Anglo American : 2023 Interim Results conference call transcript

H1 2023 results presentation

Thursday 27 July 2023

Anglo American HY23 results presentation script

Operating performance

Duncan Wanblad, Chief Executive Office

Slide 1: Welcome

Welcome and good morning ladies and gentlemen. Thank you for joining us today.

Slide 2: Cautionary statement

Slide 3: H1 2023 results agenda

We will follow our usual presentation flow. I will give you an overview of our first half performance. Stephen will unpack the detail of the numbers. And then I will take you through the longer term outlook.

Slide 4: Committed to delivering safe operations

Safety is our first priority. I am extremely disappointed and saddened by the loss of a colleague in a drilling incident at Kolomela back in February. We are also investigating a recent aviation fatality in Angola related to our exploration programme.

We have renewed our focus during this first half on three key safety levers:

1. Firstly, we are supporting operational leaders to increase the time they spend in the field - experiencing first-hand what is working well and where changes or improvements are required. Leadership is not a desktop or boardroom exercise - and in no area is that more true than in safety.
2. Secondly, at the heart of the Operating Model is a simple principle: plan, do, check, act. It applies to all our activities - including maintenance work, which has been a key focus this half. Planned maintenance work helps with the identification and control of risk, so that activities can be appropriately scheduled and safely executed.
3. And thirdly, implementation of our new Contractor Performance Management programme is under-way. This is a three-year initiative ensuring that the work our contractors undertake is well planned, aligned with our Operating Model, meaningfully risk assessed and resourced with the right skills.

I am pleased to see that these efforts have resulted in a much lower injury rate - our lowest ever. Now, clearly there is still much to do, but I am encouraged by the progress.

I'm equally pleased to report no new cases of occupational disease or environmental incidents.

Slide 5: Healthy environment & thriving communities focus

We remain committed to delivering our products to customers as sustainably as possible and I am encouraged by the progress we continue to make across our operations.

Quellaveco is now on 100% renewable electricity, which means globally 60% of our grid supply will be renewably sourced by 2025, which is when our Australian operations switch over.

In South Africa, where a different approach is required, Envusa Energy - our joint venture with EDF Renewables - is developing a regional renewable ecosystem. The first projects are

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Anglo American HY23 results presentation script

heading to financial close with construction expected to start in the second half. This will be followed by two large solar sites at Sishen and Mogalakwena. These projects will not only remove up to 2Mtpa of carbon from our operations, but will also deliver a meaningful financial benefit to our South African businesses. And as you would expect, the team is working on a much larger pipeline of projects that will follow this first wave.

On water withdrawals, we are already around 26% lower than our 2015 baseline - more than halfway to our 2030 goal. The Los Bronces Integrated Solution will deliver the next step- change in 2025. In the meantime, we continue to focus on opportunities to drive increased re-use and recycling across our water scarce assets. We are also developing new technologies, such as coarse particle recovery and dry-stacking, with the potential to further reduce our water footprint.

Our livelihoods programmes focus on delivering lasting and meaningful positive impact on our host communities. This is about delivering economic value through inclusive procurement and local recruitment, as well as initiatives to support sustainable employment and economic diversification outside the mining value chain. We are targeting an ambitious five jobs offsite for every on-site job.

Slide 6: H1 2023 results summary

Stephen will cover the numbers in detail - but as a brief summary:

Production was up 10% on the first half of 2022 driven primarily by the ramp-up of Quellaveco.

EBITDA of $5.1billion - a satisfactory performance given the 19% decrease in our price basket compared with this time last year - although FX, overall, did provide some support. Easing of the price response to the Russian-Ukraine invasion, the slower than expected re-opening of China's economy and ongoing inflationary pressure in key markets, has weighed on demand for our products as well as our costs. Cost inflation was largely offset by a maiden first half contribution from Quellaveco.

Overall, production is on track to meet our full year outlook and, as always, but especially in this macro context, operational performance and cost control represent our biggest levers.

Slide 7: H1 2023 operating performance

Looking at the first half operational performance by business:

In Copper & Nickel - Quellavecohas continued its successful ramp-up - and I will cover that on the next slide.

We were very pleased that the permit for the Los BroncesIntegrated Project was approved. We are now working through the development options for both the open pit and underground project to try and best mitigate the impact of that licensing delay in opening up the higher grade, softer ore in the next phase of the open pit. As you know, we are currently going through some lower grade areas at most of our copper and nickel operations.

In PGMs - the team has managed through Eskom load-curtailment extremely well with limited impact on first half performance. We aren't out of the woods yet with a few more months of winter to go - but certainly our agility around planning has served us well thus far.

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Anglo American HY23 results presentation script

At De Beers - delighted to have reached an agreement in principle on the Botswana mining licences concurrently with the sales agreement. Operational performance has been strong through the first half of the year - particularly at Orapa. We also recently reached a major milestone at the Venetia underground project, having achieved first production. Macro conditions have impacted rough diamond demand and are likely to remain challenging through the second half, with some build-up in midstream inventory levels.

In Iron Ore - Minas-Riohad a good first half, with a particularly strong second quarter, achieving a number of performance records, reflecting the benefit of operational improvements. This sets us up well for the second half.

At Kumba, operations have been relatively solid, with a good recovery from Kolomela, but constrained by Transnet. We continue to collaborate as part of the user group, but there is still a lot more wood to chop before we see a sustainable uptick in logistics performance.

And finally at Steelmaking coal - we saw a much improved contribution from the open pits following the very wet weather in the first half last year. The underground operations were impacted by longwall moves at Grosvenor and Aquila during this first half, coupled with some difficult strata conditions at Moranbah. Performance is now improving and we will also benefit from no longwall moves during the second half, which should drive the step-up in volumes half on half.

Slide 8: Quellaveco successfully ramped up & delivering strong results

This time last year we had just started up operations at Quellaveco, our new copper mine in Peru. The ramp-up since then has progressed very well with 240kt of copper produced in that time. It reached commercial production levels in June, with the moly plant also near to steady-state levels following a very quick and successful ramp-up. Quellaveco is on track to deliver the full year guidance at a very competitive unit cost. This strong performance is testament to the calibre of the operational team, building on the strong foundations laid by the project team. It is a great example of how projects should be planned and executed and then transitioned to operational delivery.

Slide 9: De Beers agrees in principle renewal of longstanding partnership with Botswana

At De Beers, we were very pleased to reach an agreement in principle with our longstanding partner - the Government of Botswana. As you know, the mining licencesthere were due to expire in 2029, so securing new 25-year licences to 2054 is critical to the investment pathway, underpinning the future development of the most valuable diamond mines in the world.

Under the new ten-yearsalesagreement, Botswana will have the option to directly market a larger share of production.

The licences also recognise the strength of the partnership between De Beers and Botswana through the creation of a Diamonds for Development Fund that is designed to help accelerate Botswana's economic diversification.

All parties are still working hard to reach final agreements. It will likely take some time from here before we've dotted all the I's and crossed the T's, given we also need to take this to a vote of our shareholders, as this constitutes a related party transaction.

Slide 10: Established the platform for the next phase of value delivery

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Anglo American HY23 results presentation script

As you know, one of my key priorities is restoring operational consistency across the portfolio

- we have slightly slipped on the regular drumbeat we had before covid.

In support of that, we have steadily been refreshing the executive leadership over the last 12 months and have now re-organised how we manage our production businesses and the functional expertise that supports them. These, plus other changes to work prioritisation, will ensure that our operations are optimally supported to deliver safely, responsibly, and to their targets - thereby unlocking considerable commercial value.

We also expect material additional annual cost savings from across our full range of business support activities of approximately $0.5 billion pa. We are already working on the implementation and should hit that run-rate by Q2 next year.

Stephen will give you a little bit more colour on our financial performance levers shortly but to be clear, this is our priority over the near term.

The numbers

Stephen Pearce, Finance Director

Slide 11: Thanks Duncan.

As usual, I will open with the key themes I want you to take away:

1. The weaker macro environment has weighed on our financial performance this half. We are poised to deliver a significant step-up in our production during the second half.
2. We remain committed to capital discipline, our 40% dividend payout and maintaining a strong balance sheet.
3. Despite the near-term uncertainty, the longer-term outlook for our products is highly attractive. We continue to invest in our value-adding growth options that have the potential to add to our volumes over the next decade or so.

Slide 12: H1 2023 financial results

To summarise our first half performance:

EBITDA of $5.1 billion. I'll break that down for you in bit - but weaker prices were the main driver.

That translated to an EPS of $1.38

And an interim dividend of 55 cents a share, at our 40% dividend pay-out policy. That gives an annualised yield of about 4%.

Net debt increased to $8.8 billion. I'll unpack the drivers shortly.

ROCE at a still healthy 18%

Slide 13: Resilient 41% group margin

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