Anglo American Annual Report 2012

01 Moving sections intoposition along the525 kilometre ironore slurry pipeline atour Minas-Rio projectin Brazil.02 Preparation workunder way on installingpower supply at thesite of Minas-Rio’smilling plant.01Followingsuccessfulcommissioningin 2011,Kolomelacontinued itsramp up aheadof expectationsand deliveredan outstandingperformance in2012, producing8.5 Mt ofiron ore.end of 2012, with steel mills returningto the market, which was reflected ina marked increase in index iron oreprices. Overall, index prices averaged$130/t (CFR 62% Fe Platts) in 2012,23% lower than the $169/t averageachieved in 2011.Operating performanceKumba Iron OreUnderlying operating profit decreasedby 34% from $4,491 million to$2,980 million principally as a resultof 23% weaker average export iron oreprices, partly offset by a 7% increase inexport sales volumes. Total operatingcosts rose by 16%, driven primarily bya $254 million increase in operatingcosts at Kolomela mine owing tooperating costs being capitalised in2011, above inflation cost increasesand the mining of 14.5 Mt of additionalwaste at Sishen mine.Total production of iron ore increasedby 4% to 43.1 Mt due to the ramp upof Kolomela, partially offset by theimpact of the unprotected strike duringthe fourth quarter. Total tonnes minedat Sishen rose by 4% to 171.6 Mt(2011: 165.0 Mt), of which wastemined amounted to 133.5 Mt, anincrease of 12% (2011: 119.0 Mt). Ironore production at Sishen, however,decreased by 13% to 33.7 Mt(2011: 38.9 Mt) mainly owing to theeffects of the unprotected strike.On 3 October, around 300 Sishenemployees commandeered mostof the mining equipment at the mine.The situation ended on 16 Octoberand production recommenced on20 October, though on a limitedbasis as attendance in the miningsection remained low in the immediateaftermath of the strike. Operationsare subsequently being ramped up.Production rates continue to improveand are expected to return to normaloperating levels by the end of the firsthalf of 2013.Sishen lost around 5 Mt of productionas a result of the industrial action andthe subsequent ramp up of operations.These losses exacerbated theproduction challenges experiencedearlier in the year resulting frommining feedstock and qualityconstraints that affected the availabilityof material supplied to the mine’s twoprocessing plants.Operating and financial review02FINANCIAL ANDOPERATIONAL OVERVIEWUnderlying operating profit decreasedby 33% from $4,400 million to$2,949 million, principally as a resultof weaker average export iron oreprices at Kumba and lower pricesand alloy volumes at Samancor. Thiswas partially offset by an increase inexport iron ore at Kumba and recordmanganese ore volumes at Samancor.Safety and environmentKumba Iron OreRegrettably, Kumba suffered its firstloss of life since 2010, when twoemployees were fatally injured atSishen mine during 2012. Kumbarecorded a lost-time injury rate (LTIFR)of 0.10 (2011: 0.08), a 25% increaseyear on year. Kolomela continued itsimpressive safety record and achieved29 million man-hours without a fatalincident or LTI between March 2010and October 2012.Iron Ore BrazilThere were no losses of life at Iron OreBrazil sites in the year. The LTIFR of0.01 was in line with the prior year.MarketsGlobal crude steel productionincreased by 2% in 2012 to 1,550 Mt(2011: 1,526 Mt). This increase wasdriven primarily by China, where crudesteel output increased by around 3%to 717 Mt (2011: 695 Mt). In the rest ofthe world, crude steel output was fairlyflat at 833 Mt.Seaborne iron ore supplies weresubject to adverse weather conditionsin both Brazil and Australia in the firstquarter of 2012, and ongoing Indiansupply disruptions following the ban oniron ore mining in Goa. For the year asa whole, seaborne supplies were 0.3%higher, reaching a level of 1,062 Mt.Considerable price volatility marked2012, especially during the thirdquarter when prices fell by as much as36%, as Chinese steel mills depletedstockpiles and reduced raw materialinventory levels to as little as 17 days’worth of production requirements.Iron ore prices reached a high of$151/t (62% Fe CFR China) in April2012, but fell to a low of $89/t in earlySeptember, before stabilising ataround $130/t towards the end of theyear. The market recovered at theAnglo American plc Annual Report 2012 57