TIDMAAL

RNS Number : 9959T

Anglo American PLC

28 July 2022

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HALF YEAR FINANCIAL REPORT

for the six months ended 30 June 2022

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28 July 2022

Anglo American Interim Results 2022

Portfolio quality supports underlying EBITDA of $8.7 billion

Financial highlights for the six months ended 30 June 2022

   --    Underlying EBITDA* of $8.7 billion 
   --    Profit attributable to equity shareholders of $3.7 billion 

-- Net debt* of $4.9 billion (0.3 x annualised underlying EBITDA): cash generation partially offset by investment in asset resilience and growth

-- $1.5 billion interim dividend, equal to $1.24 per share, consistent with our 40% payout policy

-- Quellaveco commissioned on time and on budget: multi-decade new copper operation expected to produce 300,000 copper equivalent tonnes per year on average over first 10 years

Duncan Wanblad, Chief Executive of Anglo American , said: "Anglo American's differentiated combination of portfolio quality and growth optionality, underpinned by our operating model and innovation track record, continues to position us strongly through the current market volatility and longer term cycle. Our unwavering focus is on driving consistent performance across our operations - which starts with the safety and health of our employees - and progress towards our full suite of sustainability ambitions. As we progressed through the first half, we began to regain operational momentum while also adjusting to the considerable challenges posed by Covid-19 related absenteeism, disrupted supply chains and logistics corridors, weather extremes and geopolitically-led economic volatility .

"Against that backdrop, we generated underlying EBITDA of $8.7 billion in the first six months, our second highest for a half year, albeit a 28% decrease compared to the record first half of 2021. Attributable free cash flow of $1.6 billion was driven largely by strong prices in the first quarter that declined towards the end of the period in tandem with increasing cost inflation. Despite those headwinds and our operational challenges, in steelmaking coal and iron ore in particular, that reduced our planned production output, our return on capital employed of 36% stayed well above our targeted 15% through-the-cycle return and our mining EBITDA margin remained at a healthy 52%. Our commitment to capital discipline and to a strong and flexible balance sheet is paramount to remain resilient to the external environment and retain optionality for value-adding growth. At the end of June, net debt of $4.9 billion, or 0.3 x annualised underlying EBITDA, reflects the cash generation of the business, partially offset by our investments in our existing assets and future growth. Our $1.5 billion interim dividend of $1.24 per share is in line with our 40% payout policy.

"We continue to make progress on our long term safety journey. There is no doubt, however, that the operational changes necessary to help protect the health of our employees during the last two years require us to apply additional targeted effort to regain our momentum of continuous improvement . I am also sad to report that we lost one colleague in March in an equipment lifting incident in Australia. It is simply unacceptable to lose a life at work and we are determined to eliminate workplace fatalities once and for all. This is my number one priority.

"Looking ahead, growing the value of our business by progressing asset development options is the foundation of our organic margin-enhancing volume growth potential of 30%(1) over the next decade. More than a third of this growth comes from our newly commissioned Quellaveco copper operation. With our customer proposition almost entirely oriented around future-enabling metals and minerals, we are well positioned to play a critical role in the decarbonisation of global energy and transport systems, alongside good progress in meeting our own ambitious emissions targets, thereby delivering enhanced value for our shareholders and stakeholders across society."

 
 Six months ended                              30 June 2022   30 June 2021   Change 
                                              =============  =============  ======= 
 US$ million, unless otherwise stated 
============================================  =============  =============  ======= 
 Revenue                                             18,111         21,779   (17) % 
============================================  =============  =============  ======= 
 Underlying EBITDA*                                   8,701         12,140    (28)% 
 Mining EBITDA margin*                                  52%            61% 
============================================  =============  =============  ======= 
 Attributable free cash flow*                         1,564          5,641    (72)% 
============================================  =============  =============  ======= 
 Profit attributable to equity shareholders 
  of the Company                                      3,680          5,188    (29)% 
============================================  =============  =============  ======= 
 Basic underlying earnings per share* 
  ($)                                                  3.11           4.30    (28)% 
 Basic earnings per share ($)                          3.03           4.18    (28)% 
============================================  =============  =============  ======= 
 Interim dividend per share ($)                        1.24           1.71    (27)% 
 Additional returns per share ($)                         -           1.60 
============================================  =============  =============  ======= 
 Total dividend and buyback per share 
  ($)                                                  1.24           3.31    (47)% 
============================================  =============  =============  ======= 
 Group attributable ROCE*                               36%            49% 
============================================  =============  =============  ======= 
 

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

(1) Copper equivalent volume growth vs. 2021 copper equivalent production .

Sustainability performance

Key sustainability performance indicators(1)

Anglo American tracks its strategic progress using KPIs that are based on our seven pillars of value: safety and health, environment, socio-political, people, production, cost, and financial. In addition to the financial performance set out above and our operational performance on pages 6-39, our performance for the first four pillars is set out below:

 
 Pillar                                        30 June       30 June                                      Target 
  of value          Metric                      2022          2021(2)          Target                      achieved 
=================  =========================  ============  ============      =========================  ============= 
 Safety             Work-related fatal 
  and health         injuries(3)                         1             0       Zero                       Not achieved 
  Total recordable 
   injury frequency 
   rate per million 
   hours(3)                                           2.36          2.34       Year-on-year reduction     Not achieved 
  New cases of occupational 
   disease                                               0             8       Year-on-year reduction     On track 
  Employees potentially 
   exposed to noise 
   over 85 dBA(4)(5)                                17,944        18,983       Year-on-year reduction     On track 
  Employees potentially 
   exposed to inhalable 
   hazards over the 
   occupational exposure                                                       5% reduction 
   limit (4)(5)                                      1,090           827       year-on-year               Not achieved 
 ===========================================  ============  ============      =========================  ============= 
                                                                               Improve energy 
                    Energy consumption                                          efficiency by 
 Environment         (million GJ)(5)                  32.7          35.3        30% by 2030               On track 
                                                                               Reduce absolute 
  GHG emissions -                                                               GHG emissions 
   Scopes 1 & 2                                        5.0           6.3        by 30% by 2030            On track 
                     (Mt CO(2) e)(5) 
                                                                               Reduce freshwater 
                                                                                abstraction in 
  Freshwater withdrawals                                                        water scarce areas 
   (million m(3) )(5)(6)                              12.5          15.7        by 50% by 2030            On track 
  Level 4-5 environmental 
   incidents(5)                                          0             0       Zero                       On track 
 ===========================================  ============  ============      =========================  ============= 
                                                                               Full compliance 
                    Social Way 3.0                                              with Social Way           Behind 
 Socio-political     implementation(7)(8)             49 %          23 %        3.0 by end 2022            schedule 
  Local procurement 
   spend ($bn)(9)                                      6.1           5.9 
  Taxes and royalties 
   ($m)(10)                                          3,491         3,303 
  Jobs supported by 
   Enterprise and Supplier 
   Development (ESD) 
   initiatives(7)(11)                              147,374       137,777 
 ===========================================  ============  ============      =========================  ============= 
                                                                               To achieve 33% 
 People             Women in management               31 %          28 %        by 2023                   On track 
  Women in the workforce                              24 %          23 % 
  Voluntary labour 
   turnover                                          2.3 %         2.5 %       < 5%                       On track 
 ===========================================  ============  ============      =========================  ============= 
 

(1) Sustainability performance indicators for the six months to 30 June 2022, and the comparative period, are not externally assured, unless otherwise stated.

(2) 2021 data includes Thermal Coal South Africa until the date of the Thungela demerger on 4 June 2021, unless otherwise stated.

(3) Prior period safety data is externally assured and includes data for the six months to 30 June 2021. The TRIFR presented for H1 2021 has been restated to reflect the final 2021 externally assured safety statistics.

(4) Reflects the number of employees who work in environments where there is potential for exposure above the exposure limit. All employees working in such environments are issued with protective equipment to prevent occupational illness. Prior period data excludes Thermal Coal South Africa.

(5) Energy, GHG emissions and water-withdrawal data for the current period and prior period is shown to end of May. Occupational exposure data for the current period is to the end of May 2022, and to the end of June for the prior period. Energy, GHG emissions, occupational exposure, and Level 4-5 environmental incidents data for the prior period is externally assured.

(6) Water metric and data have been revised in line with our freshwater definition. Data represents total Group water withdrawals.

   (7)       Data presented for the years ended 31 December 2021 and 2020. 

(8) While sites are assessed annually against all requirements applicable to their context, for consistency during the transition period, the metric reflects performance against the Social Way foundational requirements. For further information on progress, see page 4.

(9) Local procurement spend relates to spend within the country where an operation is located. The basis of calculation has been amended to more closely reflect the Group's financial accounting consolidation, i.e. 100% of subsidiaries and a proportionate share of joint operations, based on Anglo American's shareholding. The prior period comparative has been restated to reflect the new basis of preparation.

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

(11) Includes the following enterprise development programmes: Crescer (Brazil), Emerge Chile (Chile), Emerge Peru (Peru), Takura (Zimbabwe), Tokafala (Botswana) and Zimele (South Africa). Data refers to the cumulative number of businesses and jobs supported since programme inception.

Safety

Anglo American's most important priority is always safety - keeping our colleagues safe and well. Making sure every employee returns home at the end of each day, better for having worked at Anglo American, is our vision for safety and health across the business. We continue to make progress on our long term safety journey, including further developing our broader safety processes and procedures. Sadly, however, we lost one colleague at a managed operation in a fatal incident in Australia and one colleague at an independently managed joint venture operation in South Africa in the first half of the year. We are unconditional about safety, and we will not rest until zero harm is achieved and sustained across our business. We have shown it can be done for long stretches of time and now we must make it permanent. Everyone is a leader in safety and has a role to play in delivering an injury-free and fatality-free workplace.

Our Elimination of Fatalities Taskforce has, since 2018, supported a 93% reduction in fatal incidents over the last decade. The core programme is 82% complete with a material focus on Supply Chain Safety, Contractor Management, and Fatigue Management.

Our total injury frequency rate tracked up marginally again, after multiple years of progressive improvement, reflecting the changed operating configurations necessary to manage Covid-19 that tend to disrupt planned work routines. To stop, reflect and stand up for safety, all business units participated in a people-focused Global Safety Reset during April and May, led by supervisors. Significant focus is also being placed on leading indicators, specifically, increased high potential hazard (HPH) reporting, on-time investigations and action management, rigorous critical-control monitoring, and people-centric technology implementation.

Health

Our health focus remains on helping keep our people protected from Covid-19, while sustaining our work to continuously improve our key health measures. The pandemic is continuing to challenge us but, encouragingly, although case rates remain high in many places, a combination of less severe variants and much higher levels of vaccination (particularly in our organisation) has helped to keep hospitalisation and death rates far lower than in previous phases. We have also provided significant monetary and other support to accelerate vaccination rates, using our own health facilities and encouraging vaccination at the earliest opportunity, including in many host communities.

Recognising the link between employee health and broader community well-being, last year we completed community health improvement strategies for our operations in support of our Sustainable Mining Plan targets. Building on our extensive Covid-19 support, implementation of these strategies will start later this year.

We tackle the threats to health and well-being wherever we find them, with separate programmes for physical and mental health - including our Living with Dignity programme to help tackle gender-based and domestic violence; for creating a healthier working environment; and for encouraging healthy lifestyles. We are paying greater attention to psychological safety, intrinsic to embedding a safety-conscious mindset, establishing a steering group to investigate psychological safety issues, while also introducing the thinking into an array of other programmes.

People

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

We also continue to make progress against our diversity goals, including to achieve 33% female representation in management by 2023. The proportion of women at this level increased to 31% (30 June 2021: 28%), while female employees across the company represent 24% of our workforce.

Living with Dignity - building a safe and inclusive culture

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

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

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

Environment

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

Our environmental performance continues to improve, with no Level 5 or 4 incidents (or indeed Level 3) in the first half of the year. This achievement reflects the improvements to our planning and operating disciplines across the business. We launched a 'no repeats' challenge last year to help us learn from low level incidents and prevent repeats of a similar nature across the business, which has led to improvements in controls, specifically helping to prevent significant incidents.

Both energy consumption and GHG emissions decreased in the first half of the year and we remain on track to improve energy efficiency by 30% and reduce absolute GHG emissions by 30%, by 2030. We have a target to be carbon neutral across our operations by 2040, and an ambition to reduce our Scope 3 emissions by 50%, also by 2040. We are making encouraging progress. In 2020, around one third of the electricity Anglo American used globally was drawn from renewables. Having secured 100% renewable electricity supply across our operations in South America, by 2023 we expect to be drawing 56% of our global grid supply from renewables.

Socio-political

In 2020, we launched a new integrated social performance management system (Social Way 3.0) which has raised performance expectations and has resulted in continued improvement in our social performance. It was expected that additional site and corporate resourcing would be needed to support the initial plan for sites to have fully implemented the Social Way 3.0 by the end of 2022. However, these plans have been delayed through the considerable work required from our teams to deliver our Covid-19 community response programmes, recruitment challenges during the pandemic and restrictions impacting our ability to engage with external and internal stakeholders to support implementation of the new approach. Several sites are expected to still complete the transition by the end of 2022, and performance recovery plans are in place for sites where performance is lagging.

As we grow our business and improve our performance, so our total tax contribution increases, benefiting host countries. Total taxes and royalties borne and collected in the first half of the year amounted to $3.5 billion, a 6% increase compared with the prior period. We also made further progress with our enterprise and supplier development initiatives, supporting over 147,000 jobs in 2021 - a key component of our Sustainable Mining Plan goal to support five jobs offsite for every job onsite by 2030.

During the half year, we signed a $100 million 10-year loan agreement with the International Finance Corporation. The specific goals tied to the loan agreement are aimed at supporting community development in rural communities close to our operations across South Africa, including by promoting the creation of jobs, as well as improving the quality of education for more than 73,000 students. In addition, we are rolling out a comprehensive information and communications technology programme in 109 schools around our operations in South Africa, to give thousands of learners and community members the skills they need to enter the digital job market.

Sustainable Mining Plan - update in progress

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

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

Operational and financial review of Group results for the six months ended 30 June 2022

Operational performance

The impact of adverse weather and planned lower grades at many of our operations contributed to a 9% production decrease on a copper equivalent basis(1) . Extreme rainfall in Brazil, South Africa and Australia affected iron ore production at Minas-Rio and Kumba, steelmaking coal at Capcoal and Dawson, PGMs production at Mogalakwena and nickel production at Barro Alto. Planned lower grades at Los Bronces and Collahuasi (Copper), as well as the effect of expected lower water availability at Los Bronces, resulted in decreased copper production, while the impact of lower grade at Mogalakwena (PGMs) was only partially offset by improved operational performances across the remaining PGMs operations. Nickel production was also affected by lower ore grades. The planned end of mining at the Grasstree operation and ramp-up of the replacement Aquila longwall contributed to lower production volumes at Steelmaking Coal. De Beers increased production in line with continued strong demand for rough diamonds.

The suspended Grosvenor operation (Steelmaking Coal) restarted in February and ramped up well during the period, as did the Benguela Gem diamond recovery vessel (De Beers) and Aquila (Steelmaking Coal). Adding to our forecast copper production in the second half is the newly commissioned Quellaveco project in Peru, which delivered first copper concentrate in July as it nears completion ahead of receiving final regulatory clearance for commercial operations to begin.

De Beers' rough diamond production increased by 10% to 16.9 million carats (30 June 2021: 15.4 million carats), reflecting a strong operational performance and higher planned levels of production to meet continued strong demand for rough diamonds, while the first quarter of 2021 was affected by particularly high rainfall in southern Africa.

Copper production of 273,400 tonnes was 17% lower than the prior period (30 June 2021: 330,000 tonnes). At Los Bronces, production decreased by 21% to 129,700 tonnes (30 June 2021: 163,200 tonnes) due to planned lower grades and the impact of expected lower water availability on plant throughput and copper recovery. Planned lower grades at Collahuasi resulted in a 12% decrease in attributable production to 127,800 tonnes (30 June 2021: 145,900 tonnes).

Nickel production decreased by 5% to 19,600 tonnes (30 June 2021: 20,700 tonnes), primarily due to lower ore grades as a result of licensing delays that are now resolved, as well as the impact of heavy rainfall.

PGM production (metal in concentrate) decreased by 4% to 1,987,500 ounces (30 June 2021: 2,079,100 ounces), principally due to lower grade at Mogalakwena, partially offset by increased production from Mototolo, Unki and Amandelbult. Refined PGM production decreased by 16% to 1,959,100 ounces (30 June 2021: 2,326,700 ounces), as the first half of 2021 benefited from the processing of higher than normal work-in-progress inventory following the converter plant (ACP) Phase A rebuild and commissioning in the fourth quarter of 2020. Planned maintenance and the annual stock count also resulted in additional downtime of processing assets.

Iron ore production decreased by 14% to 27.5 Mt (30 June 2021: 31.9 Mt). At Kumba, production decreased by 13% to 17.8 Mt (30 June 2021: 20.4 Mt), driven by extremely high rainfall, a safety intervention at Kolomela and equipment reliability. Minas-Rio production decreased by 15% to 9.8 Mt (30 June 2021: 11.5 Mt) due to maintenance and unusually heavy rainfall that impacted the availability of the mining fleet and plant.

Steelmaking coal production decreased by 22% to 4.8 Mt (30 June 2021: 6.2 Mt), principally due to the planned end of mining at the Grasstree operation in January and ramp-up of the replacement Aquila longwall, which began operations in February and fully ramped up in June. Production was also impacted by record unseasonal rainfall in May at the open cut operations.

Manganese ore production was in line with the prior period at 1.8 Mt (30 June 2021: 1.8 Mt).

Group copper equivalent unit costs(1) increased by 18% in US dollar terms, largely due to lower production volumes and inflationary pressures, particularly diesel.

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

(2)

Financial performance

Anglo American's profit attributable to equity shareholders decreased to $3.7 billion (30 June 2021: $5.2 billion). Underlying earnings were $3.8 billion (30 June 2021: $5.3 billion), while operating profit was $6.7 billion (30 June 2021: $11.0 billion).

The war in Ukraine, and resulting trade sanctions on Russia, have restricted the supply of certain key commodities to the market, and caused further disruption to already stretched global supply chains. This has resulted in higher prices for energy, agricultural and other commodities, exacerbating broader inflationary pressures across the global economy, and contributing to more aggressive interest rate rises by central banks than had been expected and an associated strengthening of the dollar. While the medium and longer term demand outlooks for our products remain strong - not least given the role these play in sustaining global economic development for a growing population and enabling the decarbonisation of energy and transport systems - these deteriorating macro-economic conditions are contributing to a weaker near term outlook for demand, due to weaker investment and slower real income growth. Associated pressures on our operating costs have been partly mitigated by weakening commodity producer country currencies, including in Australia, Brazil, Chile and South Africa.

Underlying EBITDA*

Group underlying EBITDA decreased by $3.4 billion to $8.7 billion (30 June 2021: $12.1 billion) due to a decrease in the price for the Group's basket of products, unfavourable sales volumes and higher input costs across the Group. As a result, the Group Mining EBITDA margin* of 52% was lower than the prior year (30 June 2021: 61%). A reconciliation of 'Profit before net finance costs and tax', the closest equivalent IFRS measure to underlying EBITDA, is provided within note 3 to the Condensed financial statements.

Underlying EBITDA* by segment

 
                        6 months   6 months 
                           ended      ended 
                         30 June    30 June 
 $ million                  2022       2021 
=====================  =========  ========= 
 De Beers                    944        610 
 Copper                    1,166      1,935 
 Nickel                      239        135 
 PGMs                      2,732      4,383 
 Iron Ore                  2,298      4,910 
 Steelmaking Coal          1,399       (94) 
 Manganese                   223        154 
 Crop Nutrients             (18)       (12) 
 Corporate and other       (282)        119 
=====================  =========  ========= 
 Total                     8,701     12,140 
=====================  =========  ========= 
 

Underlying EBITDA* reconciliation for the six months ended 30 June 2021 to six months ended 30 June 2022

The reconciliation of underlying EBITDA from $12.1 billion in the six months to 30 June 2021 to $8.7 billion in the six months ended 30 June 2022 shows the controllable factors (e.g. cost and volume), as well as those outside of management control (e.g. price, foreign exchange and inflation), that drive the Group's performance.

 
 $ billion 
============================  ====== 
 H1 2021 underlying EBITDA*     12.1 
 Price                         (1.5) 
 Foreign exchange                0.4 
 Inflation                     (0.4) 
 Net cost and volume           (1.4) 
 Other                         (0.5) 
============================  ====== 
 H1 2022 underlying EBITDA*      8.7 
============================  ====== 
 

Price

Average market prices for the Group's basket of products decreased by 2% compared with the first half of 2021, reducing underlying EBITDA by $1.5 billion. Realised prices decreased for iron ore (36%), copper (13%) and the PGMs basket (7%) - primarily driven by rhodium which decreased by 30%. This was partly offset by steelmaking coal prices where the weighted average price increased by 245%.

Foreign exchange

The favourable foreign exchange impact on underlying EBITDA of $0.4 billion was due to weaker local currencies in many of our countries of operation, principally the South African rand and Chilean peso.

Inflation

The Group's weighted average CPI for the first half of the year was 7.2%, compared with 3.3% in the first six months of 2021, as inflation increased in all regions. The impact of CPI inflation on costs reduced underlying EBITDA by $0.4 billion.

Net cost and volume

The net impact of cost and volume was a $1.4 billion reduction in underlying EBITDA, driven by lower PGM sales from planned lower refined volumes following the higher than normal work-in-progress (WIP) inventory in the first half of 2021; lower sales volumes at Iron Ore Brazil due to maintenance and unusually heavy rainfall impacting production; and lower copper sales at the Chilean operations owing to planned lower grades and the negative effect on production of expected lower water availability at Los Bronces. In addition to these volume impacts, inflationary pressures (other than CPI) contributed to an increase in costs across the Group.

Other

The $0.5 billion unfavourable movement in underlying EBITDA from other factors was driven by the demerger and sale of thermal coal assets, resulting in an EBITDA reduction of $0.2 billion. Also included is $0.1 billion related to a decrease in environmental restoration provisions at Copper in the first half of 2021, and the impact of lower sales volumes and cost pressures at our Associates and Joint Ventures.

Underlying earnings*

Group underlying earnings decreased to $3.8 billion (30 June 2021: $5.3 billion), driven by the lower underlying EBITDA, partly offset by a corresponding decrease in income tax expense and earnings attributable to non--controlling interests.

Reconciliation from underlying EBITDA* to underlying earnings*

 
                                             6 months   6 months 
                                                ended      ended 
                                              30 June    30 June 
 $ million                                       2022       2021 
==========================================  =========  ========= 
 Underlying EBITDA*                             8,701     12,140 
 Depreciation and amortisation                (1,226)    (1,462) 
 Net finance costs and income tax expense     (2,552)    (3,448) 
 Non-controlling interests                    (1,136)    (1,895) 
==========================================  =========  ========= 
 Underlying earnings*                           3,787      5,335 
==========================================  =========  ========= 
 

Depreciation and amortisation

Depreciation and amortisation decreased by 16% to $1.2 billion (30 June 2021: $1.5 billion), reflecting the demerger of Thungela in the prior period and lower cost base of Steelmaking Coal, following the impairment at 30 June 2021.

Net finance costs and income tax expense

Net finance costs, before special items and remeasurements, were $0.2 billion (30 June 2021: $0.4 billion). The decrease was principally driven by fair value gains.

The underlying effective tax rate was 32.6% (30 June 2021: 29.6%). The underlying effective tax rate was impacted by the relative levels of profits arising in the Group's operating jurisdictions. Over the longer term, the underlying effective tax rate is expected to be in the range of 31% to 35%. The tax charge for the period, before special items and remeasurements, was $2.2 billion (30 June 2021: $3.0 billion).

Non-controlling interests

The share of underlying earnings attributable to non-controlling interests of $1.1 billion (30 June 2021: $1.9 billion) principally relates to minority shareholdings in Kumba (Iron Ore), PGMs and Copper.

Special items and remeasurements

Special items and remeasurements (after tax and non-controlling interests) are a net charge of $0.1 billion (30 June 2021: net charge of $0.1 billion), principally relating to adjustments to former operations of $0.1 billion arising in PGMs.

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

Net debt*

 
 $ million                                            2022      2021 
================================================  ========  ======== 
 Opening net debt* at 1 January(1)                 (3,842)   (5,530) 
================================================  ========  ======== 
 Underlying EBITDA* from subsidiaries and joint 
  operations                                         8,011    11,740 
 Working capital movements(2)                      (1,013)     (545) 
 Other cash flows from operations                       19     (261) 
================================================  ========  ======== 
 Cash flows from operations                          7,017    10,934 
 Capital repayments of lease obligations             (131)     (133) 
 Cash tax paid                                     (1,751)   (1,973) 
 Dividends from associates, joint ventures and 
  financial asset investments                          238        83 
 Net interest(3)                                     (116)     (155) 
 Dividends paid to non-controlling interests       (1,079)     (832) 
 Sustaining capital expenditure(4)                 (1,757)   (1,476) 
================================================  ========  ======== 
 Sustaining attributable free cash flow*             2,421     6,448 
 Growth capital expenditure and other(4)             (857)     (807) 
================================================  ========  ======== 
 Attributable free cash flow*                        1,564     5,641 
 Dividends to Anglo American plc shareholders      (2,052)     (907) 
 Disposals                                             467         - 
 Foreign exchange and fair value movements           (146)     (102) 
 Other net debt movements(5)                         (844)     (733) 
================================================  ========  ======== 
 Total movement in net debt*                       (1,011)     3,899 
================================================  ========  ======== 
 Closing net debt* at 30 June                      (4,853)   (1,631) 
================================================  ========  ======== 
 

(1) At 31 December 2021, the Group amended its definition of net debt to exclude variable vessel leases that are priced with reference to a freight index. Net debt reported at 30 June 2021 has therefore been restated to reflect the revised definition.

(2) Working capital movements for the six months ended 30 June 2021 have been restated to correct the presentation of a contract liability of $260 million previously presented within other borrowings.

(3) Includes cash inflows of $57 million (30 June 2021: inflows of $78 million), relating to interest receipts on derivatives hedging net debt, which are included in cash flows from derivatives related to financing activities.

(4) Following an amendment to IAS16 Proceeds before intended use, operating cash flows relating to sustaining and growth capital expenditure are no longer capitalised. For further details, refer to note 2 of the Condensed Financial Statements. Included within sustaining capital expenditure for the six months ended 30 June 2021 is $39 million of capitalised operating cash flows relating to life extension projects. 'Growth capital expenditure and other' includes $39 million (30 June 2021: $25 million) of expenditure on non-current intangible assets and $3 million of capitalised operating cash flows relating to growth projects for the six months ended 30 June 2021.

(5) Includes the purchase of shares under the 2021 buyback of $186 million; the purchase of shares for other purposes (including for employee share schemes) of $252 million; Mitsubishi's share of Quellaveco capital expenditure of $260 million; other movements in lease liabilities (excluding variable vessel leases) decreasing net debt by $65 million; and contingent and deferred consideration paid in respect of acquisitions completed in previous years of $157 million. 2021 includes Mitsubishi's share of Quellaveco capital expenditure of $226 million; other movements in lease liabilities (excluding variable vessel leases) increasing net debt by $299 million; contingent and deferred consideration paid in respect of acquisitions completed in previous years of $111 million; and the purchase of shares for employee share schemes of $174 million.

Net debt (including related derivatives) of $4.9 billion has increased by $1.0 billion since 31 December 2021, driven by working capital cash outflows of $1.0 billion due to higher PGMs pricing impacting the valuation of purchase of concentrate (POC) inventory, and an increase in finished goods at Copper and De Beers. The Group generated strong sustaining attributable free cash inflows of $2.4 billion, used in part to fund growth capital expenditure of $0.8 billion and dividends paid to Anglo American plc shareholders of $2.1 billion. Net debt at 30 June 2022 represented gearing (net debt to equity) of 12% (31 December 2021: 10%).

Cash flow

Cash flows from operations

Cash flows from operations decreased to $7.0 billion (30 June 2021: $10.9 billion), reflecting a reduction in underlying EBITDA from subsidiaries and joint operations, and a working capital build of $1.0 billion (30 June 2021: build of $0.5 billion). The inventory increase of $1.2 billion was driven by the higher POC valuation at PGMs and an increase in finished goods at Copper and De Beers. A reduction in payables of $0.3 billion was driven by the settlement of provisional price adjustments within Iron Ore, partly offset by a reduction in receivables of $0.4 billion, mainly owing to decreased base metal prices.

Capital expenditure*

 
                                                  6 months   6 months 
                                                     ended      ended 
                                                   30 June    30 June 
 $ million                                            2022       2021 
===============================================  =========  ========= 
 Stay-in-business                                    1,010        808 
 Development and stripping                             462        412 
 Life extension projects                               292        217 
 Proceeds from disposal of property, plant and                      - 
  equipment                                            (7) 
===============================================  =========  ========= 
 Sustaining capital                                  1,757      1,437 
 Growth projects                                       818        779 
===============================================  =========  ========= 
 Total                                               2,575      2,216 
 Capitalised operating cash flows                        -         42 
===============================================  =========  ========= 
 Total capital expenditure                           2,575      2,258 
===============================================  =========  ========= 
 

Capital expenditure increased to $2.6 billion (30 June 2021: $2.3 billion), as spend normalised following deferrals due to Covid-19.

Sustaining capital expenditure increased to $1.8 billion (30 June 2021: $1.4 billion), driven by planned additional stay-in-business expenditure across the Group.

Growth capital expenditure of $0.8 billion (30 June 2021: $0.8 billion) primarily relates to the Woodsmith and Quellaveco projects.

In line with previous guidance, total capital expenditure for 2022 is expected to be $6.1-6.6 billion.

Attributable free cash flow*

The Group's attributable free cash flow decreased to $1.6 billion (30 June 2021: $5.6 billion) due to lower cash flows from operations of $7.0 billion (30 June 2021: $10.9 billion), higher capital expenditure of $2.6 billion (30 June 2021: $2.3 billion), and increased dividends paid to non-controlling interests of $1.1 billion (30 June 2021: $0.8 billion). This was partially offset by decreased tax payments of $1.8 billion (30 June 2021: $2.0 billion).

Shareholder returns

In line with the Group's established dividend policy to pay out 40% of underlying earnings, the Board has proposed a dividend of $1.24 per share for the six months to 30 June 2022 (30 June 2021: $1.71 ordinary dividend per share and $0.80 special dividend per share), equivalent to $1.5 billion (30 June 2021: $3.1 billion including special dividend).

Disposals

On 11 January 2022, the Group completed the sale of its 33.3% shareholding in Cerrejón to Glencore plc for a total cash consideration of approximately $294 million - of which $50 million was received in January, after adjustment for dividends received in 2021. This sale represents the final stage of Anglo American's previously announced responsible transition from thermal coal operations.

On 25 March 2022, the Group announced the sale of its remaining 8.0% shareholding in Thungela Resources Limited, realising gross proceeds of R1,672 million (approximately $115 million). Anglo American's Marketing business continues to support Thungela in the sale and marketing of its products, and sales and purchases under the offtake agreement will continue to be reported on a net basis, together with the Group's other third-party trading activities.

In addition, there were cash receipts principally relating to the settlement of deferred consideration balances on the sale of the Rustenburg operations (PGMs) that was completed in November 2016.

Balance sheet

Net assets increased by $0.7 billion to $35.5 billion (31 December 2021: $34.8 billion), reflecting the profit for the period, offset by dividend payments and additional shareholder returns to Company shareholders and non-controlling interests.

Attributable ROCE*

Attributable ROCE decreased to 36% (30 June 2021: 49%). Annualised attributable underlying EBIT decreased to $11.5 billion (30 June 2021: $15.7 billion), reflecting the impact of lower realised prices achieved for the Group's products and lower production volumes. Average attributable capital employed remained broadly flat at $32.0 billion (30 June 2021: $32.1 billion), as growth capital expenditure, largely at Quellaveco (Copper) and Woodsmith (Crop Nutrients), was offset by the sale of thermal coal operations.

Liquidity and funding

Group liquidity remains conservative at $17.3 billion (31 December 2021: $17.1 billion), comprising $9.2 billion of cash and cash equivalents (31 December 2021: $9.1 billion) and $8.1 billion of undrawn committed facilities (31 December 2021: $8.0 billion).

In March 2022, the Group issued $500 million 3.875% Senior Notes due 2029, and $750 million 4.75% Senior Notes due 2052, as part of the Group's routine financing activities.

The weighted average maturity on the Group's bonds increased to 7.7 years (31 December 2021: 6.2 years).

The Group has an undrawn $4.7 billion revolving credit facility due to mature in March 2025.

Portfolio upgrade

Anglo American continues to evolve its portfolio of competitive, world class assets towards those future-enabling products that are fundamental to enabling a low carbon economy, a sustainable future, and that cater to global consumer demand trends. Aligned to this strategy, the Group entered into the below agreements in the first half of 2022.

On 18 March 2022, Anglo American announced the signing of a Memorandum of Understanding with EDF Renewables, a global leader in renewable energy, to work together towards developing a regional renewable energy ecosystem in South Africa. The ecosystem is expected to be designed to meet Anglo American's operational electricity requirements in South Africa through the supply of 3-5 GW of 100% renewable electricity (solar and wind) and storage by 2030, with excess electricity supplied to the grid to increase its resilience. The partnership is also expected to bring a host of economic benefits - stimulating the development of new economic sectors, local production and supply chains - to South Africa and the broader region, while also supporting the wider decarbonisation of energy in the country and the Just Energy Transition.

On 9 June 2022, Anglo American announced that it had signed a $100 million10-year loan agreement with the International Finance Corporation (IFC) linked to the delivery of sustainability goals that are integral to Anglo American's Sustainable Mining Plan. This sustainability-linked loan is the IFC's first in the mining sector and is understood to be the first in the mining sector globally that focuses exclusively on social development indicators.

On 30 June 2022, Anglo American entered into exclusive negotiations with First Mode Holding Inc (First Mode), and has agreed non-binding terms, to combine Anglo American's nuGen(TM) Zero Emissions Haulage Solution (ZEHS) with First Mode, the specialist engineering technology company that partnered with Anglo American to develop the nuGen(TM) ZEHS. The combination is expected to accelerate the development and deployment of the ZEHS technology across Anglo American's mine haul truck fleet, while exploring commercial opportunities for ZEHS across other industries that rely on heavy duty forms of transport.

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

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

 
                                                               Remaining 
                                           Capex                capex              First 
 Operation             Scope                $bn                 $bn                 production       Progress 
====================  ==================  ==================  ==================  ================  ================== 
 Copper 
 Quellaveco            New copper mine     c.2.8 (Anglo        0.6 (Anglo          2022              Construction 
                        in Moquegua,        American            American                             began in 2018. 
                        Peru producing      60% share)          60% share) 
                        c. 300 ktpa                                                                  First production 
                        (100% basis,                                                                 of concentrate 
                        180 ktpa our                                                                 in July 2022. 
                        share) over 
                        the first 10                                                                 Refer to the 
                        years.                                                                       Technology 
                                                                                                     projects 
                                                                                                     table below 
                                                                                                     for Coarse 
                                                                                                     Particle 
                                                                                                     Recovery at 
                                                                                                     Quellaveco. 
====================  ==================  ==================  ==================  ================  ================== 
 Collahuasi            Phase 1 expansion   Fifth ball          c. 0.3 in           2023              Environmental 
                       focused on near      mill c.0.1         total. Additional                     approval (EIA) 
                       term P101            (44% basis)        expansion                             approval was 
                       optimisation                            studies ongoing.                      obtained in 
                       opportunities,                          Subject to                            December 2021, 
                       the                                     permitting                            enabling 
                       implementation                          and approvals                         expansion 
                       of a fifth ball                                                               of the processing 
                       mill (approved)                                                               capacity up 
                       and a restart                                                                 to 210 ktpd, 
                       of leaching                                                                   and the 
                       activities to                                                                 construction 
                       add c.50 ktpa                                                                 of a desalination 
                       (44% basis).                                                                  plant and related 
                       Additional                                                                    infrastructure 
                       debottlenecking                                                               to provide a 
                       options to                                                                    sustainable 
                       further                                                                       alternative 
                       increase                                                                      water source. 
                       throughput 
                       remain under                                                                  The fifth ball 
                       study.                                                                        mill project 
                                                                                                     (first stage 
                       Further phase                                                                 of the expansion) 
                       expansions are                                                                is progressing 
                       in early stage                                                                according to 
                       study to increase                                                             plan. The 
                       production by                                                                 expected 
                       up to an                                                                      start-up is 
                       additional                                                                    during Q4 2023. 
                       100 ktpa (44% 
                       basis). 
 Diamonds 
 Marine Namibia        New diamond         c.0.2 (Anglo        <0.1 (Anglo         2022              Construction 
                        recovery vessel,    American            American                             began in 2019. 
                        adding 0.5 Mctpa    50% share)          50% share) 
                        (100% basis)                                                                 The vessel is 
                        of some of the                                                               now contributing 
                        highest value                                                                to marine 
                        diamonds in                                                                  production, 
                        the portfolio.                                                               having been 
                                                                                                     successfully 
                                                                                                     commissioned 
                                                                                                     ahead of schedule 
                                                                                                     and below budget 
                                                                                                     in Q1 2022. 
 Crop Nutrients 
 Woodsmith             New polyhalite      Subject             Subject to          Subject           Major critical 
                       (natural mineral     to development      development         to development   path components 
                       fertiliser)          timeline            timeline            timeline         have continued 
                       mine being           review              review              review           to progress 
                       developed                                                                     to our updated 
                       in Yorkshire,                                                                 plan. Ongoing 
                       UK. Expected                                                                  technical review 
                       to produce POLY4                                                              confirmed there 
                       - a premium                                                                   are several 
                       quality, low                                                                  improvements 
                       carbon fertiliser                                                             to modify design 
                       certified for                                                                 to bring it 
                       organic use.                                                                  up to Anglo 
                                                                                                     American's safety 
                                                                                                     and operating 
                                                                                                     integrity 
                                                                                                     standards 
                                                                                                     and optimise 
                                                                                                     value for the 
                                                                                                     long term. There 
                                                                                                     has also been 
                                                                                                     a leadership 
                                                                                                     change, with 
                                                                                                     Tom McCulley 
                                                                                                     having replaced 
                                                                                                     Chris Fraser 
                                                                                                     as CEO of Crop 
                                                                                                     Nutrients. 
 Iron Ore 
                       Implementation 
                        of Ultra High 
                        Dense Media 
                        Separation 
                        (UHDMS) 
                        technology at 
                        Kumba's Sishen 
                        operation will 
                        enable an 
                        increase 
                        in premium 
                        product 
                        production and 
                        the 
                        beneficiation 
                        of lower grade 
                        materials by 
                        reducing the 
                        current cut-off 
                        grade of <48% 
                        Fe to <40% Fe. 
                        In addition, 
                        the project 
                        contributes 
                        an additional 
                        3-4 years to                                                                 Project execution 
                        Sishen's life                                                                 approved in 
 Sishen                 of mine to 2039.   0.2                 0.2                 2023               Feb 2021. 
 PGMs 
 Mogalakwena           Evaluating          Number of           Not yet approved    2026             The Future of 
                        various             options                                                  Mogalakwena 
                        options to          being considered                                         work continues 
                        expand                                                                       to make good 
                        PGM production                                                               progress in 
                        of the mine                                                                  the six 
                        through                                                                      workstreams. 
                        technology 
                        development 
                        and deployment 
                        and the optimal 
                        mine plan to 
                        deliver feed 
                        to the 
                        concentrators. 
 Steelmaking 
  Coal 
 Moranbah-Grosvenor    Expansion of        c.0.3 (Anglo        Not yet approved    2025              Project approval 
                        the processing      American                                                 expected 2023, 
                        facilities to       88% share)                                               dependent on 
                        increase Anglo                                                               progress of 
                        American's share                                                             longwall 
                        of saleable                                                                  operations 
                        tonnes of high                                                               post-restart 
                        quality                                                                      of Grosvenor 
                        steelmaking                                                                  mine. 
                        coal by c. 2.5 
                        Mtpa (Anglo 
                        American 88%). 
 

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

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

 
                                                              Remaining 
                                              Capex            capex          Expected 
 Operation       Scope                         $bn             $bn             first production   Progress 
==============  ===========================  ==============  ==============  ==================  ===================== 
 Diamonds 
                 4 Mctpa underground 
                  replacement 
                  for the existing 
                  open pit. The 
                  project is expected 
                  to add an estimated 
                  88 million carats                                                               Open-pit mining 
                  from approximately                                                               at Venetia is 
                  134 million                                                                      planned to end 
                  tonnes of material                                                               in H2 2022, 
                  (1) and extend                                                                   with the transition 
                  the life of                                                                      to underground 
                  the mine to                                                                      mining starting 
 Venetia          2047.                       2.1             1.1             2023                 thereafter. 
 Jwaneng         9 Mctpa replacement          0.3 (Anglo      0.2 (Anglo      2027                Project progressing 
                  (100% basis)                 American        American                            on schedule. 
                  for Cuts 7 and               19.2% share)    19.2% share) 
                  8. The Cut-9 
                  expansion of 
                  Jwaneng will 
                  extend the life 
                  of the mine 
                  to 2036 and 
                  is expected 
                  to yield approximately 
                  57 million carats 
                  of rough diamonds 
                  from approximately 
                  47 million tonnes 
                  of material 
                  (1) . 
 Steelmaking 
  Coal 
 Aquila          3.5 Mtpa (70%                0.2 (Anglo      <0.1 (Anglo     2022                Development 
                  basis),                      American        American                            work began in 
                  7 year replacement           70% share)      70% share)                          September 2019 
                  for the Grasstree                                                                and first longwall 
                  operation which                                                                  production began 
                  has reached                                                                      in February 
                  the end of life.                                                                 2022. 
                  Aquila will 
                  be a longwall 
                  operation leveraging 
                  the existing 
                  Grasstree infrastructure 
                  and producing 
                  high quality 
                  hard coking 
                  coal to 2028. 
 Iron Ore 
                 4 Mtpa high 
                  grade iron ore 
                  replacement 
                  project. The 
                  development 
                  of a new pit, 
                  Kapstevel South, 
                  and associated 
                  infrastructure                                                                  Approved in 
                  at Kolomela                                                                      July 2020. Pit 
                  to help sustain                                                                  establishment 
                  output of c.13                                                                   and waste stripping 
                  Mtpa and extend                                                                  commenced in 
                  the remaining                                                                    2021, with first 
                  life of mine                                                                     ore expected 
 Kolomela         to 2034.                    0.4             0.3             2024                 in 2024. 
 PGMs 
 Mototolo/       The development              0.2             Approved        2023                Approved in 
  Der Brochen     of the project                                                                   December 2021. 
                  leverages the                                                                    Execution commenced 
                  existing Mototolo                                                                in Q1 2022. 
                  infrastructure,                                                                  First production 
                  enabling mining                                                                  expected in 
                  to extend into                                                                   late 2023. 
                  the adjacent 
                  and down-dip 
                  Der Brochen 
                  resource, which 
                  will potentially 
                  extend the life 
                  of mine beyond 
                  30 years. 
 

(1) Refer to Anglo American plc Ore Reserves and Mineral Resources Report 2021 for additional information.

Technology projects(1)

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

 
 Initiative           Scope                            Progress 
===================  ===============================  ============================================================= 
 Copper, PGMs, 
  and Nickel 
 Bulk ore sorting     Deliver improved feed 
                       grade to plants through           *    Mogalakwena (PGMs) North Concentrator (70% of 
                       early rejection of waste,              complex feed) and Los Bronces (Copper) Confluencia 
                       resulting in energy,                   Plant (65% of complex feed) units operational and 
                       water and cost savings.                integration to business as usual is under way. 
 
 
 
                                                         *    Barro Alto (Nickel) in-pit unit to commence upgrades 
                                                              in second half of 2022 for improved future sorting 
                                                              performance, and additional in-pit unit under 
                                                              technical evaluation. 
 
 
 
                                                         *    Planning for trials at Kolomela (Iron Ore) under way. 
 Copper, PGMs, 
  and Iron Ore 
 Coarse particle      Innovative flotation 
  recovery (CPR)       process allows material           *    Demonstration plant construction and commissioning 
                       to be ground to a larger               completed in 2021at El Soldado (Copper), with further 
                       particle size, rejecting               testing in progress. 
                       coarse gangue and allowing 
                       water to release from 
                       coarser ore particles, 
                       improving energy efficiencies     *    Constructing full scale system at Mogalakwena North 
                       and water savings.                     concentrator (PGMs) - start-up anticipated Q4 2022. 
 
 
 
                                                         *    CPR approved at Quellaveco (Copper) to treat 
                                                              flotation tails, improving recoveries by c.3% over 
                                                              the life of mine. Commissioning expected in late 
                                                              2023. 
 
 
 
                                                         *    Minas-Rio (Iron Ore) PFS-A complete, advancing to 
                                                              PFS-B in 2022 and Feasibility in 2023. 
 
 
 
                                                         *    Los Bronces (Copper) PFS-B complete, advancing to 
                                                              Feasibility in 2022. Options being investigated at 
                                                              Collahuasi. 
 Copper and PGMs 
 Hydraulic dry        Engineering of geotechnically 
  stack                stable tailings facilities        *    El Soldado (Copper) demonstration unit commissioned. 
                       that dry out in weeks,                 Full-scale operation is under way and validation will 
                       facilitating up to 85%                 continue until Q1 2023. 
                       water recovery. 
 
 
                                                         *    Assessing application to tailings expansion at 
                                                              Mogalakwena (PGMs) with benefits from water quality 
                                                              and quantity improvements. Brownfield trial starting 
                                                              in Q3 2022. 
 Portfolio-wide 
 nuGen(TM) Zero       Developing the world's 
  Emissions Haulage    largest hydrogen powered          *    Launched prototype ZEHS hydrogen-powered mine haul 
  Solution (ZEHS)      mining truck and providing             truck - the world's largest, designed to operate in 
                       critical supporting                    everyday mining conditions - at our Mogalakwena PGMs 
                       infrastructure such                    mine in South Africa on 6 May. 
                       as refuelling, recharging, 
                       and facilitation of 
                       hydrogen production 
                       to decarbonise high               *    Announced agreement of non-binding terms to combine 
                       power transport, using                 Anglo American's nuGen(TM) ZEHS with First Mode, the 
                       renewable energy.                      specialist engineering technology company that 
                                                              partnered with us to develop the prototype. 
 
 
 
                                                         *    Agreement aims to support decarbonisation of our 
                                                              global fleet of ultra-class mine haul trucks, of 
                                                              which approximately 400 are currently in operation. 
 

(1) Expenditure relating to technology projects is included within operating expenditure, or if it meets the accounting criteria for capitalisation, within Growth capital expenditure.

Digital projects(1)

The Group is investing c. $0.1-0.2 billion per year over the next three years on digital projects as part of the FutureSmart Mining(TM) programme (metrics presented on a 100% basis unless otherwise indicated):

 
 Initiative                 Scope                          Progress 
=========================  =============================  ============================================================ 
 PGMs, Iron Ore, 
  Steelmaking Coal, 
  Copper, and Diamonds 
 Predictive Maintenance,    Maintenance planning 
  VOXEL(TM) Asset           based on predictive             *    A variety of deployments at Mogalakwena, Amandelbult, 
  Strategy & Reliability    analytics - resulting                Amandelbult Concentrator Plant, Rustenburg Base Metal 
                            in improvements in safety,           Refinery and Polokwane Smelter (PGMs), Kolomela (Iron 
                            reliability and availability         Ore), Moranbah (Steelmaking Coal), Los Bronces 
                            of critical assets.                  (Copper), Mafuta vessel, Jwaneng, and Gahcho Kué 
                                                                 (Diamonds). 
 Copper, PGMs, 
  and Iron Ore 
 Rapid Resource             Enables consistent core 
  Modelling, VOXEL(TM)       logging, 3D implicit            *    Deployments at Mogalakwena (PGMs) and Quellaveco 
  Discovery & Geosciences    modelling, and statistical           (Copper). 
                             resource modelling as 
                             one integrated workflow 
                             in weeks vs years. 
 Spatial Inventory          Builds a digital twin 
  Management, VOXEL(TM)     of material flow, providing      *    Deployments at Los Bronces and Quellaveco (Copper), 
  Discovery & Geosciences   access to accurate                    Minas-Rio, Kolomela and Sishen (Iron Ore), and 
                            information                           Mogalakwena (PGMs). 
                            about material within 
                            the mining operation 
                            and enabling additional 
                            value through bulk ore 
                            sorting. 
 Copper, PGMs, 
  Iron Ore, and 
  Steelmaking Coal 
 Process Performance        Delivers automated support 
  Review, VOXEL(TM)          to improve the detection,       *    Deployments at Los Bronces and Quellaveco (Copper), 
  Processing                 prioritisation, and                  Moranbah (Steelmaking Coal), Kolomela (Iron Ore) and 
                             resolution of process                Mogalakwena (PGMs). 
                             issues. 
 Copper, PGMs, 
  Iron Ore, and 
  Steelmaking Coal 
 Digital Operational        Enables definition and 
  Planning, VOXEL(TM)        management of models           *    Deployments at Los Bronces (Copper), Mogalakwena 
  Integrated Operations      and data that then applies          Anglo Converter Plant and Amandelbult (PGMs), Sishen, 
                             cutting edge simulation             Kolomela and Minas-Rio (Iron Ore), and Moranbah and 
                             and elastic cloud-based             Grosvenor (Steelmaking Coal). 
                             computing technology 
                             to deliver optimised 
                             operational plans across 
                             the mining value chain. 
 Diamonds, Copper, 
  PGMs, and Iron 
  Ore 
 Advanced Process           Up to 40% improvement 
  Control                   in stability and                *    Delivered at Minas-Rio and Kumba (Iron Ore), Los 
                            productivity.                        Bronces, Quellaveco and Chagres (Copper), Mogalakwena 
                                                                 (PGMs), and Venetia and Benguela Gem (Diamonds). 
 
 
 
                                                            *    Ambition for 95% of automatable processes within our 
                                                                 plant flowsheets to be under Advanced Process Control 
                                                                 by end of 2022. 
 

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

The Board

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

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

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

   --    Duncan Wanblad joined the Board as chief executive. 

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

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

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

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

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

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

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

Principal risks and uncertainties

Anglo American is exposed to a variety of risks and uncertainties which may have a financial, operational or reputational impact on the Group, and which may also have an impact on the achievement of social, economic and environmental objectives. The principal risks and uncertainties facing the Group at the 2021 year end are set out in detail on pages 60-67 of the strategic report section of the Integrated Annual Report 2021 www.angloamerican.com . The principal risks and uncertainties facing the Group relate to the following:

   --    Catastrophic and natural catastrophe risks 
   --    Economic environment including product prices 
   --    Cyber security 
   --    Political 
   --    Community and social relations 
   --    Safety 
   --    Climate change 
   --    Regulatory and permitting 
   --    Operational performance 
   --    Pandemic 
   --    Corruption 
   --    Water 
   --    Future demand 

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

De Beers - Diamonds

Financial and operational metrics(1)

 
             Production    Sales                Unit      Group   Underlying       EBITDA   Underlying 
                 volume   volume     Price     cost*   revenue*      EBITDA*   margin*(6)        EBIT*   Capex*   ROCE* 
==========  ===========  =======  ========  ========  =========  ===========  ===========  ===========  =======  ====== 
                   '000     '000 
                    cts   cts(2)   $/ct(3)   $/ct(4)      $m(5)           $m                        $m       $m 
==========  ===========  =======  ========  ========  =========  ===========  ===========  ===========  =======  ====== 
 De Beers        16,884   15,329       213        59      3,595          944          53%          718      250     11% 
   Prior 
    period       15,409   19,161       135        59      2,900          610          42%          377      205      6% 
 Botswana        11,705      n/a       189        32        n/a          333          n/a          295       31     n/a 
   Prior 
    period       10,687        -       131        35          -          226            -          203       29       - 
 Namibia          1,016      n/a       632       292        n/a           93          n/a           78       19     n/a 
   Prior 
    period          676        -       578       374          -           43            -           25       23       - 
 South 
  Africa          2,916      n/a       147        39        n/a          227          n/a          162      169     n/a 
   Prior 
    period        2,437        -       107        48          -          113            -           34      122       - 
 Canada           1,247      n/a        97        60        n/a            2          n/a         (25)       19     n/a 
   Prior 
    period        1,609        -        55        42          -           35            -            5       17       - 
 Trading            n/a      n/a       n/a       n/a        n/a          401          12%          398        1     n/a 
   Prior 
    period            -        -         -         -          -          279          11%          276        1       - 
 Other(7)           n/a      n/a       n/a       n/a        n/a        (112)          n/a        (190)       11     n/a 
   Prior 
    period            -        -         -         -          -         (86)            -        (166)       13       - 
==========  ===========  =======  ========  ========  =========  ===========  ===========  ===========  =======  ====== 
 

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

(2) Total sales volumes on a 100% basis were 17.3 million carats (30 June 2021: 20.8 million carats). Total sales volumes (100%) include De Beers Group's joint arrangement partners' 50% proportionate share of sales to entities outside De Beers Group from Diamond Trading Company Botswana and Namibia Diamond Trading Company.

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

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

(5) Includes rough diamond sales of $3.3 billion (30 June 2021: $2.6 billion).

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

   (7)       Other includes Element Six, Brands and consumer markets, and corporate. 

Markets

Following a continued strong recovery in consumer demand for diamond jewellery over the holiday season at the end of 2021, the year began with healthy demand and inventory conditions throughout the diamond pipeline as retailers restocked in the first two months of the year - with polished diamond prices rising on the back of the strong trading environment.

The onset of the Russia-Ukraine war initially affected industry sentiment negatively as diamond businesses sought to understand the potential impact on supply and demand from both consumer self-sanctioning in western markets and subsequent formal sanctions.

Nonetheless, despite the impact of the war and associated sanctions, as well as the recovering demand for luxury travel, consumer demand for diamond jewellery in the key US market has continued to post positive growth on the record levels of demand seen in 2021. Polished prices subsequently started to rise again in the second quarter, especially in the smaller diamond sizes (of which Russia produces a large share) but softened slightly in June from higher inventory levels and increased economic uncertainty. The overall improvement in prices was despite the recovery in Chinese consumer demand for diamond jewellery seen at the start of the year being impacted in the second quarter by the latest wave of Covid-19 and subsequent lockdowns in major Chinese cities.

Demand for De Beers' rough diamonds remained robust throughout the first half of the year, supported by strong US consumer demand for diamond jewellery, tightness in global rough diamond supply and De Beers' focus on enhanced provenance assurance for its rough diamonds through its blockchain-backed Tracr(TM) technology platform.

Financial and operational overview

Total revenue increased to $3.6 billion (30 June 2021: $2.9 billion), with rough diamond sales rising to $3.3 billion (30 June 2021: $2.6 billion), as the midstream replenished their stocks following strong consumer demand over the holiday season. Rough diamond sales volumes totalled 15.3 million carats (30 June 2021: 19.2 million carats), with the prior period benefiting from very strong demand recovery following the impact of Covid-19 in 2020. The average realised price rose by 58% to $213/ct (30 June 2021: $135/ct), driven by a larger proportion of higher value rough diamonds sold, as well as growth in the De Beers rough diamond price index. The rough price index increased by 28% compared with the same period in the prior year, reflecting positive consumer demand for diamond jewellery as well as tightness in inventories across the diamond value chain .

Underlying EBITDA increased by 55% to $944 million (30 June 2021: $610 million), reflecting the recovery in sales. Unit costs were flat at $59/ct (30 June 2021: $59/ct) as the benefit of higher production was offset by rising inflation and input costs.

Capital expenditure increased by 22% to $250 million (30 June 2021: $205 million), largely due to a ramp-up in the Venetia Underground project, ahead of first production in 2023.

Operational performance

Mining

Rough diamond production increased by 10% to 16.9 million carats (30 June 2021: 15.4 million carats), reflecting a strong operational performance and higher planned levels of production to meet continued strong demand for rough diamonds, while the first quarter of 2021 was affected by particularly high rainfall in Botswana and at Venetia.

In Botswana, production increased by 10% to 11.7 million carats (30 June 2021: 10.7 million carats) owing to increased processing at both Orapa and Jwaneng, as well as planned higher grade at Orapa. The Government of the Republic of Botswana and De Beers Group have extended their existing agreement for the sale of Debswana's rough diamond production by 12 months until 30 June 2023. Following further positive progress towards a new agreement being made in the first half of 2022, the two parties have agreed to the one-year extension to enable the finalisation of the ongoing discussions.

Namibia production increased by 50% to 1.0 million carats (30 June 2021: 0.7 million carats) primarily due to continued strong performance from the new diamond recovery vessel, the Benguela Gem, in the first quarter of 2022.

South Africa production increased by 20% to 2.9 million carats (30 June 2021: 2.4 million carats) due to the treatment of higher grade ore from the final cut of the open pit at Venetia.

Production in Canada decreased by 22% to 1.2 million carats (30 June 2021: 1.6 million carats), primarily as a result of treating lower grade ore and Covid-19 related absenteeism.

Brands and consumer markets

The strong recovery in US consumer demand for diamond jewellery was reflected in continued growth in De Beers' branded diamond jewellery from De Beers Jewellers and De Beers Forevermark. As diamond provenance and traceability become increasingly important, De Beers continues to invest in its unique ability to provide source assurance for its diamonds at scale, underpinned by the Tracr(TM) blockchain platform. This proprietary technology provides an immutable record of a diamond's provenance, underpinning confidence in natural diamonds.

Operational and market outlook

Consumer desire for natural diamonds continues to be robust in key consumer markets. However, a deterioration in global macro-economic conditions and significant inflation in the key markets could result in reduced consumer spending impacting demand for diamond jewellery. Despite this, the combination of ongoing sanctions against Russia, decisions from a number of US-based jewellery businesses to apply their own restrictions on purchases of Russian diamonds, and continued development of provenance initiatives has the potential to underpin continued demand for De Beers' rough diamonds in the medium to longer term.

Meanwhile, the longer term evolution of the diamond value chain continues, including a sustained focus on inventory balance, the efficient distribution of diamonds throughout the pipeline, increased online purchasing, and a greater focus on the provenance and sustainability credentials of companies and their products. Despite the near term challenges and uncertainties, the long term outlook for diamond jewellery demand remains positive, while the global supply of rough diamonds is expected to slightly decline owing to the lack of recent discoveries.

Full year production guidance for 2022 is 32-34 million carats (100% basis), subject to trading conditions and the extent of further Covid-19 related disruptions. Full year unit cost guidance for 2022 is c.$65/ct.

Copper

Financial and operational metrics

 
                                                                                        Mining 
                  Production    Sales                Unit      Group   Underlying       EBITDA   Underlying 
                      volume   volume     Price     cost*   revenue*      EBITDA*   margin*(2)        EBIT*   Capex*   ROCE* 
===============  ===========  =======  ========  ========  =========  ===========  ===========  ===========  =======  ====== 
                          kt    kt(1)   c/lb(2)   c/lb(3)      $m(4)           $m                        $m       $m 
===============  ===========  =======  ========  ========  =========  ===========  ===========  ===========  =======  ====== 
 Copper                  273      265       401       150      2,443        1,166          47%          894      953     19% 
   Prior period          330      305       460       116      2,974        1,935          66%        1,630      768     38% 
 Los Bronces(5)          130      122       n/a       219      1,027          431          42%          324      363     n/a 
   Prior period          163      155         -       155      1,431          920          64%          768      189       - 
 Collahuasi(6)           128      128       n/a        85      1,095          821          75%          697      145     n/a 
   Prior period          146      133         -        58      1,238        1,048          85%          928      197       - 
 Quellaveco(7)           n/a      n/a       n/a       n/a        n/a          n/a          n/a          n/a      376     n/a 
   Prior period            -        -         -         -          -            -            -            -      331       - 
 Other 
  operations(8)           16       15       n/a       n/a        321         (86)         (3)%        (127)       69     n/a 
   Prior period           21       17         -         -        305         (33)          16%         (66)       51       - 
===============  ===========  =======  ========  ========  =========  ===========  ===========  ===========  =======  ====== 
 
   (1)       Excludes 216 kt third-party sales (30 June 2021: 157 kt). 
   (2)       Represents realised copper price and excludes impact of third-party sales. 
   (3)       C1 unit cost includes by-product credits. 
   (4)       Group revenue is shown after deduction of treatment and refining charges (TC/RCs). 
   (5)       Figures on a 100% basis (Group's share: 50.1%). 
   (6)    44% share of Collahuasi production, sales and financials. 

(7) Figures on a 100% basis (Group's share: 60%), except capex which represents the Group's share after deducting direct funding from non--controlling interests. H1 2022 capex on a 100% basis is $626 million, of which the Group's share is $376 million. H1 2021 capex on a 100% basis was $551 million, of which the Group's share was $331 million.

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

Financial and operational overview

Underlying EBITDA decreased by 40% to $1,166 million (30 June 2021: $1,935 million), reflecting lower production and a 13% decrease in the realised price.

Copper production of 273,400 tonnes was 17% lower than the prior period (30 June 2021: 330,000 tonnes) due to planned lower grades and expected lower water availability at Los Bronces, owing to the ongoing drought in Chile's central zone - with record low levels of precipitation in 2021 and the first half of 2022, which were partly offset by water management initiatives. Unit costs increased by 29% to 150 c/lb (30 June 2021: 116 c/lb), reflecting lower production, record levels of local inflation and higher input costs, particularly diesel and explosives, partly offset by the weaker Chilean peso and higher by-product credits.

Capital expenditure increased by 24% to $953 million (30 June 2021: $768 million), reflecting expenditure on critical infrastructure projects deferred due to the Covid-19 pandemic in Chile and the ongoing investment in the Quellaveco project in Peru, partly offset by the weaker Chilean peso.

Markets

 
                                  6 months   6 months 
                                     ended      ended 
                                   30 June    30 June 
                                      2022       2021 
===============================  =========  ========= 
 Average market price (c/lb)           443        413 
 Average realised price (c/lb)         401        460 
===============================  =========  ========= 
 

The difference between the market price and realised price is largely a function of provisional pricing adjustments, with 145,900 tonnes of copper provisionally priced at 374 c/lb at 30 June 2022 (30 June 2021: 181,072 tonnes provisionally priced at 425 c/lb), and the timing of sales across the period.

The average LME copper price was 7% higher compared with the same period in 2021, in spite of the sharp decline in the average price towards the end of June as investor selling took place across a range of markets, including copper. Fears of recession, supply-chain disruptions in manufacturing, inflation and interest rate increases have adversely impacted investor sentiment as the conflict in Ukraine persists and energy costs rise. In addition, economic growth in China is only recovering slowly after recent coronavirus-induced lockdowns in key centres. Despite copper's strong role in global energy transition activity, and concerns about supply availability over the medium and longer term, copper prices have been adversely affected by the weaker near term global economic outlook.

Operational performance

Copper production of 273,400 tonnes was 17% lower than the prior period (30 June 2021: 330,000 tonnes).

At Los Bronces, production decreased by 21% to 129,700 tonnes (30 June 2021: 163,200 tonnes) due to planned lower grades (0.59% vs 0.70%), lower plant throughput (23.1 Mt vs 24.7 Mt) as a result of expected lower water availability, and lower copper recovery (80.9% vs 83.2%). The impact of expected lower water availability, following the record low levels of precipitation at the end of 2021 and during the first half of 2022, was partially offset by initiatives to maximise water efficiency, including sourcing of external industrial water. C1 unit costs increased by 41% to 219 c/lb (30 June 2021: 155 c/lb), driven by planned lower production, record levels of inflation and cost increases associated with water management, partly offset by higher by-product credits and the weaker Chilean peso.

At Collahuasi, Anglo American's attributable share of copper production decreased by 12% to 127,800 tonnes (30 June 2021: 145,900 tonnes) due to planned lower grades (1.14% vs 1.27%) in accordance with the mine plan. C1 unit costs increased by 47% to 85 c/lb (30 June 2021: 58 c/lb), driven by planned lower production and the effect of inflation, partly offset by the weaker Chilean peso and higher by-product credits.

Production at El Soldado decreased by 24% to 15,900 tonnes (30 June 2021: 20,900 tonnes) due to planned lower grades (0.54% vs 0.73%) in accordance with the mine plan. C1 unit costs increased by 43% to 304 c/lb (30 June 2021: 213 c/lb) due to the lower production and inflation, partly offset by the weaker Chilean peso.

Chile's central zone continues to face severe drought conditions, with the two years up to June 2022 being the driest years since records began, and with the outlook for the year remaining very dry.

Operational outlook - Copper Chile

2022 full year production guidance for Chile is 560,000-600,000 tonnes, subject to the extent of further Covid-19 related disruptions and water availability. 2022 full year C1 unit cost guidance for Chile is c.150c/lb, subject to the impact of water availability on production volumes.

There is limited near term production impact from the recent rejection of the environmental permit application for the Los Bronces Integrated Project. Anglo American is continuing to engage with the relevant regulatory authorities to make available any additional information or clarity that may be required. Anglo American has requested a review by a Minister's Committee - which is the next stage of the regulated permitting process in Chile - to evaluate the full breadth of merits of the project. Anglo American remains hopeful that the positive impact this project will have on the local area, including an improvement to air quality, as well as a major long term inward investment for Chile, will be recognised.

Quellaveco update

The Group announced first production of copper concentrate from Quellaveco on 12 July 2022, a key milestone in delivery of this world class asset, on time and on budget, as Quellaveco nears completion ahead of receiving final regulatory clearance for commercial operations to begin.

The production of first copper concentrate marks the beginning of a normal period of testing of the processing plant to demonstrate readiness for operations. Copper concentrate from the testing period is being stockpiled for future sale whilst the process of obtaining regulatory permits for commercial operations takes place.

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

Focus is now on receiving the required regulatory clearances, execution of remaining project-scope activities including the commissioning of the second grinding line expected to begin in the third quarter of 2022, and safely ramping up the processing plant to nameplate capacity over the next 12 months. We are also working closely with government and local communities on the safe and responsible demobilisation of the project workforce.

Capital expenditure in the first half of 2022 (on a 100% basis) was $0.6 billion, of which the Group's share is $0.4 billion.

Capital expenditure guidance for 2022 remains $0.8-1.1 billion (100% basis), of which the Group's share is $0.5-0.7 billion.

Operational outlook - Copper Peru

Production guidance for Peru for 2022 remains 100,000-150,000 tonnes of copper. C1 unit cost guidance for 2022 is c. 135c/lb, subject to progressing the ramp-up of production volumes. All guidance and project progress remains subject to the extent of any further Covid-19 related disruption.

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

Nickel

Financial and operational metrics

 
                                                                                  Mining 
             Production     Sales                Unit      Group   Underlying     EBITDA   Underlying 
                 volume    volume     Price     cost*   revenue*      EBITDA*    margin*        EBIT*   Capex*   ROCE* 
==========  ===========  ========  ========  ========  =========  ===========  =========  ===========  =======  ====== 
                      t         t   $/lb(1)   c/lb(2)         $m           $m                      $m       $m 
==========  ===========  ========  ========  ========  =========  ===========  =========  ===========  =======  ====== 
 Nickel          19,600    16,800     11.59       487        407          239        59%          201       32     30% 
  Prior 
   period        20,700    20,000      7.21       350        325          135        41%          106       10     18% 
==========  ===========  ========  ========  ========  =========  ===========  =========  ===========  =======  ====== 
 
   (1)       Realised price. 
   (2)       C1 unit cost. 

Financial and operational overview

Underlying EBITDA increased by 77% to $239 million (30 June 2021: $135 million), reflecting higher realised nickel prices, partially offset by lower volumes and higher unit costs. C1 unit costs increased by 39% to 487 c/lb (30 June 2021: 350 c/lb) as a result of higher input prices, lower production volumes and the stronger Brazilian real.

Capital expenditure increased to $32 million (30 June 2021: $10 million), primarily due to planned higher expenditure on P101 asset productivity initiatives.

Markets

 
                                  6 months   6 months 
                                     ended      ended 
                                   30 June    30 June 
                                      2022       2021 
===============================  =========  ========= 
 Average market price ($/lb)         12.52       7.93 
 Average realised price ($/lb)       11.59       7.21 
===============================  =========  ========= 
 

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

The average LME nickel price of $12.52/lb was 58% higher (30 June 2021: $7.93/lb). The year started with strong demand and prices, which were further bolstered by the invasion of Ukraine by Russia, a major nickel supplier, and growing consumer resistance to buying Russian nickel. Prices weakened at the end of the period due to inflation and global economic growth concerns, despite available nickel stocks continuing to decline.

Operational performance

Nickel production decreased by 5% to 19,600 tonnes (30 June 2021: 20,700 tonnes), primarily due to lower ore grades as a result of licensing delays that are now resolved, as well as the impact of heavy rainfall and unplanned maintenance. Sales volumes were further impacted by logistics constraints, primarily in the container freight market.

Operational outlook

Production guidance for 2022 is 40,000-42,000 tonnes, subject to the extent of further Covid-19 related disruption.

C1 unit cost guidance for 2022 is c.495c/lb.

Platinum Group Metals

Financial and operational metrics

 
                  Production    Sales                                                Mining 
                      volume   volume   Basket    Unit      Group   Underlying       EBITDA   Underlying 
                        PGMs     PGMs    price   cost*   revenue*      EBITDA*   margin*(5)        EBIT*   Capex*   ROCE* 
===============  ===========  =======  =======  ======  =========  ===========  ===========  ===========  =======  ====== 
                                         $/PGM   $/PGM 
                      koz(1)   koz(2)    oz(3)   oz(4)         $m           $m                        $m       $m 
===============  ===========  =======  =======  ======  =========  ===========  ===========  ===========  =======  ====== 
 PGMs                  1,988    2,044    2,671     948      5,555        2,732          55%        2,555      394    119% 
   Prior period        2,079    2,568    2,884     866      7,414        4,383          71%        4,211      363    160% 
 Mogalakwena             510      540    2,543     821      1,374          871          63%          796      210     n/a 
   Prior period          637      712    2,748     690      1,958        1,403          72%        1,330      189       - 
 Amandelbult             343      372    3,016   1,184      1,122          603          54%          573       32     n/a 
   Prior period          341      441    3,247   1,178      1,432          965          67%          938       34       - 
 Other 
  operations(6)          456      436    2,780     924      1,210          581          48%          524      152     n/a 
   Prior period          425      521    3,054     880      1,547        1,116          72%        1,059      140       - 
 Processing 
  and 
  trading(7)             678      696      n/a     n/a      1,849          677          37%          662      n/a     n/a 
   Prior period          675      894        -       -      2,477          899          36%          884      n/a       - 
===============  ===========  =======  =======  ======  =========  ===========  ===========  ===========  =======  ====== 
 

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

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

(3) Average US$ realised basket price, based on sold ounces (own-mined and purchased concentrate). Excludes the impact of the sale of refined metal purchased from third parties.

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

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

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

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

Financial and operational overview

Underlying EBITDA decreased to $2,732 million (30 June 2021: $4,383 million), as a result of a 7% decrease in the PGM basket price, reflecting lower market prices, partly offset by a more normal sales mix compared with the first half of 2021. Underlying EBITDA was also negatively affected by reduced sales, as refined production in the first half of 2021 benefited from the processing of higher than normal work-in-progress inventory following the ACP Phase A rebuild. Unit costs increased by 9% to $948/PGM ounce (30 June 2021: $866/PGM ounce), reflecting higher input cost inflation and lower production volumes, partly offset by the weaker South African rand.

Capital expenditure increased by 9% to $394 million (30 June 2021: $363 million), driven by the Covid-19 related deferral of project timelines that were rescheduled from 2021 into the first half of 2022.

Markets

 
                                          6 months   6 months 
                                             ended      ended 
                                           30 June    30 June 
                                              2022       2021 
=======================================  =========  ========= 
 Average platinum market price ($/oz)          995      1,170 
 Average palladium market price ($/oz)       2,219      2,592 
 Average rhodium market price ($/oz)        17,167     24,662 
 US$ realised basket price ($/PGM oz)        2,671      2,884 
=======================================  =========  ========= 
 

The average realised PGM basket price decreased by 7% to $2,671 per PGM ounce (30 June 2021: $2,884 per PGM ounce). PGM prices were volatile in the first half of 2022, initially increasing due to supply concerns following Russia's invasion of Ukraine, then falling back as demand was negatively affected by the slowing global economy.

All three major PGMs showed similar price trends, with palladium being particularly turbulent, reaching a new all-time high of almost $3,340 per ounce in March, before ending the period below $2,000 per ounce, largely reflecting the large proportion of palladium supply that comes from Russia. The platinum price was also adversely affected by a stronger US dollar, which reached a 20-year high in the period. Strong by-product prices and differences in the timing and mix of metals sold cushioned the impact of lower PGM prices on the realised basket price.

Operational performance

Total PGM production decreased by 4% to 1,987,500 ounces (30 June 2021: 2,079,100 ounces), principally due to lower grade at Mogalakwena, partially offset by increased production from Mototolo, Unki and Amandelbult.

Own-mined production

PGM production from own-managed mines (Mogalakwena, Amandelbult, Unki and Mototolo) and equity share of joint operations decreased by 7% to 1,309,400 ounces (30 June 2021: 1,404,100 ounces).

Mogalakwena PGM production decreased by 20% to 510,200 ounces (30 June 2021: 637,400 ounces), largely as a result of heavy rainfall in the first quarter, leading to the need to mine in lower grade areas, and Covid-19 supply chain disruptions impacting delivery of heavy mining equipment.

Amandelbult PGM production increased by 1% to 343,300 ounces (30 June 2021: 341,300 ounces), despite infrastructure closures, reflecting improved underground mining performance that led to increased stability and higher throughput at the concentrator.

Production from other operations increased by 7% to 455,900 ounces (30 June 2021: 425,400 ounces), reflecting the increased production as a result of the completion of the concentrator debottlenecking projects at Unki and Mototolo.

Purchase of concentrate

Purchase of concentrate, excluding tolling, was flat at 678,100 ounces (30 June 2021: 675,000 ounces).

Refined production and sales volumes

Refined PGM production (excluding toll-treated metal) decreased by 16% to 1,959,100 ounces (30 June 2021: 2,326,700 ounces) as the first half of 2021 benefited from the processing of higher than normal work-in-progress inventory following the ACP Phase A rebuild and commissioning in the fourth quarter of 2020. Planned maintenance and the annual stock count (including at the Precious Metals Refinery, which only happens every three years) also resulted in additional downtime of processing assets.

PGM sales volumes decreased to 2,044,400 ounces (30 June 2021: 2,568,200 ounces), in line with refined production.

Operational outlook

PGM metal in concentrate production guidance for 2022 is 3.9-4.3 million ounces, with own-mined output accounting for c.65%. Refined PGM production guidance for 2022 is 4.0-4.4 million ounces, subject to the potential impact of Eskom load-shedding. Both are subject to the extent of further Covid-19 related disruption. Unit cost guidance for 2022 is c.$950/PGM ounce.

Iron Ore

Financial and operational metrics

 
                                                                                  Mining 
                Production     Sales              Unit      Group   Underlying    EBITDA   Underlying 
                    volume    volume    Price    cost*   revenue*      EBITDA*   margin*        EBIT*   Capex*   ROCE* 
=============  ===========  ========  =======  =======  =========  ===========  ========  ===========  =======  ====== 
                     Mt(1)     Mt(1)   $/t(2)   $/t(3)         $m           $m                     $m       $m 
=============  ===========  ========  =======  =======  =========  ===========  ========  ===========  =======  ====== 
 Iron Ore 
  Total               27.5      28.3      135       40      4,393        2,298       51%        2,047      427     38% 
   Prior 
    period            31.9      30.7      210       33      6,935        4,910       70%        4,661      278     88% 
 Kumba Iron 
  Ore(4)              17.8      19.6      135       43      2,907        1,570       54%        1,403      355     99% 
   Prior 
    period            20.4      19.6      216       40      4,412        3,033       69%        2,860      210    211% 
 Iron Ore 
  Brazil 
  (Minas-Rio)          9.8       8.7      134       35      1,486          728       45%          644       72     23% 
   Prior 
    period            11.5      11.1      200       22      2,523        1,877       73%        1,801       68     59% 
=============  ===========  ========  =======  =======  =========  ===========  ========  ===========  =======  ====== 
 

(1) Production and sales volumes are reported as wet metric tonnes. Product is shipped with c.9% moisture from Minas--Rio and c.1.6% moisture from Kumba.

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

(3) Unit costs are reported on an FOB wet basis. Unit costs for total iron ore are a blended average.

(4) Sales volumes and realised price differ to Kumba's stand-alone reported results due to sales to other Group companies.

Financial and operational overview

Underlying EBITDA for Iron Ore decreased by 53% to $2,298 million (30 June 2021: $4,910 million), following a 36% decrease in the realised iron ore price to $135/tonne, lower sales and higher unit costs.

Kumba

Underlying EBITDA decreased by 48% to $1,570 million (30 June 2021: $3,033 million), driven by a lower average realised FOB iron ore export price of $135/tonne (30 June 2021: $216/tonne) and higher unit costs, partly offset by the weaker South African rand. Unit costs increased by 8% to $43/tonne (30 June 2021: $40/tonne), reflecting lower production volumes and input cost inflation, partially offset by higher waste stripping capitalised.

Production decreased by 13%, largely due to heavy rainfall in the period. Total sales volumes were broadly flat at 19.6 Mt (30 June 2021: 19.6 Mt), with lower production supplemented by a sell-down of finished goods inventory.

Capital expenditure increased by 69% to $355 million (30 June 2021: $210 million), reflecting the ramp-up in activity at the Kapstevel South pit life extension project at Kolomela and the Ultra High Dense Media Separation (UHDMS) technology growth project at Sishen, partly offset by the impact of the weaker South African rand.

Minas-Rio

Underlying EBITDA decreased by 61% to $728 million (30 June 2021: $1,877 million), reflecting the lower average realised price and lower volumes as a result of maintenance and unusually heavy rainfall. Unit costs increased by 59% to $35/tonne (30 June 2021: $22/tonne), reflecting higher input costs, principally consumables and electricity, lower production volumes, increased maintenance costs and the impact of the stronger Brazilian real.

Capital expenditure was broadly flat at $72 million (30 June 2021: $68 million).

Markets

 
                                                    6 months   6 months 
                                                       ended      ended 
                                                     30 June    30 June 
                                                        2022       2021 
=================================================  =========  ========= 
 Average market price (Platts 62% Fe CFR China 
  - $/tonne)                                             140        183 
 Average market price (MB 66% Fe Concentrate CFR 
  - $/tonne)                                             174        209 
 Average realised price (Kumba export - $/tonne) 
  (FOB wet basis)                                        135        216 
 Average realised price (Minas-Rio - $/tonne) 
  (FOB wet basis)                                        134        200 
=================================================  =========  ========= 
 

Kumba's FOB realised price of $135/wet metric tonne was 14% higher than the equivalent Platts 62% Fe FOB Saldanha market price (adjusted for moisture) of $118/wet metric tonne. This reflects the premium for the higher iron content at 64.0% and relatively high proportion (approximately 66%) of lump that the product portfolio attracts (which helps steel mills reduce emissions).

Minas-Rio's pellet feed product is also higher grade (with iron content of 67% and lower impurities) than the reference product used for the Platts 62% Fe CFR China index. The Metal Bulletin (MB) 66 index, therefore, is used when referring to Minas-Rio product. The Minas-Rio realised price of $134/wet metric tonne was 1% higher than the equivalent MB 66 FOB Brazil index, (adjusted for moisture, of $133/wet metric tonne), reflecting the premium quality of the product.

Operational performance

Kumba

Production decreased by 13% to 17.8 Mt (30 June 2021: 20.4 Mt), driven by extremely high rainfall impacting feedstock availability, a safety intervention at Kolomela and equipment reliability. Production at Sishen decreased by 7% to 12.9 Mt (30 June 2021: 13.9 Mt) and at Kolomela by 25% to 4.8 Mt (30 June 2021: 6.4 Mt).

Minas-Rio

Production decreased by 15% to 9.8 Mt (30 June 2021: 11.5 Mt) due to maintenance and unusually heavy rainfall that impacted the availability of the mining fleet and plant.

Operational outlook

Kumba

2022 full year production guidance is 38-40 Mt, subject to the extent of further Covid-19 related disruption and third--party rail and port performance.

2022 full year unit cost guidance is c.$44/tonne.

Minas-Rio

2022 full year production guidance is 22-24 Mt, subject to the extent of further Covid-19 related disruption, as well as weather related disruptions.

2022 full year unit cost guidance is c.$32/tonne.

Steelmaking Coal

Financial and operational metrics

 
                                                                                  Mining 
                Production     Sales              Unit      Group   Underlying    EBITDA   Underlying 
                    volume    volume    Price    cost*   revenue*      EBITDA*   margin*        EBIT*   Capex*   ROCE* 
=============  ===========  ========  =======  =======  =========  ===========  ========  ===========  =======  ====== 
                     Mt(1)     Mt(2)   $/t(3)   $/t(4)         $m           $m                     $m       $m 
=============  ===========  ========  =======  =======  =========  ===========  ========  ===========  =======  ====== 
 Steelmaking 
  Coal                 4.8       5.2      397      160      2,213        1,399       63%        1,246      265     92% 
   Prior 
    period             6.2       6.0      115      124        736         (94)     (13)%        (383)      257   (26)% 
=============  ===========  ========  =======  =======  =========  ===========  ========  ===========  =======  ====== 
 

(1) Production volumes are saleable tonnes, excluding thermal coal production of 0.8 Mt (30 June 2021: 0.9 Mt).

(2) Sales volumes exclude thermal coal sales of 0.7 Mt (six months ended 30 June 2021: 1.1 Mt). The first half of 2022 includes 0.1 Mt of steelmaking coal mined by third parties and processed by Anglo American.

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

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

Financial and operational overview

Underlying EBITDA increased to $1,399 million (30 June 2021: $94 million loss), driven by a 245% increase in the weighted average realised price for steelmaking coal. This was partially offset by 13% lower sales volumes and a 29% increase in unit costs to $160/tonne (30 June 2021: $124/tonne), reflecting the impact of lower production, Covid-19 related disruptions and higher inflation. Also included is $250 million for the finalisation of the Grosvenor gas ignition claim by the Group's self-insurance entity. Production was primarily affected by the planned end of mining at the Grasstree operation in January 2022 and associated ramp-up of the replacement Aquila longwall operation, as well as record unseasonal rainfall in May at the open pit operations, partly offset by restart of the Grosvenor mine in February 2022, following the underground incident in May 2020.

Capital expenditure was broadly flat at $265 million (30 June 2021: $257 million), with higher development-related spend across all three underground mines largely offset by lower life extension expenditure following the completion of the Aquila project, where longwall production began in February 2022.

Markets

 
                                                            6 months   6 months 
                                                               ended      ended 
                                                             30 June    30 June 
                                                                2022       2021 
=========================================================  =========  ========= 
 Average benchmark price - hard coking coal ($/tonne)(1)         467        132 
 Average benchmark price - PCI ($/tonne)(1)                      406        110 
 Average realised price - hard coking coal ($/tonne)(2)          407        117 
 Average realised price - PCI ($/tonne)(2)                       322        103 
=========================================================  =========  ========= 
 
   (1)       Represents average spot prices. 

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

Average realised prices differ from the average market prices due to differences in material grade and timing of shipments. Hard coking coal (HCC) price realisation decreased slightly to 87% of average benchmark price (30 June 2021: 89%), driven by a higher proportion of lower grade coking coal sales in the first half of 2022 compared to the same period in 2021.

The average benchmark price for Australian HCC increased to $467/tonne (30 June 2021: $132/tonne). HCC prices at the start of 2022 were lifted by wet weather events and Covid-19 related workforce absenteeism in Australia, and later by buyers' anxiety around global sanctions on Russian supply, but fell sharply after reaching multiple record highs in March. Global seaborne demand for steelmaking coal has since fallen in tandem with weakness in the downstream steel sector.

Operational performance

Production decreased by 22% to 4.8 Mt (30 June 2021: 6.2 Mt), principally due to the planned end of mining at the Grasstree operation in January 2022 and ramp-up of the replacement Aquila longwall, which began operations in February 2022 and fully ramped up in June. Production was also impacted by record unseasonal rainfall in May at the open cut operations.

At Grosvenor, longwall operations restarted in February 2022 following regulatory approval, with production ramped up as planned in the second quarter. Longwall mining restarted at Moranbah in the next planned longwall panel in May 2022, following a fatal incident in March 2022, and an extended longwall move.

Operational outlook

2022 full year export steelmaking coal production guidance is 15-17 Mt, subject to the extent of further unseasonal wet weather, continued tight labour markets and further Covid-19 related disruption. Unit cost guidance for 2022 is c.$110/tonne.

As a result of increases to Queensland's royalty rates from 1 July, government taxation for the second half of the year is expected to increase from around 48% to 59% in total (at current spot prices).

Manganese

Financial and operational metrics

 
                                                                        Mining 
                      Production     Sales       Group   Underlying     EBITDA   Underlying 
                          volume    volume    revenue*      EBITDA*    margin*        EBIT*   Capex*   ROCE* 
===================  ===========  ========  ==========  ===========  =========  ===========  =======  ====== 
                              Mt        Mt          $m           $m                      $m       $m 
===================  ===========  ========  ==========  ===========  =========  ===========  =======  ====== 
 Manganese                   1.8       1.8         475          223       47 %          192      n/a    162% 
   Prior period(1)           1.8       1.9         370          154       42 %          121        -    104% 
===================  ===========  ========  ==========  ===========  =========  ===========  =======  ====== 
 
   (1)       Sales and financials include ore and alloy. 

Financial and operational overview

Manganese (Samancor)

Underlying EBITDA increased by 45% to $223 million (30 June 2021: $154 million), benefiting from a stronger average realised manganese ore selling price, partially offset by a 3% decrease in manganese ore sales volumes, as well as increased freight and operating costs.

The average benchmark price for manganese ore (Metal Bulletin 44% manganese ore CIF China) increased by 39% to $6.99/dmtu (30 June 2021: $5.03/dmtu), largely due to stronger demand in the first quarter and the impact of the war in Ukraine.

Operational performance

Attributable manganese ore production was in line with the prior period at 1.8 Mt (30 June 2021: 1.8 Mt) . There was no manganese alloy production as the South African smelter has been on care and maintenance since the Covid-19 lockdown in 2020. The divestment of the Metalloys business did not proceed as certain commercial conditions were not satisfied.

Crop Nutrients

Financial and operational metrics

 
                                                                          Mining 
                       Production      Sales       Group   Underlying     EBITDA   Underlying 
                           volume     volume    revenue*      EBITDA*    margin*        EBIT*   Capex*   ROCE* 
===================  ============  =========  ==========  ===========  =========  ===========  =======  ====== 
                                                      $m           $m                      $m       $m 
===================  ============  =========  ==========  ===========  =========  ===========  =======  ====== 
 Crop Nutrients               n/a        n/a         110         (18)        n/a         (18)      242     n/a 
   Prior period                 -          -          53         (12)          -         (12)      279       - 
 Woodsmith project            n/a        n/a         n/a          n/a        n/a          n/a      242     n/a 
  Prior period                  -          -           -            -          -          n/a      279       - 
 Other(1)                     n/a        n/a         110         (18)        n/a         (18)      n/a     n/a 
   Prior period                 -          -          53         (12)          -         (12)        -       - 
===================  ============  =========  ==========  ===========  =========  ===========  =======  ====== 
 

(1) Other comprises projects and corporate costs as well as the share in associate results from The Cibra Group, a fertiliser distributor based in Brazil.

Crop Nutrients

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

The Woodsmith project is located approximately 8 km south of Whitby, where polyhalite ore will be extracted via two 1.6 km deep mine shafts and transported to Teesside on an underground conveyor belt in a 37 km tunnel, thereby minimising impact on the surface. It will then be granulated at a materials handling facility to produce a low carbon fertiliser product - known as POLY4 - that will be exported from our dedicated port facility to a network of customers around the world.

Woodsmith project

Anglo American has completed a detailed technical review of the Woodsmith project to ensure the technical and commercial integrity of the full scope of its design recognising the multi-decade life of the mine. The review confirmed that a number of elements of the project's original design would benefit from modification to bring it up to Anglo American's safety and operating integrity standards and to optimise the value of the asset and its world class orebody for the long term.

Throughout 2022, and ahead of the full project execution phase, the Woodsmith team, led by new Crop Nutrients CEO Tom McCulley, is working through the detailed design engineering and is making a number of changes. Changes relate particularly to the design and phasing of the two main shafts, the development of the underground mining area, and the processing and port facilities, as well as those changes required to accommodate both increased production capacity and more efficient and scalable mining methods; such improvements will also require the installation of additional ventilation earlier in the development of the underground mining area.

Anglo American expects that the improvements it is making to the project will result in an enhanced configuration and therefore a different and longer construction schedule than anticipated prior to Anglo American's ownership. Anglo American's capital budget for the development of Woodsmith will reflect such scope and timing changes to ensure that its exacting standards are met and the full commercial value of the asset is realised. The capital budget and schedule to completion will be finalised once the detailed design engineering is complete and with the benefit of further shaft sinking progress over the next 12-18 months.

In the meantime, development of the project's major critical path components has continued to progress to our updated plan during the first half of 2022, with capital expenditure of $242 million in the first half out of an estimated $600 million for the year as a whole (2021: $530 million). The mineral transport tunnel has now been connected to the 383 m deep intermediate access shaft site at Lockwood Beck during a period of planned maintenance for the tunnel boring machine. At the mine site, engineering improvements have been made to the infrastructure in the services shaft aimed at increasing shaft sinking rates over the project's duration. We continue to progress the infrastructure at the production shaft in advance of shaft sinking activities getting under way, with the shaft boring road header now assembled in the shaft.

Market development - POLY4

The ongoing focus of the market development activities is to develop and implement customer-centric sales and marketing strategies utilising regional customer insights throughout the value chain and developing routes to market. With more than 1,150 commercial scale, in-progress or completed on-farm demonstrations, we continue to build a compelling body of evidence that shows POLY4's efficacy to support crop production through increased yields, improved crop quality and enhanced soil health through resilience to compaction, erosion and run-off, as well as improving nutrient availability to crops, helping to reduce nutrient waste into watercourses.

Sustainability is becoming an ever more central imperative for the fertiliser industry, aiming to improve environmental sustainability, including reducing carbon intensity. Regenerative farming is also gaining in popularity among upstream and downstream agribusinesses. Anglo American has an important role to play, with POLY4 offering a unique combination of properties to support sustainable agricultural production. POLY4 offers farmers a solution to agricultural efficiency and sustainability challenges, through its natural multi-nutrient composition, its suitability for organic use and ultra-low carbon footprint generating up to 85% fewer carbon emissions than the equivalent conventional nutrient products, with little to no waste generated in its production.

At a macro market level, the dislocation experienced within the global fertiliser market during the first half of 2022 has had a major impact, causing restrictions in the availability of, and sharp increases in, the price of crop nutrients. Prices are expected to remain firm and above historical levels for the foreseeable future, as supply restrictions and high energy and manufacturing costs continue. Many countries are re-assessing their sourcing of fertiliser and agricultural products as they seek greater reliability of supply while also encouraging more efficient fertiliser use, driving innovation, and supporting more sustainable crop solutions.

Corporate and Other

Financial metrics

 
                         Production     Sales              Unit       Group   Underlying   Underlying 
                             volume    volume    Price    cost*    revenue*      EBITDA*        EBIT*   Capex* 
======================  ===========  ========  =======  =======  ==========  ===========  ===========  ======= 
                              Mt(1)     Mt(2)   $/t(3)   $/t(4)          $m           $m           $m       $m 
======================  ===========  ========  =======  =======  ==========  ===========  ===========  ======= 
 Segment                        n/a       n/a      n/a      n/a         258        (282)        (360)       12 
  Prior period                    -         -        -        -         907          119         (33)       98 
 Exploration                    n/a       n/a      n/a      n/a         n/a         (64)         (65)      n/a 
  Prior period                    -         -        -        -           -         (42)         (43)        - 
 Corporate activities 
  and unallocated 
  costs                         n/a       n/a      n/a      n/a         258        (218)        (295)       12 
  Prior period                    -         -        -        -         135         (27)        (103)       17 
 Thermal Coal -                   -         -        -        -           -            -            -        - 
  South Africa(5) 
  Prior period                  5.7       5.3       77       46         553          101           70       81 
 Thermal Coal -                   -         -        -        -           -            -            -      n/a 
  Colombia(6) 
  Prior period                  3.6       3.4       65       34         219           87           43        - 
======================  ===========  ========  =======  =======  ==========  ===========  ===========  ======= 
 

(1) Production volumes are saleable tonnes. South African production volumes include export primary production, secondary production sold into export markets, production sold domestically at export parity pricing and excludes other domestic production of 5.6 Mt in 2021.

(2) South African sales volumes include export primary production, secondary production sold into export markets and production sold domestically at export parity pricing and exclude domestic sales of 5.3 Mt in 2021 and third-party sales of 6.4 Mt in 2021.

(3) Thermal Coal - South Africa realised price is the weighted average export thermal coal price achieved. Excludes third-party sales from locations other than Richards Bay.

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

(5) Thermal Coal - South Africa mining activity included in prior period until the demerger on 4 June 2021.

(6) Thermal Coal - Colombia represents the Group's attributable share from its 33.3% shareholding in Cerrejón and reflects earnings and volumes from the first half of 2021 only, before the agreement was entered into.

Financial overview

Exploration

Exploration's underlying EBITDA loss was $64 million (30 June 2021: $42 million loss), driven by the recovery from the Covid-19 disruptions in 2021 that affected greenfield base metals exploration and near-mine iron ore exploration.

Corporate activities and unallocated costs

Underlying EBITDA was a $218 million loss (30 June 2021: $27 million loss), driven primarily by the finalisation of the $250 million Grosvenor gas ignition claim by the Group's self-insurance entity which resulted in an expense in Corporate activities that was offset within the underlying EBITDA of Steelmaking Coal.

Guidance summary

Production and unit costs

 
                       Unit costs 
                        2022F              Production volumes 
                      ================== 
   Units                                            2022F     2023F       2024F 
  =============================================== 
 Diamonds(1)               c.$65/ct         Mct      32-34      30-33       30-33 
 
 Copper(2)                 c.147c/lb         kt     660-750   910-1,020   910-1,020 
 
 Nickel(3)                 c.495c/lb         kt      40-42      41-43       42-44 
 
 PGMs - metal          c.$950/PGM ounce             3.9-4.3    4.1-4.5     4.1-4.5 
  in concentrate(4)                          Moz 
 
 Platinum                                   Moz     1.8-2.0    1.9-2.1     1.9-2.1 
 Palladium                                  Moz     1.2-1.3    1.3-1.4     1.3-1.4 
 Other                                      Moz     0.9-1.0    0.9-1.0     0.9-1.0 
 
 PGMs - refined(5)                          Moz     4.0-4.4    3.8-4.2     4.1-4.5 
====================  ==================  =======  ========  ========== 
 Iron ore(6)              c.$40/tonne        Mt      60-64      64-68       67-71 
 
 Steelmaking 
  Coal(7)                c.$110/tonne        Mt      15-17      22-24       24-26 
 
 

Note: Unit costs are subject to any further effects of Covid-19 and exclude royalties, depreciation and include direct support costs only. FX rates for H2 2022 unit costs: 17 ZAR:USD, 1.5 AUD:USD, 5.5 BRL:USD, 1,000 CLP:USD, 4 PEN:USD. Production volumes are subject to the extent of further Covid-19 related disruption.

(1) Unit cost is based on De Beers' share of production. Production on a 100% basis except for the Gahcho Kué joint operation, which is on an attributable 51% basis, subject to trading conditions. Venetia continues to transition to underground operations during 2022, with ramp-up expected from 2023.

(2) Copper business unit only. On a contained-metal basis. Total copper is the sum of Chile and Peru. Unit cost total is a weighted average based on the mid-point of production guidance. 2022 Chile: 560-600kt; Peru 100-150kt. 2023 Chile: 590-650kt; Peru: 320-370kt. 2024 Chile: 590-650kt; Peru 320-370kt. Chile production is subject to water availability. Chile production in 2022 impacted by lower expected grades at Collahuasi and Los Bronces, and lower water availability at Los Bronces. Peru production in 2022 subject to progress on ramp-up of operations. Chile 2022 unit cost is c.150c/lb and is subject to the impact of water availability on production volumes. Peru 2022 unit cost is c.135c/lb and is based on progressing the ramp-up of production volumes.

(3) Nickel operations in Brazil only. The Group also produces approximately 20 kt of nickel on an annual basis as a co-product from the PGM operations. 2023 and 2024 volumes dependent on bulk ore sorting technology and briquetting.

(4) Unit cost is per own mined 5E + gold PGMs metal in concentrate ounce. Production is 5E + gold produced metal in concentrate ounces. Includes own mined production (65%) and purchased concentrate volumes (35%).

(5) 5E + gold produced refined ounces. Includes own mined production and purchased concentrate volumes. Refined production is subject to the potential impact of Eskom load-shedding.

(6) Wet basis. Total iron ore is the sum of Kumba and Minas-Rio. Unit cost total is a weighted average based on the mid-point of production guidance. 2022 Kumba: 38-40Mt; Minas-Rio: 22-24Mt. 2023 Kumba: 39-41Mt; Minas-Rio: 25-27Mt. 2024 Kumba: 41-43Mt (subject to UHDMS plant coming online); Minas-Rio: 26-28Mt. Kumba production is subject to the third party rail and port performance, as well as weather related disruptions. Kumba 2022 unit cost is c.$44/tonne. Minas-Rio 2022 unit cost is c.$32/tonne.

(7) Steelmaking Coal FOB/tonne unit cost comprises managed operations and excludes royalties and study costs. Volumes are subject to the progress of ramp-up of the longwalls and exclude thermal coal by-product from Australia.

Capital expenditure(1)

 
               2022F                    2023F                    2024F 
 Growth        $1.6-2.1bn               $1.2-1.7bn               $1.5-2.0bn 
                Includes $0.6bn 
                Woodsmith capex 
 Sustaining           $4.5bn           $4.8bn                  $4.1bn 
                  Reflects $3.4bn       Reflects $3.5bn         Reflects $3.3bn 
                baseline plus $0.7bn    baseline plus $0.8bn    baseline plus $0.6bn 
                 lifex projects plus     lifex projects and       lifex projects and 
                 $0.4bn Collahuasi      $0.5bn Collahuasi       $0.2bn Collahuasi 
                desalination plant(2)    desalination plant(2)    desalination plant(2) 
 Total         $6.1-6.6bn               $6.0-6.5bn               $5.6-6.1bn 
============  =======================  ======================= 
 

Further details on Anglo American's high quality growth and life-extension projects, including details of the associated volumes benefit, are disclosed on pages 13 -17.

Long term sustaining capital expenditure is expected to be c.$3.0 billion per annum(3) , excluding life-extension projects.

Other guidance

   --    2022 depreciation: $2.8-3.0 billion (previously $3.0-3.2 billion) 
   --    2022 effective tax rate: 33-35%(4) 
   --    Long term effective tax rate: 31-35%(4) 
   --    Dividend payout ratio: 40% of underlying earnings 
   --    Net debt:EBITDA: <1.5x at the bottom of the cycle 

(1) Cash expenditure on property, plant and equipment including related derivatives, net of proceeds from disposal of property, plant and equipment and includes direct funding for capital expenditure from non-controlling interests. Shown excluding capitalised operating cash flows. Consequently, for Quellaveco, reflects attributable share of capex. Collahuasi desalination capex shown includes related infrastructure. Guidance includes unapproved projects and is, therefore, subject to progress of growth project studies and Woodsmith is excluded after 2022. Long term sustaining capex guidance is shown on a real basis. Refer to the H1 2022 results presentation slides 42 - 46 for further detail on the breakdown of the capex guidance at project level.

   (2)       Attributable share of capex. 

(3) Long term sustaining capex guidance is shown on a real basis.

(4) Effective tax rate is highly dependent on a number of factors, including the mix of profits, and may vary from the guided ranges.

For further information, please contact:

 
 Media                                    Investors 
 UK                                       UK 
  James Wyatt-Tilby                        Paul Galloway 
  james.wyatt-tilby@angloamerican.com      paul.galloway@angloamerican.com 
  Tel: +44 (0)20 7968 8759                 Tel: +44 (0)20 7968 8718 
 Marcelo Esquivel                         Emma Waterworth 
  marcelo.esquivel@angloamerican.com       emma.waterworth@angloamerican.com 
  Tel: +44 (0)20 7968 8891                 Tel: +44 (0)20 7968 8574 
 Katie Ryall                              Michelle Jarman 
  katie.ryall@angloamerican.com            michelle.jarman@angloamerican.com 
  Tel: +44 (0)20 7968 8935                 Tel: +44 (0)20 7968 1494 
 South Africa 
  Nevashnee Naicker 
  nevashnee.naicker@angloamerican.com 
  Tel: +27 (0)11 638 3189 
 Sibusiso Tshabalala 
  sibusiso.tshabalala@angloamerican.com 
  Tel: +27 (0)11 638 2175 
 

Notes to editors:

Anglo American is a leading global mining company and our products are the essential ingredients in almost every aspect of modern life. Our portfolio of world-class competitive operations, with a broad range of future development options, provides many of the future-enabling metals and minerals for a cleaner, greener, more sustainable world and that meet the fast growing every day demands of billions of consumers. With our people at the heart of our business, we use innovative practices and the latest technologies to discover new resources and to mine, process, move and market our products to our customers - safely and sustainably.

As a responsible producer of diamonds (through De Beers), copper, platinum group metals, premium quality iron ore and steelmaking coal, and nickel - with crop nutrients in development - we are committed to being carbon neutral across our operations by 2040. More broadly, our Sustainable Mining Plan commits us to a series of stretching goals to ensure we work towards a healthy environment, creating thriving communities and building trust as a corporate leader. We work together with our business partners and diverse stakeholders to unlock enduring value from precious natural resources for the benefit of the communities and countries in which we operate, for society as a whole, and for our shareholders. Anglo American is re-imagining mining to improve people's lives.

www.angloamerican.com

Webcast of presentation:

A live webcast of the results presentation, starting at 9.00am UK time on 28 July 2022, can be accessed through the Anglo American website at www.angloamerican.com

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

Group terminology

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

Forward-looking statements and third party information:

This document includes forward-looking statements. All statements other than statements of historical facts included in this document, including, without limitation, those regarding Anglo American's financial position, business, acquisition and divestment strategy, dividend policy, plans and objectives of management for future operations, prospects and projects (including development plans and objectives relating to Anglo American's products, production forecasts and Ore Reserve and Mineral Resource positions) and sustainability performance related (including environmental, social and governance) goals, ambitions, targets, visions, milestones and aspirations, are forward-looking statements. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Anglo American or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such forward-looking statements are based on numerous assumptions regarding Anglo American's present and future business strategies and the environment in which Anglo American will operate in the future. Important factors that could cause Anglo American's actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of global demand and commodity market prices, mineral resource exploration and project development capabilities and delivery, recovery rates and other operational capabilities, safety, health or environmental incidents, the effects of global pandemics and outbreaks of infectious diseases, the impact of attacks from third parties on our information systems, natural catastrophes or adverse geological conditions, climate change and extreme weather events, the outcome of litigation or regulatory proceedings, the availability of mining and processing equipment, the ability to obtain key inputs in a timely manner, the ability to produce and transport products profitably, the availability of necessary infrastructure (including transportation) services, the development, efficacy and adoption of new technology, challenges in realising resource estimates or discovering new economic mineralisation, the impact of foreign currency exchange rates on market prices and operating costs, the availability of sufficient credit, liquidity and counterparty risks, the effects of inflation, political uncertainty, tensions and disputes and economic conditions in relevant areas of the world, evolving societal and stakeholder requirements and expectations, shortages of skilled employees, the actions of competitors, activities by courts, regulators and governmental authorities such as in relation to permitting or forcing closure of mines and ceasing of operations or maintenance of Anglo American's assets and changes in taxation or safety, health, environmental or other types of regulation in the countries where Anglo American operates, conflicts over land and resource ownership rights and such other risk factors identified in 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 document. Anglo American expressly disclaims any obligation or undertaking (except as required by applicable law, the City Code on Takeovers and Mergers, the UK Listing Rules, the Disclosure and Transparency Rules of the Financial Conduct Authority, the Listings Requirements of the securities exchange of the JSE Limited in South Africa, the SIX Swiss Exchange, the Botswana Stock Exchange and the Namibian Stock Exchange and any other applicable regulations) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Anglo American's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Nothing in this document should be interpreted to mean that future earnings per share of Anglo American will necessarily match or exceed its historical published earnings per share. Certain statistical and other information about Anglo American included in this document is sourced from publicly available third party sources. As such it has not been independently verified and presents the views of those third parties, but may not necessarily correspond to the views held by Anglo American and Anglo American expressly disclaims any responsibility for, or liability in respect of, such information.

(c)Anglo American Services (UK) Ltd 2022. (TM) and (TM) are trade marks of Anglo American Services (UK) Ltd.

Anglo American plc

17 Charterhouse Street London EC1N 6RA United Kingdom

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(END) Dow Jones Newswires

July 28, 2022 02:00 ET (06:00 GMT)

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