal mine plan to deliver feed to the concentrators.	0.8 - 1.4 (Studies ongoing)	Not yet approved	2024	Remains subject to Board approval expected late 2021. Studies are ongoing to potentially construct a new concentrator, incorporating latest technology, including bulk ore sorting, coarse particle recovery, and precise particle classification to improve throughput and recovery.
Metallurgical Coal
Moranbah-Grosvenor	Expansion of the processing facilities to increase production of high quality metallurgical coal by 4-6Mtpa (our 88% share).	0.3 - 0.4 (Anglo American 88% share)	Not yet approved	2024	Project approval expected in 2022.

Life Extension Projects (metrics presented on a 100% basis unless otherwise indicated)

Operation	Scope	Capex $bn	Remaining spend $bn	First production	Progress
Diamonds
Venetia	5 Mctpa underground replacement for the existing open pit. The project is expected to add an estimated 95 million carats and extend the life of the mine to 2045.	2.1	1.3	2023	Open-pit mining at Venetia is planned to run until 2023 with the transition to underground mining starting in 2022.
Jwaneng	9 Mctpa replacement (100% basis) for cuts 7 and 8. The Cut-9 expansion of Jwaneng will extend the life of the mine to 2036 and is expected to yield approximately 51 million carats of rough diamonds.	0.3 (Anglo American 19.2% share)	0.3 (Anglo American 19.2% share)	2027	Project progressing on schedule.
Metallurgical Coal
Aquila	3.5 Mtpa (70% basis), 6 year extension of Capcoal's underground operations with Grasstree approaching end of life. Aquila will be a longwall operation leveraging the existing Grasstree infrastructure and producing high quality hard coking coal. The project will extend the life of the Capcoal underground operations to 2028.	0.2 (Anglo American 70% share)	0.1 (Anglo American 70% share)	2022	Development work began in September 2019 and first longwall production is expected in early 2022.
Iron Ore
Kolomela	4 Mtpa high grade iron ore replacement project. The development of a new pit, Kapstevel South, and associated infrastructure at Kolomela to help sustain output of c.13Mtpa and extend the remaining life of mine to 2032.	0.4	0.4	2024	Approved in July 2020. Pit establishment and waste stripping will commence in 2021, with first ore expected in 2024.
PGMs
Mototolo/Der Brochen	Development of infrastructure to access the Der Brochen ore body, replacing declining production from Mototolo, and extending the life of mine by more than 30 years.	0.2 (studies ongoing)	Not yet approved	2024	Project approval expected in 2021.

  Technology Projects¹  

The Group is spending $0.2-$0.5bn per annum on technology programmes over the next three years to support the FutureSmart Mining programme (metrics presented on a 100% basis unless otherwise indicated):

Initiative	Scope	Progress
Nickel, Copper and PGMs
Bulk ore sorting	Deliver improved feed grade to plants through early rejection of waste at key assets.	-Full scale testing underway at El Soldado (Copper). -Testing complete at Mogalakwena (PGMs). Commissioning of full scale North Concentrator unit in Q1 2021 (~70% of feed). -Testing complete at Barro Alto (Nickel). $40m capex to scale up to 100% throughput through 2021-22. -Initial installation & testing at Los Bronces (Copper) during Q1 2021. $10m capex for initial deployment up to ~60% of throughput. Phase 2 study work underway.
Copper, PGMs & Iron Ore
Coarse particle recovery (CPR)	Innovative flotation process allows material to be crushed to a larger particle size, rejecting coarse gangue and allowing water to release from coarser ore particles, improving energy efficiencies and water savings.	- Full scale demo plant installed at El Soldado (Copper) with ramp up to full capacity expected by mid 2021. - Full scale system under construction at Mogalakwena North concentrator (PGMs). Commissioning expected Q4 2021. - In February 2021 CPR was approved at Quellaveco (Copper) that will re-treat coarse particles from flotation tailings, improving recoveries by ~3% on average over life of mine. Commissioning of the new plant is expected in 2022. -Feasibility work continues at Los Bronces (Copper) & Minas-Rio (Iron Ore).
PGMs
Smart Power Hydrogen Trucks	Developing the world's first hydrogen powered mining truck to decarbonise high power transport, using renewable energy.	Engineering under way with first trial at Mogalakwena (PGMs) in 2021, with 40 truck roll-out starting 2024, powered by a 75Mw solar plant on site. Targetting roll out at 7 sites by 2030.
Copper
Hydraulic dry stack	Engineering of geotechnically stable tailings facilities that dry out in weeks, facilitating up to 85% water recovery.	El Soldado (Copper) unit under construction, due to complete in Q3 2021.

⁽¹⁾  Technology projects are included within Growth capex.

THE BOARD

Changes during 2020 to the composition of the Board are set out below.

On 1 January 2020, Nonkululeko Nyembezi joined the Board as a non-executive director.

Following the conclusion of the Annual General Meeting on 5 May 2020, Dr Mphu Ramatlapeng stepped down from the Board as a non-executive director after almost seven years.

On 31 December 2020, Jim Rutherford stepped down from the Board as a non-executive director after seven years.

As announced on 10 December 2020, Hilary Maxson will join the Board as a non-executive director and member of the Audit Committee with effect from 1 June 2021.

As announced on 16 February 2021, Elisabeth Brinton will join the Board as a non-executive director with effect from  1 March 2021.

The names of the directors at the date of this report and the skills and experience our Board members contribute to the long term sustainable success of Anglo American are set out on the Group's website:

www.angloamerican.com/about-us/leadership-team/board

PRINCIPAL RISKS AND UNCERTAINTIES

Anglo American is exposed to a variety of risks and uncertainties which may have a financial, operational or reputational impact on the Group, and which may also have an impact on the achievement of social, economic and environmental objectives.

The principal risks and uncertainties facing the Group relate to the following:

• Catastrophic risks

• Product prices

• Cyber security

• Safety

• Climate change

• Operational stability

• Pandemic

• Political and regulatory

• Corruption

• Water

• Future demand

The Group is exposed to changes in the economic environment, as with any other business. Details of any key risks and uncertainties specific to the period are covered in the Operations review section.

The principal risks and uncertainties facing the Group at the 2020 year end are set out in detail in the strategic report section of the Integrated Annual Report 2020 on the Group's website www.angloamerican.com .

DE BEERS

Financial and operational metrics⁽¹⁾

	Production volume		Sales volume		Price		Unit cost*		Group revenue*		Underlying EBITDA*		EBITDA margin*(6)		Underlying EBIT*		Capex*		ROCE*
	'000  cts		'000  cts(2)		$/ct(3)		$/ct(4)		$m(5)		$m				$m		$m
De Beers	25,102		21,380		133		57		3,378		417		54	%	0		381		0	%
Prior year	30,776		29,186		137		63		4,605		558		43	%	168		567		2	%
Botswana	16,559		-		124		35		-		225		-		178		66		-
Prior year	23,254		-		139		29		-		385		-		325		88		-
Namibia	1,448		-		492		272		-		113		-		82		77		-
Prior year	1,700		-		534		303		-		121		-		86		55		-
South Africa	3,771		-		99		53		-		165		-		16		147		-
Prior year	1,922		-		108		73		-		57		-		28		275		-
Canada	3,324		-		58		36		-		92		-		40		31		-
Prior year	3,900		-		119		44		-		138		-		66		31		-
Trading	-		-		-		-		-		80		3	%	74		3		-
Prior year	-		-		-		-		-		133		3	%	126		4		-
Other(7)	-		-		-		-		-		(258)		-		(390)		57		-
Prior year	-		-		-		-		-		(276)		-		(463)		114		-

⁽¹⁾   Prepared on a consolidated accounting basis, except for production, which is stated on a 100% basis except for the Gahcho Kué joint operation in Canada, which is on an attributable 51% basis.

⁽²⁾   Total sales volumes on a 100% basis were 22.7 million carats (2019: 30.9 million carats). Total sales volumes (100%) include De Beers Group's joint arrangement partners' 50% proportionate share of sales to entities outside De Beers Group from Diamond Trading Company Botswana and Namibia Diamond Trading Company.

⁽³⁾   Pricing for the mining business units is based on 100% selling value post-aggregation of goods. Realised price includes the price impact of the sale of non-equity product and, as a result, is not directly comparable to the unit cost.

⁽⁴⁾   Unit cost is based on consolidated production and operating costs, excluding depreciation and operating special items, divided by carats recovered.

⁽⁵⁾   Includes rough diamond sales of $2.8 billion (2019: $4.0 billion).

⁽⁶⁾   Total De Beers EBITDA margin shows mining EBITDA margin on an equity basis, which excludes the impact of non-mining activities, third-party sales, purchases, trading downstream and corporate. 

⁽⁷⁾   Other includes Element Six, downstream, acquisition accounting adjustments and corporate.

Markets

The diamond industry started 2020 positively after a strong US holiday season at the end of 2019, with robust demand for rough diamonds. The onset of the Covid-19 pandemic, and measures taken by governments in response, had a profound impact on global diamond supply and demand. Much of the industry was temporarily unable to operate, with up to 90% of jewellery stores closed at the peak of lockdowns, first in China, then in Europe and the US.

Reduced demand from jewellery retailers due to store closures, combined with the closure of diamond cutting and polishing factories in India from April to June, led to a substantial reduction in rough diamond purchases in the first six months. In response, De Beers reduced production and offered significantly increased flexibility to customers.

The gradual easing of restrictions across the globe led to improved trading conditions and an increase in demand throughout the supply chain in the second half of the year. Consumer demand for diamond jewellery improved in key markets, particularly in China, which continued its strong recovery, while demand in the US has also been encouraging. The recovery in consumer demand supported polished price growth in the second half and a rebuild in inventory levels in advance of the year end holiday season.

Financial and operational overview

As a result of the difficult market conditions, lockdowns in India and associated flexibility offered to customers, total revenue decreased by 27% to $3.4 billion (2019: $4.6 billion) with rough diamond sales falling by 30% to $2.8 billion (2019: $4.0 billion). Rough diamond sales volumes decreased by 27% to 21.4 million carats (2019: 29.2 million carats). The average realised price decreased by 3% to $133/ct (2019: $137/ct), with a 10% decline in the average rough index largely offset by an increased proportion of higher value rough sold in 2020, driven by midstream demand and inventory mix.

Underlying EBITDA decreased by 25% to $417 million (2019: $558 million) owing to the impact of the lower sales volumes and the lower rough price index reducing margins in both the mining and trading business, particularly in the first half of the year. Despite the reduction in production volumes, unit costs decreased by 10% to $57/ct (2019: $63/ct) owing to cost saving measures and favourable exchange rates that have resulted in a higher mining margin of 54% (2019: 43%).

De Beers' capital expenditure decreased by 33% to $381 million (2019: $567 million) due to the deferral of stay-in-business projects into future years without compromising safety or operational integrity. This decrease was also driven by favourable exchange rates. Although there were Covid-19-related disruptions at De Beers' expansion projects, execution of Venetia Underground and Jwaneng Cut-9 continued to progress, and the new AMV3 vessel for Namibia (the largest diamond recovery vessel ever built) remains on track for commissioning in 2022. The construction of the laboratory-grown diamond facility in Oregon for Lightbox Jewelry was completed in 2020 and will ramp up during 2021.

Operational performance

Mining and manufacturing

Rough diamond production decreased by 18% to 25.1 million carats (2019: 30.8 million carats) in response to lower demand due to the pandemic and the Covid-19-related shutdowns in southern Africa during the first half of the year.

In Botswana, production decreased by 29% to 16.6 million carats (2019: 23.3 million carats), with volumes at Jwaneng reduced by 40% to 7.5 million carats (2019: 12.5 million carats), while production at Orapa decreased by 16% to 9.0 million carats (2019: 10.8 million carats). This was largely due to a nationwide lockdown from 2 April to 18 May, and the planned treatment of lower grade material at both Jwaneng and Orapa, following their restart, as a production response to lower demand. Both mines substantially reconfigured their mining operations to preserve costs in light of the lower levels of production, thereby preserving the mining margin.

In Namibia, production decreased by 15% to 1.4 million carats (2019: 1.7 million carats), primarily due to the suspension of marine mining during part of the third quarter in response to lower demand. Production at the land operation decreased by 21%, principally as a result of the Covid-19-related shutdown.

In South Africa, production increased to 3.8 million carats (2019: 1.9 million carats) as the reductions experienced in the first half due to the national shutdown were more than offset by an expected increase in grade as the ore from the last cut of the open pit is processed as the mine transitions to underground operations.

In Canada, production decreased by 15% to 3.3 million carats (2019: 3.9 million carats) principally reflecting Victor reaching the end of its life in the first half of 2019. Gahcho Kué production decreased by 4% to 3.3 million carats (2019: 3.5 million carats) as a result of the implementation of Covid-19 workforce protection measures.

Brands and consumer markets

Covid-19 significantly impacted De Beers' brand sales in 2020, with large-scale store closures in Asia in the first quarter, followed by western markets in the second quarter and beyond. However, both De Beers Jewellers and Forevermark™ saw a strong recovery in sales as restrictions eased and stores reopened.

Online sales continued to show strong growth, reflecting De Beers' investments in e-commerce and increasing consumer willingness to purchase diamond jewellery through these channels.

As part of the longer term strategy, De Beers announced 12 goals that are part of the company's 'Building Forever' framework, a sustainability approach, aligned with the Anglo American Sustainable Mining Plan, that is focused on maximising the positive impact of diamonds on their journey from discovery to retail. The aim is to achieve a shared vision for a better future focusing on De Beers' pillars of leading ethical practices across the industry, partnering for thriving communities, protecting the natural world and accelerating equal opportunity.

Operational and market outlook

Recent consumer demand trends have been positive in key markets and industry inventories are in a healthier position, providing the potential for a continued recovery in rough diamond demand during 2021, subject to the ongoing impact of Covid-19. Consumer desirability for natural diamonds is set to remain high over the medium to long term despite the economic impact of the pandemic and increasing supply of lab-grown diamonds.

In the longer term, the impact of Covid-19 has accelerated the transformation that was already underway across the industry and which is expected to continue at pace. This includes more efficient inventory management, increased online purchasing, and a growing consumer desire for products with demonstrable ethical and sustainability credentials, including an enhanced appreciation for the natural world. The long term outlook for the sector remains positive as De Beers continues to focus on its business transformation to support the continued growth of its own business and the wider diamond value chain.

For 2021, production guidance is 32-34 million carats, subject to trading conditions, the extent of further Covid-19-related disruptions and ongoing operational challenges. The higher production is driven by an expected increase in ore and improved grade performance at both Jwaneng and Venetia. Unit cost guidance is c. $55/ct, reflecting the increase in production volumes and the benefits of the restructuring undertaken in 2020.

COPPER

Financial and operational metrics

	Production volume		Sales volume		Price		Unit cost*		Group revenue*		Underlying EBITDA*		Mining EBITDA margin*(2)		Underlying EBIT*		Capex*		ROCE*
	kt		kt(1)		c/lb(2)		c/lb(3)		$m(4)		$m				$m		$m
Copper	647		648		299		113		7,176		1,864		45	%	1,227		1,443		19	%
Prior year	638		644		273		126		5,840		1,618		44	%	960		1,078		16	%
Los Bronces(5)	325		325		-		149		2,013		639		32	%	294		272		-
Prior year	335		336		-		135		1,872		745		40	%	378		239		-
Collahuasi(6)	277		278		-		62		1,767		1,308		74	%	1,083		313		-
Prior year	249		254		-		100		1,414		916		65	%	691		275		-
Quellaveco(7)	-		-		-		-		-		-		-		-		788		-
Prior year	-		-		-		-		-		-		-		-		494		-
Other operations(8)	46		45		-		-		3,396		(83)		9	%	(150)		70		-
Prior year	54		54		-		-		2,554		(43)		7	%	(109)		70		-

⁽¹⁾   Excludes 453 kt third-party sales (2019: 349 kt).

⁽²⁾   Price represents realised price, Mining EBITDA margin excludes impact of third-party sales.

⁽³⁾   C1 unit cost includes by-product credits.

⁽⁴⁾   Group revenue is shown after deduction of treatment and refining charges (TC/RCs).

⁽⁵⁾   Figures on a 100% basis (Group's share: 50.1%).

⁽⁶⁾   44% share of Collahuasi production, sales and financials.

⁽⁷⁾  Figures on a 100% basis (Group's share: 60%), except capex which represents the Group's share after deducting direct funding from non-controlling interests. 2020 capex on a 100% basis was $1,314 million, of which the Group's 60% share is $788 million. 2019 capex on a 100% basis was $1,338 million, of which $515 million was funded by cash from the Mitsubishi syndication transaction in 2018. Of the remaining $823 million, the Group and Mitsubishi funded their respective 60% and 40% shares via shareholder loans.

⁽⁸⁾  Other operations includes El Soldado and Chagres (figures on a 100% basis, Group's share: 50.1%), third-party sales and purchases, projects and corporate costs.

Financial and operational overview

Underlying EBITDA increased by 15% to $1,864 million (2019: $1,618 million) driven by a 10% increase in the average realised copper price and record low unit costs of  113c/lb (2019: 126 c/lb).

Production increased to 647,400 tonnes (2019: 638,000 tonnes), with record production at Collahuasi and a strong operational performance at Los Bronces offsetting the headwinds related to Covid-19 restrictions and expected lower water availability. Unit costs decreased by 10%, reflecting the weaker Chilean peso, higher by-product credits, cost savings and increased production, partly offset by actions taken to mitigate the impact of Covid-19-related restrictions on production and inflation.

Capital expenditure increased by 34% to $1,443 million (2019: $1,078 million), principally driven by expenditure at Quellaveco (see 'Quellaveco update'). Other capital expenditure reflects higher deferred stripping and the routine replacement of, and higher spend on, key infrastructure and technology projects, including the construction of a coarse particle recovery demonstration plant at El Soldado. This was partly offset by the deferral of non-critical projects into 2021 as a result of Covid-19-related constraints, and favourable movements in the Chilean peso.

Markets

	2020	2019
Average market price (c/lb)	280	272
Average realised price (c/lb)	299	273

The differences between the market price and realised price are largely a function of the timing of sales across the year and provisional pricing adjustments, with 140,599 tonnes of copper provisionally priced at 352 c/lb (2019: 111,213 tonnes provisionally priced at 273 c/lb).

The average LME copper price in 2020 increased by 3% compared with 2019. The Covid-19 pandemic had the greatest impact on global demand, temporarily depressing consumption as restrictions hampered economic activity in the first half of the year. A sharp recovery took place in China and, elsewhere, measures to restart activity took place to mitigate the effects of the pandemic. Despite trade tensions between the US and China, optimism over vaccine programmes further bolstered sentiment. Constraints in mine supply have also contributed to a positive outlook on fundamentals, as has copper's role in the push to achieve carbon neutrality, greater energy efficiency and improved living standards, allowing the metal to reach price highs last seen in 2013.

Operational performance

Production increased marginally to 647,400 tonnes (2019: 638,000 tonnes).

At Los Bronces, production decreased by 3% to 324,700 tonnes (2019: 335,000 tonnes) due to expected lower water availability and planned lower grades (0.81% vs. 0.83%), partly offset by strong operational performance. C1 unit costs increased by 10% to 149 c/lb (2019: 135 c/lb), reflecting the lower production volumes and the drawdown on stockpiles due to Covid-19-related restrictions and inflation, partly mitigated by cost-saving initiatives and the impact of the weaker Chilean peso.

At Collahuasi, Anglo American's attributable share of copper production increased by 11% to 276,900 tonnes (2019: 248,800 tonnes). This was a record production performance for the operation, driven by strong plant performance, reflecting the plant improvement projects implemented during 2019, as well as planned higher grades (1.24% vs.1.19%). C1 unit costs decreased by 38% to 62 c/lb (2019: 100 c/lb), another record, reflecting the solid production performance, higher by-product credits and the weaker Chilean peso, partly offset by inflation.

Production at El Soldado decreased by 15% to 45,800 tonnes (2019: 54,200 tonnes) due to planned lower grades (0.84% vs. 0.93%) and water restrictions. C1 unit costs were flat at 204 c/lb (2019: 205 c/lb), with the lower production volumes fully offset by the weaker Chilean peso and cost-saving initiatives.

Operational outlook

Production guidance for 2021 is 640,000-680,000 tonnes, subject to water availability and the extent of further Covid-19-related disruption.

C1 unit cost guidance for 2021 is c. 120 c/lb, reflecting an expected strengthening of the Chilean peso, inflation and ongoing impacts from Covid-19 mitigation activities.

Quellaveco update

Strong progress continues, with the project currently tracking against its original schedule, despite the impact of Covid-19, with execution having been well ahead of schedule prior to the pandemic, and all applicable milestones achieved.

Following the onset of the pandemic, on 17 March, Quellaveco withdrew the majority of the project's 10,000-strong workforce from site after the Peruvian government announced the start of a national lockdown. Following subsequent extensions of the lockdown, non-critical works were suspended for three months in support of continuing efforts to control the spread of Covid-19.

Remobilisation of the construction workforce began in July following approval by the Peruvian authorities and is largely complete, with construction activities gradually restarted across all project sites. Significant progress has been made at the processing plant, where the shells for the first SAG and ball mills are installed, installation of the electric motors is under way, and all 46 flotation cells have been assembled. The majority of materials and equipment are now in-country and the first of three rope shovels has been assembled, along with eight mining trucks.

Despite the Covid-19-related slowdown, first production is still expected in 2022, in part due to the excellent progress achieved prior to the national lockdown, and based on optimised construction and commissioning plans. Key activities in 2021 include the start of pre-stripping, which will see the first greenfield use of automated hauling technology in Peru; progressing construction of the primary crusher and ore transport conveyor tunnel to the plant; completion of the 95 km freshwater pipeline that will deliver water from the water source area to the Quellaveco site; completing installation of the shells and motors for both milling lines; and completion of the tailings starter dam.

Total project capital expenditure is expected to be $5.3-5.5 billion (100% basis), subject to the extent of any further Covid-19-related disruption, of which the Group's 60% share is approximately $2.7-2.8 billion. Capital expenditure guidance (100% basis) for 2021 is approximately $1.3-1.6 billion, of which the Group's 60% share is approximately $0.8-1.0 billion. Quellaveco expects to deliver around 300,000 tonnes per annum of copper equivalent production (100% basis) on average in the first 10 years of operation.

In February 2021, the Group approved the construction of a coarse particle recovery (CPR) plant at Quellaveco. This breakthrough technology will initially allow retreatment of coarse particles from flotation tailings to improve recoveries by c. 3% on average over the life of the mine. This investment will also enable future throughput expansion which will bring a reduction in energy and water consumption per unit of production. The CPR project will incur additional capital expenditure on a 100% basis of approximately $130 million, of which the Group will fund its 60% share. Commissioning of the new plant is expected in 2022.

PLATINUM GROUP METALS

Financial and operational metrics

	Production volume PGMs		Sales volume PGMs		Basket price		Unit cost*		Group revenue*		Underlying EBITDA*		Mining EBITDA margin*(5)		Underlying EBIT*		Capex*		ROCE*
	koz(1)		koz(2)		$/PGM oz(3)		$/PGM oz(4)		$m		$m				$m		$m
PGMs	3,809		2,869		2,035		713		8,465		2,555		51	%	2,270		571		48	%
Prior year	4,441		4,634		1,347		703		6,866		2,000		40	%	1,672		569		38	%
Mogalakwena	1,182		839		2,065		530		1,720		1,059		62	%	944		273		-
Prior year	1,215		1,222		1,459		566		1,789		995		56	%	863		264		-
Amandelbult	608		501		2,228		1,031		1,108		474		43	%	429		56		-
Prior year	893		866		1,387		876		1,206		355		29	%	298		84		-
Other operations(6)	759		576		2,083		757		1,295		562		43	%	461		242		-
Prior year	903		915		1,336		731		1,202		329		27	%	216		221		-
Processing and trading(7)	1,260		953		-		-		4,342		460		11	%	436		-		-
Prior year	1,430		1,631		-		-		2,669		321		12	%	295		-		-

⁽¹⁾  Production reflects own-mined production and purchase of metal in concentrate. PGMs includes 5E metals and gold.

⁽²⁾  Sales volumes exclude the sale of refined metal purchased from third parties and toll material. PGMs includes 5E metals and gold.

⁽³⁾  Average US$ realised basket price. Excludes the impact of the sale of refined metal purchased from third parties.

⁽⁴⁾  Total cash operating costs (includes on-mine, smelting and refining costs only) per own mined PGM ounce of production.

⁽⁵⁾   The total PGMs mining EBITDA margin excludes the impact of the sale of refined metal purchased from third parties, purchase of concentrate and tolling.

⁽⁶⁾   Includes Unki, Mototolo and PGMs' share of joint operations. Other operations margin includes unallocated market development, care and maintenance, and corporate costs.

⁽⁷⁾   Purchase of concentrate from joint operations, associates and third parties for processing into refined metals, tolling and trading activities.

Financial and operational overview

Underlying EBITDA increased by 28% to $2,555 million (2019: $2,000 million), as a result of a 51% increase in the dollar basket price, driven primarily by stronger prices for palladium and rhodium, which more than offset the impact on sales volumes of outages at the Anglo Converter Plant (ACP) and Covid-19-related restrictions. Unit costs were broadly flat at $713/PGM ounce (2019: $703/PGM ounce), as the benefits of the weaker South African rand and underlying operational improvements were offset by the lower volumes.

Capital expenditure was in line with the prior year at $571 million (2019: $569 million) as additional expenditure incurred on the ACP Phase A rebuild offset the benefit of the weaker South African rand.

Markets

	2020		2019
Average platinum market price ($/oz)	885		864
Average palladium market price ($/oz)	2,197		1,539
Average rhodium market price ($/oz)	11,220		3,914
US$ realised basket price ($/PGM oz)	2,035		1,347

PGM prices started the year strongly before Covid-19 impacted demand; however, prices soon recovered as PGM supply also faltered. Further gains came in the second half as the global automotive sector experienced a rapid recovery as Covid-19-related restrictions were eased. The average realised basket price increased by 51% in dollar terms compared with 2019. The average dollar platinum market price increased by 2%, supported by robust industrial demand, despite continuing declines in diesel automotive demand. Palladium and rhodium were significantly stronger, increasing by 43% and 187%, respectively, driven by the trend of increased loadings in autocatalysts due to tighter emissions standards, particularly in Europe and China.

Operational performance

Total PGM production decreased by 14% to 3,808,900 ounces, mainly due to the shutdown of operations in response to the Covid-19 pandemic during the second quarter and their subsequent ramp-up, as well as the closure of some mining areas at Amandelbult mine that had reached the end of their life. By the end of December, production levels at all assets had returned to normal.

Own-mined production

PGM production from own-managed mines (Mogalakwena, Amandelbult, Unki and Mototolo and equity share of joint operations) decreased by 15% to 2,549,000 ounces (2019: 3,011,300 ounces) due to lower production at all operations as a result of the Covid-19 shutdowns, as well as the end of life of some mining areas at Amandelbult.

Mogalakwena PGM production decreased by 3% to 1,181,600 ounces (2019: 1,215,000 ounces), largely driven by reduced operating capacity in the second quarter due to the impact of Covid-19.

Amandelbult PGM production decreased by 32% to 608,100 ounces (2019: 893,300 ounces), largely due to the impact of Covid-19 which reduced capacity during the second and third quarter in particular, as well as the infrastructure closures in December 2019 at Tumela Upper section and surface production reaching its end of life.

Production from other operations decreased by 16% to 759,300 ounces (2019: 903,000 ounces), driven by lower production at joint operations.

Purchase of concentrate

Purchase of concentrate, excluding tolling, decreased by 12% to 1,259,900 ounces of PGMs, reflecting the lower production from joint operations.

Refined production and sales volumes

Refined PGM production (excluding toll-treated metal from Sibanye-Stillwater) decreased by 42% to 2,713,000 ounces (2019: 4,650,000 ounces) following shutdowns of the ACP during the year. The ACP Phase A unit was closed for a rebuild following an explosion within the converter in February, with the ACP Phase B unit being returned to operation from maintenance during May. The ACP Phase B unit was subject to additional inspections and controls, which led to intermittent stoppages during the remainder of the year until it was pre-emptively closed on 5 November to ensure a continued safe operating environment. The rebuild of the ACP Phase A unit was successfully completed ahead of schedule on 24 November 2020, with first converter matte dispatched to the Base Metal Refinery for further processing on 7 December. The ACP Phase B unit is now undergoing its planned full rebuild, scheduled to be completed in the second half of 2021. 

The ACP stoppages during 2020 resulted in an increase of work-in-progress inventory of 1.0 million ounces, which is expected to be drawn down over 2021 and 2022.

PGM sales volumes decreased by 38% to 2,868,500 ounces (2019: 4,633,700 ounces), due to the lower refined production, although refined inventory from minor metals was drawn down to supplement sales.

Operational outlook

PGM metal in concentrate production guidance for 2021 is 4.2-4.6 million ounces, with own-mined output accounting for c. 65%. Refined PGM production guidance for 2021 is 4.6-5.0 million ounces, supported by a drawdown in work-in-progress inventory levels in the year. Both are subject to the extent of further Covid-19-related disruption. Unit costs in 2021 are expected to be c. $700/PGM ounce, reflecting the recovery in volumes.

IRON ORE

Financial and operational metrics

	Production  volume		Sales volume		Price		Unit  cost*		Group revenue*		Underlying EBITDA*		Mining EBITDA margin*		Underlying EBIT*		Capex*		ROCE*
	Mt(1)		Mt(1)		$/t(2)		$/t(3)		$m		$m(4)				$m(4)		$m
Iron Ore	61.1		63.6		112		27		7,954		4,565		58	%	4,091		517		41	%
Prior year	65.5		64.9		91		29		6,758		3,407		50	%	2,952		594		31	%
Kumba Iron Ore (5)	37.0		39.8		115		31		4,880		2,702		55	%	2,386		354		84	%
Prior year	42.4		42.0		97		33		4,445		2,243		50	%	1,918		389		70	%
Iron Ore Brazil (Minas-Rio)	24.1		23.8		107		21		3,074		1,863		62	%	1,705		163		30	%
Prior year	23.1		22.9		79		21		2,313		1,164		50	%	1,034		205		20	%

⁽¹⁾   Minas-Rio production and sales volumes are reported as wet metric tonnes. Product is shipped with c.9% moisture. Total iron ore is the sum of Kumba (dry basis) and Minas-Rio (wet basis).

⁽²⁾  Prices for Kumba Iron Ore are the average realised export basket price (FOB Saldanha). Prices for Minas-Rio are the average realised export basket price (FOB Açu) (wet basis). Prices for total iron ore are a blended average.

⁽³⁾  Unit costs for Kumba Iron Ore are on an FOB (dry) basis. Unit costs for Minas-Rio are on an FOB (wet) basis. Unit costs for total iron ore are a blended average.

⁽⁴⁾  Kumba Iron Ore segment includes $80 million projects and corporate costs (2019: $66 million). Iron Ore Brazil segment includes $63 million projects and corporate costs (2019: $55 million).

⁽⁵⁾  Sales volumes, stock and realised price for FY 2020 differ to Kumba's stand-alone reported results due to sales to other Group companies.

Financial and operational overview

Kumba

Underlying EBITDA increased by 20% to $2,702 million (2019: $2,243 million), driven by a higher average realised iron ore price of $115/tonne (2019: $97/tonne) and a 6% decrease in unit costs to $31/tonne (2019: $33/tonne), largely reflecting the weaker South African rand, partly offset by lower sales volumes.

Sales volumes decreased by 5% to 39.8 Mt (2019: 42.0 Mt), principally reflecting an 84% decrease in domestic sales, lower production volumes that were impacted by Covid-19-related disruptions, and extended annual maintenance on a ship loader.

Capital expenditure decreased by 9% to $354 million (2019: $389 million), reflecting the weaker South African rand.

Minas-Rio

Underlying EBITDA increased by 60% to $1,863 million (2019: $1,164 million), reflecting higher average realised prices, the impact of the weaker Brazilian real, higher volumes and the continued focus on cost control. Unit costs of $21/tonne were in line with the prior year, as additional pipeline inspection costs were offset by the impact of the weaker Brazilian real and higher volumes.

Capital expenditure was lower than the prior year at $163 million (2019: $205 million), driven primarily by the weaker Brazilian real, partly offset by spend on P101 initiatives and a routine tailings dam raise.

Markets

	2020	2019
Average market price (IODEX 62% Fe CFR China - $/tonne)	109	93
Average market price (MB 66% Fe Concentrate CFR - $/tonne)	120	104
Average realised price (Kumba export - $/tonne) (FOB Saldanha)	115	97
Average realised price (Minas-Rio - $/tonne) (FOB wet basis)	107	79

Kumba's FOB realised price of $115/dry metric tonne was 18% higher than the equivalent IODEX 62% Fe FOB Saldanha market price, principally reflecting the higher iron content at 64.3% and relatively high proportion (approximately 69%) of lump in the product portfolio (which helps steel mills reduce emissions). There was also a $6/tonne timing benefit (2019: $1/tonne) principally related to the pricing of our products on the date of delivery.

Minas-Rio's pellet feed product is also higher grade (higher iron content of 67% and lower impurities) than the reference product used for the IODEX 62% Fe CFR China index. The Metal Bulletin (MB) 66 index, therefore, is used when referring to Minas-Rio product. Adjusting for moisture, the Minas-Rio realised price of $107/wet metric tonne (2019: $79/wet metric tonne) was 14% higher than the average MB 66 FOB Açu index, reflecting the higher iron content as well as an $9/tonne timing benefit (2019: $1/tonne) related to the pricing of our products on the date of delivery.

Operational performance

Kumba

Production decreased by 13% to 37.0 Mt (2019: 42.4 Mt), principally due to the impact of Covid-19 and logistical capacity constraints. Sishen's production decreased by 13% to 25.4 Mt (2019: 29.2 Mt) and Kolomela's decreased by 12% to 11.7 Mt (2019: 13.2 Mt).

Minas-Rio

Production increased by 4% to 24.1 Mt (2019: 23.1 Mt), driven by a strong operational performance and the impact of P101 productivity initiatives, despite a one-month planned stoppage to carry out routine internal scanning of the pipeline. Production was not affected by the Covid-19 pandemic, owing to the successful measures put in place to safeguard the workforce and our host communities.

Operational outlook

Kumba

Kumba's production guidance for 2021 is 40-41 Mt, subject to the extent of further Covid-19-related disruption.

Unit costs for 2021 are expected to increase to c.$34/tonne, with the benefit of higher volumes more than offset by stronger local currency and cost inflation.

Minas-Rio

Production guidance for 2021 is 24-26 Mt, supported by P101 productivity initiatives, subject to the extent of further Covid-19-related disruptions.

Unit cost guidance is c. $22/tonne, as the benefit of higher volumes is largely offset by routine maintenance and infrastructure improvements.

COAL

Financial and operational metrics

	Production volume		Sales volume		Price		Unit cost*		Group revenue*		Underlying EBITDA*		Mining EBITDA margin*(6)		Underlying EBIT*		Capex*		ROCE*
	Mt(1)		Mt(2)		$/t(3)		$/t(4)		$m		$m(5)				$m(5)		$m
Coal	-		-		-		-		3,798		35		0	%	(632)		867		(16)	%
Prior year	-		-		-		-		6,137		1,832		33	%	1,010		934		26	%
Metallurgical Coal	16.8		16.9		109		86		1,909		50		3	%	(468)		683		(15)	%
Prior year	22.9		22.4		165		63		3,756		1,707		45	%	1,079		670		39	%
Thermal Coal - South Africa	16.5		16.6		57		38		1,680		(15)		(6)	%	(81)		184		(21)	%
Prior year	17.8		18.1		61		45		1,887		(5)		(3)	%	(94)		264		(19)	%
Thermal Coal - Colombia(7)	4.1		4.5		46		39		209		0		0	%	(83)		-		(21)	%
Prior year	8.6		8.8		56		33		494		130		26	%	25		-		4	%

⁽¹⁾  Production volumes are saleable tonnes. South African production volumes include export primary production, secondary production sold into export markets, production sold domestically at export parity pricing and excludes other domestic production of 14.0 Mt (2019: 10.0 Mt). Metallurgical Coal production volumes exclude thermal coal production of 2.0 Mt (2019: 1.4 Mt).

⁽²⁾   South African sales volumes include export primary production, secondary production sold into export markets and production sold domestically at export parity pricing and exclude domestic sales of 12.4 Mt (2019: 9.8 Mt) and non-equity traded sales of 9.4 Mt (2019: 10.9 Mt). Metallurgical Coal sales volumes exclude thermal coal sales of 2.3 Mt  (2019: 1.8 Mt).

⁽³⁾  Metallurgical Coal realised price is the weighted average hard coking coal and PCI sales price achieved at managed operations. Thermal Coal - South Africa realised price is the weighted average export thermal coal price achieved. Excludes third-party sales from locations other than Richards Bay.

⁽⁴⁾   FOB cost per saleable tonne, excluding royalties and study costs. Thermal Coal - South Africa unit cost is for the trade operations.

⁽⁵⁾   Metallurgical Coal segment includes $74 million projects and corporate costs (2019: $69 million). Thermal Coal - South Africa segment includes $42 million projects and corporate costs (2019: $59 million).

⁽⁶⁾   Excludes impact of third-party sales.

⁽⁷⁾   Represents the Group's attributable share from its 33.3% interest in Cerrejón.

Financial and operational overview

Metallurgical Coal

Underlying EBITDA decreased by 97% to $50 million (2019: $1,707 million), driven by a 34% reduction in the weighted average realised price for metallurgical coal, a 25% decrease in sales volumes and the associated 37% increase in unit costs to $86/tonne (2019: $63/tonne). The volume and cost performances were principally impacted by two underground operational incidents at Moranbah North and Grosvenor, as well as a longwall move at Grosvenor.

Capital expenditure was marginally higher due to increased activity at the Aquila life-extension project, largely offset by a decrease in development work at Grosvenor owing to the suspension of all underground activities since the gas ignition incident in early May.

Thermal Coal - South Africa

Underlying EBITDA was a $15 million loss (2019: $5 million loss), driven by a 7% decrease in the realised export thermal coal price and lower export sales volumes of 16.6 Mt (2019: 18.1 Mt) owing to the impact of the Covid-19 restrictions on operations and logistics infrastructure. Unit costs benefited from the weaker South African rand at $38/tonne (2019: $45/tonne) with productivity improvements and cost savings also contributing to offset the effects of inflation and lower production volumes.

Capital expenditure decreased by 30% to $184 million (2019: $264 million), principally driven by the weaker South African rand and the completion of the Navigation life-extension at Khwezela, and the rescheduling of other projects into 2021 due to the impact of Covid-19.

Thermal Coal - Colombia

The decrease in underlying EBITDA reflects the 48% reduction in sales volumes principally as a result of Covid-19-related restrictions on production and the three-month strike, as well as an 18% decrease in average realised price. Unit costs increased by 18% to $39/tonne (2019: $33/tonne) due to the lower production volumes. 

Revenue for thermal coal includes amounts realised from the sale of volumes purchased from third parties (non-equity traded sales) that were not mined by the Group. Excluding these volumes, revenue from the mining of thermal coal (including Thermal coal business volumes from South Africa, Colombia and the Metallurgical Coal business) for the year was $1,384 million, or 4% of the Group's revenue (2019: $1,783 million, 6%).

Markets

Metallurgical coal

	2020		2019
Average benchmark price - hard coking coal ($/tonne)(1)	124		177
Average benchmark price - PCI ($/tonne)(1)	78		110
Average realised price - hard coking coal ($/tonne)(2)	112		171
Average realised price - PCI ($/tonne)(2)	84		110

(1)  Represents average spot prices.

(2)  Realised price is the sales price achieved at managed operations.

Average realised prices differ from the average market price owing to differences in material grade and timing of contracts. Hard coking coal price realisation decreased to 90% of benchmark in 2020 (2019: 97%), as sales consisted of a lower proportion of premium quality hard coking coal from Moranbah North and Grosvenor.

Market prices decreased in the first half of 2020 as Covid-19-related lockdowns impacted demand. Despite a brief recovery in the third quarter, prices decreased again towards the end of the year due to China's unofficial import restrictions on Australian coal.

Thermal coal

	2020		2019
Average market price ($/tonne, FOB South Africa)	65		72
Average market price ($/tonne, FOB Colombia)	48		54
Average realised price ($/tonne, FOB South Africa)(1)	57		61
Average realised price ($/tonne, FOB Colombia)	46		56

⁽¹⁾  Realised price is the weighted average export thermal coal price achieved. Excludes third-party sales from locations other than Richards Bay.

The average realised price for export thermal coal differs from the average market price owing principally to quality discounts relative to the industry benchmark and timing differences. 

South Africa export thermal coal average realised prices were 7% lower as the Covid-19 demand-driven declines during the first half were only partly offset by a strong recovery in the second half as Covid-19 restrictions eased in India and China. In the second half of 2020, imports to India, a key market for South African coal, returned to the levels experienced in the same period in 2019. A shortage of thermal coal in China led to accelerated customs clearance at Chinese ports in December 2020, providing a boost to seaborne demand.

The Colombia realised price difference decreased year-on-year, broadly in line with the lower market price.

Operational performance

Metallurgical Coal

Production decreased by 26% to 16.8 Mt (2019: 22.9 Mt), principally due to the suspension of operations at Grosvenor, the fall of ground during the first quarter at Moranbah North and subsequent geotechnical challenges, and the impact of a longwall move at Grosvenor. Open cut operations were scaled back at Dawson and Capcoal in response to reduced demand for lower quality metallurgical coal.

At Grosvenor, operations have been suspended since the beginning of May following the gas ignition incident underground. Anglo American is continuing to respond to the incident, including through investing in the acceleration of technology and sealing off part of the affected longwall panel to prepare the mine for restart. The incident resulted in a $100 million write-down relating to lost equipment and longwall assets in that area. Grosvenor is currently expected to return to operation in the second half of 2021.

Thermal Coal - South Africa

Export production decreased by 7% to 16.5 Mt (2019: 17.8 Mt), mainly due to the impact of Covid-19 operational restrictions and mine sections reaching their end of life at Goedehoop.

Thermal Coal - Colombia

Anglo American's attributable production from its 33.3% ownership of Cerrejón decreased by 52% to 4.1 Mt (2019: 8.6 Mt) owing to the impact of Covid-19-related restrictions on production in the first half and the effect of the strike in the second half.

Operational outlook

Metallurgical coal

Export metallurgical coal production guidance for 2021 is 18-20 Mt, but is expected to be at the lower end of the range following a suspension of operations at Moranbah North in response to elevated gas levels on 20 February 2021, subject to the timing of a safe restart at Moranbah North, as well as the extent of further Covid-19-related disruption. Unit cost guidance is c. $75/tonne; a reduction of 13% from 2020, reflecting increased volumes following the restart of the Grosvenor longwall, expected in the second half of 2021. The guidance reflects the sale of a 12% interest in the Grosvenor mine, which was completed on 18 December 2020, equalising the ownership across its integrated operations at Moranbah North and Grosvenor.

Export thermal coal

Production guidance in 2021 for export thermal coal is unchanged at c. 24 Mt (Export South Africa c. 16 Mt; Colombia c. 8 Mt - attributable share), subject to the extent of further Covid-19-related disruption.

NICKEL AND MANGANESE

Financial and operational metrics

	Production volume(1)		Sales volume(1)		Price		Unit cost*		Group revenue*		Underlying EBITDA*		Mining EBITDA margin*		Underlying EBIT*		Capex*		ROCE*
					c/lb(2)		c/lb(3)		$m		$m(4)				$m(4)		$m
Nickel and Manganese	-		-		-		-		1,269		510		40	%	324		33		17	%
Prior year	-		-		-		-		1,498		634		42	%	477		42		20	%
Nickel	43,500		43,000		563		334		572		206		36	%	79		33		5	%
Prior year	42,600		41,700		624		380		572		191		33	%	89		42		4	%
Manganese(5)	3.6		3.6		-		-		697		304		44	%	245		-		82	%
Prior year	3.7		3.7		-		-		926		443		48	%	388		-		109	%

⁽¹⁾   Nickel production and sales are tonnes (t). Manganese production and sales are million tonnes (Mt).

⁽²⁾   Realised price.

⁽³⁾   C1 unit cost.

⁽⁴⁾   Nickel segment includes $14 million projects and corporate costs (2019: $12 million).

⁽⁵⁾  Production, sales and financials include ore and alloy.

Financial and operational overview

Nickel

Underlying EBITDA increased by 8% to $206 million (2019: $191 million), benefiting from improved operational stability and favourable foreign exchange movements, partly offset by the lower realised nickel price. Capital expenditure decreased by 21% to $33 million (2019: $42 million), driven mainly by favourable foreign exchange movements.

Within special items and remeasurements an impairment of $589 million was recognised at Barro Alto reflecting a revision of the Group's medium and long term price forecasts.

Manganese (Samancor)

Underlying EBITDA decreased by 31% to $304 million (2019: $443 million), mainly owing to the lower manganese ore price and a 2% decrease in manganese ore sales due to Covid-19-related production constraints, mainly in South Africa.

Markets

Nickel

	2020	2019
Average market price (c/lb)	625	632
Average realised price (c/lb)	563	624

Ferronickel is traded based on discounts or premiums to the LME nickel price, depending on market conditions, supplier products and consumer preferences. Differences between market prices and realised prices are largely due to variances between the LME and the ferronickel price.

The average LME nickel price of 625 c/lb was 1% lower than the prior year as the impact of Covid-19 on demand in the first half was offset by the subsequent easing of restrictions, notably in China. Nickel consumption in batteries (electric vehicles and energy storage) was particularly robust, reflecting demand for metals supporting the transition to a lower carbon economy. However, the realised price decreased by 10%, principally owing to the increased ferronickel discount, driven by the higher LME nickel price at the end of 2019.

Manganese

The average benchmark price for manganese ore (Metal Bulletin 44% manganese ore CIF China) was $4.67/dmtu, a decrease of 16% (2019: $5.58/dmtu). In the first half of 2020, Covid-19-related mining operation shutdowns in South Africa led to tighter supply and higher manganese ore prices. In the second half of 2020, manganese ore prices eased as South African supply volumes returned to close to pre-Covid-19 levels.

Operational performance

Nickel

Nickel output increased by 2% to 43,500 tonnes (2019: 42,600 tonnes), reflecting continuing operating stability and the effect of a 40-day planned stoppage at Barro Alto in 2019.

Manganese

Attributable manganese ore production was in line with the prior year at 3.5 Mt as the impact of the Covid-19 lockdowns in South Africa in the first half of the year was largely offset by an increase in Australian ore production on the back of improved mining and concentrator performance.

Operational outlook

Nickel

Production guidance for 2021 is 42,000-44,000 tonnes, subject to the extent of further Covid-19-related disruption.

C1 unit cost guidance for 2021 is 360 c/lb, driven mainly by higher input prices.

CROP NUTRIENTS

Financial and operational metrics

	Production volume		Sales volume		Price		Unit cost		Group revenue*		Underlying EBITDA*		Mining EBITDA margin*		Underlying EBIT*		Capex*		ROCE*
					c/lb		c/lb		$m		$m				$m		$m
Crop Nutrients	n/a		n/a		n/a		n/a		107		1		n/a		1		292		n/a
Prior year	-		-		-		-		-		-		-		-		-		-
Woodsmith project	n/a		n/a		n/a		n/a		n/a		n/a		n/a		n/a		292		n/a
Prior year	-		-		-		-		-		-		-		-		-		-
Other(1)	n/a		n/a		n/a		n/a		107		7		n/a		7		-		n/a
Prior year	-		-		-		-		-		-		-		-		-		-

⁽¹⁾  Other comprises a 30% interest in Cibra, a fertiliser distributor based in Brazil.

Crop Nutrients

Anglo American is developing the Woodsmith project in the north east of England to access the world's largest known deposit of polyhalite, a natural mineral fertiliser product containing potassium, sulphur, magnesium and calcium - four of the six nutrients that every plant needs to grow.

The Woodsmith mine is being constructed approximately three km south of Whitby, where polyhalite ore will be extracted via two 1.6 km deep mine shafts and transported to the port at Teesside on an underground conveyor belt system in a 37 km tunnel, thereby minimising impact on the surface above. It will then be granulated at a materials handling facility to produce a fertiliser product - known as POLY4 - that will be exported to a network of customers overseas from our dedicated port.

Woodsmith project

Following the completion of the acquisition of Sirius Minerals Plc on 17 March 2020, integration activities have progressed well and the development of the project continues, with total capital expenditure of $292 million incurred by Anglo American during 2020. By the end of December, the excavation of the conveyor tunnel had reached almost 12 kilometres and continues to progress well. At the mine head, the first shaft-boring machine has been assembled within the service shaft and is being commissioned, while good progress is also being made on the production shaft. The impact of Covid-19 on the project's development has been limited to date due to the successful implementation of appropriate health measures.

Following the acquisition, Anglo American initiated a detailed technical review of the project's development plan with the objectives of optimising the project and aligning it with Anglo American's technical and other standards. This review is nearing completion and confirms the high quality of the overall project design and development approach. Ahead of the scheduled mid-2021 Board update, in which we will present final capital and schedule estimates, we are refining two aspects of the project that we had allowed for in our investment case: we will likely bring forward the investment in additional ventilation to increase early production flexibility, and we are working through the detailed scheduling of the two shaft installations.

Total capital expenditure in 2021 is expected to be $0.5 billion, $0.2 billion higher than originally planned at the completion of the takeover. This investment reflects the good progress made in 2020 and the focus on certain critical-path items in 2021, including the continuation of the conveyor tunnel and site preparation for the processing facility, in addition to the ongoing shaft sinking programme.  

 

Market development - POLY4

Supply agreements with a global customer base are in place, including with a number of well-established counterparties such as Archer Daniels Midland Company, BayWa AG, Cibra, IFFCO, Wilmar Group and Muntajat. Many of these agreements have price levels benchmarked against the market prices of the underlying key nutrients within POLY4 and have been set up on a take-or-pay basis. In total, these offtake arrangements accommodate production in excess of 10 Mtpa.

The ongoing focus of the market development activities is now around developing and implementing detailed sales and marketing strategies for each region and supporting customers with their own market development activities in order to further promote POLY4 to the end-users of the product. At the end of December, full scale farm trials, with more than 200 commercial partners around the world, were testing POLY4 as part of the commercial demonstration programme that is a key part of the product marketing strategy. 

 

CORPORATE AND OTHER

Financial metrics

	Group revenue*		Underlying EBITDA*		Underlying EBIT*		Capex*
	$m		$m		$m		$m
Segment	191		(145)		(231)		21
Prior year	121		(43)		(229)		56
Exploration	n/a		(101)		(102)		-
Prior year	n/a		(126)		(128)		1
Corporate activities and unallocated costs	191		(44)		(129)		21
Prior year	121		83		(101)		55

Financial overview

Corporate and other reported an underlying EBITDA loss of $145 million (2019: $43 million). Revenue increased to $191 million (2019: $121 million), predominantly due to a ramp-up of third-party shipping activity.

Exploration

Exploration's underlying EBITDA loss decreased to $101 million (2019: $126 million), reflecting decreased exploration activities across most product groups, due to the impact of Covid-19-related restrictions.

Corporate activities and unallocated costs

Underlying EBITDA decreased to a $44 million loss (2019: $83 million gain), driven primarily by a reduction in profits on third-party shipping and transaction costs related to the acquisition of Sirius Minerals Plc.

GUIDANCE SUMMARY

All guidance set out below is unchanged versus that previously disclosed.

Production and unit costs

	Unit costs 2021F	Production volumes
		Units	2021F	2022F	2023F
Diamonds 1	~$55/ct	Mct	32-34	30-33	30-33
Copper2	~120c/lb	Kt	640-680	680-790	890-1,000
PGMs 3 Platinum Palladium Other	~$700/PGM oz	Moz Moz Moz Moz	4.2-4.6 1.9-2.1 1.4-1.5 0.9-1.0	4.2-4.6 1.9-2.1 1.4-1.5 0.9-1.0	4.2-4.6 1.9-2.1 1.4-1.5 0.9-1.0
Iron ore 4	Kumba: ~$34/t Minas-Rio: ~$22/t	Mt	64-67	65-68	66-69
Metallurgical coal5	~$75/t	Mt	18-20	22-24	23-25
Thermal coal 6	~$40/t	Mt	~24	~24	~24
Nickel 7	~360/lb	kt	42-44	42-44	47-49

Note: Unit costs exclude royalties, depreciation and include direct support costs only. FX rates for 2021 costs: ~16 ZAR:USD, ~1.4 AUD:USD, ~5.3 BRL:USD, ~760 CLP:USD. Production volumes are subject to the extent of further Covid-19 related disruption.

1.  Unit cost is based on De Beers' share of production. Production on a 100% basis except for the Gahcho Kué joint operation, which is on an attributable 51% basis, subject to trading conditions and ongoing operational challenges. Reduction in volumes in 2022 as Venetia continues transition to underground operations.

2.  Copper business unit only. On a contained-metal basis.

3.  Unit cost is per own mined 5E + gold PGMs metal in concentrate ounce. Production is 5E + gold produced metal in concentrate ounces. Includes own mined production (~65%) and purchased concentrate volumes (~35%). See 2020 results presentation for refined production.

4.  Total iron ore is the sum of Kumba (dry basis) and Minas-Rio (wet basis, as product is shipped with ~9 per cent moisture). Kumba volumes are subject to rail and port performance.

5.  Volumes excludes thermal coal production in Australia. 2021 production is expected to be at the lower end of the range following a suspension of operations at Moranbah North in response to elevated gas levels on 20 February 2021, subject to the timing of a safe restart at Moranbah North. Increase in 2022 from 2021 due to the expected restart of Grosvenor in H2 2021.

6.  Unit cost is for the South Africa trade mines only, with benefit of higher volumes in 2021 offset by unfavourable foreign exchange. Volumes include South Africa export production (including volumes sold domestically at export parity pricing) and Colombia production.

7.  Nickel business unit only. 2023 volumes dependent on bulk ore sorting technology and briquetting.

Capital expenditure¹

	2021F	2022F	2023F
Growth	$2.0-2.5bn Includes ~$0.5bn Woodsmith capex	$1.5-2.0bn	$1.5-2.0bn
Sustaining	~$3.7bn Reflects ~$3.0bn baseline plus ~$0.7bn lifex projects	~$4.2bn Reflects ~$3.0bn baseline plus ~$0.9bn lifex projects and ~$0.3bn Collahuasi desalination plant	~$4.1bn Reflects ~$3.0bn baseline plus ~$0.8bn lifex projects and ~$0.3bn Collahuasi desalination plant
Total	$5.7-6.2bn	$5.7-6.2bn	$5.6-6.1bn

1.  Cash expenditure on property, plant and equipment including related derivatives, net of proceeds from disposal of property, plant and equipment and includes direct funding for capital expenditure from non-controlling interests and reimbursement of capital expenditure. Shown excluding capitalised operating cash flows. Consequently, for Quellaveco, reflects attributable share of capex, see pages 21-22. Guidance includes unapproved projects and is, therefore, subject to progress of growth project studies and Woodsmith is excluded after 2021 pending completion of technical review. Refer to the FY20 results presentation slides 44 to 49 for further detail on the breakdown of the capex guidance at project level.

Further details on Anglo American's high quality growth and life extension projects, including details of the associated volumes benefit, are disclosed on pages 12-15.

Long-term sustaining capex is expected to be ~$3.0 billion per annum, excluding life extension projects.

Other guidance

• 2021 depreciation: $3.2-3.4 billion

• 2021 effective tax rate: 30-32%

• Long term effective tax rate: 30-33%

• Dividend pay-out ratio: 40%

• Net debt:EBITDA: <1.5x at the bottom of the cycle

For further information, please contact:

Media	Investors
UK James Wyatt-Tilby [e-mail]	UK Paul Galloway [e-mail]
Marcelo Esquivel [e-mail]	Robert Greenberg [e-mail]
Katie Ryall [e-mail]	Emma Waterworth [e-mail]
South Africa Sibusiso Tshabalala [e-mail] Nomonde Ndwalaza [e-mail]

Notes to editors:

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

Webcast of presentation:

A live webcast of the results presentation, starting at 9.00am UK time on 25 February 2021, can be accessed through the Anglo American website at www.angloamerican.com

Note: Throughout this results announcement, '$' denotes United States dollars and 'cents' refers to United States cents. Tonnes are metric tons, 'Mt' denotes million tonnes and 'kt' denotes thousand tonnes, unless otherwise stated.

Group terminology

In this document, references to "Anglo American", the "Anglo American Group", the "Group", "we", "us", and "our" are to refer to either Anglo American plc and its subsidiaries and/or those who work for them generally, or where it is not necessary to refer to a particular entity, entities or persons. The use of those generic terms herein is for convenience only, and is in no way indicative of how the Anglo American Group or any entity within it is structured, managed or controlled. Anglo American subsidiaries, and their management, are responsible for their own day-to-day operations, including but not limited to securing and maintaining all relevant licences and permits, operational adaptation and implementation of Group policies, management, training and any applicable local grievance mechanisms. Anglo American produces Group-wide policies and procedures to ensure best uniform practices and standardisation across the  Anglo American Group but is not responsible for the day to day implementation of such policies. Such policies and procedures constitute prescribed minimum standards only. Group operating subsidiaries are responsible for adapting those policies and procedures to reflect local conditions where appropriate, and for implementation, oversight and monitoring within their specific businesses

Forward-looking statements and third-party information:

This document 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 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.

Anglo American plc

20 Carlton House Terrace London SW1Y 5AN United Kingdom

Registered office as above. Incorporated in England and Wales under the Companies Act 1985.

Registered Number: 3564138 Legal Entity Identifier: 549300S9XF92D1X8ME43

 

END

 

 

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