Anglo American plc (AAUKF) Q4 2022 Earnings Call Transcript

Anglo American plc (OTCQX:AAUKF) This autumn 2022 Earnings Convention Name February 23, 2023 4:00 AM ET

Firm Individuals

Stuart Chambers – Chairman

Duncan Wanblad – Chief Govt Officer

Stephen Pearce – Chief Monetary Officer

Matt Daley – Technical Director

Paul Galloway – Head of Investor Relations

Convention Name Individuals

Jason Fairclough – Financial institution of America Merrill Lynch

Danielle Chigumira – Credit score Suisse

Sylvain Brunet – BNP Paribas Exane

Ian Rossouw – Barclays

Alain Gabriel – Morgan Stanley

Richard Hatch – Berenberg

Myles Allsop – UBS

Liam Fitzpatrick – Deutsche Financial institution

Tyler Broda – RBC

Dominic O’Kane – J.P. Morgan

Stuart Chambers

So heat welcome to all people, and good morning. Welcome to Anglo American’s 2022 full yr outcomes.

You will have seen the numbers exit a few hours in the past. And earlier than I hand over to Duncan and Stephen to take you thru all of that, only a few quick remarks from me.

Initially, a few Board modifications since we final met on this approach in July. We have had Elisabeth Brinton, one among our Non-Govt Administrators step down in September and Tony O’Neil additionally stepped down on the finish of the yr prematurely of his retirement in June. We’re additionally truly within the superior levels of a recruitment of our new Non-Govt Director, and we’ll be making an announcement about that fairly quickly.

Now while that is our second greatest EBITDA efficiency ever, we’re all very conscious of the truth that we are able to at all times do extra on the essential space of operational stability, and that is one thing we’re very, very centered on. The macro atmosphere, after all, is sort of unstable, together with issues like climate. However regardless of these operational — these, I am sorry, reasonably considerably uncontrollable headwinds that we’ve, we nonetheless imagine we are able to drive working efficiency additional. And naturally, if we obtain that, with operational stability comes enhancements in security as nicely as operational efficiency. And as we all know, these two issues go very a lot hand in hand. Duncan will little doubt discuss somewhat bit extra about this.

Lastly, let me guarantee you from the American — Anglo American Board in addition to administration that we’re very, very centered specifically in two areas, security and sustainability in its broadest sense among the many bigger suite of efficiency supply that we do. And we’re very conscious of the duties we’ve throughout the complete spectrum of our stakeholders in these two areas.

So, with none additional ado, let me hand over to our Chief Govt, Duncan.

Duncan Wanblad

Thanks. Thanks, once more, Stuart, and good morning to all people. Thanks for being with us once more. And I do know that many are on-line, so welcome to you all. At all times respect your time now.

Our attorneys inform me I’ve to pause on the assertion, however I am not going to do this for very lengthy as a result of what it is all about, and I do know that you will get by way of that every one in your in time.

So, by now, I suppose, we’ve a reasonably well-trodden formulation by way of how you can run nowadays. I’ll begin and take you thru form of the headlines. Stephen will then take over from me, drill into among the numbers for you. After which, I’ll come again and speak about how we place the enterprise for the long term. And this time, I’ll be spending fairly a little bit of time taking us by way of Woodsmith, how we give it some thought, why we predict it is such an extremely good venture and why we’re so assured within the product. And so, we promised you final yr that we’d do it, so it is now. So, buckle up for that as a result of it is coming quickly.

All proper. So, I’ve to start out, as at all times, with security and security efficiency. And as Stuart talked about, it’s clearly nonetheless my primary precedence, and it’ll at all times be my primary precedence, as it’s the precedence for the entire of the GMC and the senior management of this group.

I’m very a lot deeply saddened to remind us all that we did have two fatalities as a result of incidents at our managed operations through the yr and very disillusioned to report yet one more fatality at Kolomela final week. So Kolomela now’s seven years with out a fatality. However final week, we had one in a drilling-related atmosphere, so 4 individuals across the drill rig. And I feel that, that simply goes to indicate how very fragile this atmosphere is and the way a lot you’ll be able to by no means take your eye off the ball by way of what we’ve to do to make sure that individuals go residence safely each day.

And as , we had been very dissatisfied at first of the yr final yr with our complete recordable incident frequency fee, and that is the measure that we have a look at as a result of it is a way more refined measure than among the different blunt devices which are on the market to reveal our efficiency on how we’re attending to grips with the tradition of security greater than anything within the enterprise. And we responded to that fairly urgently at first of final yr.

And as Stuart identified, truly, the full recordable harm frequency fee for us is a transparent main indicator as to the soundness of the entire of the enterprise. So, you’ll be able to’t actually speak about security in a special silo from manufacturing. They must go collectively. They stay collectively, 100% of the time. And when your main indicator begins to shake, it is telling you that there is a stability difficulty within the enterprise, and we clearly noticed that.

So, we stood the entire of the enterprise down. We refreshed our psyche round what it’s that we had been attempting to do. We went again to among the foundation on this and more than happy to say that we did see a cloth turnaround within the efficiency of the enterprise, each from a security standpoint and from an operations standpoint through the second half of final yr. In reality, on this specific indicator, in December, we ended up with our greatest efficiency within the historical past of the corporate at 0.96. So, we all know that we are able to do it, and we’ll preserve doing it.

Now we’ve a fairly constant method with the way in which we take into consideration all our security, well being and atmosphere. Comparable mindset in as far as the concept of attaining zero hurt is the core driver right here. So, zero hurt to our individuals and nil hurt to the atmosphere.

On well being, I’ve to report that we had 5 new instances of occupational illness, all of those had been associated to noise-induced listening to loss. Within the close to time period, our focus stays on — very clearly on the execution of deliberate and rigorously risk-assessed work within the concept of eradicating individuals from the publicity of noise. So, we attempt in all of this stuff to provide you with engineering options and engineer individuals out of the atmosphere during which these exposures exist.

On the environmental entrance, we had one Degree 3 water discharge incident, and that occurred in direction of the top of the yr. And this was a confluence of two issues. Polokwane smelter was down, so it occurred at Polokwane smelter. The ponds that retailer the water for circulation of working water, clearly, had been comparatively full because the furnace was down. We then had a a number of day, multi-day storm, and we simply barely over prime the dam. So, heaps to be taught out of that. More than happy to say that the group bought on prime of that in a short time, cleaned up all the pieces that they might, and our evaluation is that there isn’t any materials or significant environmental affect on account of that. Nevertheless it was a reportable incident, and I simply needed to make clear that.

So, trying now on the key elements of our environmental and social efficiency. So, our power consumption in absolute phrases did lower year-on-year, and that was although we would ramped up Quellaveco. And I feel it does mirror the actual fact due to the ramp-up of Quellaveco that truly we had been beneath the power utilization within the steadiness of the enterprise, most likely as a result of we weren’t producing on the plan that we anticipated to supply. So numerous that can also be a operate of the Polokwane smelter being down in direction of the top of the yr.

We did, nevertheless, see a really, very pleasing enchancment in our Scope 1 and Scope 2 emissions, and that displays the transition of Grasstree to Aquila in Australia in addition to the renewable electrical energy contracts that we’ve now put in in all of our South America companies. All of them kicked in, in 2022 with Quellaveco being the final to come back on stream, and that will probably be on stream through the course of this yr.

We proceed to make actually good progress on our longer-term sustainability targets, too, and I’ll unpack that in a slide or two’s time.

On our social efficiency, more than happy to report some nice progress made right here on the implementation of our Social Means 3.0. I did level out to you in December that we’re now on Model 3 of this course of. This present model is a big uplift, a a lot increased bar for us than the earlier model. And for the administration group to have been capable of go to the purpose the place, through the course of the yr of its implementation, they had been independently assessed as having delivered 66% of the foundational necessities of this new coverage, I feel, is nice information.

We all know that attaining this degree of efficiency does characterize a a lot increased bar than something that we have seen of an identical ilk within the {industry} thus far. And among the stuff is deeply entwined in our long-term sustainability objectives, our sustainable mining plan objectives, for instance, the supply of 5 jobs off-site for each one job that we’ve on website. So it is as a result of we’ve methods and processes like this that we’re assured that we’ll ship into our sustainable mining plan targets.

Now on the numbers, simply briefly from me. In order a abstract, EBITDA of $14.5 billion and an EBITDA margin of 47%, and all of that within the face of very vital price pressures. I feel this can be a testomony to the standard and the diversification of our portfolio. As we spoke about in December, the manufacturing was somewhat bit decrease in comparison with 2021, and we noticed a big step up, as I referred to earlier, within the second half as we stopped the enterprise, bought on prime of the fundamentals of it and began to show round once more. And I am very assured now that the deal with this operational excellence is — and getting the fundamentals proper has put us in good condition for 2023. So, a great begin to the yr up to now.

Unit prices had been impacted by a mixture of very excessive inflation in addition to decrease volumes. And Stephen, myself and the remainder of the GMC are extremely centered on mitigating the impacts of these price drivers. To reiterate, secure, steady and succesful operations stay our primary, and quantity two priorities, and we’re completely decided to maintain getting that proper. So, general, I feel a extremely robust set of economic outcomes. It may have been somewhat bit higher had we hit all of our marks, however we’re a piece in progress, and we’re undoubtedly going to get there.

So simply breaking the enterprise efficiency out by way of the enterprise items. De Beers, a superb yr for this group. Operationally, efficiency was very robust. This was coupled with the good thing about some high-grade ore that got here out of a great purchase lower on the Venetia open pit. And now that’s closed, and we’re absolutely in transition mode to the underground operations at Venetia. We additionally noticed very robust markets within the U.S., significantly within the first half of the yr, and we’re now barely seeing a little bit of a shareholder or website holder warning on account of the present weaker world financial outlook.

The long-term fundamentals, nevertheless, for the enterprise stay extremely promising, and I’m more than happy — very, more than happy with the provenance work that the De Beers group had finished within the run-up to the start of final yr, which actually set us in nice stead because the invasion of the Ukraine performed out and folks’s actual deal with shopping for the proper kind of diamonds actually come out to the fore. What’s extra is I feel that this can be a actual indicator of how persons are going to be desirous about buying all metals sooner or later, so metals which are produced in the proper approach and have the proper affect on the supply of their manufacturing, not simply on the endpoint of their use. So nice pathfinding approach there, led by the De Beers group.

In fact, the GRB stays a particularly essential companion to us and we to them, and we’re trying ahead to refreshing that settlement with them through the course of this yr. And as , Bruce has now transitioned out of the position of Chief Govt. Al Prepare dinner took over from Monday. So, it is all his now, and Bruce goes to affix me for the remainder of this yr, a minimum of because the co-chair of De Beers. So, we are going to protect the worth and the information that he has on this enterprise for some time but.

So, in Base Metals, more than happy with the supply of Quellaveco, after all, on time and on funds, contributing to only over 100,000 tonnes of copper manufacturing because it began. I do suppose that is testimony once more to Tom and the broader group who delivered that venture by way of some actually troublesome circumstances. In Chile, we noticed some nice work there by the group by way of mitigating the water constraints that Los Bronces has been experiencing in addition to the anticipated decrease grades from the 2 massive operations at Los Bronces and Collahuasi.

The group now has taken numerous steps to handle the more durable ore affect, so the mine turned monophasic. And on account of that, they’ve determined to separate a bench to allow them to get several types of ore by way of the plant and mitigate the affect of a few of that hardness and that is beginning to work very nicely for them in the intervening time, too. So, we stay very assured that we’ll attain a practical answer too with the authorities in Chile by way of the built-in allow for Los Bronces.

In our PGM enterprise, we noticed a way more normalized set of working performances following the good thing about having the ACP again up and working on the finish of 2021 regardless of the affect of the decrease grades that we noticed coming by way of at Mogalakwena. At Amandelbult, Natascha has shut down among the increased price areas of the mine and the focus is to deal with extra productive, extra value-adding and decrease price ounces and that work goes very nicely. The Polokwane smelter was lastly accomplished to a really excessive degree of specification in December. It is again up and working and in full manufacturing in the intervening time.

In our Bulks enterprise, a way more difficult yr. So each the iron ore companies had been hit by moist climate occasions, significantly within the first half. And at Kumba, we’ve to, after all, proceed to observe the impacts of the logistics efficiency fairly carefully, undoubtedly in direction of the top of final yr and proper now, as we’re into the start of 2023. At Minas-Rio, the initiatives there to handle the challenges that we have been seeing by way of the ore traits at the moment are truly beginning to pay dividends. And at last, at Steelmaking Coal, we completed the yr flat on ’21, however that was actually a great efficiency. And I’m fairly inspired by the way in which the group have taken on the challenges outlined by the brand new working regime specified by the strata and the gasoline management necessities on account of our learnings from the incident just a few years in the past and the change of form of the laws within the nation, so excellent and pleasing begin from them at first of 2023, too.

So, all in all, I feel a extremely first rate efficiency. And importantly, I am very inspired that we’re centered on the proper issues as we progress into the start of this yr.

Now, I mentioned I would come again to among the sustainability highlights. As I mentioned, I coated the headlines of the environmental and social efficiency a second in the past. However I am positive that, that does not actually seize a variety of the actually nice progress that we’ve made in direction of assembly our sustainable mining plan targets.

On carbon, I am positive that not a lot of you on this room missed this, however we did truly launch the hydrogen truck as a prototype within the first half of 2022. The actually excellent news is that truck truly is in operation in the intervening time. It is going by way of its paces, getting an entire lot of information for his or her engineers to enhance the design for the second model of the prototype, however it’s fairly one thing to see it in a circuit with all the opposite mining automobiles, presenting itself to shovels, taking the fabric to both the waste dump or the product stockpile. And so, I feel nice progress made there and on plan to get that — on plan to get that rolled out at scale.

We additionally introduced the primary 600 megawatts of our renewable power initiatives in Southern Africa. That is first 600 megawatts out of a imaginative and prescient of three to five gigawatts of power as a part of the Envusa Power program. And that is now very fortunately been given the standing in South Africa of a strategic built-in venture, and that is very useful by way of consolidating authorities assist for this program and extra excellent news on that entrance in a single day from the Minister of Finance too. And so we’re on observe to start the development of the primary two of these initiatives in that 600-megawatt bucket through the course of this yr.

In Chile, we had been capable of safe a desalinated water venture for greater than 45% of Los Bronces’ wants from 2025 onwards. And naturally, you may all keep in mind that that is now such a water strapped space and has actually struggled over the previous couple of years with excessive climate occasions. On this specific occasion, typically droughts reasonably than extreme rain and to have the ability to no longer must rely just about 100% on the abstraction of continental water, however have another supply of water that’s extra in our management could be very liberating for an operation like Los Bronces.

There is a second half to that is as but an unapproved part, however I feel this additionally goes to the mindset of how we holistically take into consideration creating worth from these types of issues, and that’s that we’re within the technique of attempting to swap each kiloliter of water on this venture for double the amount of gray water that’s presently simply being put to waste. So, laws in Chile is that no gray water can be utilized for human consumption, however we are able to completely use it within the plant. And we’ve a approach that we’d be capable to swap this out and that will carry us to nearly full independence from the traditional methods of abstracting water in Chile. So, a good way to consider that. And naturally, neighborhood develop — the neighborhood advantages very considerably out of water safety on account of this program, too.

The social contribution that we make might be one of many hardest components of our ESG program or efficiency to measure. However I do suppose that it is also most likely one of the crucial highly effective issues that we do and by way of the direct affect that it has on enhancing individuals’s lives.

I am very pleased with the work that the group has finished in constructing an inclusive office, and our focus, significantly on gender-based violence, not solely within the operations, however within the communities in and across the operations. So, gender-based violence, bullying, harassment and victimization, all the basic tenets of an inclusive office that we’re busy creating in Anglo American.

We’ve got now established on account of all of those insurance policies Residing with Dignity Hub in South Africa, and this can be a place the place unbiased assist mechanisms can be found for not solely our workers, however our contractors and their households to the extent that any of them are victims. The same facility can also be in place in Australia now and persevering with to develop.

So, with that, Stephen, I feel I will hand over to you, and you may take us by way of the numbers.

Stephen Pearce

Thanks, Duncan, and morning to all.

So, as , I at all times like to start out with the 2 form of key themes that I would such as you to remove from my part.

So, as Duncan talked about, so regardless of some working challenges, we did ship the second highest EBITDA efficiency for the yr by way of the second half. We actually centered on these efforts by way of delivering secure, constant, steady operational momentum, and that’s poised to proceed into 2023.

The second theme, one among my fixed themes in this stuff, robust steadiness sheet, 40% dividend payout is maintained that offers us a yield round 5% or a minimum of it was at first of the week. It is most likely a bit extra on the finish of the week.

Lastly, we proceed to put money into value-adding development and that positions the portfolio for the 2 main demand drivers that we see, and whereas our know-how and innovation packages allow us to provide these metals and minerals in essentially the most sustainable approach.

So, turning to the ’22 efficiency. EBITDA of $14.5 billion, and I will unpack that for you somewhat bit within the subsequent couple of slides, however wholesome pricing helped to mitigate the affect of these increased unit prices. That gave us an EPS of $4.97 and reflecting that 40% payout coverage, dividends had been $1.98 per share and that ends in $2.4 billion of shareholder returns from this yr’s end result.

Web debt landed at $6.9 billion, and that was somewhat bit higher than we anticipated once we spoke to you in December as costs began to rise in direction of the top of the yr. And all of that ends in a wholesome return on capital employed for the yr of 30%.

So, if we break that EBITDA efficiency down throughout the completely different enterprise items. Diamonds, robust operational efficiency and wholesome markets, a full yr EBITDA of $1.4 billion and a 52% mining margin. In 2023, we’re watching these macro themes carefully and the opening up of China. The 2022 vacation season was sturdy, although we had a barely decrease sight 1, we stay hopeful that issues ought to choose up as this yr progresses.

In Base Metals, $2.6 billion EBITDA, specializing in copper, anticipated decrease grades, water and ore hardness at Los Bronces. We did have excessive inflation in that a part of the world by way of our enter prices and C1 unit prices had been up 31% on account of that inflation and the lowered volumes. In 2023, clearly, Quellaveco, far more sizable contribution is anticipated.

In PGMs, a wholesome $4.4 billion EBITDA, a 54% mining margin and a 24% processing and buying and selling margin, a strong basket value of $2,550 an oz, and remembering that ’22 was impacted by the Polokwane smelter rebuild.

In Bulks, $6.6 billion EBITDA. Moist climate impacts throughout the varied operations. Begin of ’23, we’ve seen continued heavy rain, significantly at Minas-Rio and in Queensland, however a 49% margin reflecting the premium nature of our steelmaking components.

So general, a great set of numbers within the circumstances, and I’m inspired by that operational momentum that we’re carrying into 2023 as we deal with getting that consistency and rhythm again.

So, let’s take a look at the drivers of EBITDA. So, a reminder that our 2021 EBITDA was our highest ever supported by these excessive costs. ’22 EBITDA, our second highest ever. Costs have remained sturdy, though decrease than 2021, however they do stay above long-term averages.

There have been numerous recognized components that got here into ’22, significantly when evaluating to the 2021 interval. So, in 2021, we had the rundown of the ACP shares that we have constructed up, and that wasn’t repeated in 2022. We had deliberate decrease grades in Chile simply with the mine sequencing, however we additionally had water challenges at Los Bronces and better enter prices. Different components in ’22, additionally talked about the Polokwane smelter, the re-ramp-up of the Steelmaking Coal longwalls and clearly, the climate impacts that we have spoken about.

So, inflationary headwinds and decrease volumes and the way that performed out by way of unit prices, so up 15% throughout the complete yr, however that was an enchancment on the place we sat on the finish of H1. At that time, we had been up 18%. So, breaking that down, volumes contributed 5% of that affect, and that basically is that invaluable prize that we all know we are able to chase by way of the yr as we get that stability again.

Inflation general totaled 14%. And I feel as others have reported, diesel was the most important a part of that above CPI inflation at round 75% of that above CPI inflation affect. And the work that we’re doing on the sustainability entrance by way of our decrease emissions, renewable power, et cetera, goes to actually place us nicely to take that form of variability out of our outcomes as we go ahead. And naturally, in our case, weaker producer currencies assist offset a few of these results that you simply see above.

So, looking forward to ’23, as we mentioned in December, we’re anticipating round a 3% enhance in unit prices, step-up in our volumes, significantly with the addition of Quellaveco ought to assist, and it’s that main prize that we’re chasing to assist offset ongoing impacts of inflation.

So, financial contribution, I’ve to say that is one thing I am actually pleased with, of that vital financial contribution that we make and it totaled $30.6 billion throughout the yr. Importantly, a big a part of that affect is instantly on individuals’s lives within the nations that we function in.

So, a key a part of that contribution is the tax and royalty funds that we make, which totaled $5.9 billion for 2022. So, it is down on 2021, however very a lot consistent with earnings. The dramatic enhance in royalty charges in Queensland, coupled with increased earnings there, resulted in a big enhance in our royalty funds in Australia. The change in royalty charges meant that we paid an extra USD200 million in royalties through the second half in comparison with the earlier regime, with complete royalty funds for the yr being over USD700 million. The rise in coal royalty charges was forecast to ship an extra AUD1.2 billion to the Queensland authorities over a four-year interval. Nonetheless, the funds measure is now anticipated to ship AUD3 billion simply on this yr alone, and it solely got here in midway by way of the yr. So, with the {industry}, we proceed to hunt significant dialogue with the Queensland authorities to assessment these royalty charges, significantly in gentle of the miscalculation of the affect of that change.

Whereas in South Africa, the headline company tax fee is about to lower in 2023 from 28% to 27%, however we do see will increase elsewhere. Tax charges and tax bases in all of our working nations is one thing we watch rigorously as governments handle fiscal deficits impacted by the pandemic. And Chile is one such instance the place the federal government is trying to increase further tax revenues from sectors which have seen elevated income in recent times, similar to mining. So, whereas the royalty outlook there stays unsure, the newest proposal that is now passing by way of the varied approval levels, whereas nonetheless excessive, has moderated considerably from the place it began. We’re persevering with to actively interact with a full vary of stakeholders to make sure that they acknowledge the complete financial worth that we generate. And our taxes and royalty contributions in Chile elevated this yr to over USD1 billion.

So, turning to the steadiness sheet. I do know this can be a matter you’ll all be enthusiastic about right this moment. So, whereas Tom and the Woodsmith group persevering with to work throughout the varied streams of the venture, we’re clear at this stage to maximise the long-term worth of this multigenerational ore physique, and we have to make investments extra upfront to broaden the capability of a few of that core infrastructure, similar to the method that we adopted with Quellaveco, and that helps lock within the choices of future expansions as the marketplace for POLY4 polyhalite develops.

However we’re being prudent. We’re taking a phased method to the construct the place we are able to to make sure that we make investments capital in the proper approach when we have to, and importantly, because the market develops. So, consequently, we anticipate to take longer and value extra to carry the configuration we would like for Woodsmith into operation.

So, we talked about in December that we would feed this newest considering into our fashions for year-end accounting functions, and this ends in us impairing the carrying worth of $2.6 billion by $1.7 billion. As we progress by way of the remaining research and as we derisk the remaining schedule, I anticipate the worth and the low cost fee ought to each transfer in our favor over time.

However for accounting functions, we proceed to take a optimistic nonetheless conservative view of the POLY4 market value in our fashions. We do incorporate various pricing methodologies, together with mix substitution and we weight them primarily based on possibilities of final result. However this can be a market that we have to develop over time with the intention to notice full worth for the merchandise qualities. And that is why we’re comfy with an extended timeframe and why we’re placing a lot effort into the advertising and marketing capabilities of the enterprise. We’re increase a financial institution of agronomic, scientific and industrial proof for each the yield and the environmental efficiency of the product, in order that we are able to market that successfully and appeal to a big premium for it sooner or later. And Duncan will discuss you extra concerning the product attributes specifically in a second. However till we have finished that work, it is nonetheless somewhat early to include that worth into these form of accounting fashions.

As , these fashions will be extremely delicate to modifications in near-term expenditures. And whereas this expanded scope will enhance the general price and push out preliminary ramp-up in money move, it additionally offers us extra confidence in our capacity to maximise the worth from Woodsmith over the long run.

So, turning to CapEx, $5.7 billion for the yr. It was up on 2021, pushed by increased sustaining spend, partly as we caught up on a few of these initiatives that had been deferred or delayed through the pandemic in addition to particular initiatives such because the Collahuasi diesel plant, the start-up of Quellaveco, smelter rebuilding PGMs, some increased spend at Los Bronces and likewise some affect from inflation. Development CapEx of $1.6 billion largely displays spending of Quellaveco and Woodsmith.

Steering for 2023 stays at $6 billion to $6.5 billion, increased because of the SA renewables and the nuGen truck program, the Collahuasi diesel, work on the PGM smelters, the Minas-Rio plant in addition to some price inflation and the ramp-up of operations at Quellaveco and in Steelmaking Coal.

Web debt elevated to $6.9 billion, decrease than we had been anticipating once we spoke to you again in December, once more, affect of upper metallic costs working into the year-end, and we additionally had some increased dividend receipts from a few of our affiliate operations.

We paid $3.7 billion to shareholders through the yr and that features the extra dividend declared that — we declared at 2021 full yr outcomes on that yr’s document earnings in addition to the rest of the buyback that we introduced within the half prior.

Working capital elevated by $2.1 billion. That displays stock builds at PGMs owing to the Polokwane smelter rebuild in addition to builds at Copper, Kumba and De Beers that we mentioned in December.

However we’re making nice strides in 2023 by way of our Sustainable Mining Plan objectives. And in 2022, we put our cash the place our mouth is with two sustainability-linked debt issuances, so a $745 million bond in addition to the USD100 million mortgage with the IFC, each are linked to deliverables from our sustainable mining plan. And importantly, this holds us to account in reporting in opposition to our progress in opposition to these metrics. And you will see that in our reporting suite over the subsequent couple of weeks.

And with our robust and versatile steadiness sheet, we’re nicely positioned to proceed that disciplined funding within the pipeline of our development alternatives.

So, to recap, I at all times wish to report in opposition to our capital allocation scorecard. So, money era of $3.3 billion after funding sustaining capital, $2.4 billion for the bottom dividend, with additional $0.6 billion being the extra returns we introduced this time final yr and the $0.2 billion the tail finish of the buyback that we introduced on the 2021 half. We then allotted $1.6 billion to development capital.

So, lastly, we’re dedicated to our capital allocation framework. It delivers us a robust steadiness sheet, a pretty 40% payout ratio and that interprets right into a wholesome dividend yield and presents us flexibility by way of how we put money into discretionary capital choices, each natural and inorganic in addition to how we take into account further returns to shareholders. So greater than 90% of our development CapEx is allotted to value-adding, high-margin initiatives that ship merchandise into the long-term demand themes that we see.

And with that, I will hand again to Duncan. Thanks.

Duncan Wanblad

Thanks, Stephen.

So, simply earlier than I get to the Woodsmith part, I need to begin with what I feel the massive image once more. I’m positive that right this moment throughout our demand portfolio, the Metals & Minerals extra broadly, not solely those that we produce, however I feel that world seems and feels actually, actually good from a basic perspective. So many costs have now been elevated above their long-term common for fairly some time now, and the demand outlook is simply set to get stronger from right here in our view.

And but, regardless of all of that, no large flood of latest initiatives into this market. I mentioned it earlier than, I’ll say it once more, provide is sort of constrained right here by way of these dynamics. Recycling, substitution, thrifting is all going to be actually, actually essential contributors, and boy, do we’d like them. However even with all of that, there’s nonetheless going to be, I imagine, the structural scarcity of metals and minerals.

The {industry} provide may also, I feel, proceed to disappoint somewhat bit, reasonably underwhelm expectations than exceeds expectations. And a cause I feel that, that may proceed to be the case for all the explanations that I specified by December, which is that there are allowing points the world over. There are disruptions that we’re seeing an increasing number of, extra frequent excessive climate occasions, grade declines, fiscal uncertainty and so forth and so forth.

On issues which are exterior of our world too, so taking a look at unbiased sources and commentators within the area, nicely famend and nicely revered similar to Local weather Motion Tracker, their view of life is that presently, the world is on a trajectory to succeed in 2.7 levels of warming above pre-industrial ranges. And that’s fairly a great distance mathematically from the 1.5 diploma C that’s required by the Paris settlement.

And so, all of that, I feel, goes to proceed to serve to place a rare quantity of strain on metals depth and using the metals and minerals. And so, what of all of that for me is that it nonetheless feels that we’re structurally headed in direction of increased pricing sooner or later.

From our perspective, our geographically various portfolio is supplying into two main demand traits which are turning into ever extra clear to us. And the primary is the one which we actually simply touched on now, and that’s of decarbonization of our power and our transport methods to get us to this cleaner, greener, and extra sustainable world that all of us need to see. However the second continues to be this broader drive to the development of residing requirements for a rising and urbanizing inhabitants, and meaning demand for all the pieces from properties to electronics and for meals to client luxuries. In order that’s actually what we imply by a future enabling venture — portfolio reasonably than only a future-facing portfolio.

And so, turning to initiatives very briefly. Quellaveco, the brand new mine in Peru, continues to ramp up each traces working very nicely, and really, they produced 80,000 tonnes within the final quarter of final yr, so 100,000 tonnes for the yr, 80,000 within the final quarter. Purpose for me saying that’s that I need you to know that it may be about 30,000 tonnes decrease than that within the first quarter of this yr for some excellent causes.

Two of these are as a result of we’ve to take the plant down now as a part of the traditional ramp-up and commissioning course of. We’re performing some massive upkeep. We’re performing some resets from the learnings and among the methods that occurs naturally throughout these first phases of commissioning, then we’ll get it again up and working once more.

The second cause is that the Quellaveco tailings dam is at a really delicate stage of its preliminary building. It must be — it’s fee restricted by way of how a lot materials we are able to deposit at this specific time limit till we get the basal cone of this dam correctly stabilized. And naturally, this can be a dam that is going to be right here for a lot of, a few years. It behooves us to get this proper, and we’re following the engineers’ directions to the letter by way of doing that.

The third ingredient right here, after all, is while we’ve not seen any materials affect of this, we proceed to should be very conscious of the truth that there’s a variety of unrest and socio-politically pushed points that will nicely have an effect on the provision of supplies into the mine and the elimination of focus from the mine, so we’ve to be conscious of that. At this time limit, as I say, no main affect. And really, the group on the bottom inform me that issues appear to be quietening down and enhancing somewhat bit from their perspective in the intervening time, too.

Okay. Let’s speak about Woodsmith. So, Stephen did offer you a taste of it only a second in the past. And I would wish to set out for you our view of the importance of this venture and significantly the product, POLY4 and the way uniquely we predict that is now positioned to handle the agricultural industries, crucial and rising challenges. I would wish to cowl by way of this part why we imagine Woodsmith is a Tier 1 asset and the way we anticipate to ship high-margin returns and money flows from this multi-generational asset. I imply this will probably be a cornerstone of the Anglo American portfolio for many years to come back.

So, I’ve mentioned earlier than that we hardly ever do have to get the design and the engineering on a venture like this proper. And once we took it over, we did say that we had been going to carry it in-house and we had been going to check it and produce it as much as an ordinary that we as Anglo American, we’ll be proud of by way of the way it was going to be delivered. And I mentioned to you in December, I will offer you a way of what the form and the dimensions of this venture seems like now. So quite a bit has occurred since we acquired Woodsmith. It simply was, by the way in which, instantly simply earlier than the pandemic set in. And naturally, final yr was a large reset yr for us on many fronts. However as we additional built-in it, but in addition, we’re capable of interpolate among the outcomes of these research and the technical assessment that we did after bringing it on board.

So, firstly, on the core improvement areas of the venture, we have made some massive modifications to the scope of the design. They could look actually small while you have a look at it from an image at a excessive degree, however truly, they’re fairly vital, and I will unpack a few of these for you now. Guaranteeing that we get this venture to an ordinary that we’re proud of and we get it arrange in order that it might successfully proceed to optimize its output over the a number of many years that it may be in existence for.

So, we have modified additionally, beneath Tom’s management, the execution technique on this. So, when he took over the venture in — was it April or so final yr, Tom, the one of many first issues that he did was shut all of it down. It was very distressing for me, I’ve to inform you. After which three or 4 months later, he began up once more. And when he began up once more, it was a very completely different image by way of the way in which it was working and the precise manufacturing efficiency by way of the shaftings and the tunnel development. So, by way of doing that, we now have an EPCM mannequin, which follows fairly carefully the method that we had at Quellaveco and Tom has additionally engaged some specialist contractors to execute the sync of the 2 deep shafts.

Secondly, on the timeline and the scope of the work for this venture, so we’re nonetheless making some modifications for an extension to the scope. And I’ll clarify that shortly. And that is particularly to align with the market potential for our product. And what we need to do is make sure that we set this up proper. So, a key level to recollect right here, it is a deep underground mine. You will have extra choices to course appropriate for technique in an open pit mine in flight than you do in an underground mine. So, setting it up with that in thoughts could be very, very key, and that is what the work of our technical and advertising and marketing group has been doing within the final couple of years. So, none of us need to flip round in 10 years’ time and say, “Darn. I want we would finished it just a bit bit in a different way and may’t now avail ourselves of the choices and the alternatives that we actually do imagine that this product goes to carry to the market.”

So, there nonetheless are a substantial variety of research that have to do as we progress this core infrastructure. One, by way of the configuration of the proper final result or the very best final result that we are able to provide you with. And two, to reduce the chance of the particular price of the event of this venture. So, I mentioned earlier than, numerous this can be a operate of the extent of engineering, what and perceive, and subsequently, that defines your execution methods, significantly through the shaft sinking time.

Because it stands right this moment, we’ve a venture that circa 25% to 35%, Tom, I feel I am proper in these numbers, which are in idea and prefeasibility stage, and that is why we’ve not taken it to the Board for approval but. And we’ve the steadiness of the venture, roughly equally weighted between building degree assurance and feasibility degree assurance. So simply actually nice progress being made on these fronts. As I mentioned earlier than, we do now have a really extremely skilled venture administration group led by Tom and dealing very near specialists each internally and externally and constructing on all of the learnings that we got here — that we had popping out of not solely Minas-Rio, however even the successes popping out of Quellaveco.

So, vital progress on the core infrastructure. So, an important image on this slide, completely love what that appears like, whereas the scoping work is ongoing. So, on the 2 deep shafts, each being excavated by these machines known as Shaft Boring Roadheaders. They don’t seem to be a primary for us. They’re the third era of these kinds of machines, well-trodden in Canada and Belorussia. And we at the moment are having had Tom do the reconfiguration of the form of among the technical points on these items through the first half of final yr, over 20% down on the service shaft. And we hit a extremely massive milestone in January of this yr, the place we began the sink on the manufacturing shaft.

On the tunnel, we’re now over midway by way of the tunnel boring actions, presently round 21.7 kilometers of a complete of 37 kilometers. And also you keep in mind, the unique configuration of this was assumed that we’d use three tunnel boring machines. We’re now going to make use of one tunnel boring machine to drive the entire 37 kilometers.

There are three shallower intermediate shafts which are going to sink all the way down to tunnel for varied causes, second egress, air flow functions, upkeep, et cetera, et cetera, so these will all hit a ultimate depth of someplace between 320 meters and 360 meters, all progressing exceptionally nicely. So, very near the intersection level on the MTS shaft at Woodsmith. We’re full on Lockwood Beck and the Ladycross shaft has simply began, however progressing precisely as we had anticipated it to do.

So, I would like to only lay out now the size of the venture as we see it right this moment from an optimized configuration or very near optimized configuration since we took possession of the asset. So, we at the moment are going to set it up to have the ability to ship 13 million tonnes, and that is a 30% bigger venture than it was initially supposed to be. This doesn’t suggest that we go to 13 million tonnes on day one. I feel that I need to be very clear about that. However you’ve gotten the choices to have the ability to develop it into that, and that’s going to be very optimized from a capital execution standpoint or capital effectivity standpoint over time. We’re going greater as a result of we imagine on this asset, and we completely imagine within the product and what that product goes to have the ability to do out there.

The annual spend goes to differ year-to-year on this factor. We have authorized $0.8 billion for this yr, and it will likely be within the order of $1 billion between now and 2027 once we would anticipate it to be in first manufacturing. So, at that time, we’ll begin getting our personal product out and into the market. After which we are going to construct it as much as 5 million tonnes every year in 2030. Throughout that time frame, we nonetheless have a variety of these research to do to optimize not solely the mining, but in addition the distribution of the product and getting the product to market in addition to constructing the worth case — the value-accretive case for the product reasonably than simply counting on product value substitution.

So, it may, subsequently, take somewhat bit longer and value somewhat bit greater than may need been envisaged beneath the earlier proprietor. And definitely, as Stephen has described to you, from an accounting perspective, you’ll be able to respect how simply that from an NPV perspective, by pushing among the early money flows out somewhat bit for these excellent causes, has had the affect that it has finished.

I wish to guarantee you that beneath our palms, we’re taking a really long-term view and a really centered view on how you can maximize the worth from this asset, an asset that is going to, as I say, be a cornerstone of the Anglo American portfolio for a minimum of 5 many years from the time that it comes into manufacturing.

So gone are the times now, I feel I pointed this out someday final yr, too, the place we’d provide you with an idea design, get sufficient of the engineering into form of 30% of element and say, “That is the equal of a feasibility research, and subsequently, we’ll put that into the market.” We’re going to do the homework on this factor. We will get it proper. We will perceive what the true threat and the place the true threat areas are, and we’ll develop detailed engineering methods to remove these dangers and create an increasing number of surety of price of time and executability of the venture as we take it ahead. I feel that is completely important for a venture at any scale in mining, however significantly for deep shaft mining initiatives.

So simply to visualise what this venture seems like. So excellent cartoon right here by way of the schematic. Paul drew it. He did an important job. Two deep-level shafts on the left-hand aspect, 1.6 kilometers to the purpose the place they intersect. What he is drawn as a splendidly tabular white seam, polyhalite seam, so miners are actually trying ahead to entering into that fold, thanks. And as I mentioned, these — that sink finished by these two SBRs.

Secondly, given the proximity to the port, the connection — I imply, that is a tremendous benefit for this venture, too, by the way in which. I imply there are only a few bulk product market initiatives which are solely 37 kilometers away from their port. So that is the supplies transport system that is being developed in the intervening time with a tunnel boring machine.

After which, lastly, I feel you’ll be able to see the three smaller shafts that I referred to, the MTS shaft nearly on the intersection level. That is the place the mid-shaft loading, as we’d name it in mining phrases, happens to switch the product from the underground onto the conveyance to take it to the processing plant and the port.

So, all going comparatively nicely. There’s nonetheless extra work to do right here on the non-critical half objects, however these are nonetheless going to clearly be a part of the core infrastructure. So, there is a port space the place we could have a granulation plant, and there is a precedence, and we are going to hopefully have the entry on a precedence foundation to the export services. Restricted processing right here, so not a variety of chemical processing that happens right here. None in any respect. In reality, it’s granulation, our capacity to make a product that appears and appears like people who farmers are presently utilizing right this moment is a vital a part of our go-to-market technique.

So, proceed to make good course of, and we’ll get much more work finished throughout 2023. In 2024, we’ll hit that seam above the polyhalite seam, which is the sand seam. That is an space that we do not perceive lots about. It is a water-bearing layer. What we have to do is make sure that our water sealing methods and our sink fee mechanism by way of that zone is nicely understood, and we’re nicely ready for that. We get into there in 2024. So, at that individual time limit, we’re in a very completely different degree of understanding of the time it may take them to finish the venture.

So, what do it’s a must to take into consideration from going from 5 million tonnes to 13 million tonnes? Properly, if you happen to set it up proper, not a hell of lots, actually. So, in underground mines, you clearly must get the core infrastructure sizing and form proper if you happen to’re trying to doubtlessly broaden. The one factor that’s actual worth damaging in any deep-level underground mines is while you put a part of the infrastructure in after which just a few years later, you actually cannot put one other set of the identical kind of infrastructure. And so, you nail your productiveness year-on-year with declines and sub-declines and sub-verticals to the purpose the place the mine turns into utterly uneconomic. So, you’ve gotten an opportunity to get it proper in a world the place there’s such an enormous quantity of potential upside to the product valuation, and that is what we must do right here.

One of many issues that we did do truly, a small factor, so you’ll be able to’t even see it on the schematic that we have finished right here. However we must carry some air flow. There was at all times air flow within the planning of this mine. It was out in 20 years. Now we need to carry it ahead barely. However truly, one of many massive items of labor that the technical group did was simply merely broaden the diameter of every of these two deep shafts by 75 centimeters. So, there was some configuration that Tom and the group needed to do to these shaft boring roadheaders to have the ability to get that finished. However simply that somewhat bit, it would not look like a hell of lots within the complete diameter, has a cloth affect on timing, measurement, form and value of the long run infrastructure. So these are the sort of issues that the group has been desirous about and executing over the previous couple of years.

So, among the different key infrastructure issues that, once more, as I say, not on the important half in the intervening time which are going to be required to ship 13 million tonnes. Necessary to say that this overview is of the potential plan, and there are nonetheless fairly just a few research. I say, 25% to 35% of the venture nonetheless in idea and prefeas stage. The blue bits on this graph present us these kinds of scope modifications are going to be required.

So first, one thing that you simply — that we’ve beforehand raised is the addressing of the air flow difficulty, after which getting on to work out how we optimize the mining methodology. So proper now, the bottom mining methodology right here is simply merely standard board and pillar mining. Given the speed at which know-how is creating for mining, given the time that it may take to get us right here, we’ve a really stable plan A, however Matt is throughout plan B and plan C, and there could also be different ways in which we are able to get into this that has a decrease air flow load that’s much more productive than we’re presently seeing it, and we’ve the chance allowing for the size of lifetime of an ore physique similar to this. After which, after all, it is the way you configure the supplies extraction shaft or the transport shaft, the way you set the conveyor to go from 5 million tonnes to 13 million tonnes, and that is actually merely what is going on on at that time.

Tips on how to develop the market is one other basic a part of the technique of the event of the mine in and of itself. So, it is not essentially true that we’ve to place all the granulating capabilities at one place, which could have been an unique idea. Within the work that Alex and his group are with the ability to do with a lot of our companions and our off-takers of this factor, there are different ways in which we’d take into consideration distributing, mixing and bringing this product to market at varied nodes and factors throughout the globe. So meaning it is actually essential to take our time, get these issues proper, perceive these markets after which deploy the capital, as Stephen mentioned, on the proper time and in the proper place on the proper issues.

I’ve talked lots concerning the venture itself now, however actually what makes this factor so thrilling is the product and the very distinctive nature of this product and the issues that made us so drawn to it within the first occasion. It does play into these world megatrends that we see. Farmers have to supply extra meals, and so they have to do that as a result of the inhabitants is rising. And on the similar time, shoppers, so the farmers’ clients, and all the provision chain and authorities expectations which are round right this moment even have to enhance their very own sustainability and scale back the affect of their manufacturing on the world or on the globe itself. And that rising world inhabitants demand, requiring improved residing requirements, together with diet, is all a vital basic half to how meals goes to be offered within the first occasion after which secured.

And the one factor that we all know is land will not be turning into extra out there. And we all know that fertilizers have had a large position in growing the productiveness of farming. So, because the Sixties, we all know that there is been a 150% enchancment in meals productiveness with solely a 12% enhance in using arable land, however we simply do not see there’s one other 12% of arable land simply out there for related types of meals fee development which are going to be required to feed a inhabitants of 10 billion individuals.

And naturally, that has not come with out a price. So, there are environmental impacts of the way in which fertilizers are used right this moment. They’ve greenhouse gasoline emission impacts. There’s air pollution of waterways. There’s biodiversity loss on account of the appliance of a few of these fertilizers. And farmers and shoppers must, simply as mining firms and steelmaking firms, et cetera, must search for extra sustainable practices sooner or later.

There is a third ingredient right here, which is the affect instantly on nature and the deterioration of soil well being being a key difficulty is now form of proper on the highest of the agri {industry}’s agenda. And the long-term use of chemical fertilizers versus our product, which is an natural fertilizer, does have a — I imply there’s actually good proof that this does have a detrimental impact on soil energy, on soil construction, and subsequently, on the productiveness that’s then with the ability to be attributed to no matter parcel of arable land is accessible.

So, we’d like fertilizers. I feel the case for that’s actually clear. However it could be nice if we did not must incur the identical form of affect that present kinds of fertilizers have on a sustainable foundation going ahead. So, POLY4 is that product. It isn’t the savior for all the pieces, however it does make an enormous distinction to a few of these key drivers that this {industry} is now very quickly attempting to begin to get its head round. There aren’t any different pure natural mineral fertilizers that feel and appear like this, and Anglo American has the one scalable supply of polyhalite globally. I imply that could be a very distinctive and enticing proposition for shareholders. This mineral is so distinct in its composition, its conduct and its advantages. And subsequently, in its worth. So, let’s simply speak about this worth equation somewhat bit extra.

So, we’ve to develop our industrial methods by way of how you can carry this to market, proper? And there is, one, left-hand aspect of the equation is you simply substitute it. The opposite aspect is you create a premier for it, and you would be very cautious about how you set it into {the marketplace}. We now have an fascinating assortment, along with engineers and social scientists within the Anglo American steady, groups of agronomists and crop scientists working throughout the globe on quite a few crop trials and improvement initiatives for this product.

We now have performed over 1,500 industrial on-farm demonstration initiatives, and we are able to present the profit in a really, very optimistic approach. So, on the time that we acquired this venture, solely 400 crop trials had been finished. All of them seemed nice. Now 1,500 summit demonstration scale, and glorious outcomes. So, we’re seeing now on common a 3% to five% yield enchancment that may enhance income not only for us, however for our clients too, these being the farmers, crucial in a low-margin enterprise like theirs. And greater than that, we’re starting to see outcomes that basically do now begin to set POLY4 other than standard and chemical fertilizers.

First one is that we do now have this proof that it’ll enhance the uptake of vitamins within the soil, and it might scale back the necessity for a lot of the chemical fertilizers. Not all, proper, this isn’t a whole substitution for present chemical fertilizers, however it might materially affect the amount of people who will probably be used sooner or later. So, it is a 6% uptake. That is what we have seen from our trials of nitrogen and phosphorus simply relative to that, that you simply see when MOP is utilized instantly. And that is all the way down to the extended nutrient launch profile and the multi-nutrient nature of POLY4 versus among the others. So identical to you and me, a plant wants a balanced weight loss plan if it may be wholesome, and this can be a good core element of that weight loss plan going ahead.

Lastly, it does have the potential to materially scale back a few of these environmental impacts that I used to be talking about earlier. It is a low waste product, i.e., product — ore to product ratio is 1:1, given the dimensions and the character of the seam and ore physique, the fabric comes out of the mine, there isn’t any waste dump. It goes straight to the granulator, onto the ship or onto the ship instantly. In order that’s actually essential from a land use standpoint, from a chemical inputs processing standpoint, and clearly, additionally from a value standpoint. Due to the truth that there is no such thing as a chemical processing that sits on the again finish of this factor, the product already has a carbon footprint that is 85% decrease than any of the standard fertilizers which are out there out there right this moment.

So, it’s the solely recognized mineral fertilizer product that may do all of this stuff. And we do proceed to work, Alex and his group continues to work with all of the companions that we’ve on this worth chain, from the farmer, to the shopper, by way of the supermarkets and the distributors. And in reality, POLY4 is now being utilized in industrial trial of low-carbon fertilizers, led by a serious U.Ok. grocery store, to chop the carbon footprint of their very own meals provide chains.

So, these are just a few of the explanations that we predict that the basics are so robust and supportive of a product of this nature going ahead.

So how can we value it then, okay? Initially, it is not a commodity, okay? It is a marketed product. I feel that is the essential factor to recollect. You’ll be able to deal with it as a commodity however it truly is a marketed product, as a result of its price will mirror, finally, all of this stuff that I have been describing within the final couple of slides. And the conversion of these advantages must be into the worth and subsequently, will mirror within the value in some unspecified time in the future in time.

And by the way in which, we’re not simply dreaming this up as a result of we’ve some expertise of how that is finished. And I feel De Beers is clearly the very best instance of how you can take one thing and create worth, tangible worth round that providing. However extra more and more, we’re making use of that system and that logic and that considering and that method to only among the standard mining venture — merchandise, and what Pete and his group have been capable of do with the premium related to a few of our iron ore and steelmaking coal merchandise is strictly a great indicator of what I am speaking about right here.

So, this slide overly — outlines how we is perhaps taking a look at worth. So, on the left-hand aspect of the slide, there’s only a pure substitution bucket, proper? So, you are going to purchase a bag of fertilizer out of your native ironmongery shop or backyard heart. And in that, there is a ratio of N, P and Ok. And what we are able to do is simply extract the elements in that bag which are in polyhalite, resubstitute them with polyhalite, and that bag goes to price much less, okay? However simply the worth of that bag, precisely the identical factor. That is $170 per tonne out there right this moment. And that is a blunt substitution method.

You begin making use of a few of these different advantages that we have began to speak about. And the direct yields — now the farmer hasn’t paid for any of the yield advantages that come out of this and positively hasn’t began to consider the worth related to the sustainability advantages of this venture. If you have a look at this on a crop-by-crop foundation, district-by-district foundation, there are extra enhanced worth issues by way of time to get these things to the market, the way it deploys out there, how shortly it liberates within the soil, what it does for soil and soil construction, and the truth that you now get the yield profit. So, it prices much less. It is bought yield advantages related to it. After which finally, you can begin pricing in among the issues related to the provenance of the product, as I discussed earlier, and the sustainability components of the product going ahead.

So, you’ll be able to see the place it goes to on the finish, and it is not going to go there on day one. So, let’s be clear. We all know that from day one. In order that was very a lot what Tom and the group dropped at the Board on the finish of final yr was this extra considerate approach of setting ourselves as much as get into this, however on the similar time being very considerate and really pragmatic about creating the market, creating it and constructing off the success of it because it goes ahead. And we’ve not taken all of those advantages into consideration in any respect in the way in which that we thought concerning the valuation of this right this moment by way of the mannequin that Stephen was speaking about earlier. If we did simply get 30% of the upside that I’ve simply described, the worth of this is able to be about $100 a tonne greater than we’re desirous about. So very prudently, we have solely captured $20 a tonne of that in our present $190 a tonne mark. And it is not unhelpful that right this moment, as you look on the display, for a really related kind of product, it is presently buying and selling at simply over $300 a tonne.

So, to recap then. First, making actually good progress on delivering the important path elements of the infrastructure on this venture, significantly within the shafts and the tunnels. Secondly, we are going to proceed to check and optimize the scope of this work, significantly from a phasing into the market perspective in addition to understanding and minimization of the chance to capital and the timing and the spend of the capital. And thirdly, in case it wasn’t very clear, I’m very enthusiastic about this product and what it should do and the position it should have on the earth within the subsequent 50 years.

So, Woodsmith is a Tier 1 asset in a really low-risk jurisdiction, providing long-term worth to our shareholders. It has structural benefits within the high quality of the ore physique and the proximity of the mine to logistics channels. It’s scale, and it has low working prices and could have a really low capital depth too, by the way in which, from an SIB perspective, and I feel there’s numerous upside by way of the creation of value and worth for a product like this the place we can crystallize a few of these premiums that I spoke about. And it clearly does nonetheless have fairly long-term potential and optionality for much more expansions.

So, the product and the property are excellent, and we actually at the moment are at first of this journey. It’s a very scarce and multigenerational asset, and we’ll use the time that we’ve to get this totally proper, however actually nice progress by way of the place it’s right this moment.

So, lastly, while I hope I’ve given you a barely deeper understanding of how we take into consideration this venture and the way it’s dimensioned and the place it may from right here, I feel the easiest way so that you can actually get your head round is come and see it. So, we’re planning a website go to for this later this yr, most likely October 4, October-ish, and we would like to take round and present you. There, you may haven’t simply me, however you’ll be able to meet the group led by Tom, who’re desirous about each day how you can execute this safely, extra productively and at decrease price, and the group beneath Alex working for Tom who’re considering very arduous about how you can develop this market and the way strategically to take the product from the place it’s right this moment to some extent the place it will get a big chunk of the worth premium that it ought to — that it deserves to get.

Proper. In order that was Woodsmith. Shortly trying ahead and the way this all comes collectively from a broader development optionality perspective. With our deal with operational excellence and paired with our natural and really enticing inner choices centered on merchandise which are aligned to these future demand themes that we have been talking about, we nonetheless have inner choices to supply 25% development from contained in the portfolio over the subsequent decade or so. And we imagine that there is much more upside from absolutely embedding the working mannequin on this enterprise and realizing the complete potential of our present property beneath administration, which will probably be delivered by our P101 program.

We imagine that the FutureSmart Mining program, which is our know-how providing, and our built-in method to all issues sustainable within the spherical, is each differentiated and industry-leading and can allow us to unlock, I feel, the complete capability or functionality of our property. Ally Atkinson’s appointment final month to guide our venture and improvement alternatives will proceed to progress our modern know-how and digital program as nicely.

Quellaveco and Woodsmith are key clear main contributors to Anglo American’s development profile. However so too, are Collahuasi, Mogalakwena and Sakatti. And we’ll sequence these choices by way of Stephen’s capital allocation mannequin completely appropriately. And as at all times, we are going to evaluate the worth upsides in all the natural alternatives with any natural alternatives that come up throughout that time frame.

Our customer-centric advertising and marketing capabilities assist to optimize worth and determine alternatives as a broader materials options supplier. We have to make sure that we produce as sustainably as potential and that we provide to those clients who worth each the work that we do by way of limiting our affect on the atmosphere and the optimistic distinction we make to and round our mines.

That is my final slide. In abstract, we’ve proven, I feel, actual resilience by way of 2022, and we’ve to navigate some actually robust working challenges amid fairly a risky macro backdrop. We adjusted our plans quickly, and we centered our efforts on safer and extra constant operational execution. I’m more than happy with the progress that we did make through the second half of ’22 and up to now into the early months of 2023. And I do imagine that we’re nicely positioned to execute on our technique.

As Stephen mentioned, we do supply steadiness throughout numerous dimensions, a geographically various portfolio, delivering most of the metals and minerals that the world now so desperately wants, underpinned by a robust steadiness sheet from which we do pay enticing returns after which additionally develop our pipeline of enabling natural development initiatives.

Okay. Questions. Jason?

Query-and-Reply Session

Q – Jason Fairclough

Jason Fairclough, Financial institution of America Merrill Lynch or Financial institution of America. So, thanks for that Duncan. You are clearly actually enthusiastic about Woodsmith, which is nice. Nevertheless it’s somewhat little bit of a combined message, proper, since you’re tremendous enthusiastic about it, there’s all this upside, and then you definately’re taking fairly a giant write-down, proper, very early within the venture. So, I suppose the query is, what has stunned you concerning the venture? Why the write-down? Did the accountants win over the dreamers?

Duncan Wanblad

Sure, Stephen’s fairly a dreamer, too, I’ve to inform you, however he’s constrained by a algorithm that he has to use very diligently, and I feel that we’ve finished that on this case. The write-down now could be very a lot a operate of the appliance of accounting guidelines and the prudence that we must apply to those issues, given what we all know of the venture right this moment. It doesn’t construct in all of those upsides that I have been talking about that we’re very assured goes to be there, however we’ve to ship it proper, Jason, and that is the work that we’re planning on doing.

Stephen, do you need to discuss somewhat bit extra concerning the mechanics of the write-down?

Stephen Pearce

It’s a robust one. Clearly, I do not need to discuss down the accounting occupation in any sense. However there’s a basic distinction between what it’s a must to do, each from a administration and an audit perspective, by way of a long-dated discounted money move mannequin and the assumptions that you’ve to have the ability to confirm and tick off to place in that over time versus a mannequin and the assumption that you’ve by way of the true worth that you could ship over time, and we’re simply in that circumstance.

You will be aware if you happen to get to — I am unable to keep in mind the be aware quantity, however the detailed be aware on the carrying worth and the write-down, we have put sensitivities in there for you as a result of we’re utilizing a really excessive low cost fee, which is suitable for accounting fashions in the intervening time, its greenfield nature, however we have put sensitivities. So, you’ll be able to see if that comes again to the company WACC, in principle, the NPV and accounting view of the worth rises considerably. Equally for the worth, we have put the sensitivity in there for you as nicely, in order that if you happen to do imagine, as we imagine, within the worth the product brings, you can too see the sensitivity that, that may drive into the worth. And that most likely displays our true perception within the worth of this product reasonably than the accounting mannequin.

So hopefully, you’ll be able to work by way of that, and we might help you — Paul, and the group might help you thru that within the subsequent few days.

Jason Fairclough

Okay. So only a follow-up then. So, what stunned you as you’ve got taken over the venture?

Duncan Wanblad

So, not lots, Jason, if I am completely sincere with you. I imply, once we acquired the venture, it was one of the crucial enticing choices that we noticed. We knew we had been going to must do a variety of work to actually get beneath the pores and skin of this and do it in a approach that was according to the venture that will exist in Anglo American for a number of many years. Numerous the issues that we picked up through the diligence that we had entry to at that individual time limit are all enjoying out as anticipated within the design and the supply of the venture. So, I’d say no main surprises in any respect.

Jason Fairclough

Okay. Thanks.

Danielle Chigumira

Thanks. I am Danielle Chigumira from Credit score Suisse. A pair extra on Woodsmith, if I’ll. So, when Woodsmith goes to Board for approval, at what kind will it’s in? Will it’s the 5 million tonne model, the 13 million tonne model, one thing in between?

Duncan Wanblad

Sure. No, it is — we are going to take the venture in phases to the Board for approval. So, the Board authorized the $800 million for this yr. We must return to the Board on the finish of this yr to present them an replace on the place we’re with the venture, how the event has turned out. And we are going to get partial approvals to get to the purpose the place we’ve dimensioned all the threat and bought the capital into some extent the place we’re actually proud of it. So, the proper degree of engineering, the proper degree of threat within the venture.

So, I’d recommend that there is one other couple of years, we would definitely need to get extra element within the sandstones earlier than we had accomplished the design on the venture after which actually understood the sink fee and time to get to the underside earlier than we took it to the Board for ultimate approval. So, it is a minimum of two years out, I’d suppose, from a ultimate approval from — for full discover to proceed in the way in which that you’d have considered at Quellaveco.

Danielle Chigumira

Okay. So, in 2024, while you’re within the sandstone, you may be able to take the 13 million tonne model to the Board for approval, is that how we should always give it some thought?

Duncan Wanblad

I am undecided that it could be 13 million tonnes, however it could definitely a minimum of be the 5 million tonnes at that time.

Danielle Chigumira

Okay. Nice. And simply desirous about from the advertising and marketing perspective, you are talking about as much as 5 million tonnes in 2030. What would you could see by way of suggestions from crop research and so forth to get — to trust in that 5 million tonnes after which finally to the 13 million tonnes? As a result of the commentary that you simply make across the worth of the product and the pretty sluggish ramp-up, there appears to be a little bit of inconsistency in that. So, how do I take into consideration that?

Duncan Wanblad

No, no, that is very a lot a market improvement technique that is coming to play right here. I imply we may put numerous this product into the market comparatively early on simply merely on a substitution foundation. I feel it will likely be actually arduous at that time to start out constructing the premier that needs to be related to this product. So, we’ll must let it earn its stripes out there, proper?

I imply the one factor that the farmer actually needs to know and perceive is that this factor is not going to have any detrimental impact to the way in which that he runs the farm right this moment, as an illustration, proper? So, crucial that they get real-life alternative, not simply from crop trials and exterior our bodies with who we work with who’re offering a variety of this info right this moment, however on their very own farms as to when these things is of their retailer, that it exists of their retailer in a approach that it does with different merchandise. That after they put it into the distributor and so they run it on the tractor by way of the farm that it distributes in the identical approach. In fact, when it is within the soil, it does what it must do.

So, all of this stuff should be recognized. Then they be taught and so they expertise the yield advantages and so forth and so forth, and so we are able to construct into it on that foundation. So, this can be a very, very deliberate technique, and the tempo of uptake of that is perhaps completely different in numerous elements of the world for all types of causes, and that is why we are saying as much as, however we’ll get there.

Danielle Chigumira

Okay. Thanks.

Duncan Wanblad

Sure. And so, we’ll simply preserve going alongside the traces.

Sylvain Brunet

Thanks. Sylvain Brunet, BNP Paribas Exane. Simply one other one on Woodsmith, however needs to be a fast one. I perceive why the low cost fee has modified in comparison with the start, even if you happen to run sensitivities round that. Why was it modified in comparison with when the acquisition happened in 2020?

Stephen Pearce

Why is the low cost fee modified?

Sylvain Brunet

Sure.

Stephen Pearce

The low cost fee hasn’t modified. Truly, we use the identical low cost fee within the acquisition mannequin as we’ve on this mannequin. However keep in mind, there are two very basically completely different initiatives right here by way of what we’re constructing by way of time, scale, progress, pre-investment.

The factor I would additionally encourage you to consider, that is very completely different to a standard — Quellaveco might be a great instance the place you’ve got bought — and Matt, forgive me right here, however comparatively a easy mine with extra advanced processing and logistics and all the pieces that goes with that, whereas that is all concerning the pre-investment within the infrastructure with quite simple processing and logistics. So, it is truly completely a flip round to how you’d usually suppose it.

And simply to again up Duncan’s level right here on the pre-investment that you could make, I would additionally liken it somewhat bit to nearly a greenfield iron ore mine, the place the constructing of the mine is definitely comparatively easy, significantly if you happen to’re considering of Pilbara-type operations. So, the funding within the rail and the port infrastructure that you simply nail to the bottom, and also you form of get one probability — sure, you’ll be able to broaden them later, however you get one probability to put money into that and scale it and get the efficiencies proper. That is nearly an equivalent state of affairs right here. So, it is nearly — I would just encourage you to consider it somewhat bit in a different way to a standard large-scale open lower, different deep shaft mines, considering precisely the identical approach is what we’re considering right here.

Sylvain Brunet

Second query on iron ore. And again to Kolomela, if you happen to may maybe assist us perceive somewhat bit the distinction there may be between the challenges that Kolomela is experiencing now versus Sishen? The previous couple of years, Kumba is definitely a great instance of a great restoration, and it seems like issues have grow to be harder, somewhat bit obscure from the surface.

And my final query is on Botswana, simply to know, what’s being mentioned in the intervening time? Is it purely fiscal phrases? Have you ever agreed on among the objects already? And why are you positive that 2023 needs to be the time line for the ultimate settlement?

Duncan Wanblad

Okay. Thanks, Sylvain. So, on Kolomela, so Kolomela was hampered in a barely completely different approach final yr from Sishen. So, among the basic underlying points related to the climate and the mine improvement had been similar to Sishen, so all turnaround-able in a brief area of time. However after all, it had a three- to four-month interval the place it, along with that, had a misfire on one of many most important benches within the mine. And Mpumi and the group completely fairly rightly wanted to navigate that misfire in a really, very cautious approach. In order that slowed the mining fee down considerably throughout that time frame. By the top of the yr, Kolomela was doing very nicely.

Now there’s a differentiator too between Kolomela and Sishen within the context of entry to rail. And on the finish of the yr, once we began to actually wrestle with rail entry through the strike at Transnet after which the prolonged upkeep interval that occurred at Transnet, we elected to prioritize the Kumba materials onto the rail, and we stocked the Kolomela.

So these two should not be confused. So, Kolomela did get by way of the misfire state of affairs. The problems that that they had much like Sishen associated to the mine points, that’s in progress and doing very well at this time limit. However we are going to most likely nonetheless prioritize Sishen to Kolomela onto the rail. Okay?

On — at Botswana, so truly, the overwhelming majority of all the components of the negotiation have been accomplished. I am unable to keep in mind what number of workstreams there are, however there’s just one excellent workstream, and that is the place the group is working in the intervening time. Okay?

Ian Rossouw

Good morning. Ian Rossouw from Barclays. Simply a few questions on — firstly, on Woodsmith. May you — from reminiscence, the Sirius plan was to get to 13 million tonnes ultimately. So, with greater shaft, et cetera, is that finally the capability the shafts can do? Or is there upside long term?

After which, Stephen, perhaps simply remind us, I feel from reminiscence, the long-term value you talked about on the time of the deal was extra like $120 to $140. So simply to perhaps clarify the bridge to the brand new long-term value.

After which, simply lastly on working capital, what ought to we anticipate for this yr and form of roll off of the platinum inventories as nicely, please?

Duncan Wanblad

So, Stephen, final two for you. On the Sirius plan to 13 million tonnes, the true constraints in that mine are most likely not the ore physique, it’s actually a shaft capability and the tunnel capability to get to the port. And it is not simply merely the dimensions of the conveyances that you could put in there, that are actually essential, however truly basically constrained by the air flow.

And our method to air flow, and air flow, crucial within the context of the mining methodology that you choose, the gear that you simply put down there and so forth and so forth. Our method at all times was more likely to be completely different from Sirius’. I do not actually need to touch upon the comparability between our plan and the Sirius plan, as a result of from day one, we mentioned we had been actually drawn to this chance due to the character of the product, due to the dimensions, scale of this ore physique, however what we needed to do was do our personal assessment on it, work out how we had been going to optimize the execution of it, and these are our plans.

Stephen Pearce

On the worth, sure, your recollection is appropriate. I feel we had been speaking round $125 to $140 on the time that we acquired the venture. So, you’re spot on there, Ian. What have we finished since to tell our view? So, the economists have gone to city by way of basic supply-demand balances throughout the 4 most important vitamins that make up the 4 most important elements of the product. And it is that view of the basic provide demand-balance over time expressed as an actual value for the relative percentages that informs the $170. We’ve got then gone by way of and checked out, nicely, how can we really feel about on a steadiness of possibilities the place a few of that worth is, and in a reasonably conservative method, we have added $20 to it. As Duncan talked about, if you happen to took a special method, you’d add $100 fairly shortly. And the present market view of that’s over $300. So, we have tried to stay comparatively conservative, however it’s that basic financial buildup view of the 4 most important vitamins into the $170 as a place to begin. So, I hope that solutions the query.

On working capital, we have needed to construct the working capital and it hasn’t at all times been — some for good causes, as I feel I mentioned in December and a few that we would love to not see by way of interruptions of manufacturing. So, De Beers might be one the place we have had a little bit of a tick up in completed items. And a few of that is clearly a view of the group main into the New Yr and potential China reopening. So, attempting to place for that. Hopefully, we would see that move by way of. The opposite is as a result of we have got the transition of Venetia this yr from underground, which the final lower is now being accomplished — sorry, the open lower, the final lower is being accomplished and the underground transition as that begins to ramp up by way of the yr.

And so once more, the group are eager to verify we have got the suitable mixture of diamonds to take to the market by way of the yr as we undergo that transition. And so, we’re carrying somewhat bit of additional inventory by way of there. We’ve got seen, I must say, the final couple of years, we’re most likely coming into the yr. We have had optimistic views, and that is performed out nicely. So, it is fed into among the outcomes as we have carried some inventory. And it simply occurs to be throughout 31 December as we go into sight 1. So, it varies then somewhat bit by way of the yr.

On copper, Quellaveco ramp up, that is good. Clearly, by way of that operation arising, so we’re seeing somewhat little bit of buildup there. And you would be conscious that there was a fireplace on the third-party port that we use close to Los Bronces that we used to take the product out. In order that noticed somewhat little bit of buildup in December. And whereas it is again up and working at decrease volumes in the intervening time, it should take one other few months, I think, by way of the half yr. Do not anticipate an affect on full yr gross sales and positively no affect on manufacturing from that.

And PGM might be the most important WIP buildup that we have had throughout the portfolio. A few of that POC materials, the acquisition focus that we herald off of present pricing, and in order that feeds into our carrying worth. A few of it’s the Polokwane smelter. You’ll have seen within the Platts end result that indicated — that may take somewhat little bit of time truly to expire. So although it is up and working and processing nicely, you get one other pinch level simply this aspect of the ACP as you steadiness the correct mix and feed by way of the ACP. So that may take by way of ’23 and ’24 to expire.

So, they’re the primary issues that we’re watching on the working capital entrance. A few billion {dollars}. I would like to get a minimum of half of that again within the close to time period to maintain that. So, I hope, Ian, that aspect provide help to down as nicely by way of working capital administration.

Ian Rossouw

All proper. Thanks.

Alain Gabriel

Alain Gabriel at Morgan Stanley. Duncan, first query is on Woodsmith. Do you’ve gotten a way of the working prices if you happen to had been to attain 5 million tonnes after which subsequently 13 million tonnes? That is the primary query.

And my second query is, exterior of Woodsmith, your development choices for the subsequent 5 years seems to have stalled or are paused, particularly round Mogalakwena and Collahuasi, the growth. Are you able to give us an replace the place we stand on these development choices exterior of Woodsmith, a minimum of for the subsequent 5 years? Thanks.

Stephen Pearce

Thanks, Alain. Working prices at Woodsmith stalls form of across the 10 million tonne mark. We’re circa $50 a tonne. That is barely increased than that at $5 million a tonne, however — 5 million tonnes, however presumably decrease than that at 13 million tonnes. The expansion choices exterior of Woodsmith, stalled, I am undecided that I’d characterize it as that, simply that it takes longer to get this stuff finished. As I say, they’re actually massive initiatives in there apart from Woodsmith and Collahuasi — apart from Woodsmith and Quellaveco are Collahuasi, Sakatti in Finland and Mogalakwena. So these are the massive choices and costs to go for.

Rather a lot nonetheless to have been finished on extracting the optionality that existed definitely at Collahuasi. The group has finished a superb job there. Now could be the time to start out getting our heads round how you can carry that ahead. That can also be in a world the place allowing is a really completely different kind of world right this moment than it was simply 5 years in the past. And Jorge and the group needed to begin understanding how you can repermit the water that they had been utilizing of their present operations earlier than they needed to get by way of desirous about how they had been going to broaden the operation. So, I feel that, that is what underpins among the timing related to that.

Mogalakwena, itself, completely made nice progress. Natascha had the six pillars of labor that she was going by way of to get her head round how we had been going to broaden this, what the very best deployment of capital was between the mine and the plant, what the plant configuration may and may seem like and the time for this. And so, I feel that by way of her personal program, we’re bang on observe by way of the place we needs to be with that at this specific time limit.

And Sakatti additionally going nice weapons from an engineering standpoint, however in a extremely fascinating world of allowing, given the place that useful resource is situated. So, I spent a while in Finland a month or so in the past. I spoke to individuals. I imply very a lot all incentivized to need to attempt to make this occur, however nonetheless numerous work to do from an EIA perspective.

Alain Gabriel

Thanks.

Richard Hatch

Good morning. Richard Hatch from Berenberg. A query on capital allocation. You simply purchased 9.9% of Canada Nickel for $25 million. It is actually fascinating venture. It seems prefer it may very well be fairly massive, lengthy life. And I would not need to say it, however if you happen to did purchase it and we sit right here 5, 10 years down the road, we’re speaking about the identical issues. [Junior] (ph) takes the venture ahead, you then must recapitalize it, put it proper. The CapEx is considerably greater than what was initially envisioned. Why not proper now? You should purchase it for $150 million, put a small premium on it. The amount of money that you simply generate, you could possibly simply put your foot on an fascinating province in a commodity you want, which you are underweight on primarily based in your pie chart. Why not purchase the entire thing now and get it finished? That is the primary one.

Stephen Pearce

[Multiple Speakers] It is an fascinating venture, however very early stage. And I suppose we’re taking a look at it from nearly a know-how form of perspective on it. It is actually fairly low grade, however doubtlessly massive scale, however very early day in its life. And so, we’re comfortable to come back in as a — I am unable to keep in mind the quantity, 9-point-something % shareholder with others. It is early days and comfortable to be a part of that work program within the subsequent few years. However let’s examine the way it develops. It’s fairly early days, large-scale, low-grade. Possibly know-how can work for us right here as nicely and some different little twists that we’ll work on.

Duncan Wanblad

Sure. So, within the first occasion there, the offtake element of that was very enticing and essential to us. However as Stephen mentioned, the concept we may truly deploy a few of our considering by way of the applied sciences round dry stack administration, et cetera, et cetera, was additionally enticing. So, we’re in. We’ve got a seat on the desk there, which could be very useful for us by way of desirous about what the choices are sooner or later.

Richard Hatch

Thanks.

Unidentified Analyst

Sorry, going again to Woodsmith, I imply utilizing $50 per tonne price, it is arduous to see how this venture can generate greater than single-digit ROICs 5 to 10 years down the road, proper, given the $5 billion upfront CapEx. I am simply considering the way it stacks up in opposition to all the opposite choices that you’ve like Mogalakwena. I imply by way of going again to the capital allocation framework, was this nonetheless the very best venture you could possibly do at this time limit? Or is it sort of the sunk price fallacy holding you again into — you’ve got already sunk 300 meters of shaft, so let’s go forward with it.

Duncan Wanblad

So, Stephen goes to reply that query. However earlier than he does, I need to inform you that this venture and the allocation of capital to this venture will not be holding up both Mogalakwena or Collahuasi in any approach, form or kind.

Stephen Pearce

Nice reply. Properly finished. So, I completely agree with that. Pay attention, we’ve a really robust view of the worth that we predict we are able to ship from this. And you are able to do some easy sums by way of a $50 price and potential income quantity per tonne and the money move that this factor can generate for a really, very lengthy time frame could be very enticing to have as a part of that portfolio. In the event you put that by way of your calcs, as we’ve finished, clearly, you are lacking just a few bits and items by way of your individual easy fashions, and we are going to hopefully provide help to with that over time. And if you happen to then derisk the venture because it comes by way of its pure life cycle of time and certainty and with our view of the market, we predict it should stack up actually fairly attractively.

Additionally simply in the intervening time, you are not allowed to place in sure different advantages from an accounting perspective that we’d see, and having a robust money move income producing, a enterprise in our residence head workplace nation is one thing that we’ve not had ever since we moved to London. And so, to have that as a part of the portfolio can also be fairly a pretty theme by way of general economics.

Unidentified Analyst

Is it potential to get additional tax advantages given numerous initiatives like Britishvolt mega plant there, et cetera, in that area has fallen off?

Stephen Pearce

Pay attention, one of many issues that this venture does carry could be very enticing development and exercise to a area of the U.Ok. that wants enticing development and exercise. And it is one of many largest capital initiatives north of London. So, by way of each the federal government priorities, our priorities and the worth and neighborhood exercise and social elements we predict it might carry it performs very nicely into that complete story.

Myles Allsop

Myles Allsop, UBS. Possibly simply on Woodsmith as nicely. So, we have had just a few questions, however not all of the solutions but. Would you herald a companion, I imply, to derisk such as you did with Quellaveco? So, on the tax, are we proper to say in the intervening time, there is no such thing as a tax profit apart from form of the offset to move workplace prices, however there isn’t any sort of form of decrease tax fee for a sure time frame or something like that?

Stephen Pearce

No decrease tax fee, and there’s no head workplace tax profit within the fashions as we current them right this moment, as a result of beneath the accounting requirements, you are not permitted to do this. So these can be upside in the event that they had been to play out ultimately.

Myles Allsop

Have you ever — I imply, I am positive you’ve gotten, however you most likely did not share it, however the IRR on the venture is, the bottom case, is that form of over 10% or over 15% or…

Stephen Pearce

I anticipate it should meet our hurdles round once we get to that ultimate choice level as we think about our view of worth and the optionality of this stuff — this venture brings by way of time and the way we see the product out there. Now we have got to show up a few of these issues as we get in direction of ultimate choice, however the place I sit right this moment, and I feel we’re as a administration group and a Board is that we’re assured that may play out into that form of territory to cross the hurdles.

Stephen Pearce

And simply to your level on potential syndication of the venture. At all times open to that, Myles. There are some — there are two actually good causes to consider this stuff on occasion. One is, is there a companion that is additive to you and may improve an final result that you simply by yourself could not do? Or is that this a great way to handle threat given the character and kind of the venture and placement of the venture going ahead? All of that mentioned, it must be the proper companion, and, it ought to actually be on the proper time if it may be worth accretive to shareholders. So, there aren’t any plans to do it proper now, however that does not imply that there will not ever be.

Myles Allsop

Possibly simply on platinum as nicely. May — I imply Mogalakwena is beginning to seem like extra of a mediocre asset reasonably than an excellent particular asset that we wish to imagine. If you have a look at the decrease grades and the form of efficiency over the past 12 months. May you give us a way as to how the grade profile will evolve and the way we’ll get Mogalakwena again on the left-hand aspect of the price curve?

Duncan Wanblad

Sure. Okay. Properly, Matt’s within the room. So, as he is within the room, I’ll ask him to speak to that grade profile. However I feel crucial factor to recollect is that each asset, so we see it at Los Bronces, we see it at Collahuasi has a grade profile by way of the entire of that asset. And there are occasions within the phasing of the event of that asset the place you undergo increased grade, decrease grade, more durable ore sort of traits and so forth and so forth. So that could be a part that Mogalakwena has been in in the intervening time, and it has had some difficulties which have been actually made starkly prevalent by the elimination of the inter-processing stockpile related to the geometallurgical mannequin from a predictability standpoint. However we’re getting on prime of that and that we are going to clear up through the course of this yr, I am positive. However it’s nonetheless an extremely good asset. I imply, the underground components of this asset, so the ore physique at depth, remains to be most likely a differentiator ore physique from any in its class.

However Matt, do you need to discuss to somewhat bit extra element concerning the grade profile?

Matt Daley

Sure, definitely, Duncan. Sure, thanks for the query. So, I suppose ranging from an endowment standpoint, that is an extremely outstanding useful resource. The extent is eighteen kilometers alongside strike, it is not closed at depth. Ore physique width varies from 40 to a few hundred meters. Relying on the place you’re within the pit, there’s a variety of variability from north to south. So, the place we’re shifting, the subsequent few years into the southern a part of the pit the place you see a lot increased grades within the subsequent two or three pushbacks, which will certainly assist that grade profile. If you begin to have a look at the transition to underground, we would be much more selective in how we mine, and we’re taking a look at having grades nearer to the 4-, 5-, 6-gram per tonne as a substitute of the run of mine from the open lower are in that 2 to 3-gram per tonne. So, trying over the subsequent 10, 15 years as a few of these potential choices grow to be actual, I feel you may see some actually thrilling issues round that grade profile truly enhancing.

Liam Fitzpatrick

Liam Fitzpatrick from Deutsche Financial institution. I will offer you a break from Woodsmith. So, two questions. One on De Beers, I simply needed to come back again to your feedback about all the pieces nearly being finished. Ought to we take that as that means that there is not going to be any materials change in sort of the possession and the economics as they’ve stood over the past 10 years?

After which secondly, I suppose extra of a broader query on the group. Anglo nonetheless is a reasonably difficult enterprise while you have a look at what number of property you’ve gotten, the completely different areas and so forth. Do you consider streamlining or divestment steps from right here simply to actually sort of maybe take the simplification one other step ahead? Thanks.

Duncan Wanblad

So, on De Beers, Liam, I imply, it’s clearly in negotiation rights, one which occurs each 5 years for us, and it’s in each events’ curiosity to provide you with a price accretive deal on each side of the fence right here. I do not need to forerun any of the element of this factor. I imply we’re in the course of a negotiation at this time limit, however the negotiation is being finished in good spirit on each side of the fence right here.

From an Anglo construction standpoint, after all, if I had a clean sheet of paper, it would not seem like this from a construction standpoint. What I’m actually very comforted by is the standard of the underlying asset base that exists in that construction. There’s not lots I can do about this within the quick run in any respect. However I do know that we’re fairly efficient at with the ability to handle by way of that complexity, and we’ll proceed to do this for so long as we are able to.

Tyler Broda

Tyler Broda from RBC. So, the Woodsmith venture, so it is $5 billion or $5 billion, $1 billion a yr for 5 years to get to the 5 million tons. What’s the form of capital depth we needs to be taking a look at for the 5 million to 13 million tonne on subsequent steps? After which ought to we predict that you simply go straight from 5 million tonnes to 13 million tonnes relying on how the market develops? As a result of — when will we anticipate this to grow to be free money move optimistic, I suppose, as nicely?

Duncan Wanblad

Sure. Okay. So, Tyler, on the speed at which we progress from 5 million tonnes to 13 million tonnes, I feel very a lot a operate on how we — how the market methods by way of improvement are enjoying out. I haven’t got the capital depth numbers at my fingertips right here. However definitely, it was a big drop between 13 million tonnes and 5 million tonnes.

Paul, you do not have them handy, do you?

Paul Galloway

Sure, a few third.

Duncan Wanblad

It is a few third of the capital depth to go from 5 million tonnes to 13 million tonnes because it was from zero to five million tonnes.

Stephen Pearce

And that is all due to that pre-investment in the primary components of infrastructure to get you there.

Tyler Broda

After which only a fast comply with up, if I may. The alternative of Liam’s query. You are seeing a variety of discuss now about M&A within the area. How do you suppose Anglo American is viewing M&A at this level from an acquisition standpoint?

Duncan Wanblad

Similar approach we have at all times considered M&A. I imply, to the extent that there’s an M&A chance for us, the place we are able to truly lean into with an actual distinction on the finish of the day, so make a differentiated final result from a price perspective, it’s in play. It can at all times have to finish with any of the interior choices that we’ve. And so, we have a look at it all the time. None of that is modified.

Paul Galloway

We bought two final questions on the phone. So, Dom, can we go to you first, please. However we’re sadly not [strapped] (ph) on the time so simply go forward.

Operator

You have bought Dominic O’Kane from J.P. Morgan.

Dominic O’Kane

I’ve bought two questions. First one on, once more, going again to capital allocation. Duncan, you made the remark Woodsmith is not constraining your capacity to maneuver ahead to do development choices, however I’d argue that it’s having an affect in your shareholder distributions by advantage of your web debt quantity. So, are you able to simply assist us or remind us what your guardrails are on extra capital distributions from this level ahead? So, i.e., how can shareholders entry returns larger than the 40% payout?

After which, my second query is simply on South Africa typically. I feel that is the primary full yr the place you’ve got not been topic to capital controls. May you simply perhaps remind us what the affect of that’s in your day-to-day enterprise and treasury administration?

Stephen Pearce

Why do not I take care of that one first, if you happen to’re comfortable to. So sure, it is truly nearly been most likely two full years, I would recommend, that we have had restrictions on the capital controls lifted in follow. So, I suppose the nation used to have a — just about, you’ll be able to’t transfer it out except you get permission coverage. Now that is moved to all the pieces can exit except you could get particular approval kind coverage. And the primary establishments by way of Finance Ministry, Reserve Financial institution, et cetera, have been actually dedicated to that journey. And so, we now profit from that. It is extra like an Australian FX administration regime than maybe what that they had beforehand simply to make use of an instance. And so, we’ve full freedom.

We notify them after the occasion for big issues that exceed sure limits versus having to hunt permission in any approach for dividend funds or for steadiness sheet administration. So, it’s only a routine motion of money move throughout borders like it could be for another nation now. So, it has been actually pleasing to see that they’ve actually dedicated to that coverage change and delivered very clearly on that coverage change. So, it has been an important help to us.

Would you like me to have a go on the different one? Otherwise you need a crack at this?

Duncan Wanblad

Let me simply say Dom, and Stephen you’ll be able to add to this, we’re completely trying to profitably develop this firm, and we’re doing this as a result of it’s undoubtedly within the shareholders’ curiosity for us to do this. From a web debt standpoint and the way we take into consideration that by way of distributions, our place on this hasn’t modified a hell of lots simply to form of roughly dimension that. If web debt ever ended up nicely beneath $3 billion, after all, we’re nearly sure that there’d be a redistribution of a few of that extra capital. If we had been between $3 billion and $5 billion, there’s at all times a dialog that we’ve. In reality, we debate this each half with the Board as to the place the cash goes. After which above $5 billion, unlikely that there’d be main distributions along with the 40% payout ratio.

Stephen, you need to add to it?

Stephen Pearce

There’s not lots so as to add. I feel you’ve got answered it fairly nicely. I feel, actually, it is concerning the steadiness that I typically discuss, and we weigh these issues up over time. And so, I feel we have had a fairly good observe document of contemplating these additional returns when costs, markets and steadiness sheet place enable for that. And so, we do actively take into account it, and I feel we have demonstrated we do act on it as nicely.

Paul Galloway

The final query has gone. So, due to the time, 5 to 11:00, thanks very a lot, certainly. We’ll name it to an finish. Thanks for becoming a member of us this morning.

Duncan Wanblad

Thanks, all.

Stephen Pearce

Thanks.