Anglo American results H1 2014 | RNS | Ticker

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Anglo American results H1 2014

RNS Announcement

RNS Number : 2945N

Anglo American PLC

25 July 2014

Anglo American Interim Results 2014

Continuing improvement in operating performance against backdrop of weaker commodity prices

· Improved business performance, reflecting a greater focus on mining processes and costs, underpins turnaround strategy

· Higher volumes across most of the portfolio, with cash costs down 2% in real terms

· Headwinds of weaker commodity prices ($1.0 billion underlying operating profit impact) and the effects of the platinum strike ($385 million underlying operating profit impact)

· Group underlying operating profit⁽¹⁾ of $2.9 billion for the half year, a 10% decrease

· Long term net debt target of $10 to $12 billion, supported by increased operating cash flows and divestment proceeds from refocusing of portfolio

Financial highlights US$ million, unless otherwise stated	6 months ended 30 June 2014	6 months ended 30 June 2013	Change
Underlying operating profit⁽¹⁾	2,932	3,262	(10)%
Underlying earnings⁽²⁾	1,284	1,250	3%
Group revenue (incl. associates and JVs)⁽³⁾	16,144	16,193	-
Profit before tax⁽⁴⁾	2,945	1,994	48%
Profit for the financial period attributable to equity shareholders of the Company⁽⁴⁾	1,464	403	263%
Underlying earnings per share (US$)⁽²⁾	1.00	0.98	2%
Interim dividend per share (US$)	0.32	0.32	-
Attributable ROCE%⁽⁵⁾	10%	11%

Notes to the table are shown on the following page.

Mark Cutifani, Chief Executive of Anglo American, said: "Anglo American's improved business performance, assisted by depreciating producer currencies, partially offset the headwinds of input cost inflation, the effect of the platinum strike and lower prices, primarily in bulk commodities. This performance underlines the merits of our business strategy of commodity and geographic diversification.

"Looking at our allocation of capital across the portfolio, we have resolved to refocus on those assets that offer us the greatest source of potential value - over the short and long term - and that best match our chosen areas of focus and skills to drive returns. In Platinum, we have already outlined plans to reposition the portfolio through the planned divestment of Rustenburg and Union mines and our interest in the Pandora JV operation. We plan to divest a number of other assets at the appropriate time and to redeploy that capital to support our drive for higher returns. I expect our divestments and improved business performance to support a long term net debt target of $10 to $12 billion.

"Our Driving Value programme is delivering improved operational performance, reflecting a greater focus on mining processes and costs. Across the portfolio, production volumes were up, with the notable exception of Platinum. At Sishen, where the recovery plan is being implemented, we have seen improved mining and production volumes of 5% and expect a further increase in waste volumes in the second half. In our Copper business, the 12% increase in production also demonstrates the benefits of greater mine efficiency and throughput gains.

"I can also report that we are on track to ship first iron ore from our Minas-Rio project in Brazil by the end of this year. At the end of June, we had completed 95% of the project required to achieve this objective. We are commissioning all areas of the operation and expect to complete within the budgeted total capital cost of $8.8 billion."

Mark Cutifani, added: "Safety is the clearest indicator of how we are managing the business and is always my first priority. We recorded the first quarter of 2014 with no loss of life and this positive trend in safety performance is continuing, with the key indicators all showing improvement. Our total recordable case frequency rate of 0.74 is a 31% improvement compared to FY 2013 and the lowest level ever achieved by Anglo American, while recognising that the Platinum strike did contribute to some of the safety improvements. We have made progress but it is unacceptable that three of our people have lost their lives in the first six months of this year and that others suffered injury. We are focused on five key areas which are characteristic of effective and sustainable safety management: leadership, planning, risk management, incident management and effective frontline supervision.

"The first six months of 2014 for the mining industry have seen ongoing soft demand and declines in average realised prices for most of the commodities Anglo American produces, compared to both the first half of 2013 and 2013 as a whole, reflecting uncertainty surrounding global economic growth prospects in the developed and developing economies.

"Looking at the operational improvements in more detail, we have started to make good progress at our Copper business's two largest operations in Chile at Los Bronces and Collahuasi, where mine planning improvements, stripping volumes and process tonnages, as well as strong grades in H1, delivered a 12% increase in copper production. At the constrained Sishen iron ore mine in South Africa, a redesign of the pit and changes to core operating processes are beginning to increase production. Kumba's Kolomela mine continues to perform strongly, at above production design capacity, and serves to partially offset the current challenges at Sishen. De Beers continued its upward performance trajectory, increasing output by 12% driven by stronger production performance and sales into rising demand. In Coal, we saw record first half metallurgical coal production of 10.9 Mt, a 21% increase, having improved underground longwall cutting hours at Grasstree by 60% and at Moranbah North by 5%. These improvements helped to partially offset the sharply lower price environment.

"As we look at the global economic outlook, uncertainty is likely to persist for the balance of 2014, though there are some encouraging signs that activity is strengthening in our key markets. Our diversified portfolio positions us well for the potential significant further urbanisation and industrialisation required to support growth in China and other emerging economies, while an expanding middle class is expected to support a rising intensity of consumption for our late cycle products. Over the long term, we expect new supply to be constrained and to see tightening market fundamentals and a recovery in price performance."

Notes to the table on page 1

⁽¹⁾ Underlying operating profit is presented before special items and remeasurements and includes the Group's attributable share of associates' and joint ventures' operating profit before special items and remeasurements - see notes 4 and 5 to the Condensed financial statements. For the definition of special items and remeasurements, see note 6 to the Condensed financial statements.

⁽²⁾ See note 10 to the Condensed financial statements for basis of calculation of underlying earnings.

⁽³⁾Includes the Group's attributable share of associates' and joint ventures' revenue of $1,923 million (H1 2013: $1,788 million). See note 4 to the Condensed financial statements.

⁽⁴⁾Stated after special items and remeasurements. See note 6 to the Condensed financial statements. For the six months ended 30 June 2014, special items and remeasurements, including the attributable share of associates and joint ventures, and after tax and non-controlling interests, amounted to a gain of $180 million (H1 2013: loss of $847 million).

⁽⁵⁾Attributable ROCE is based on underlying performance and reflects the realised prices and foreign exchange during the period, and is in line with commitments made as part of the Driving Value initiatives. Where ROCE relates to a period of less than one year, the return for the period has been annualised (with the exception of De Beers - see footnote on page 25).

Financial review of Group results for the six months ended 30 June 2014

Anglo American's underlying earnings for the first half of 2014 were $1.3 billion, 3% higher than for the same period in 2013, with an underlying operating profit of $2.9 billion, a 10% decrease from $3.3 billion. Continuing weak global economic growth, coupled with increases in seaborne commodity supply, led to a further decline in many commodity prices. The lower price environment and platinum strike impact more than offset currency gains and improved business performance.

Generally lower realised prices of commodities resulted in a reduction of $1.0 billion in underlying operating profit. The lower prices included a 23% decrease in achieved Australian export metallurgical coal prices, a 17% decrease in achieved iron ore prices at Kumba and a 3% decrease in realised copper prices. Despite a decrease in unit costs at Copper and De Beers, driven by increased production and at Coal Australia and Canada, due to improved operating efficiencies leading to higher production, costs elsewhere were affected by cost pressures and higher waste-stripping.

The decrease in underlying operating profit was partly offset by the weakening of producer currencies ($0.8 billion) and improved operational performance. Production increases were delivered at the Coal, Iron Ore, Copper, De Beers, and Nickel businesses. Other businesses were impacted by a number of events, including strikes and inclement weather.

Attributable ROCE was 10% versus 11% in the same period in the prior year. This was a consequence of lower operating profit coming from Kumba Iron Ore, Anglo American Platinum and Coal Australia and Canada. Average attributable capital employed increased from $39 billion at 30 June 2013 to $41 billion at 30 June 2014, primarily due to increased capital expenditure during the 12 month period.

Underlying operating profit/(loss)

US$ million	6 months ended 30 June 2014	6 months ended 30 June 2013
Iron Ore and Manganese	1,229	1,653
Coal⁽¹⁾	260	345
Copper	760	635
Nickel	26	(11)
Niobium⁽¹⁾	34	42
Phosphates⁽¹⁾	9	48
Platinum	(1)	187
De Beers	765	571
Corporate and other⁽¹⁾	(150)	(208)
	2,932	3,262

⁽¹⁾ Refer to note 4 in the Condensed financial statements for changes in reporting segments. Comparatives have been reclassified to align with current year presentation.

Iron Ore and Manganese recorded an underlying operating profit of $1,229 million, 26% lower than the corresponding period in 2013. This was driven by a 17% decrease in achieved iron ore prices at Kumba and higher costs, due to the ramp-up in waste volumes and cost pressures. Samancor also contributed to the fall in underlying operating profit, with a decrease in realised prices.

Production of iron ore increased by 5% to 22.8 Mt. Kolomela is performing above production design capacity and the execution of the recovery plan at Sishen is under way. Manganese ore production decreased by 6% to 1.6 Mt, while manganese alloy production increased 5% to 137,300 tonnes.

Coal delivered an underlying operating profit of $260 million, a 25% decrease on the first half of 2013. This was primarily due to the impact of lower realised export prices and a decrease in self-insurance recovery amounts by $23 million. This was compensated for in part by strong cost management at Coal Australia and Canada, resulting in a 4% decrease in unit cash costs at the Australian export operations and a $22 million profit on sale of reserves in South Africa.

Total production of coal increased by 3% to 48.5 Mt. Record export metallurgical coal production of 10.9 Mt was driven by productivity improvements at both the open-cut and underground operations. A focus on high-margin products resulted in a favourable product mix towards higher-quality coking coal. Export thermal coal production from South Africa increased by 6% through productivity improvements. Production at Cerrejón increased by 29%, primarily due to the strike impact in Q1 2013.

Copper recorded an underlying operating profit of $760 million, 20% higher than for the first half of 2013, due to a 15% increase in sales volumes and lower unit costs of production, offset by a 3% decline in the average realised copper price. The increase in sales volumes was driven by higher production, which increased by 12% to 396,400 tonnes. This was driven by improved performance at Los Bronces and Collahuasi, the result of continued improvement in throughput and higher grades, as well as by higher recoveries at Los Bronces. Production is expected to decline in H2 2014, as forecast, due to lower grades at Los Bronces and Collahuasi.

Nickel reported an underlying operating profit of $26 million, a $37 million improvement, due to a $26 million favourable exchange-rate gain on Loma de Níquel as well as improved cash costs at Codemin and lower study-cost spend at projects. Underlying operating profit from the Barro Alto project continues to be capitalised as the asset is not yet in commercial production. Production increased by 35% to 19,800 tonnes following improved operational stability at Barro Alto.

Niobium's underlying operating profit decreased by 19% to $34 million, due to lower sales prices, the effects of inflation and higher cash costs. Sales volumes of 2,300 tonnes and production of 2,200 tonnes were both in line with the first six months of 2013.

Phosphates' underlying operating profit decreased by 81% to $9 million, due to softer sales prices and inflation, partially offset by the devaluation of the Brazilian real. Fertiliser production decreased by 5% to 542,900 tonnes, as a consequence of maintenance stoppages, throughput constraints and weather induced power shortages.

Platinum's underlying operating loss was $1 million, compared to an underlying operating profit of $187 million in the first half of 2013, as a result of the five-month-long industrial action by the AMCU trade union at the Union, Rustenburg and Amandelbult operations. Sales volumes were maintained at H1 2013 levels, as production was supplemented by sales from stock, which reduced the impact of the prolonged strike on the financial results of the business.

Equivalent refined platinum production of 715,200 ounces decreased by 39% owing to the impact of the industrial action. Refined platinum production of 855,800 ounces, however, was only 16% lower as pipeline stock was drawn down.

De Beers recorded an underlying operating profit of $765 million, an increase of 34%. The increase was primarily due to solid demand across key markets, resulting in strong revenue growth, together with favourable exchange rate trends.

Production increased by 12% to 16.0 million carats following a strong performance by Debswana and the South African operations. This rise in output reflected improvements in productivity and the business's ability to cope with adverse weather conditions, together with the recovery from the impacts in 2013 of the Jwaneng slope failure clean-up and Orapa's planned plant maintenance.

Corporate and other's underlying operating loss was $150 million, a 28% improvement on the same period last year, driven mainly by improved performance from the Lafarge Tarmac joint venture.

Corporate costs considered to be directly value adding are allocated to each business unit. Costs reported externally as Group corporate costs only comprise costs associated with parental or direct shareholder related activities.

Underlying Earnings

Group underlying earnings were $1,284 million, a 3% increase (H1 2013: $1,250 million).

		30 June 2014
US$ million	Underlying operating profit/(loss)	Net finance costs and income tax expense	Non-controlling interests	Underlying earnings

Iron Ore and Manganese	1,229	(399)	(387)	443
Coal⁽¹⁾	260	(95)	(4)	161
Copper	760	(274)	(177)	309
Nickel	26	3	-	29
Niobium⁽¹⁾	34	(11)	-	23
Phosphates⁽¹⁾	9	1	-	10
Platinum	(1)	(9)	9	(1)
De Beers	765	(200)	(96)	469
Corporate and other⁽¹⁾	(150)	(16)	7	(159)
	2,932	(1,000)	(648)	1,284

⁽¹⁾ Refer to note 4 in the Condensed financial statements for changes in reporting segments.

Net finance costs

Net finance costs, before special items and remeasurements, excluding associates and joint ventures, were $73 million (30 June 2013: $201 million). Interest costs were lower primarily due to an increase in the amount of interest capitalised, mainly at the Minas-Rio and Grosvenor projects.

Tax

The effective rate of tax before special items and remeasurements including attributable share of associates' and joint ventures' tax was 31.5%. This was lower than the equivalent effective rate of 32.7% in the six months ended 30 June 2013 due to the impact of various prior year adjustments. In future periods it is expected that the effective tax rate will remain above the United Kingdom corporate tax rate.

Reconciliation to profit for the period from underlying earnings US$ million	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying earnings	1,284	1,250
Operating special items	(61)	(410)
Operating remeasurements	179	(402)
Non-operating special items	19	(83)
Financing special items and remeasurements	45	(35)
Special items and remeasurements tax	(4)	75
Non-controlling interests on special items and remeasurements	(4)	45
Share of associates' and joint ventures' special items and remeasurements	6	(37)
Profit for the financial period attributable to equity shareholders of the Company	1,464	403
Underlying earnings per share (US$)	1.00	0.98

Special items and remeasurements

Operating special items of $61 million relate to restructuring costs, principally in respect of organisational changes as part of the Driving Value programme (H1 2013: $410 million principally relating to impairments at the Isibonelo and Kleinkopje operations in Coal South Africa, and the remaining reversal of the De Beers inventory uplifts relating to inventory which was fair valued on acquisition and subsequently sold). Operating remeasurements reflect net gains (H1 2013: losses) on derivatives, mainly related to capital expenditure in Iron Ore Brazil.

The net non-operating special items gain of $19 million includes a $22 million gain on the Atlatsa refinancing transaction in the Platinum segment and the Kumba Envision Trust charge of $19 million (H1 2013:$26 million). Further non-operating special items in H1 2013 included a loss of $46 million on the revaluation of Amapá assets held for sale, a $55 million loss on the formation of the Lafarge Tarmac joint venture, and a gain of $44 million on deferred proceeds from the sale of undeveloped coal assets in Australia in 2010.

Financing special items and remeasurements reflect a net gain of $45 million (H1 2013: net loss of $35 million) principally comprising gains on derivatives relating to debt.

Special items and remeasurements tax amounts to a charge of $4 million (H1 2013: credit of $75 million). This comprises a tax charge on special items and remeasurements of $82 million (H1 2013: tax credit of $241 million) and a tax remeasurement credit of $78 million (H1 2013: charge of $166 million). Tax remeasurements relate to foreign exchange impacts arising in US dollar functional currency entities where tax calculations are generated based on local currency financial information and hence deferred tax is susceptible to currency fluctuations.

Capital expenditure

US$ million	6 months ended 30 June 2014	6 months ended 30 June 2013
Iron Ore and Manganese	1,312	877
Coal⁽¹⁾	457	476
Copper	333	472
Nickel⁽²⁾	(26)	(18)
Niobium⁽¹⁾	90	64
Phosphates⁽¹⁾	18	8
Platinum	245	235
De Beers	320	255
Corporate and other⁽¹⁾	15	28
	2,764	2,397

⁽¹⁾ Refer to note 4 in the Condensed financial statements for changes in reporting segments. Comparatives have been reclassified to align with current year presentation.

⁽²⁾ Cash capital expenditure for Nickel of $35 million (H1 2013: $19 million) is offset by the capitalisation of $61 million (H1 2013: $37 million) of net operating cash flows generated by Barro Alto which has not yet reached commercial production.

Capital expenditure was $2,764 million, 15% higher than for the first half of 2013, driven by the Minas-Rio iron ore project, partially offset by lower expenditure in Copper. Capital expenditure guidance for 2014 is between $6.5 billion and $7.0 billion, including $0.8 billion of deferred stripping capital expenditure.

Cash flow

Net cash inflows from operating activities were $3,510 million (H1 2013: $3,167 million), an increase of 11% despite the 8% decrease in underlying EBITDA. This was primarily driven by a reduction in working capital investment in 2014.

Inflows on working capital in the current period of $180 million (H1 2013: outflows of $735 million) reflected $123 million inflow on inventories, primarily due to release of stock at Platinum during the strike action in the first half of 2014, as well as debtor decreases of $494 million, due to high year end debtors at Kumba and Copper, following strong production performance in the closing months on 2013, being received in the period.

Net cash used in investing activities of $2,753 million (H1 2013: $2,436 million) was primarily attributable to capital expenditure of $2,764 million (H1 2013: $2,397 million).

Net cash used in financing activities was $39 million (H1 2013: $1,682 million). This included cash receipts on issuance of bonds of $3,165 million offset by net repayments of borrowings of $1,517 million, dividend payments to Company shareholders and non-controlling interests totalling $1,198 million, as well as interest payments of $503 million.

Capital structure

Net debt (including related hedges) of $11,515 million was $863 million higher than at 31 December 2013 and $1,759 million higher than at 30 June 2013. The increase in net debt compared to full year 2013 was driven by capital expenditure of $2,764 million, the payment of dividends of $696 million to Company shareholders and $502 million to non-controlling interests, and interest payments of $503 million. This was partially offset by cash from operating activities of $3,510 million.

Following the issue of $3.5 billion of bonds in 2013, the Group issued further bonds of $3.2 billion consisting of $1.0 billion through accessing the US bond markets, $2.1 billion under the Euro Medium Term Note programme and $0.1 billion under the South African Domestic Medium Term Note programme during the period.

Anglo American's objective is to maintain a strong investment grade rating, which demands rigorous capital discipline. However, we recognise that over the next year and a half we will have limited flexibility due to heavier capital expenditure commitments as we complete the development of Minas-Rio, in Brazil, and Grosvenor, in Australia, after which we expect capital expenditure to be moderated. Anglo American is targeting a long term net debt level of $10 to $12 billion.

Liquidity and funding

Net debt at 30 June 2014 comprised $19,961 million of debt and derivative liabilities, offset by $8,446 million of cash and cash equivalents. At 30 June 2014 the gearing level was 23.1%, compared with 22.2% at 31 December 2013. At 30 June 2014, the Group had undrawn committed bank facilities of $9.1 billion.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, indicate the Group's ability to operate within the level of its current facilities for the foreseeable future.

Dividends

An interim dividend of 32 US cents per share (H1 2013: 32 US cents per share) has been declared, in line with the Board's commitment to provide a base dividend, which will be maintained or increased through the cycle.

The Board

On 1 January 2014, Dr Judy Dlamini joined the Board as a non-executive director. Dr Dlamini is a successful businesswoman with longstanding public company board experience across a range of geographies. On 24 April, Sir CK Chow and David Challen retired from the Board, having served since 2008 and 2002 respectively. The effect of these changes is that since the appointment of Sir John Parker as chairman in August 2009, there has been a 100% change in the Company's non-executive directors.

In addition to the above appointment and retirements, Sir Philip Hampton was appointed senior independent non-executive director in place of David Challen on 24 April and, on the same date, Dr Byron Grote took over the chairmanship of the Audit Committee from David Challen.

Related party transactions

Related party transactions are disclosed in note 16 to the Condensed financial statements.

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 at the year end were set out in detail in the operating and financial review section of the Annual Report 2013 (pages 46-53), and have not changed significantly since. Key headline risks relate to the following:

· Commodity prices

· Liquidity risk

· Currency risk

· Inflation

· Safety and health

· Environment

· Political, legal and regulatory

· Operational performance and project delivery

· Event risk

· Employees

· Infrastructure

· Community relations

· Information and cyber security

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 Annual Report 2013 is available on the Group's website www.angloamerican.com.

Operations review for the six months ended 30 June 2014

In the operations review on the following pages, underlying operating profit includes the attributable share of associates' and joint ventures' operating profit and is before special items and remeasurements unless otherwise stated. Capital expenditure relates to cash expenditure on property, plant and equipment including cash flows on related derivatives.

IRON ORE AND MANGANESE

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit	1,229	1,653
Kumba Iron Ore	1,182	1,596
Iron Ore Brazil	(9)	(12)
Samancor	99	116
Projects and corporate	(43)	(47)
Underlying EBITDA	1,381	1,787
Capital expenditure	1,312	877
Kumba Iron Ore	305	248
Iron Ore Brazil	1,007	629
Share of Group underlying operating profit	42%	51%
Attributable return on capital employed %	13%	22%
Kumba Iron Ore	80%	113%
Iron Ore Brazil	(0)%	(1)%
Samancor	23%	24%

Underlying operating profit for Iron Ore and Manganese declined by 26% to $1,229 million. This was attributable to softening average iron ore export prices at Kumba, which were 17% weaker, and a marginal increase in operating expenses, mainly as a result of higher mining volumes.

Markets⁽¹⁾

Iron ore

At 30 June, global crude steel production had increased by 4% year on year to 819 Mt, (H1 2013: 790 Mt), with China's record H1 2014 production of 409 Mt⁽²⁾ being 5% higher (H1 2013: 389 Mt⁽²⁾). Following seasonal trends, Chinese steel mills drew down their iron ore inventory in early 2014, and this served to reduce apparent iron ore demand in the first half of the year. Global seaborne iron ore supply increased to almost 700 Mt, driven by strong export growth of 25% from Australia, with a further 8% growth from Brazil. Chinese imports of iron ore grew strongly and displaced some of the high cost domestic material.

Average prices (CFR China 62% Fe) were down 19% at $111/t (H1 2013: $137/t). Prices have steadily declined from $134/t at the beginning of the year, with the index price ending the first half of 2014 at $93/t.

Operating performance

	6 months ended 30 June 2014	6 months ended 30 June 2013
Attributable iron ore production (tonnes)	22,792,800	21,612,800

Kumba Iron Ore

At Sishen mine, iron ore production increased by 5% to total 17.0 Mt (H1 2013: 16.1 Mt), in line with the mining plan to ramp up production to 37 Mt by 2016. Total tonnes mined increased by 5% to 107.2 Mt (H1 2013: 102.5 Mt), of which waste mined made up 86.9 Mt (H1 2013: 82.1 Mt), an increase of 6%. Sishen's pit continued to be mined according to the production recovery plan, although excessive rainfall hampered waste pre-stripping operations. Waste mining plans for the second half of the year were completed and are being executed, which includes further ramp-up and fleet-efficiency improvements.

Key initiatives of the improved mining plan to achieve 37 Mt production in 2016 include:

· a focus on productivity through improved scheduling of work by implementation of the Business Process Framework;

· the Dingleton project;

· construction of two new waste dumps; and

· the five year fleet plan and associated infrastructure.

The Dingleton project to facilitate the expansion of Sishen to the west has commenced and construction of the houses, businesses, churches and schools is underway.

Kolomela mine continued to perform strongly, producing 5.5 Mt, an increase of 4%. Total tonnes mined rose by 11% to 31.3 Mt (H1 2013: 28.2 Mt), of which waste mined accounted for 24.4 Mt (H1 2013: 21.7 Mt), an increase of 12%.

Kumba's sales rose by 2% to 22.5 Mt (H1 2013: 22.1 Mt), mainly as a result of a 39% increase in domestic sales volumes in line with the new supply agreement with ArcelorMittal South Africa Limited. Export sales volumes were marginally down at 19.7 Mt (H1 2013: 20.1 Mt). Finished product inventory held at the mines and ports increased to 3.6 Mt from 2.9 Mt as at 31 December 2013 (H1 2013: 3.6 Mt).

Iron Ore Brazil

Iron Ore Brazil generated an underlying operating loss of $9 million (H1 2013: loss of $12 million), largely reflecting the non-capitalised costs for the construction of the Minas-Rio project.

Samancor

Underlying operating profit decreased by 15% to $99 million, this was driven by lower prices, offset to some extent by higher sales volumes and a renewed focus on cost control.

Production of manganese ore decreased by 6% to 1.6Mt (attributable basis) due to a greater number of weather-related stoppages at GEMCO in Australia and planned maintenance shutdowns in South Africa.

Production of manganese alloys increased by 5% to 137,300 tonnes (attributable basis) owing to blend optimisation and other productivity improvements at TEMCO in Australia.

Projects

Iron Ore Brazil

Construction continues at the 26.5 Mtpa Minas-Rio project, with significant progress made towards delivering first ore on ship by the end of 2014. During the first six months of 2014, key development milestones were achieved and commissioning has commenced. At the beneficiation plant, first ore feed to the primary crusher was achieved in May and ore to the mill in July, using the fresh-water pumping system which was completed in May. The 529 km pipeline to the port at Açu has been laid. Water pumping tests started in early June from pumping station 2 to the port, and from pumping station 1 to pumping station 2 later in the month, following finalisation of all pressure and geometric tests on the main line. At the port, construction is continuing as scheduled and good progress has been made on the breakwater, with 26 of 33 caissons installed for first ore on ship. Further progress continues to be made in obtaining the outstanding licences required: the port operation licence was granted in May and the licences for the mine/beneficiation plant and the pipeline are expected for Q3. A temporary licence was issued for the power transmission line, to be converted into a definitive one once the remaining licences are obtained.

Project capital expenditure remains in line with the estimate provided in January 2013 of $8.8 billion. $6.6 billion has been spent to date, with $1.2 billion expected over the second half of 2014. This would leave around $1 billion for remaining capital expenditure for 2015, including the full extension of the breakwater, and mine equipment for the ramp up.

Legal

Kumba Iron Ore

There have been no significant changes to the legal matters reported on for the year ended 31 December 2013. SIOC has not yet been awarded the 21.4% Sishen mining right, for which it applied following the Constitutional Court judgment on the matter in December 2013.

Outlook

Kumba Iron Ore

The production outlook for Sishen mine remains at around 35 Mt for 2014 as a whole. The Sishen pit, however, remains constrained; therefore, the planned waste ramp-up is continuing as part of the strategy to improve mining flexibility over the longer term. It is expected that waste tonnages will reach ~220 Mt for the year. At Kolomela, output remains at approximately 10 Mt, in line with production design capacity, with waste mined at 40-50 Mt. Kumba aims to increase current production through de-bottlenecking and optimisation of the plant. Export sales volumes for the year are also expected to be in line with 2013 levels. 2014 production guidance for iron ore is maintained at 44-46 Mt, excluding Thabazimbi.

Steel fundamentals remain under pressure. Although recent data points to a recovery in economic growth in China, the construction market continues to be fragile as concern persists over housing prices. Iron ore prices are expected to remain around the current level as supply exceeds demand in the second six months, though restocking by steel mills and a slowdown in Chinese domestic iron ore production in winter, is expected to support prices towards the end of the year.

COAL

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit	260	345
Australia and Canada	18	130
South Africa	178	171
Colombia	95	96
Corporate and projects	(31)	(52)
Underlying EBITDA	638	726
Capital expenditure	457	476
Australia and Canada	403	420
South Africa	54	56
Share of Group underlying operating profit	9%	11%
Attributable return on capital employed %	7%	10%
Australia and Canada	0%	4%
South Africa	28%	26%
Colombia	19%	19%

Australia and Canada

Underlying operating profit decreased by 86% to $18 million, primarily due to the impact of lower export prices, with the average realised metallurgical coal price reducing by 23%; there was also a decrease in self-insurance recovery amounts of $23 million. These impacts were mitigated by increased volumes from productivity improvements, with export metallurgical sales volumes increasing by 17%, and by lower unit costs through the continuation of the cost-reduction programme, which led to a 4% reduction in FOB cash unit costs at the Australian export operations.

South Africa

Underlying operating profit increased by 4% to $178 million, with a $22 million profit on sale of reserves in South Africa offsetting a 7% reduction in the average realised export thermal coal price. Profits were further supported by a 5% reduction in the US$ FOB unit cash cost, with the weaker South African rand offsetting the high mining inflation environment.

Colombia

At Cerrejón, underlying operating profit decreased by 1% to $95 million, driven by lower thermal coal prices, offset largely by the recovery in volumes following the strike in Q1 2013.

Markets

The strengthening of the Australian dollar against the US dollar (appreciating during the first half of 2014) has reduced profitability for thermal and metallurgical producers in Australia, thereby forcing further cost savings and productivity improvements.

Metallurgical coal

Seaborne metallurgical coal prices are traded at historically low levels this year, with the Q2 quarterly HCC benchmark price reaching a record low of $120/t. Strong Australian production and resilient US supply has resulted in excess availability of seaborne metallurgical coal, with buyers exercising increased optionality. The average quarterly HCC benchmark price of $132/t for the first six months of 2014 was 22% lower than the respective period in 2013. Semi-soft and PCI prices, however, experienced some relief, with a narrowing of the price differential between premium quality and lower grade coking coals.

Thermal coal

Global seaborne prices declined on average by 13%. The Newcastle reference price dropped below $72/t in June, its lowest price in five years, as aggressive domestic coal pricing in China dragged seaborne prices lower. Delivered prices into Europe also broke the $72/t mark.

The global market remained well supplied despite an interrupted delivery from South Africa due to a force majeure event at Richards Bay in February as well as enforcement of a regulation requiring direct loading in Colombia that reduced supply temporarily.

Demand from India picked up as absolute prices fell and the rupee strengthened.

Australia and Canada

Anglo American weighted average achieved sales prices ($/tonne)	6 months ended 30 June 2014	6 months ended 30 June 2013
Export metallurgical coal (FOB)	117	151
Export thermal coal	81	87
Domestic thermal coal	37	39

Attributable sales volumes ('000 tonnes)	6 months ended 30 June 2014	6 months ended 30 June 2013
Export metallurgical coal	10,539	9,003
Export thermal coal	1,917	3,012
Domestic thermal coal	3,201	2,809

South Africa

Anglo American weighted average achieved sales prices ($/tonne)

6 months

ended

30 June 2014

6 months

ended

30 June 2013

Export thermal coal (FOB)

Domestic thermal coal

Attributable sales volumes

('000 tonnes)

6 months

ended

30 June 2014

6 months

ended

30 June 2013

Export thermal coal⁽¹⁾

7,960

7,964

Domestic thermal coal

18,756

19,809

⁽¹⁾ Excludes traded coal sales of 53,000 tonnes (30 June 2013: 145,000 tonnes).

Colombia

Anglo American weighted average achieved sales prices ($/tonne)

6 months

ended

30 June 2014

6 months

ended

30 June 2013

Export thermal coal (FOB)

Attributable sales volumes

('000 tonnes)

6 months

ended

30 June 2014

6 months

ended

30 June 2013

Export thermal coal

5,505

4,931

Operating performance

Australia and Canada

Attributable production ('000 tonnes)	6 months ended 30 June 2014	6 months ended 30 June 2013
Export metallurgical coal	10,884	9,010
Export thermal coal	1,728	3,007
Domestic thermal coal	3,074	2,798

Export metallurgical coal production increased by 21% to 10.9 Mt, a record first half-year performance. The underground operations delivered a 14% increase in output, with improvements in longwall cutting hours at Grasstree and Moranbah of 60% and 5%, respectively. Both underground sites successfully completed planned longwall moves during H1, in contrast to a single longwall move at Moranbah in 2013. At Dawson, the implementation of asset optimisation initiatives at the open cut site led to a 70% increase in metallurgical coal production. In addition, production performance was not subject to flood and rail closures, as had occurred in Q1 2013.

Export thermal coal production was down 43% at 1.7 Mt, due to a product-mix change to higher margin metallurgical coal, and lower production from Drayton, as the mine is approaching the end of its life.

South Africa

Attributable production ('000 tonnes)	6 months ended 30 June 2014	6 months ended 30 June 2013
Export thermal coal	8,443	7,924
Eskom coal	15,554	16,896
Domestic other	2,971	3,093

Production was 3% lower, owing to an 8% reduction in production for Eskom, though this was mainly compensated by a 6% increase in export production on the back of productivity gains at Goedehoop and Greenside. Production was further supported by an improved safety performance, mitigating the safety-related stoppages in 2013.

Colombia

Attributable production

('000 tonnes)

6 months

ended

30 June 2014

6 months

ended

30 June 2013

Colombia export thermal coal

5,856

4,526

Cerrejón's output increased 29% to 5.9 Mt, primarily owing to the recovery in production following the strike in Q1 2013 as well as the production ramp-up associated with the P40 expansion project.

Projects

Australia and Canada

The greenfield Grosvenor metallurgical coal project in Queensland continues to make progress, with all permits and licences in place. The surface infrastructure is nearing completion, with commissioning under way, while development of the first drift has also been completed. Underground development works are expected to commence on schedule in October. Longwall production remains on schedule and is forecast to commence in late 2016.

South Africa

In South Africa, the 12 Mtpa New Largo project has reached the feasibility stage-gate. Discussions continue with Eskom to determine empowerment structures prior to joint implementation approval.

Colombia

In Colombia, the expanded port is currently being commissioned as part of the Cerrejón P40 project. Utilisation of the incremental capacity will be limited in the short to medium term due to operational and market constraints. The current plan is to produce and sell approximately 35 Mtpa for the next few years.

Outlook

Metallurgical coal

Strong production from Australia and high US export volumes will ensure the seaborne metallurgical coal market continues to be well supplied in the near term. However, announcements of supply rationalisation and improving demand from traditional markets should support a tightening in fundamentals over the medium to long term.

2014 production guidance for metallurgical coal is increased to approximately 20 Mt (previously 18-20 Mt).

Thermal coal

Pricing pressure resulting from a well-supplied thermal market looks set to continue in the short term. Expansions in Australia are largely pre-committed for the next one to two years, and this will continue to keep pressure on prices. US export volumes are falling as fixed-price contracts roll off and a modest increase in imports to the US, mainly from Colombia, is likely.

Chinese import levels will depend on the competitive position of domestic coals, but the growth rate of imported coal will be weaker than in previous years. India will continue to increase its imports of thermal coal owing to the shortage of coal in the medium term.

2014 production guidance for thermal coal (South African export and Colombia) is reduced to 28-29 Mt (previously 29-30 Mt).

BASE METALS & MINERALS - COPPER

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit	760	635
Underlying EBITDA	1,106	942
Capital expenditure	333	472
Share of Group underlying operating profit	26%	19%
Attributable return on capital employed %	22%	17%

Copper generated an underlying operating profit of $760 million, 20% higher than the same period in 2013, as a result of a 15% increase in sales volumes, offset by a 3% decline in average realised copper prices. C1 unit costs reduced by 7%, owing to a combination of improved operating efficiencies, higher grades and a weaker Chilean peso, which more than offset higher expenditure on mine development at Los Bronces.

Markets

6 months
ended

30 June 2014

6 months
ended

30 June 2013

Average market prices (c/lb)

314

342

Average realised prices (c/lb)

307

318

The copper price started 2014 at 337c/lb before it softened and then registered a steep decline in early March on the back of growing concerns of a slowdown in the Chinese economy. Since then, government stimulus has assuaged some of these concerns although the market is still expected to be in surplus for the year.

The London Metal Exchange (LME) copper price at the end of June was 315c/lb, averaging 314c/lb for the half year, 8% lower than for the same period in 2013. A negative provisional pricing adjustment of $64 million was recorded (H1 2013: negative $189 million), resulting in an average realised price of 307c/lb (H1 2013: 318c/lb).

Operating performance

6 months
ended

30 June 2014

6 months
ended

30 June 2013

Attributable copper production (tonnes)

396,400

353,300

Attributable copper production rose by 12% to 396,400 tonnes.

Production at Los Bronces increased by 11% to 221,600 tonnes, with higher grades and continued throughput improvement at both plants. The improvement in grade reflected adjustments to extraction sequencing, with higher-grade areas being mined sooner, ahead of more challenging winter conditions. Lower-grade areas are expected to be reached in Q3 2014, however, offsetting these early gains. Mine development progressed, with waste stripping increasing by 49% to 38 Mt. The improved mine development has led to reduced congestion in the mine and improved continuity of ore feed to the two processing plants.

Production at El Soldado decreased by 38%, owing to lower ore availability and grades following the delay to the next major phase of ore supply caused by a geological fault, as previously disclosed. Ore feed in the second six months will come from lower-grade stockpiles and slag from the nearby Chagres smelter in order to bridge the gap until the next phase of ore is accessed. Output at Mantos Blancos and Mantoverde decreased by 8% and 13% respectively because of lower grades.

Anglo American's share of Collahuasi's production, at 105,900 tonnes increased by 58% owing to continuing higher grades reflecting the current phase of mining, as well as output recovering from the 49-day shutdown in H1 2013 of the SAG Mill 3 for a planned stator motor replacement.

Projects

At the Quellaveco project in Peru, the feasibility study for the expanded mine is continuing as planned and is expected to be ready for review during 2015. Work on the Asana river diversion tunnel has continued along with our social programmes in the area.

At Mantoverde, the construction of the desalination plant has been completed meeting the current water requirements of the operation.

Outlook

2014 production guidance is increased to 725,000 to 740,000 tonnes, from 710,000 to 730,000 tonnes, in light of improved confidence in underlying operational improvements at Los Bronces and Collahuasi. This guidance is against a backdrop of forecast lower grades at Los Bronces and Collahuasi in the second half as previously guided. At El Soldado, the lack of ore availability is expected to adversely impact production during 2015 and 2016.

Ongoing market concerns arising from uncertainties over the near-term outlook for the global economy may lead to short-term volatility in the copper price. However, the medium- to long-term fundamentals for copper remain strong, predominantly driven by robust demand from the emerging economies, ageing mines and declining grades across the industry, and a lack of new supply.

BASE METALS & MINERALS - NICKEL

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit/(loss)	26	(11)
Underlying EBITDA	30	(7)
Capital expenditure⁽¹⁾	(26)	(18)
Share of Group underlying operating profit	1%	0%
Attributable return on capital employed %	2%	(1)%

⁽¹⁾ Cash capital expenditure for Nickel of $35 million (H1 2013: $19 million) is offset by the capitalisation of $61 million (H1 2013: $37 million) of net operating cash flows generated by Barro Alto which has not yet reached commercial production.

Nickel reported an underlying operating profit of $26 million, an improvement of $37 million due to a $26 million favourable exchange-rate gain on Loma de Níquel as well as improved cash costs at Codemin, driven by lower electricity prices and lower project study cost spend. Underlying operating profit from the Barro Alto project continues to be capitalised as the asset is not yet in commercial production.

Markets

6 months
ended

30 June 2014

6 months
ended

30 June 2013

Average market prices (c/lb)

749

732

Average realised prices (c/lb)⁽¹⁾

716

⁽¹⁾ Realised prices are now reported inclusive of Barro Alto sales. This has led to the restatement of the 2013 realised price from 711 c/lb to 716 c/lb

Nickel prices improved following implementation of the Indonesian nickel ore export ban in Q1 and an improvement in demand. Prices increased as the market became more convinced that the export ban would remain in place. The ban led to significant rises in the cost of nickel ore in China, lifting the cost of nickel pig iron (NPI) production. The LME nickel price improved through H1, with an average of 664c/Ib in Q1 and to 838c/Ib in Q2, with prices peaking at 962c/Ib in May.

Operating performance

	6 months ended 30 June 2014	6 months ended 30 June 2013
Attributable nickel production (tonnes)	19,800	14,700

Nickel production increased by 35% to 19,800 tonnes. Barro Alto produced 15,500 tonnes, an increase of 52%, reflecting continued operational stability, with fewer stoppages than in the first half of 2013.

Projects

The Barro Alto furnace rebuilds received board approval in April. The first full furnace rebuild is expected to start in late 2014 and the second in mid-2015. Barro Alto expects to achieve nominal production capacity during 2016.

Outlook

While there are still considerable stocks of nickel on the LME, the expectation is that stocks will reduce as the Indonesian nickel ore export ban negatively impacts both NPI production in China and overall nickel supply volumes.

As has been reported previously, the Barro Alto ramp-up has been significantly affected by design flaws in both the kilns and the furnaces, and only a furnace redesign, involving the rebuilding of both lines, will rectify the project's underlying faults.

Having addressed many of these issues now, and with careful monitoring, pending the rebuilding of the furnaces, Barro Alto has achieved a level of stability which enabled an average feed rate for the two lines of 85% of design capacity over the first half.

2014 production guidance for nickel has been increased to 32,000-35,000 tonnes, (previously 30,000-35,000 tonnes).

BASE METALS & MINERALS - NIOBIUM

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit	34	42
Underlying EBITDA	37	44
Capital expenditure	90	64
Share of Group underlying operating profit	1%	1%
Attributable return on capital employed %	16%	41%

Niobium reported an underlying operating profit of $34 million, a 19% decrease, due to lower sales prices, inflation and higher cash costs (driven by above-inflation increases in labour, contracted services and mining costs).

Markets

6 months
ended

30 June 2014

6 months
ended

30 June 2013

Average realised prices ($/kg)

39.02

39.30

Ferroniobium exports from Brazil increased by 8.5%, but have declined in recent months as lower volumes were sold to China. Although exports to Europe and the US were above expectations, broadly offsetting lower exports to China, the shift in volumes is putting some downward pressure on prices.

Operating performance

	6 months ended 30 June 2014	6 months ended 30 June 2013
Attributable niobium production (tonnes)	2,200	2,200

Production of 2,200 tonnes was in line with the first half of 2013.

Projects

The Boa Vista Fresh Rock (BVFR) project continued to make progress and is now 93% complete, with piling works, civils and steel structure complete and mine commissioning started. The project includes the construction of a new upstream plant that will enable continuity of the Catalão site through processing the fresh-rock orebody. The project is expected to start production in Q4 2014. On completion of the project, production capacity will increase to approximately 6,800 tonnes of niobium a year at steady state.

Outlook

The global market has now recovered to the same levels as in 2012 and. While uncertainties remain regarding Chinese macro-economic policies and excess crude steel capacity, medium-term fundamentals for niobium remain strong, with growth being driven by developed economies and India.

BASE METALS & MINERALS - PHOSPHATES

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit	9	48
Underlying EBITDA	20	59
Capital expenditure	18	8
Share of Group underlying operating profit	0%	1%
Attributable return on capital employed %	5%	28%

Phosphates underlying operating profit decreased by 81%, mainly due to lower sales prices, partially offset by the devaluation of the Brazilian real.

Markets

6 months
ended

30 June 2014

6 months
ended

30 June 2013

Average market prices - mono-ammonium phosphate (MAP)

($/t CFR Brazil)

485

519

Mono-ammonium phosphate (MAP) prices started the year at a relatively low level of around $420/t, reached a peak of around $520/t in February/March motivated by Brazil's safrinha mini-crop, stronger demand in US and supply issues from Morocco. Thereafter, MAP prices trended downwards in April and May, reaching an average $469/t in the seasonally weaker 'intercrop' period which was also characterised by uncertainties over India. Prices for the period were lower than for the first half of 2013, mainly because substantially lower prices, driven by significant reduction in Indian consumption in the second half of last year, continued into 2014.

Operating performance

	6 months ended 30 June 2014	6 months ended 30 June 2013
Attributable fertiliser production (tonnes)	542,900	573,700

Production of 542,900 tonnes of fertiliser decreased by 5%, mainly as a result of a reduction in throughput, maintenance activities and a power outage.

Outlook

The market looks stable, especially for the third quarter, with strong demand likely to come from India (provided the country has a normal monsoon season) as well as from Brazil. Fertiliser demand in Brazil is expected to increase in 2014, reflecting additional demand driven by strong agricultural commodity prices during 2013 and H1 2014, generating solid margins for farmers and, thus increasing fertiliser usage. For the full year, phosphate fertiliser demand is expected to increase by around 3% to 11.9 Mt (2013: 11.5 Mt).

PLATINUM

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating (loss)/profit	(1)	187
Underlying EBITDA	231	497
Capital expenditure	245	235
Share of Group underlying operating profit	0%	6%
Attributable return on capital employed %	(0)%	4%

Anglo American Platinum (Platinum) recorded an underlying operating loss of $1 million, compared to an underlying operating profit of $187 million in the first half of 2013. This performance reflected significantly lower production owing to the effects of the five-month industrial action by the Association of Mineworkers and Construction Union (AMCU) at the Rustenburg, Union and Amandelbult operations. Although operating costs savings were implemented at strike-affected operations, costs of approximately $400 million were incurred at these mines during the strike period, with a consequent negative impact on Platinum's earnings.

Refined platinum sales decreased by 3% to 1.04 million ounces (H1 2013: 1.07 million ounces). Sales exceeded refined production as refined inventory was drawn down owing to the strike action. The average dollar basket price achieved increased by 2% to $2,474 per ounce (H1 2013: $2,416 per ounce).

Cash operating costs per equivalent refined platinum ounce of R27,810 were severely impacted by the industrial action. After adjusting for the strike, the cash operating cost of approximately R18,000 increased by 5%, from the cash costs of R17,053 per ounce achieved for the full year in 2013.

Markets

The increase in global demand for platinum this year is being driven by growth in autocatalyst, industrial and jewellery demand, which exceeds the decline in investment demand and growth in recycle supply. Indications for the first six months of 2014 are that pent-up demand for vehicles in Europe and global industrial demand are translating into higher platinum consumption. Jewellery demand remains strong at current depressed price levels and investment demand growth exceeded expectations.

Despite the five month industrial action, coupled with early signs of increased vehicle sales in Europe, the platinum price was flat during the first half of 2014. This was driven by platinum supply being adequate to meet demand due to sales by South African producers from refined working inventories and a draw down from above ground stocks. Contractual supply to customers was uninterrupted.

Palladium demand remained firm, dominated by continued growth in demand for gasoline vehicles in developing markets and supported by the launch of two South African ETFs in 2014.

Autocatalysts

Strong demand for diesel vehicles in Europe resulted in higher vehicle sales in each of the first five months of 2014 compared to the corresponding months in 2013. Platinum loadings on Euro VI (light duty vehicles) compliant cars are higher than loadings on Euro V compliant cars.

Industrial, jewellery and investment

Gross platinum demand for industrial applications increased, with evidence of consumption matching new-capacity construction in the glass and chemicals sectors. The platinum price continued to trade at a higher level than the gold price in the first half of 2014, although demand for platinum jewellery increased, particularly in China. Growth in investment demand in 2013 and 2014 arose primarily as a result of the launch of the South African Exchange Traded Funds ("ETFs"). Platinum investment demand in the first half of 2014 increased by 350 koz, despite the record levels of growth in ETF holdings in 2013.

Operating performance

	6 months ended 30 June 2014	6 months ended 30 June 2013
Attributable equivalent refined platinum production (oz)	715,200	1,177,000

Equivalent refined platinum production (equivalent ounces are mined ounces expressed as refined ounces) from the mines managed by Anglo American Platinum and its joint venture partners, at 715,200 ounces, was significantly affected by the industrial action from 23 January to 24 June 2014. Mogalakwena and Unki mines and the associates and joint operations portfolio, which remained mainly strike-free, all showed year-on-year improvements in production. Rustenburg, Amandelbult and Union operations were heavily affected by the disruption, losing 424,000 ounces of equivalent refined production during the strike and a further 16,000 platinum ounces in the ramp-up period at 30 June.

Underground mining performance reflected the effects of the industrial action. Equivalent refined platinum production at Platinum's own mines and the Western Limb tailings retreatment plant decreased by 468,200 ounces, or 59% year on year, to 319,100 ounces. At Amandelbult, output fell by 137,000 ounces, or 80% year on year; Rustenburg declined by 258,200 ounces, or 88% year on year; and Union dropped by 85,600 ounces, or 89%. Output was also impacted by the restructuring of Rustenburg and Union mines, with a combined 86,500 ounce decrease in equivalent refined production in the first half of 2014.

Mogalakwena achieved a record performance, raising production to 184,800 ounces as a result of higher achieved 4E built-up head grade, an increase in the platinum content of the ore fed to the concentrator and improved mining performance. Unki maintained production at around 30,000 ounces. At Twickenham, production was 4,400 ounces higher.

Equivalent refined platinum production from associates and joint ventures, inclusive of both mined and purchased output, increased by 4% year on year to 370,700 ounces. This was due to higher production volumes across all mines, most notably at Kroondal (8%) and Bokoni (17%), following productivity-improvement initiatives.

Equivalent refined platinum ounces purchased from third parties decreased by 26% to 25,400 ounces (H1 2013: 34,200 ounces).

Refined platinum production at 855,800 ounces was 16% lower. Again, this was primarily due to the impact of the strike, though it was offset by a drawdown in pipeline inventory. Refined production of palladium and rhodium decreased by 5% and 13%, respectively. Variances in palladium and rhodium output were a reflection of the industrial action, a changed ore-source mix from operations, and different pipeline processing times for each metal.

Platinum sales exceeded refined production by 189,000 ounces in H1, owing to lower production and a drawdown in the refined inventory in anticipation of possible lengthy strike action.

Wage-negotiation update

On 23 January, AMCU, the majority and recognised union, declared industrial action against Anglo American Platinum. The Commission for Conciliation, Mediation and Arbitration (CCMA) issued AMCU with a strike certificate for non-resolution of wage negotiations, deeming the strike legal.

After five months of extensive consultation, mediation and other efforts to find an affordable solution, AMCU settled the new wage agreement on 24 June. This is a three-year deal with an average cost to company of 8.4% per annum over the three-year period (the cost to company will be 10.5% in year 1, 7.7% in year 2, and 7.1% in year 3). The wage settlement applies retrospectively from 1 July 2013, and the 'no work, no pay' principle applies to all workers.

Outlook

The global platinum market is expected to remain in deficit in the short and medium term as steady demand growth exceeds growth in primary and secondary supply. The impact on supply from the industrial action in 2012, the introduction of platinum ETFs in 2013 and the most recent industrial action in 2014 has resulted in a significant reduction of above-ground platinum stocks. Capital constrained supply growth and depressed margins are likely to continue at current price levels. Working inventory levels are currently lower than normal operating levels and will necessitate a re-stocking as production resumes and returns to normal.

Palladium demand is expected to increase in 2014, supported by global vehicle production growth and tightening emissions legislation, with growth in petrol vehicle production in China remaining the dominant driver. Supply is constrained as a result of the same factors influencing platinum, and further deficits are expected in the palladium market in 2014 and the near term.

Equivalent refined production in H2 2014 will be impacted by the ramp-up process which is estimated to be back at steady state by Q4 2014. Full medical and safety checks will be completed before production can return to normal. As a result we are reducing both our refined production and sales guidance to between 2.0 to 2.1Moz, as pipeline stock needs to be replenished. Cost inflation will continue to present severe challenges. Platinum estimates that its cash unit costs for 2014 as a whole will increase to between R18,000 and R19,000 per equivalent refined platinum ounce, after adjusting for the impact of the strike.

Platinum's project portfolio has been aligned with the proposals of the Portfolio Review, and capital expenditure guidance is R5.5bn - R6.5bn for 2014, excluding pre-production cost, capitalised waste stripping and interest.

DE BEERS

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit	765	571
Underlying EBITDA	983	788
Capital expenditure	320	255
Share of Group underlying operating profit	26%	18%
Attributable return on capital employed⁽¹⁾	13%	8%

⁽¹⁾ Operating profit used in the calculation of De Beers' attributable return on capital employed is based on the last 12 months rather than on an annualisation of the first six months' performance. This is due to the seasonal sales and operating profit profile of De Beers, as noted in the Markets and sales section. Attributable ROCE for the first half of 2013 is presented on a pro forma basis.

De Beers recorded an underlying operating profit of $765 million, an increase of 34% compared with the first half of 2013. The increase was primarily due to solid demand across key markets resulting in strong revenue growth, together with the benefit of favourable exchange rate trends.

Markets and sales

Rough diamond demand was robust, reflecting a positive outlook for polished diamonds in De Beers' key markets of the US, China and India. This contrasted with the first half of 2013, when encouraging growth in the US was not matched in India (where demand was weak). Stronger year-on-year consumer demand between Thanksgiving and Chinese New Year - the key selling season - resulted in higher levels of retailer restocking during the first half of 2014 than in the same period last year.

These factors contributed to the strong sales performance, with total sales up by 15% to $3.8 billion, while rough diamond sales were also 15% higher at $3.5 billion. Higher rough diamond revenue was driven by an increase in sales volumes net of slightly lower realised prices (4% lower). De Beers' average price index in H1 2014 was 4% higher than in H1 2013 with this being offset by a marginally lower product mix.

The seasonal nature of polished diamond consumption means that De Beers' annual performance is generally more heavily weighted towards the first six months, reflecting normal restocking by midstream diamantaires after the key selling season. While stocking levels increase as the end of the year approaches, this is offset by manufacturing slowdowns that typically impact upon rough demand in the second half. It is expected that this trend will continue this year.

In July, De Beers announced details of a new approach to its rough diamond sales contracts. The new contract period, which will start in March 2015 and run for three years, with an option for De Beers to extend, requires De Beers' rough diamond customers to comply with more rigorous financial and governance requirements in order to be eligible for supply.

Mining and manufacturing

	6 months ended 30 June 2014	6 months ended 30 June 2013
Total diamond production (thousand carats)⁽¹⁾	16,046	14,295

⁽¹⁾Includes 100% of production from joint ventures.

De Beers' half-year production increased by 1.8 Mct to 16.0 Mct (H1 2013: 14.3 Mct), largely owing to higher production from Debswana and the South African operations.

At Debswana, production benefited from higher efficiency at the processing plants, as a result of operational improvement initiatives. This was enhanced by recovery from the twin impacts in 2013 of the Jwaneng slope failure clean-up and planned plant maintenance at Orapa, partly offset by the mining of lower grades at Jwaneng.

In South Africa, higher production was achieved, mainly as a result of there being no repetition of the challenges faced in 2013 after extreme flooding at Venetia. In addition, the implementation of a range of initiatives to improve rain preparedness at Venetia limited the impact of heavy seasonal rainfall this year.

In Canada, production continued to improve at both Victor and Snap Lake. Work continues on optimising the Snap Lake mine to enable economic access to the promising, though challenging, orebody, with a continued focus on water-management issues.

In Namibia, production has increased at both Namdeb and Debmarine Namibia, with strong performance by the Mafuta vessel and progress made on beach accretion. Namdeb Holdings has been issued with a 15-year licence extension for both land and sea operations to at least 2035.

Element Six achieved encouraging sales growth of 10% derived from most product groups, particularly oil and gas and precision machining, which have benefited from increased investment in innovation. Overall revenue growth was strong in the Americas and Asia, although Europe declined slightly owing to weaker markets for carbide products.

Brands

As consumers' preference for branded products increases, De Beers continues to position its Forevermark and De Beers Jewellers brands in major consumer markets across the world.

Forevermark continues to grow strongly, particularly in the core markets of China, Japan, India and the US. In May, Forevermark was launched in Turkey and, in July, plans were announced to make the brand available in the UK and Ireland. The brand is now available in more than 1,400 authorised jewellery stores in 29 countries, an increase of more than 30% on the same point in 2013. More than one million diamonds have now received a unique Forevermark inscription since the brand's launch in 2008.

De Beers Jewellers had healthy like-for-like sales growth, having restructured its portfolio of stores to focus on fast-growing markets - particularly in Asia. Sales continue to be boosted by its Chinese clientele, both in Asia and in other luxury shopping destinations around the world.

Projects

In Botswana, Jwaneng Cut-8 waste mining is progressing well, with 46% of the 500 million tonnes of waste stripping required to expose the ore now complete. Cut-8 will become the main source of ore for Jwaneng during 2017.

Construction of the Venetia underground mine in South Africa is also progressing well. Development of the decline from the surface is under way, with almost 100 metres of tunnel advanced. The collar of the production shaft is now in place and the pre-sink in the production shaft is scheduled to begin in H2. With first production planned for 2021, the project is around 10% complete.

In Canada, permitting for the Gahcho Kué project in the Northwest Territories is on track, with final approvals for the land-use permit and water licence expected during the second half. Detailed engineering and pioneer works are well under way, and the project is progressing according to plan.

Outlook

De Beers expects continued growth in diamond jewellery demand across its key markets in 2014, driven primarily by the US and China. Other markets are also projected to show growth in local currency this year, with final dollar-equivalent demand levels partly dependent on currency fluctuations.

In India, recent parliamentary elections have resulted in improved economic confidence, which is expected to impact positively on both activity in the country's cutting centres and on rough diamond demand generally.

2014 production guidance has been increased to 31 to 32 million carats (previously 30 to 32 million carats).

CORPORATE AND OTHER

US$ million (unless otherwise stated)	6 months ended 30 June 2014	6 months ended 30 June 2013
Underlying operating profit /(loss)	(150)	(208)
Other Mining and Industrial	11	(30)
Exploration	(76)	(93)
Corporate activities & unallocated costs	(85)	(85)
Underlying EBITDA	(98)	(127)
Capital expenditure	15	28
Share of Group underlying operating profit	(5)%	(6)%

Other Mining and Industrial

The underlying operating profit of $11 million for the first half of 2014 was an improvement on the underlying operating loss of $30 million in the same period in 2013, mainly attributable to an improved performance from Lafarge Tarmac joint venture, as well as Tarmac Buildings Products prior to its disposal on 31 March 2014.

Lafarge Tarmac joint venture

The Group's share in the underlying operating profit of the joint venture was $21 million, an improvement on the underlying operating loss of $16 million in the first half of 2013, despite a slow start to the year owing to exceptionally wet weather. The outlook for the second half is positive and is supported by improving market conditions in the UK.

Following the announcement on 7 July 2014 of an agreement in principle, the Group reached a binding agreement on 24 July 2014 to sell its 50% ownership interest in Lafarge Tarmac to Lafarge SA ("Lafarge") for a minimum value of £885 million (approximately $1.5 billion) in cash, on a debt and cash free basis and subject to other customary working capital adjustments. The sale will be subject to a number of conditions, including the completion of the proposed merger of Lafarge and Holcim Limited, the divestment of Lafarge Tarmac being accepted as a suitable remedy for the UK market in respect of the merger, and approval of this sale transaction by the necessary regulators.

In the event that a subsequent divestment of Lafarge Tarmac is agreed within 18 months of this sale being completed, then Anglo American will participate in a minority proportion of the upside beyond a small premium to the terms of this transaction.

Exploration

Underlying operating loss for Exploration H1 2014 was $76 million, a decrease of 18% compared to prior year following reductions in diamonds and metallurgical coal exploration costs.

Corporate activities and unallocated costs

Underlying operating loss for Corporate activities and unallocated costs for the first half of 2014 were $85 million, in line with the first half of 2013.

For further information, please contact:

Media

Investors

James Wyatt-Tilby

Tel: +44 (0)20 7968 8759

Paul Galloway

Tel: +44 (0)20 7968 8718

Emily Blyth

Tel: +44 (0)20 7968 8481

Caroline Crampton

Tel: +44 (0)20 7968 2192

South Africa

Pranill Ramchander

Tel: +27 (0)11 638 2592

Sarah McNally

Tel: +44 (0)20 7968 8747

Anglo American is one of the world's largest mining companies, is headquartered in the UK and listed on the London and Johannesburg stock exchanges. Our portfolio of mining businesses meets our customers' changing needs and spans bulk commodities - iron ore and manganese, metallurgical coal and thermal coal; base metals and minerals - copper, nickel, niobium and phosphates; and precious metals and minerals - in which we are a global leader in both platinum and diamonds. At Anglo American, we are committed to working together with our stakeholders - our investors, our partners and our employees - to create sustainable value that makes a real difference, while upholding the highest standards of safety and responsibility across all our businesses and geographies. The Company's mining operations, pipeline of growth projects and exploration activities span southern Africa, South America, Australia, North America, Asia and Europe.

www.angloamerican.com

Webcast of presentation:

A live webcast of the results presentation, starting at 9.00am UK time on 25 July 2014, 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; operating profit includes attributable share of associates' and joint ventures' operating profit and is before special items and remeasurements, unless otherwise stated; special items and remeasurements are defined in note 6 to the Condensed financial statements. Underlying earnings, unless otherwise stated, is calculated as set out in note 10 to the Condensed financial statements. Earnings before interest, tax, depreciation and amortisation (EBITDA) is operating profit before special items and remeasurements, depreciation and amortisation in subsidiaries and joint operations and includes attributable share of EBITDA of associates and joint ventures. Tonnes are metric tons, 'Mt' denotes million tonnes and 'kt' denotes thousand tonnes, unless otherwise stated.

Forward-looking statements

This announcement includes forward-looking statements. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding Anglo American's financial position, business and acquisition strategy, plans and objectives of management for future operations (including development plans and objectives relating to Anglo American's products, production forecasts and reserve and resource positions), 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, the availability of mining and processing equipment, the ability to produce and transport products profitably, 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 governmental authorities such as 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 Anglo American's most recent Annual Report. 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 announcement. Anglo American expressly disclaims any obligation or undertaking (except as required by applicable law, the City Code on Takeovers and Mergers (the "Takeover Code"), 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 SWX 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 announcement 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 announcement is sourced from publicly available third party sources. As such, it presents the views of those third parties, though these may not necessarily correspond to the views held by Anglo American.

Click on, or paste the following link into your web browser, to view the associated PDF document:

http://www.rns-pdf.londonstockexchange.com/rns/2945N_-2014-7-24.pdf

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR PGUWUMUPCPGC

RNS metadata

Title: Anglo American results H1 2014
Time: 08:00:08
Date: 25 Jul 2014
Category: Results
ID: 2945N