23 February 2023

Anglo American Preliminary Results 2022 

Portfolio quality, diversification and growth support underlying EBITDA of $14.5 billion

Financial highlights for the year ended 31 December 2022 

•Underlying EBITDA* of $14.5 billion

•Profit attributable to equity shareholders of $4.5 billion 

•Net debt* of $6.9 billion (<0.5 x underlying EBITDA): cash generation offset by investment in value-adding growth

•Woodsmith impaired by $1.7 billion due to extended development schedule and budget, designed to deliver maximum returns over long life of asset

•Quellaveco commissioned on time and on budget: multi-decade copper operation ramping up

•$0.9 billion final dividend, equal to $0.74 per share, consistent with our 40% payout policy.

Duncan Wanblad, Chief Executive of Anglo American, said: "Anglo American offers a differentiated investment proposition of portfolio quality, diversification and growth, positioning us strongly for the structurally attractive long term dynamics. Our unwavering focus is on driving consistent performance across our operations - which starts with the safety and health of our employees - and progress towards our full suite of sustainability ambitions, including our 2040 carbon neutral operations commitment.

"Safety always comes first as we strive to reach zero harm for every one of our people, every single day. While we continue to make progress on our long term safety journey and further develop our safety processes and procedures, we were deeply saddened to lose two colleagues at our managed operations during the year. We will not rest until zero harm is achieved and sustained across our business.

"We continued to feel the effects of dislocations in the global economy on our business in 2022 - in energy, and across supply chains and labour markets. Extreme weather has disrupted the lives of so many, with exceptional rainfall also setting back several of our operations, while the energy crisis caused policymakers to react to mitigate sharply higher inflation. With that backdrop, we built momentum during the year with our focus on regaining operational stability and targeted incremental performance improvement.

"Underlying EBITDA of $14.5 billion, a 30% decrease compared with the record achieved in 2021, reflects inflationary headwinds and higher energy prices combined with lower production volumes which, together, lifted our production costs amid dampened prices for many of our products. We delivered a return on capital employed of 30% - above our targeted 15% through-the-cycle return - and a mining EBITDA margin of 47%. Our commitment to capital discipline and to a strong and flexible balance sheet is paramount to remain resilient to the external environment and retain optionality for value-adding growth. Net debt increasing to $6.9 billion, or less than 0.5 x underlying EBITDA, reflects the growth investments we are making in line with our belief in the strong long term fundamentals. Our $0.9 billion final dividend of $0.74 per share is in line with our 40% payout policy.

"The fundamental demand picture for future-enabling metals and minerals - particularly those that are responsibly sourced with traceable provenance - is ever more compelling. Our new Quellaveco copper operation in Peru increases our global production base by 10%(1) and is the cornerstone of our value-adding growth potential of 25%(2) over the next decade, with further optionality beyond, from copper to crop nutrients. As most of the world's major economies accelerate their decarbonisation efforts and as the global population increases and continues to urbanise, we aim to keep growing the value of our business into that demand."

See page 2 for footnotes. Terms with this symbol * are defined as Alternative Performance Measures (APMs). For more information, refer to page 86.

Sustainability performance

Key sustainability performance indicators(3)

Anglo American tracks its strategic progress using KPIs that are based on our seven pillars of value: safety and health, environment, socio-political, people, production, cost, and financial. In addition to the financial performance set out above and our operational performance on pages 7-40, our performance for the first four pillars is set out below:

(1)Copper equivalent volume growth from 2022 baseline, pre the commissioning of Quellaveco.

(2)Copper equivalent production basis. Calculated including the equity share of De Beers' production and using long term consensus parameters. It is normalised to reflect the demerger of the South Africa thermal coal operations and the sale of our interest in Cerrejón. Future production levels are indicative and subject to final approval.

(3)Sustainability performance indicators for the year ended 31 December 2022, and the comparative period, are not externally assured, unless otherwise stated.

(4)2021 data includes Thermal Coal South Africa until the date of the Thungela demerger on 4 June 2021, unless otherwise stated.

(5)Safety data is externally assured. The work-related fatal injuries figure presented for 2021 has been restated to reflect the death of an employee in April 2022, following a fall-related injury in November 2021. While the Group's TRIFR improved year-on-year, it has not yet

decreased below the rate experienced in 2020. The focused safety interventions in the second half of 2022 did, however, result in a significant improvement in our injury rates, with a H2 2022 TRIFR of 2.00.

(6)Reflects the number of employees who work in environments where there is potential for exposure above the exposure limit. All employees working in such environments are issued with protective equipment to prevent occupational illness.

(7)Energy, GHG emissions, occupational exposure, fresh water withdrawals and Level 4-5 environmental incidents data is externally assured. Energy, GHG emissions, fresh water withdrawals and occupational exposure data for 2021 excludes Thermal Coal South Africa.

(8)Water metric and data have been revised in line with our fresh water definition.

(9)While sites are assessed annually against all requirements applicable to their context, for consistency during the transition period, the metric reflects performance against the Social Way foundational requirements. For further information on progress, see page 5.

(10)Local procurement spend relates to spend within the country where an operation is located. The basis of calculation reflects the Group's financial accounting consolidation, i.e. 100% of subsidiaries and a proportionate share of joint operations, based on Anglo American's shareholding.

(11)Taxes and royalties include all taxes and royalties borne and taxes collected by the Group. This includes corporate income taxes, withholding taxes, mining taxes and royalties, employee taxes and social security contributions and other taxes, levies and duties directly incurred by the Group, as well as taxes incurred by other parties (e.g. customers and employees) but collected and paid by the Group on their behalf. Figures disclosed are based on cash remitted, net of entities consolidated for accounting purposes, plus a proportionate share, based on the percentage shareholding, of joint operations. Taxes borne and collected by equity accounted associates and joint ventures are not included.

(12)Jobs supported since 2018, in line with the Sustainable Mining Plan Livelihoods stretch goal.

Safety

Anglo American's most important priority is always safety - keeping our colleagues safe and well. We believe everybody, everywhere should return home each and every day. 'Always safe' is our safety vision and safety is our number one value.

In 2022, we continued to implement our safety strategy through targeted tactics, and by investing in systems, standards and people. We enabled this through digital innovation and advanced systems, informing and eliminating and minimising risk wherever possible as we seek to be an innovative safety leader.

While we continue to make progress on our long term safety journey, we were deeply saddened to lose two colleagues at our managed operations during the year - at our Steelmaking Coal business in Australia and at a De Beers operation in Canada, as well as the loss of a colleague from a complication following an injury sustained in our PGMs business in 2021. We also lost one colleague at an non-managed PGMs joint operation in South Africa. As well as thoroughly and rigorously investigating each of these tragic incidents and sharing learnings internally, we are committed to also sharing those learnings across the industry so that action can be taken to help prevent repeats and achieve our 'Always safe' vision on a sustainable basis.

We are unconditional about safety, and 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. Everyone is empowered to be a leader in safety and has a role to play in delivering an injury-free and fatality-free workplace.

Our total recordable injury frequency rate (TRIFR) improved by 2% to 2.19 (2021: 2.24), reflecting the urgent safety reset and calls to action completed across the Group in the second half of the year, in response to the fatal incidents and the deterioration in overall safety performance in the first half. We remain absolutely committed to working towards a step-change in the reduction of injuries.

Safety is often the first topic discussed in meetings across the Group, from operations to our corporate offices. We continually focus on improving our safety performance by strengthening our culture, including ensuring our workforce feels safe to speak up about concerns related to safety, and making specific safety interventions when we see deficiencies in our operations.

During 2022, our areas of focus included Chief Executive safety summits with senior leaders from across the business units; observing and actively monitoring mandatory critical controls for common catastrophic and fatal risks; sharing of lessons learned and actions taken from incidents across the organisation; safety stand-downs (voluntary events to pause production and talk with employees and contractors about safety); employee-engagement sessions; and enhanced reporting and progress tracking of safety-improvement initiatives.

We also held Contractor Safety Engagement Summits between senior Anglo American leaders and key suppliers around the world.

Health

Our health focus remains on helping keep our people protected from Covid-19, while sustaining our work to continuously improve our key health measures. We continued to work to prevent the spread of Covid-19 among our employees and in our host communities, primarily through testing and providing access to vaccines and boosters as

part of our WeCare programme. This approach provides three phases of support - Prevention, Response and Recovery - relating to physical health, mental health, living with dignity, and community response interventions.

Alongside the continued deployment of testing, we also focused on vaccine access. We worked in close partnership with national and local governments around the world to help deliver vaccinations to our employees, contractors and host communities. We have mobilised resources to manage 'long Covid', where people continue to feel symptoms of the disease for weeks or even months after its typical course.

In 2022, there were 5 reported new cases of occupational disease, all related to noise exposure (2021:16). Reducing exposure to noise, which remains our single greatest occupational health risk, is a significant challenge. While all our employees are issued with and trained in the use of PPE, there are still as many as 23,000 employees in the workplace where noise levels can exceed applicable exposure levels, rending the proper use of PPE necessary as a mitigation mechanism. The identification and monitoring of critical noise controls allow us to analyse the effectiveness of our controls and develop additional measures. The comprehensive roll-out of diesel particulate filters across our PGMs business contributed to the reduction in employees exposed to inhalable hazards. 

In 2022, we focused on the implementation of our Health and Well-being strategy in line with the World Health Organization (WHO) principles, covering employee health, in accordance with our global approach to quality of life.

We understand there is a continuum between the workplace and home and host communities. We are committed to dedicating the resources required to apply evidence-based interventions, including emerging digital solutions, aimed at reducing risks associated with occupational diseases, as well as with unhealthy lifestyles, including smoking and poor diet.

Our many years of work with employees and host communities on HIV/AIDS and TB, and over nearly three years on Covid-19, have positioned us to extend our learnings from managing communicable diseases to non-communicable diseases, a major focus in 2022.

The launch of our digital health strategy is driven by the concept of virtual care and our ability to use mobile data devices and a growing range of applications to help individuals harness their own health information.

People

Tightly linked to our safety imperative and our Values, we strive to create a workplace that places people even more at its heart. People are central to everything we do, and each individual has expectations of us. Workforce engagement is a priority for every leader at Anglo American and we aim to create safe, inclusive and diverse workplaces that encourage high performance and innovative thinking. We have zero tolerance for any form of bullying, harassment or victimisation and we know there is no room for complacency when it comes to culture in any organisation. To that end, we have extensive training, systems and processes in place to keep improving both physical and psychological safety. We will continue to embed and launch initiatives that will allow us to realise our vision of a truly inclusive workplace where every employee can reach their full potential.

We also continue to make further progress to reach our gender representation goal of 33% female representation by the end of 2023 at all management levels, across the business. We have set a similar target for 33% of our Group Management Committee and those reporting to the committee to be women by the end of 2023. The proportion of women at this level was in line with the prior year at 29%. At the end of 2022, and across Anglo American as a whole, 24% of our employees were women.

Living with Dignity - building a safe and inclusive culture

Building a safe and inclusive culture has been a focus for us for a number of years and this is constant work for any company or society. We are committed to listening to our people and other stakeholders that are close to our business every day.

We have long understood the role of our business in society, and we believe that this extends beyond our own mine gates. We launched our Living with Dignity programme in 2019, founded on the belief that everyone has the right to dignity - in our homes, schools, at work and everywhere in between. Through this programme, Anglo American is working collaboratively with our partners in government and civil society to build sustainable partnerships aimed at providing direct employee and community support to combat gender-based and domestic violence.

We continue to build on this important work and we have now established our Living with Dignity Hub in South Africa that brings together our policies and its mandates to provide ongoing and committed support to our employees, contractors and their families. The hub handles all formal complaints of sexual harassment and gender-based violence and bullying, harassment and victimisation across our South African footprint and is overseen by an independent Ambassador to ensure we stand by our policies and remain committed to amplifying our efforts.

Environment

Our Sustainable Mining Plan includes commitments to be a leader in environmental stewardship. By 2030, we aim to reduce GHG emissions (Scopes 1 and 2) by 30%; improve energy efficiency by 30%; achieve a 50% reduction in fresh water abstraction in water scarce areas; and deliver net-positive impacts in biodiversity wherever we operate.

Our environmental performance continues to improve. In 2022, we saw no Level 5 environmental incidents at our managed operations, for the tenth consecutive year, and no Level 4 incidents. There was, unfortunately, one Level 3 incident reported in 2022, at our Polokwane PGMs smelter, related to water discharge following a period of significant storm water. The discharge did not result in any environmental toxic impact. A full investigations was carried out and lessons learned across both PGMs and the wider Anglo American Group. We launched a 'no repeats' challenge last year to help us learn from low level incidents and prevent repeats of a similar nature across the business, which has led to improvements in controls, specifically helping to prevent significant incidents.

Both energy consumption and GHG emissions decreased in the year and we remain committed to improving energy efficiency by 30% and reducing absolute GHG emissions by 30%, by 2030. We have a target to be carbon neutral across our operations by 2040, and an ambition to halve our Scope 3 emissions, also by 2040. We are making encouraging progress. In 2020, around one third of the electricity Anglo American used globally was drawn from renewables. Having secured 100% renewable electricity supply across our operations in South America from 2023, and for our Steelmaking Coal operations in Australia from 2025, we expect to be drawing approximately 60% of our global grid supply from renewables from 2025.

As part of the our ambition to reduce our Scope 3 emissions by 50% by 2040, we are focusing on hard-to-abate sectors such as steel - from which most of our value chain emissions derive. We are joining forces with steelmakers in Europe and Asia to research efficient feed materials - capitalising on the premium physical and chemical qualities of our minerals, including iron ore pellets and lump iron ore. These premium products are suited for use in the direct reduced iron (DRI) process, a technically proven and significantly less carbon intensive steel production method.

Examples of this approach include the memorandum of understanding (MOU) announced in July, between Anglo American and Nippon Steel Corporation, where the two companies will research ways to optimise premium lump ore produced by Anglo American's mines to decrease emissions via the traditional blast furnace (BF) steelmaking process; and the MOU announced in October, between Anglo American and its longstanding customer Thyssenkrupp Steel, to collaborate on developing new pathways for the decarbonisation of steelmaking.

Socio-political

In 2022, we continued working to strengthen and broaden our social performance competencies through embedding the Social Way 3.0 (launched in 2020) across the organisation. As part of the implementation process, each site and function has established cross-functional Social Performance Management Committees.

Over 2,000 people across the business have participated in Social Way training sessions since 2020. This includes orientation sessions for leaders, completing Social Way Foundation Training, as well as cross-functional Social Way Foundation Training for non-social performance teams, at all sites, business units and relevant functions.

At the end of 2022, 66% of Social Way 3.0 foundational requirements were implemented. While we did not meet our ambitious goal of implementation of the Social Way 3.0 at all sites by the end of 2022, we continued to make significant progress and recognise the very much higher standards (the highest that we are aware of across our industry) required of this third version of our social management system. The programme is critical to underpinning many of our ambitious 2030 Sustainable Mining Plan targets,  demonstrating our commitment to partnering with host communities and governments.

The success of our business drives tax revenues for host communities, in addition to significant royalty and mining tax payments made regardless of our profitability, and our broader economic contribution to other stakeholders. Total taxes and royalties borne and taxes collected amounted to $5.9 billion, a 17% decrease compared with 2021.

Anglo American has committed to support three off site jobs by 2025, and five off site jobs by 2030 for every on site job. Since the launch our Sustainable Mining Plan, 114,534 off site jobs have been supported through socio-economic development programmes, including local procurement, enterprise and supplier development initiatives, training, mentoring and capacity development, loan funding to small businesses, agriculture programmes, and collaborative regional development initiatives.

In June, we signed a $100 million 10-year sustainability-linked loan agreement with the International Finance Corporation. The specific goals tied to the loan agreement are aimed at supporting community development in rural communities close to our operations across South Africa, including by promoting the creation of jobs, as well as improving the quality of education for more than 73,000 students.

In September, we issued our first sustainability-linked bond, including performance targets to reduce greenhouse gas emissions and fresh water abstraction, and to support job creation in host communities. This €745 million bond is the first instrument issued following the publication of Anglo American's Sustainability Financing Framework and bond investors will be entitled to a higher final coupon payment should the company not meet the targets.

Sustainable Mining Plan - update in progress

We launched Anglo American's Sustainable Mining Plan in 2018, setting out three sustainability pillars and a number of medium and longer term stretch goals for each, guided by our Purpose and supported by six critical foundations that underpin how we do business. The three pillars of Healthy Environment, Thriving Communities, and Trusted Corporate Leader encapsulate the holistic realities of what it means to be a socially responsible and ultimately sustainable business. We continue to make good progress towards our 2025 and 2030 goals, as laid out in the table on page 2, in addition to progress towards our 2040 carbon neutral operations target that we added in 2020.

Our Sustainable Mining Plan is designed to be a living plan and we will continue to evolve it to ensure it stays relevant and suitably stretching, in tune with our employees' and stakeholders' ambitions for our business. We are currently exploring a number of areas that we feel would benefit from being incorporated into the Sustainable Mining Plan and will update the plan when we have developed these options more fully.

Operational and financial review of Group results for the year ended 31 December 2022

Operational performance

The impact of adverse weather and planned lower grades at many of our operations contributed to a 2% production decrease on a copper equivalent basis(1). Extreme rainfall in Brazil, South Africa and Australia affected iron ore production at Minas-Rio and Kumba, steelmaking coal production at Capcoal and Dawson, and nickel production at Barro Alto. First copper concentrate production from our newly commissioned Quellaveco copper mine in Peru more than offset lower production at our copper operations in Chile that were due to planned lower grades at Los Bronces and Collahuasi. Lower grades also impacted production at Mogalakwena (PGMs) and Barro Alto (Nickel). The planned end of mining at the Grasstree steelmaking coal operation was partially offset by the ramp-up of the replacement Aquila longwall. De Beers increased production in line with continued strong demand for rough diamonds.

De Beers' rough diamond production increased by 7% to 34.6 million carats (2021: 32.3 million carats), reflecting strong operational performance and higher planned levels of production to meet continued strong demand for rough diamonds, particularly in the first half of the year.

Total copper production of 664,500 tonnes increased by 3% (2021: 647,200 tonnes). Copper Chile's production of 562,200 tonnes was 13% lower than the prior year (2021: 647,200 tonnes), principally driven by Los Bronces, where production decreased by 17% to 270,900 tonnes (2021: 327,700 tonnes) due to planned lower grades, coupled with unfavourable ore characteristics and unplanned stoppages. Planned lower grades at Collahuasi resulted in a 9% decrease in attributable production to 251,100 tonnes (2021: 277,200 tonnes). Copper Peru (Quellaveco) delivered 102,300 tonnes of production, reflecting the ongoing ramp-up of the newly commissioned mine in July 2022.

Nickel production decreased by 5% to 39,800 tonnes (2021: 41,700 tonnes), primarily due to lower ore grades as a result of licensing delays, as well as the impact of unplanned maintenance and heavy rainfall.

Total PGM production decreased by 6% to 4,024,000 ounces (2021: 4,298,700 ounces), principally due to lower grade at Mogalakwena and the impact of planned infrastructure closures at Amandelbult, partially offset by increased production from Mototolo and Unki.

Iron ore production decreased by 7% to 59.3 Mt (2021: 63.8 Mt). At Kumba, production decreased by 8% to 37.7 Mt (2021: 40.9 Mt), reflecting the impact of high rainfall across Kumba's operating footprint and a safety intervention at Kolomela, as well as equipment reliability and the impact of third-party logistics constraints at both mines. Minas-Rio production decreased by 6% to 21.6 Mt (2021: 22.9 Mt) due to more challenging ore feed characteristics, lower mining equipment availability and heavy rainfall.

Steelmaking coal production was in line with the prior year at 15.0 Mt (2021: 14.9 Mt), with all three underground longwalls operating in the second half of 2022. The planned end of mining at the Grasstree operation in January 2022 was partially offset by the ramp-up of the replacement Aquila longwall, which began operations in February and fully ramped up in June. Production was also impacted by tight labour markets and record unseasonal rainfall at the open pit operations.

Manganese ore production was in line with the prior period at 3.7 Mt (2021: 3.7 Mt).

Group copper equivalent unit costs(1) increased by 15% in US dollar terms, largely due to lower production volumes and inflationary pressures, particularly diesel, partially offset by favourable foreign exchange.

(1)Copper equivalent production and unit cost is normalised to reflect the demerger of the South Africa thermal coal operations and the sale of our shareholding in Cerrejón.

Financial performance

Anglo American's profit attributable to equity shareholders decreased to $4.5 billion (2021: $8.6 billion). Underlying earnings were $6.0 billion (2021: $8.9 billion), while operating profit was $9.2 billion (2021: $17.6 billion).

Underlying EBITDA*

Group underlying EBITDA decreased by $6.1 billion to $14.5 billion (2021: $20.6 billion) due to a decrease in the price for the Group's basket of products, lower sales volumes and higher input costs across the Group. As a result, the Group Mining EBITDA margin* of 47% was lower than the prior year (2021: 56%). 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

Underlying EBITDA* reconciliation for the year ended 31 December 2021 to year ended 31 December 2022 

The reconciliation of underlying EBITDA from $20.6 billion in 2021 to $14.5 billion in 2022 shows the major controllable factors (e.g. cost and volume), as well as those outside of management control (e.g. price, foreign exchange and inflation), that drive the Group's performance.

Price

Average market prices for the Group's basket of products decreased by 6% compared to 2021, reducing underlying EBITDA by $2.2 billion. Realised prices decreased for iron ore (29%), copper (15%) and the PGMs basket (8%) - primarily driven by rhodium, which decreased by 20%. These were partly offset by steelmaking coal prices, where the weighted average price increased by 52%, and De Beers, where the realised price increased by 35%.

Foreign exchange

The favourable foreign exchange impact on underlying EBITDA of $1.1 billion reflected weaker local currencies in many of our countries of operation, principally the South African rand.

Special items and remeasurements

Special items and remeasurements (after tax and non-controlling interests) are a net charge of $1.5 billion (2021: net charge of $0.4 billion), principally relating to impairments after tax and non-controlling interests of $1.7 billion recognised in Crop Nutrients, and $0.1 billion recognised in Kumba, partially offset by an impairment reversal after tax of $0.3 billion at Steelmaking Coal.

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

Net debt*

(1)    Includes cash outflows of $14 million (2021: inflows of $101 million), relating to interest receipts on derivatives hedging net debt, which are included in cash flows from derivatives related to financing activities.

(2)    Following an amendment to IAS16 Proceeds before intended use, operating cash flows relating to sustaining and growth capital expenditure are no longer capitalised. For further details, refer to note 2 of the Condensed Financial Statements. Included within sustaining capital expenditure for the year ended 31 December 2021 is $8 million of capitalised operating cash flows relating to life-extension projects. 'Growth capital expenditure and other' includes $129 million (2021: $68 million) of expenditure on non-current intangible assets and $4 million of capitalised operating cash flows relating to growth projects for the year ended 31 December 2021.

(3)    Includes the purchase of shares under the 2021 buyback of $186 million; the purchase of shares for other purposes (including for employee share schemes) of $341 million; Mitsubishi's share of Quellaveco capital expenditure of $446 million; other movements in lease liabilities (excluding variable vessel leases) decreasing net debt by $33 million; and contingent and deferred consideration paid in respect of acquisitions completed in previous years of $165 million. 2021 includes the purchase of shares under a buyback of $814 million; the purchase of shares for other purposes (including for employee share schemes) of $270 million; Mitsubishi's share of Quellaveco capital expenditure of $530 million; other movements in lease liabilities (excluding variable vessel leases) increasing net debt by $340 million; dividends received from Cerrejón of $240 million; and contingent and deferred consideration paid in respect of acquisitions completed in previous years of $117 million.

Net debt (including related derivatives) of $6.9 billion has increased by $3.1 billion since 31 December 2021, driven by working capital cash outflows of $2.1 billion primarily due to inventory builds. The Group generated sustaining attributable free cash inflows of $3.3 billion, used in part to fund growth capital expenditure of $1.6 billion and dividends paid to Anglo American plc shareholders of $3.5 billion. Net debt at 31 December 2022 represented gearing (net debt to total capital) of 17% (2021: 10%).

Cash flow

Cash flows from operations

Cash flows from operations decreased to $11.9 billion (2021: $20.6 billion), reflecting a reduction in underlying EBITDA from subsidiaries and joint operations, and a working capital build of $2.1 billion (2021: release of $1.1 billion). The inventory increase of $1.8 billion was driven by a delay in the rebuild of the Polokwane smelter and

an increase in purchase of concentrate at PGMs, as well as an increase at De Beers and in finished products at Copper and Kumba. An increase in receivables of $0.4 billion was largely due to the start of copper concentrate sales in September 2022, following the ongoing ramp-up of operations at Quellaveco (Copper Peru). Payables are broadly flat, with the ramp-up of operations at Quellaveco being offset by the settlement of provisional price adjustments within Iron Ore.

Capital expenditure*

Portfolio upgrade

Anglo American continues to evolve its portfolio of competitive, world class assets towards those future-enabling products that are fundamental to enabling a low carbon economy and that cater to major global consumer demand trends. Aligned to this strategy, we delivered the newly commissioned Quellaveco copper mine in Peru in July 2022, with commercial operations starting in September. The operation continues to ramp up and is expected to reach nameplate capacity around mid-2023.

The Group also entered into the below agreements in the second half of 2022:

On 14 September 2022, Anglo American plc issued its first sustainability-linked bond, including performance targets to reduce greenhouse gas emissions and fresh water abstraction, and to support job creation in host communities. This €745 million bond is the first instrument issued following the publication of Anglo American's Sustainability Financing Framework and bond investors will be entitled to a higher final coupon payment should the company not meet specific sustainability targets.

On 4 October 2022, Anglo American in partnership with EDF Renewables announced their agreement to form a new jointly owned company, Envusa Energy, to develop a regional renewable energy ecosystem (RREE) in South Africa. As part of the agreement, Envusa Energy is launching a mature pipeline of more than 600 MW of wind and solar projects in South Africa - a major first step towards the development of an ecosystem that is expected to generate 3-5 GW of renewable energy by 2030.

On 16 November 2022, Anglo American agreed terms for a 10-year partnership with Stanwell Corporation, the Queensland Government-owned provider of electricity and energy solutions, to source the supply of 100% renewable electricity for its operations in Australia from 2025, supporting Anglo American's progress towards carbon neutral operations by 2040.

In November 2022, we signed an agreement with Aguas Pacífico, a Chilean water desalination and solutions provider, to secure desalinated water for our Los Bronces copper mine. In this first phase, the desalination plant will supply up to 500 litres per second of desalinated water to the mine from 2025, via a pipeline from the plant to a water-reception pool at our Las Tórtolas operation. This desalinated water will supply more than 45% of Los Bronces' needs while also providing clean water to approximately 20,000 people in the communities of Colina and Til Til, local to the operation.

On 24 November 2022, Anglo American signed a memorandum of understanding with Aurubis AG (Aurubis) - a global provider of non-ferrous metals and one of the world's largest copper recyclers - to develop a copper product offering that responds to increasing expectations for future-enabling metals that are sustainably sourced and supplied. The objective of the collaboration is to provide assurance around the way copper is mined, processed, transported and brought to market.

In addition, on 7 December 2022, Anglo American signed a binding agreement to combine Anglo American's nuGen™ Zero Emissions Haulage Solution (ZEHS) with First Mode Holding Inc. (First Mode), the specialist engineering technology company that partnered with Anglo American to develop the nuGen™ ZEHS. The combination is expected to accelerate the development and deployment of the ZEHS technology across Anglo American's mine haul truck fleet, while exploring commercial opportunities for ZEHS across other industries that rely on heavy duty forms of transport. The transaction was completed on 5 January 2023.

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

Progress and current expectations in respect of our key growth projects are as follows:

Life-extension projects (metrics presented on a 100% basis unless otherwise indicated)

Progress and current expectations in respect of our key life-extension projects are as follows:

(1)    Refer to Anglo American plc Ore Reserves and Mineral Resources Report 2022 for additional information.

Technology projects(1)

The Group plans to continue investing c. $0.2-0.5 billion per year on projects to support the FutureSmart MiningTM programme and the delivery of Anglo American's Sustainable Mining Plan targets, particularly those that relate to safety, energy, emissions and water, including the following innovative technology projects (metrics presented on a 100% basis unless otherwise indicated):

(1)    Expenditure relating to technology projects is included within operating expenditure, or if it meets the accounting criteria for capitalisation, within Growth capital expenditure. Also includes capex on the regional renewable energy ecosystem in South Africa, which includes the Group's proportionate share of capex incurred by Envusa Energy.

Digital projects(1)

The Group plans to continue investing c. $0.1-0.2 billion per year on digital projects as part of the FutureSmart MiningTM programme (metrics presented on a 100% basis unless otherwise indicated):

(1)    Expenditure relating to digital programmes is included within underlying operating costs.

The Board

Changes during 2022 to the composition of the Board are set out below.

On 1 January 2022, Ian Tyler joined the Board as a non-executive director and member of the Audit and Remuneration committees.

On 19 April 2022, at the conclusion of the Company's Annual General Meeting:

-Duncan Wanblad joined the Board as chief executive.

-Mark Cutifani retired as chief executive and stepped down from the Board, after nine years in the role.

-Anne Stevens and Byron Grote stepped down from the Board as non-executive directors, having both served for nine years.

-Ian Tyler succeeded Anne Stevens as chair of the Remuneration Committee, and Hilary Maxson succeeded Byron Grote as chair of the Audit Committee.

-Ian Tyler succeeded Byron Grote as the Board's senior independent director.

-Marcelo Bastos succeeded Byron Grote as the designated non-executive director to chair the Anglo American Global Workforce Advisory Panel.

On 23 September 2022, Elisabeth Brinton stepped down from the Board as a non-executive director.

On 31 December 2022, Tony O'Neill stepped down from the Board and as technical director, following his decision to retire from the Group in June 2023.

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 and natural catastrophe risks

-Economic environment including product prices

-Cyber security

-Political

-Community and social relations

-Regulatory and permitting

-Operational performance

-Safety

-Climate change

-Pandemic

-Corruption

-Water

-Future demand

The Group is exposed to changes in the economic environment, including to tax rates and regimes, as with any other business. Details of any key risks and uncertainties specific to the period are covered in the Operations review section. Details of relevant tax matters are included in note 6 to the Condensed financial statements.

The principal risks and uncertainties facing the Group at the 2022 year end are set out in detail in the strategic report section of the Integrated Annual Report 2022 on the Group's website from 6 March 2023 www.angloamerican.com.

De Beers - Diamonds

Financial and operational metrics(1)

Copper Peru

The world class Quellaveco copper mine in Peru was delivered on time and on budget during 2022 - a major achievement for the Group. First production of copper concentrate was announced on 12 July 2022, with concentrate shipments commencing at the end of September. The second processing line started up in September, with regulatory clearances received in early December.

Quellaveco produced 102,300 tonnes at a C1 unit cost of 136 c/lb, reflecting the operational ramp-up.

The delivery of the project has taken place against an extremely challenging backdrop through more than two years of pandemic-related disruption. Despite this, Quellaveco is producing copper in line with the original construction schedule and less than four years after project approval. The final total capex estimate is $5.5 billion and is in line with the 2020 budget to accommodate Covid-19 requirements. The Group's share of the final total capex is $2.8 billion.

With the mine operational, focus is now on safely ramping up the processing plant to nameplate capacity, receiving the required regulatory clearances for the molybdenum plant and completing the construction and commissioning of the coarse particle recovery (CPR) plant. We are also working closely with government and local communities on the safe and responsible demobilisation of the project workforce by the middle of 2023.

Operational outlook

Copper Chile

Production guidance for Chile for 2023 is 530,000-580,000 tonnes, subject to water availability.

C1 unit cost guidance for 2023 is c.190 c/lb.

There is limited near term production impact from the rejection of the environmental permit application for the Los Bronces Integrated Project in early 2022. Anglo American is continuing to participate in the appeals process to make available any additional information required, as the merits of the project are re-evaluated by a Committee of Ministers. Anglo American remains hopeful that the positive impact this project will have on the local area, including an improvement to air quality, as well as a major long term inward investment for Chile, will be recognised to enable urgent critical-path mine planning activities to get under way.

Copper Peru

Production guidance for Peru for 2023 is 310,000-350,000 tonnes.

C1 unit cost guidance for 2023 is c.100 c/lb., subject to any socio-political effects and full ramp-up.

Project capital expenditure guidance for 2023 is c.$0.2 billion (100% basis), of which the Group's share is c.$0.1 billion.

Quellaveco expects to deliver around 300,000 tonnes per annum of copper equivalent production on average in its first 10 years of operation.

Nickel

Financial and operational metrics

(1)    Realised price.

(2)    C1 unit cost. 

Financial and operational overview

Underlying EBITDA increased by 19% to $381 million (2021: $320 million), reflecting higher realised prices, partially offset by higher unit costs and lower sales volumes. C1 unit costs increased by 36% to 513 c/lb (2021: 377 c/lb) as a result of high input cost inflation, particularly on consumables, lower production volumes and the stronger Brazilian real.

Capital expenditure increased to $79 million (2021: $29 million), primarily due to planned higher expenditure on productivity initiatives, such as bulk ore sorting.

Markets

Differences between the market price (which is LME-based) and our realised price (the ferronickel price) are due to the discounts (or premiums) to the LME price, which depend on market conditions, supplier products and consumer preferences. 

The average LME nickel price of $11.61/lb was 38% higher (2021: $8.39/lb). Global nickel consumption grew year on year, with the fourth quarter seeing the highest level of consumption as China began to recover from earlier Covid-19 related industrial stoppages. Batteries were the main driver of demand growth, as the production of electric vehicles continued to accelerate. Global refined nickel production also increased in the year; however, the nickel price was further supported by the decision of some purchasers to avoid Russian-sourced metal, following the invasion of Ukraine. 

Operational performance

Nickel production decreased by 5% to 39,800 tonnes (2021: 41,700 tonnes), primarily due to lower ore grades as a result of licensing delays, as well as the impact of unplanned maintenance and heavy rainfall. Sales volumes were further impacted by logistics constraints, primarily in the container freight sector.

Operational outlook

Production guidance for 2023 is 38,000-40,000 tonnes.

C1 unit cost guidance for 2023 is c.515 c/lb.

Platinum Group Metals

Financial and operational metrics

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

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

(3)    Average US$ realised basket price, based on sold ounces (own-mined and purchased concentrate). 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 (Kroondal and Modikwa). 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 decreased to $4,417 million (2021: $7,099 million), primarily reflecting lower sales volumes as the prior year benefited from the processing of higher than normal work-in-progress inventory following the ACP Phase A rebuild, as well as the impact of the Polokwane smelter rebuild in the second half of 2022. Underlying EBITDA was also affected by an 8% decrease in the basket price to $2,551/PGM ounce (2021: $2,761/PGM ounce), as well as higher unit costs. Unit costs increased by 8% to $937/PGM ounce (31 December 2021: $868/PGM ounce), impacted by high input cost inflation and lower production, partly offset by the weaker South African rand.

Capital expenditure increased by 14% to $1,017 million (2021: $894 million), driven by the impact of Covid-19 related deferrals in 2021.

Markets

The average realised PGM basket price decreased by 8% to $2,551 per PGM ounce (2021: $2,761 per PGM ounce), reflecting lower market prices. PGM prices surged in early 2022 owing to supply concerns following Russia's invasion of Ukraine, but soon fell back when no trade sanctions were levied on Russian metal. The price decline was exacerbated by growing fears of another poor year for automotive production due to renewed Chinese Covid-19 lockdowns. Sentiment improved in the second half as restrictions eased in China, leading to a sharp recovery in global automotive production, underpinned by an improvement in manufacturing supply chains. The recovery in automotive production resulted in a rally in palladium and rhodium prices; however, platinum prices continued to

struggle as tighter US monetary policy pushed the US dollar to multi-decade highs. By the end of the year, the situation had reversed, with palladium and rhodium prices decreasing on fears of a global slowdown, while platinum prices rallied as the US dollar retreated.

The palladium price was particularly volatile, reaching a new all‑time high of almost $3,340 per ounce in March 2022, reflecting the importance of Russian supply, albeit the metal started and ended the year below $2,000 per ounce. Platinum prices also peaked in March but the late rally meant it increased by 11% over the year. Strong by-product prices and differences in the timing and mix of metals sold cushioned the impact of lower PGM prices on the realised basket price.

Operational performance

Total PGM production decreased by 6% to 4,024,000 ounces (2021: 4,298,700 ounces), principally due to lower grade at Mogalakwena and the impact of planned infrastructure closures at Amandelbult, partially offset by increased production from Mototolo and Unki.

Own-mined production

PGM production from own-managed mines (Mogalakwena, Amandelbult, Unki and Mototolo) and equity share of joint operations decreased by 7% to 2,649,200 ounces (2021: 2,858,300 ounces).

Mogalakwena PGM production decreased by 16% to 1,026,200 ounces (2021: 1,214,600 ounces), largely as a result of lower grades as well as the impact of Eskom load-shedding.

Amandelbult PGM production decreased by 8% to 712,500 ounces (2021: 773,200 ounces) as a result of the planned mining infrastructure closures and the closure of the Merensky Concentrator, as well as the impact of Eskom load-shedding.

Production from other operations increased by 5% to 910,500 ounces (2021: 870,500 ounces), reflecting the benefit of concentrator debottlenecking projects at Unki and Mototolo, as well as higher grades due to improved ground conditions at Mototolo, offsetting lower production from Kroondal as a consequence of planned infrastructure closures.

Purchase of concentrate

Purchase of concentrate decreased by 5% to 1,374,800 ounces (2021: 1,440,400 ounces), driven by lower third-party receipts as well as the impact of lower production at Kroondal.

Refined production and sales volumes

Refined PGM production (excluding toll-treated metal) decreased by 25% to 3,831,100 ounces (2021: 5,138,400 ounces) as the first half of 2021 benefited from the processing of higher than normal work-in-progress inventory following the ACP Phase A rebuild in the fourth quarter of 2020. The second half of 2022 was impacted by the planned structural rebuild of the Polokwane smelter - a process that was extended by approximately two months following the receipt of materials found to be sub-standard as identified through our quality assurance processes.

PGM sales volumes decreased by 26% to 3,861,300 ounces (2021: 5,214,400 ounces), in line with refined production.

Operational outlook

PGM metal in concentrate production guidance for 2023 is 3.6-4.0 million ounces, with own-mined output accounting for c.65%. Refined PGM production guidance for 2023 is 3.6-4.0 million ounces, subject to the impact of Eskom load-shedding. 

Unit cost guidance for 2023 is c.$1,025/PGM ounce.

Steelmaking Coal

Financial and operational metrics

(1)  Production volumes are saleable tonnes, excluding thermal coal production of 1.6 Mt (2021: 1.7 Mt). Includes production relating to processing of third-party product.

(2)     Sales volumes exclude thermal coal sales of 1.7 Mt (2021: 2.1 Mt). 2022 includes 0.3 Mt of steelmaking coal mined by third parties and processed by Anglo American.

(3)  Realised price is the weighted average hard coking coal and PCI sales price achieved at managed operations.

(4)    FOB cost per tonne, excluding royalties and study costs. 

Financial and operational overview

Underlying EBITDA increased to $2,749 million (2021: $962 million), driven by a 52% increase in the weighted average realised price for steelmaking coal and higher sales volumes. This was partially offset by a 2% increase in unit costs to $107/tonne (2021: $105/tonne), reflecting higher inflation and the impact of tight labour markets. Also included is $250 million for the finalisation of the Grosvenor gas ignition claim by the Group's self-insurance entity that was received in the first half of the year, as well as a further $93 million insurance receipt in December for the overpressure event claim at Moranbah. 

Capital expenditure was flat at $648 million (2021: $649 million), with higher development-related spend across all three underground mines largely offset by lower life-extension expenditure following the completion of the Aquila project, where longwall production began in February 2022.

Within special items and remeasurements, impairment reversals of $211 million and $217 million (before tax) were recognised at Moranbah-Grosvenor and Dawson respectively. The reversal at Moranbah-Grosvenor represents a partial reversal of previous impairments, with improvements in the macro-economic environment partially offset by a revised production profile and deferral of the expansion project. The majority of the Dawson reversal is arising from value expected to be generated in the short term.

Markets

(1)  Represents average spot prices.

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

Average realised prices differ from the average market prices due to differences in material grade and timing of shipments. Hard coking coal (HCC) price realisation decreased to 85% of average benchmark price (2021: 93%), driven by a higher volume of premium HCC being produced and sold in the second half of 2022 when the benchmark price was lower. 

The average benchmark price for Australian HCC reached a record high of $364/tonne (2021: $226/tonne). In the first half of 2022, steelmaking coal prices rose on Queensland supply challenges and buyers' anxiety around the effects of sanctions on Russian supply. The daily spot index rallied to record multiple highs and eventually peaked at $671/tonne in March 2022. In the second half of the year, HCC prices remained at elevated levels due to ongoing supply challenges in Australia and Canada, despite a significant decline in demand from global steelmakers and coke merchants.

Operational performance

Production was broadly flat at 15.0 Mt (2021: 14.9 Mt), with all three underground longwalls operating in the second half of 2022. The planned end of mining at the Grasstree operation in January 2022 was partially offset by the ramp-up of the replacement Aquila longwall, which began operations in February 2022, and fully ramped up in June.

At Grosvenor, longwall operations restarted in February 2022 following regulatory approval, while longwall mining restarted at Moranbah in the next planned longwall panel in May 2022, following a fatal incident in March 2022, and an extended longwall move. Both these longwall operations have continued to ramp up during the second half of the year under the new operating protocols and regulatory environment - a learning process that will continue through 2023.

Production was also impacted by tight labour markets and record unseasonal rainfall at the open pit operations.

Operational outlook

Export steelmaking coal production guidance for 2023 is 16-19 Mt. 

Unit cost guidance for 2023 is c.$105/tonne.

Manganese

Financial and operational metrics

Financial and operational overview

Manganese (Samancor)

Underlying EBITDA increased by 20% to $378 million (2021: $315 million), benefiting from a stronger average realised manganese ore price, partially offset by a 4% decrease in manganese ore sales volumes and by increased freight and operating costs.

The average benchmark price for manganese ore (Metal Bulletin 44% manganese ore CIF China) increased by 16% to $6.06/dmtu (2021: $5.21/dmtu). Prices increased strongly in the first half of the year, but were on a declining trend through much of the second half. Prices regained some ground during December, ending the year at $5.13/dmtu.

Operational performance

Attributable manganese ore production was flat at 3.7 Mt (2021: 3.7 Mt).

Crop Nutrients

Financial and operational metrics

(1)    Other comprises projects and corporate costs as well as the share in associate results from The Cibra Group, 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 project is located on the North Yorkshire coast, just south of Whitby, where polyhalite ore will be extracted via 1.6 km deep mine shafts and transported to Teesside via an underground conveyor belt in a 37 km tunnel, thereby minimising any environmental impact on the surface. It will then be granulated at a materials handling facility to produce a low carbon fertiliser - known as POLY4 - that will then be exported from our port facility, where we have priority access, to a network of customers around the world. POLY4 will enable farmers to enhance their crop yield, increase crop quality and improve soil structure with one core product.

Progress update

Woodsmith project

Throughout 2022, we continued with the detailed design reviews and non-critical path studies, following which a number of areas were modified to align with Anglo American's standards and optimise value for the long term. Progress has continued to plan on the core project infrastructure, with capital expenditure of $522 million in 2022.

During the year, as part of the construction review, contracts were awarded for the shaft sinking operations, programme management services and construction management to ensure the project can be executed in line with Anglo American's stringent requirements.

With the award of these contracts and other infrastructure improvements, activities at the deep shafts have progressed well during 2022. The service shaft is now more than 360 metres deep, while shaft sinking began 120 metres below the surface for the production shaft in January 2023, as planned.

Three intermediate shafts will provide both ventilation and additional access to the mineral transport system (MTS) tunnel. The Lockwood Beck intermediate access shaft was successfully completed in 2022 and is fully lined and connected to the tunnel. Work on the MTS shaft at the mine head progressed through 2022 and is 85% complete, and the excavation at the final intermediate access shaft at the Ladycross site commenced in early 2023.

Following a planned maintenance pause in mid-2022 to refurbish the tunnel boring machine and allow the connection with the Lockwood Beck shaft, the mineral transport tunnel is now past the 21 km point and is more than 56% complete, progressing at rates not seen since the start of the tunnelling activities.

As noted in a number of market updates throughout 2022, we are enhancing the project's configuration - including the capacity of the shafts and other infrastructure to accommodate higher production volumes and more efficient and scalable mining methods over time - to ensure we deliver maximum commercial returns from Woodsmith over the expected multi-decade asset life. These project team proposals, endorsed by the Board at the end of the year, indicate an extension of the development schedule and the capital budget, compared to what was previously anticipated. 

In light of these changes, we now expect first product to market in 2027, with an annual capital investment of around $1.0 billion. We also expect design capacity to increase from c.10 Mtpa to c.13 Mtpa, subject to studies and approval. $0.8 billion is approved for 2023, with the bulk of initial spend on the shaft sinking and tunnel boring activities. As usual in developing underground mines, the schedule will largely be determined by the ground conditions encountered as sinking activities progress.

We believe that the changes we have made to the project have had a materially positive impact on the project's long term attractiveness and prospects. However, for accounting purposes at this early stage of the project's development, we have recognised an impairment of $1.7 billion to the carrying value of the asset within special items and remeasurements, reflecting the extension of the development schedule and capital budget.

Market development - POLY4

The ongoing focus of the market development activities is to develop and implement detailed sales and marketing strategies for each region and to support customers with their own market development activities to further promote POLY4 to the end users of the product - farmers.

The number of commercial scale on-farm demonstrations has accelerated, with more than 1,500 now complete and hundreds more in progress. The demonstrations continue to validate the extent of improvements that our product can deliver to farmers in terms of crop yield and quality. In addition, studies show POLY4 enhances soil health through resilience to compaction, erosion and run-off, as well as improve nutrient availability to crops and fertiliser nutrient use efficiency.

POLY4 offers farmers a solution to agricultural efficiency and sustainability challenges through its naturally low chloride multi-nutrient composition, its suitability for organic use and low carbon profile, with a carbon footprint up to 85% lower compared to conventional fertilisers, and with little waste generated in its production.

Corporate and Other

Financial metrics