Anglo American Annual Report 2012

Underlying operating profit$ millionUnderlying operating profit from thenon-core businesses was $168 million,a $37 million increase, due to lowerdepreciation as a result of thetransfer of Tarmac Quarry Materialsand Scaw South Africa to ‘held for sale’and the reversal of penalty provisionsat Amapá which were in place at theend of 2011, partly offset by lowerrealised iron ore prices at Amapá.Exploration costs for the year were$206 million, a 70% increase, mainlydriven by the inclusion of explorationcosts at De Beers (following theacquisition of the additional 40%interest), increased drilling due tofavourable weather conditions inAustralia and Chile, and a ramp upin drilling activities at the Sakattipolymetallic project in Finland.Corporate costs (after cost allocations)of $203 million were incurred in 2012.In 2011, following the reassessment ofestimates of likely outcomes of existinginsurance claims, liabilities decreasedsignificantly in the insurance captive,offsetting the unallocated corporatecosts and resulting in an operatingprofit for 2011 of $15 million.ProductionProduction increases weredelivered at the Kumba Iron Ore,Metallurgical Coal, Thermal Coal,Copper, Nickel, Phosphates andNiobium business units.Year ended31 Dec 2012Year ended31 Dec 2011Iron Ore and Manganese 2,949 4,400Metallurgical Coal 405 1,189Thermal Coal 793 1,230Copper 1,687 2,461Nickel 26 57Platinum (120) 890Diamonds 496 659Other Mining and Industrial 337 315Exploration (206) (121)Corporate activities and unallocated costs (203) 15Operating profit including associates before special itemsand remeasurements 6,164 11,095Iron Ore and Manganese – productionof iron ore increased by 4% to 43.1 Mtdue to the ramp up of Kolomela,partially offset by the unprotected strikewhich resulted in lost production ofapproximately 5 Mt. Manganese oreproduction increased by 20% to 3.3 Mt.Metallurgical Coal – productionincreased by 11% to 30.6 Mt, withrecord metallurgical coal productionof 17.7 Mt, benefiting fromproductivity improvements at boththe open cut and undergroundoperations and a reduction in weatherrelated stoppages.Thermal Coal – production improvedby 1% to 68.7 Mt, despite the closureof high cost production sections inSouth Africa, driven by the Zibuloramp up and strong operationalperformance supported by favourableweather conditions at Cerrejón.Copper – production increased by10% to 659,700 tonnes, mainly owingto the ramp up of the Los Broncesexpansion project, partly offsetby expected lower ore grades atCollahuasi and operationalchallenges at the Los Bronces mineand at Collahuasi.Nickel – production increased by 35%to 39,300 tonnes due to the ramp up ofBarro Alto, partially offset by thecessation of production at Loma deNíquel from September 2012.Platinum – equivalent refinedproduction was 8% lower than 2011mainly due to the illegal strike actionthat occurred between September andNovember 2012 at the Rustenburg,Amandelbult, Union and Bokoni minesand operational challenges in the firsthalf of the year.Diamonds – production decreasedby 11% to 27.9 million carats, withDebswana production impacted bythe Jwaneng slope failure. In lightof prevailing rough diamondmarket trends, and in keeping withDe Beers’ stated production strategyfor 2012, operations continued tofocus on maintenance and wastestripping backlogs.Phosphates – record productionof 1.1 Mt of fertiliser, a 5% increaseyear on year, due to a number ofasset optimisation initiatives whichimproved overall performance atCatalão and Cubatão.Niobium – production increased 13%,as declining ore quality was more thanoffset by improvements in boththroughput and recoveries.FINANCIAL OVERVIEWGroup underlying operating profit was$6,164 million, 44% lower than 2011.The main reason for the reduction inunderlying operating profit was adecline in the realised prices of mostof the commodities produced by theGroup. These included falls in realisedprices of 29% in the case of exportmetallurgical coal, 19% in SouthAfrican export thermal coal and 23%in iron ore.The Group’s results are affected bycurrency fluctuations in the countrieswhere the operations are based. Thestrengthening of the US dollar againstthe South African rand and the Brazilianreal resulted in a $945 million positiveexchange variance in underlyingoperating profit compared to 2011. CPIinflation had a negative $591 millionimpact on underlying operating profitcompared to the prior year.Sales volumes were higher than 2011,owing to increased production atKolomela and Los Bronces as theexpansion projects ramped up,offset by operational issues at theLos Bronces mine and Collahuasi, asOperating and financial reviewAnglo American plc Annual Report 2012 43