Q4 2015 Production Report

28 January 2016

Anglo American plc

Production Report for the fourth quarter ended 31 December 2015

Overview

·    Q4 2015 production increased by 3% (on a copper equivalent basis) compared to both Q4 2014 and Q3 2015. The 2015 full year production increased by 5% (on a copper equivalent basis)⁽⁷⁾.

·     Iron ore production from Kumba decreased by 12% to 10.9 million tonnes as Sishen is being transitioned to a lower cost pit configuration.

·     Minas-Rio produced 3.3 million tonnes (wet basis) of iron ore, a more than fourfold increase compared to 0.7 million tonnes in Q4 2014, reflecting the ongoing ramp up of the operation.

·   Export metallurgical coal production increased by 11% to 5.5 million tonnes due to strong operational performances at both Grasstree and Moranbah.

·     Export thermal coal production decreased by 21% to 7.7 million tonnes due to the impact of strikes in South Africa and weather related production issues at Cerrejón.

·    Copper production from the retained operations (excluding the AA Norte assets that were sold effective 1 September 2015) increased by 23% to 181,400 tonnes due to higher grades, throughput and metal recoveries. Overall copper production increased by 4%.

·    Nickel production increased by 57% to 10,500 tonnes following the successful completion of the planned Barro Alto furnace rebuilds.

·    Niobium production increased by 23% to 1,600 tonnes with the continuing ramp up of the Boa Vista Fresh Rock (BVFR) plant. Fertiliser production increased by 6%.

·    Platinum production (expressed as metal in concentrate)⁽⁵⁾ was broadly flat at 598,000 ounces with operational improvements at own operations, offset by a reduction in purchase of concentrate ounces from third parties.

·    Diamond production decreased by 16% to 7.1 million carats, reflecting the decision to reduce production in response to trading conditions.

(1) Wet basis; (2) Copper production from the Copper business unit; (3) Copper production shown on a contained metal basis; (4) Nickel production from the Nickel business unit; (5) In keeping with industry benchmarks, production disclosure has been amended to reflect own mine production and purchases of metal in concentrate. Previous disclosure of own mine production and purchases of metal in concentrate was converted to equivalent refined production using standard smelting and refining recoveries; (6) De Beers production on 100% basis; (7) Copper equivalent production using long-term prices and normalised for the sale of Anglo Norte.

IRON ORE AND MANGANESE

(1)  Wet basis

(2)  Saleable production

(3)  Production includes medium carbon ferro-manganese

Kumba Iron Ore - Production from Kumba Iron Ore decreased by 12% to 10.9 million tonnes.

Sishen produced 7.7 million tonnes, a decrease of 17%. During 2016, the mine continues to transition to a lower cost pit configuration, which is expected to result in previously disclosed lower production and materially lower waste stripping volumes.  The planned mine configuration will have a materially lower cost base.

At Kolomela, efficiency and throughput at the plant continued to improve, partially offset by planned plant maintenance during October, resulting in production of 2.9 million tonnes for the quarter, a 5% increase.

Export sales decreased by 10% to 10.5 million tonnes, due to lower production.  Total finished product stocks were 4.7 million tonnes, compared with 6.5 million tonnes at 31 December 2014 as stocks were drawn-down to optimal levels.

Mining ceased at Thabazimbi at the end of September 2015. Material previously mined was processed during the final quarter. Closure procedures have been implemented and all activity at the mine is expected to cease in the middle of 2016.

Iron Ore Brazil - Minas-Rio's ramp up continues, with 3.3 Mt (wet basis) produced in the quarter, 11% higher than in Q3 2015. Each element of the Minas-Rio system has been tested to full capacity, however Q4 production was lower than the revised plan, as a result of ore variability and drought related water availability issues. Following recent rainfall, water availability is now back to normal, whilst the ore variability is expected to be overcome as the mining footprint expands over time.

The production strategy for Minas-Rio is being revised to ensure lower operating costs.

Manganese ore - Manganese ore production decreased by 32%, largely driven by the temporary suspension of operations at the Wessels and Mamatwan mines following a fatal incident on 2 November 2015. Ore production at the GEMCO operation in Australia decreased by 5%.

Manganese alloy - Manganese alloy production decreased by 46% following the suspension of three of four furnaces at Metalloys in South Africa, due to market conditions.

COAL

Australia and Canada - Export metallurgical coal production increased by 11% to 5.5 million tonnes due to strong operational performances at Grasstree and Moranbah, as well as the delivery of development coal from Grosvenor. This more than offset the effect of Peace River Coal being placed on care and maintenance in December 2014 (Q4 2014 production of 0.2 million tonnes).

Australian export thermal coal production decreased by 38% to 1.2 million tonnes due to expected lower production from Drayton as the mine nears the end of its life. In addition, a favourable mix at Dawson led to an increase in higher value metallurgical coal production. 

On 20 January 2016 the agreement to sell the Callide thermal coal mine to Batchfire Resources was announced and remains subject to a number of conditions.

South Africa - Export thermal coal production reduced by 19% to 3.9 million tonnes driven by strikes (which had a 0.6 million tonnes impact), the planned closure of a section at Goedehoop and the transition to new reserves at Mafube.   

Eskom production decreased by 26% to 5.5 million tonnes predominantly due to reduced demand from Eskom, as well as safety stoppages impacting the New Denmark mine in November.

Colombia - Cerrejón's production decreased by 12% to 2.6 million tonnes, due to the impact of severe dry weather and the suspension of operations due to dust emission levels, which had an impact on production of ~1 million tonnes in the year.

COPPER

(1)   Copper production shown on a contained metal basis

(2)   Anglo American Norte excluded for all periods

Copper - Copper production increased by 4% to 181,400 tonnes, despite the sale of the AA Norte assets, effective from 1 September 2015. Production from the retained operations increased by 23%.

Production from Los Bronces increased by 27% to 111,000 tonnes, driven by higher throughput, grades and recoveries. High levels of precipitation during the latter part of Q3 and into Q4 meant that throughput restrictions related to water availability were removed, contributing to the improved performance in the quarter.

At Collahuasi, attributable production increased by 17% to 61,500 tonnes primarily due to higher grades. The previously reported vibration and structural issues on the two smaller SAG lines were successfully resolved with a step-change in plant operating times in the fourth quarter, resulting in a 41% increase in production compared to Q3 2015.

El Soldado production increased by 20% to 8,900 tonnes due to higher grades. 

At the end of 2015, Anglo American had 197,631 tonnes of copper provisionally priced at 214 c/lb, bringing the realised copper price for the full year to 228c/lb. The final price of these sales will be determined in the 2016 financial year.

NICKEL

Nickel - Nickel production increased by 57% to 10,500 tonnes, following the successful rebuild of the Barro Alto furnaces which are now producing at nameplate capacity.  Production from Codemin increased by 9% to 2,400 tonnes due to higher ore grade.

NIOBIUM

Niobium - Niobium production increased by 23% to 1,600 tonnes reflecting the ongoing ramp up of the BVFR plant. Production is expected to increase to 6,800 tonnes per year once the BVFR plant reaches nameplate capacity in Q3 2016.  This, when combined with certain metallurgical debottlenecking activities (currently being implemented), will take the total annual capacity to 9,000 tonnes.

PHOSPHATES

Phosphates - Concentrate production was unchanged. Phosphoric acid production decreased by 19% mainly due to maintenance activities. Fertiliser production increased 6% as a result of good performance at the granulation plant. DCP production decreased by 14% as priority was given to phosphoric acid sales.

PLATINUM

(1)   Nickel and copper refined through third parties is shown as production of nickel matte and copper matte.

(2)   In keeping with industry benchmarks, production disclosure has been amended to reflect own mine production and purchases of metal in concentrate. Previous disclosure of own mine production and purchases of metal in concentrate was converted to equivalent refined production using standard smelting and refining recoveries.

Platinum - Platinum production was broadly flat at 598,000 ounces, compared to 603,000 ounces in Q4 2014, with operational improvements at own operations offset by a reduction in purchase of concentrate ounces from third parties.

Platinum production from own mines and tailings retreatment increased to 398,000 ounces from 389,000 ounces due to higher production from Amandelbult and Unki, partially offset by lower production at Union and Rustenburg.

Whilst Mogalakwena production was largely flat at 98,000 ounces, Amandelbult increased by 14% to 121,000 ounces due to improved mining efficiencies, increased concentrator recoveries and the start-up of opencast mining.  Production from Unki also increased by 19% to 19,000 ounces due to improved mining efficiencies and plant performance.  

Rustenburg (including Western Limb Tailings Retreatment) platinum production decreased by 4,000 ounces to 118,000 ounces due to lower grade and safety related stoppages. Production from Union decreased by 5,000 ounces to 38,000 ounces, mainly due to the closure of the decline section during Q4 2014.

Independently managed production (mined and purchased) excluding third party purchase of concentrate, was broadly unchanged at 199,000 ounces.

Refined platinum production increased by 30% to 745,000 ounces, following a return to normal production after the industrial action and subsequent ramp up in Q4 2014. Refined palladium and rhodium increased for similar reasons. The mix of metals returned to normal compositions as all mines produced at normal rates.

DIAMONDS

De Beers - Diamond production decreased by 16% to 7.1 million carats, reflecting the decision to reduce production in response to trading conditions.

At Debswana (Botswana), production decreased by 21% to 4.7 million carats as a result of a reduction in tonnes treated at Jwaneng and Orapa, consistent with the decision to reduce production in line with trading conditions.  Damtshaa (a satellite operation of Orapa Mine) was placed on care and maintenance from 1 January 2016.

Production at DBCM (South Africa) increased marginally to 1.5 million carats.  Venetia's production declined, driven by a reduction in tonnes treated, consistent with the decision to reduce production in line with trading conditions.  Voorspoed and Kimberley both increased production, although this represents a small proportion of overall production.

On 21 January 2016, the completion of the sale of Kimberley mines to Ekapa Minerals was announced.

Production at Namdeb Holdings (Namibia) decreased by 18% to 0.4 million carats due to mining being focused on lower grade areas, consistent with the decision to reduce production in line with trading conditions.

Production in Canada decreased by 8% to 0.4 million carats, due to marginally reduced activity at Victor and lower grade at Snap Lake.  In December 2015, De Beers announced that Snap Lake would be placed on care and maintenance with immediate effect.

Quarterly production increased by 17% compared with Q3 2015, due to improved grade at Orapa and as a result of an annual planned six-day plant shutdown at Venetia in Q3. 

Rough diamond sales volumes in the quarter were 3.6 million carats (from 3 sights), compared with 3.0 million carats in Q3 (from 2 sights). This reflected the weaker trading conditions and higher pipeline stocks that impacted the midstream. 

For the full year, volumes decreased by 39% to 19.9 million carats (20.6 million carats on a 100% basis including all sales by joint ventures).

The De Beers rough price index was on average 8% lower in 2015 than in 2014, with the index falling by 15% over the course of the year.  However, the average realised price at $207 per carat was 5% higher than in 2014 due to a higher quality average product mix.

EXPLORATION AND EVALUATION

Exploration and Evaluation expenditure totalled $85 million, a decrease of 23%.  Exploration expenditure for the quarter was $51 million, a decrease of 16%. Evaluation expenditure for the quarter was $34 million, a decrease of 31%.

NOTE

This Production Report for the fourth quarter ended 31 December 2015 is unaudited.

PRODUCTION SUMMARY

The figures below include the entire output of consolidated entities and the Group's attributable share of joint operations, associates and joint ventures where applicable, except for De Beers' joint ventures which are quoted on a 100% basis.