Anglo American Annual Report 2012

(1)Throughout theMetallurgical Coalcommentary,all volumes are expressedon an attributable basis.(2)CRU Metallurgical CoalMarket Report(February 2013)(3)Customs Information(Global TradeInformation ServicesInc.)BUSINESS OVERVIEWAnglo American is Australia’s secondlargest metallurgical coal producerand third largest global exporter ofmetallurgical coal. (1)Its coal operations in Australia arebased on the east coast, from wherethe business serves a range ofcustomers throughout Asia and theIndian sub-continent, Europe andSouth America. Our operation inCanada, Peace River Coal, mainlyserves customers in Europe, Japanand South America.Metallurgical Coal operates six minesin Australia and one metallurgical coalmine, Peace River Coal, in BritishColombia, Canada. In Australia thereis one wholly owned mine, and five inwhich Metallurgical Coal has a majorityinterest. Five of the mines are locatedin Queensland’s Bowen Basin:Moranbah North (metallurgical coal),Capcoal (metallurgical and thermalcoal), Foxleigh (metallurgical coal),Dawson (metallurgical and thermalcoal) and Callide (thermal coal).Drayton mine (thermal coal) is in theHunter Valley, New South Wales. Allof the mines are in well-establishedlocations and have direct access torail and port facilities at Dalrymple Bayand Gladstone in Queensland andNewcastle in New South Wales.Moranbah North (88%) is anunderground longwall miningoperation with a mining leasecovering 100 km 2 . Coal is minedfrom the Goonyella Middle Seam,approximately 200 metres below thesurface. The mine’s annual capacityis 4.5 million tonnes (Mt) of hardcoking coal for steel manufacturing.Capcoal (70%) operates twounderground mines and an opencut mine. Together, they producedaround 6.0 Mt of hard coking,pulverised coal injection (PCI) andthermal coals in 2012.Dawson (51%) is an open cutoperation, with production of 4.6 Mtof coking and thermal coal in 2012.Foxleigh (70%) is an open cutoperation which produced 1.9 Mtof high quality PCI coal in 2012.Peace River Coal (100%) is an opencut operation in Canada, with an outputof 1.4 Mt of metallurgical coal in 2012,an increase of 47% over the prior year.Metallurgical Coal owns an effective23% interest in the Jellinbah andLake Vermont mines in Queensland,producing 2.1 Mt of coking, PCI andthermal coals in 2012.Anglo American has agreed to acquirea 58.9% interest in the Revuboèmetallurgical coal project inMozambique from the Talbot Estatefor a total cash consideration ofA$540 million (approximatelyUS$555 million). The Revuboè projectis an incorporated joint venture andincludes Nippon Steel Corporation(33.3% interest) and POSCO (7.8%interest). Revuboè comprises hardcoking and thermal coal suitable foropen cut mining, with the potentialto support the export of 6 to 9 milliontonnes per annum (Mpta) on a100% basis.The transaction remains subject toa number of conditions and is in linewith Anglo American’s strategiccommitment to grow the globalmetallurgical coal business to supplyour customers from each of the keymetallurgical coal supply regions ofAustralia, Canada and Mozambique.Metallurgical Coal’s resource base,consisting of Measured, Indicated andInferred (in LOM) Resources additionalto Coal Reserves, totals 3.8 billiontonnes on a 100% basis (2.7 billiontonnes on an attributable basis).Details of Metallurgical CoalResources appear in the CoalReserves and Resources section ofthe Annual Report, pages 200–203.INDUSTRY OVERVIEWMetallurgical coal, composed ofcoking coal and PCI coal, is anessential raw material in blast-furnacesteel production, which representsapproximately 70% of global crudesteel output.Global metallurgical coal supplyamounts to approximately 1 billiontonnes per year. China is the biggestconsumer of metallurgical coal, withtotal consumption of approximately730 Mt (2) in 2012. Owing to its largedomestic metallurgical coalproduction, China only needs toimport about 7%, or 50 Mt (3) , of its totalmetallurgical coal requirement. This,however, represents a significantportion (20%) of the total globalseaborne metallurgical coal market.Metallurgicalcoal, composedof coking coaland PCI coal,is an essentialraw materialin blast-furnacesteel production.ORGANISINGCAPCOALOPEN CUT –AUSTRALIANMINE OFTHE YEARMetallurgical Coal’s CapcoalOpen Cut operation won theMining Prospect Award’sAustralian Mine of the YearAward in 2012 owing to safetyimprovements, increasedthroughput at the coal handlingand preparation plant (CHPP) andproduction milestones deliveredover an 18 month period.The site experienced a real stepchange in safety, with the totalrecordable case frequency ratedecreasing by 75% since 2010and the electrical maintenanceworkshop achieving 22 years’lost-time injury free in July 2012.The site experienced the benefitsof an upgrade to the CHPP, whichincreased capacity at the plantwith the installation of a new 5 Mtcapacity module. In June 2012,the CHPP achieved record feedtonnes with 1.4 Mt of coalprocessed through the plant inthe month.The introduction of a new ropeshovel at Capcoal has allowedthe site to take advantage ofdouble sided loading. In thefirst half of 2012, the mineexperienced record metallurgicalcoal production, delivering itshighest first half of the year runof mine tonnes at 3.3 Mt, a 28%improvement on the previousbest half production.ImageMetallurgical Coal’s Capcoal open cut minein Queensland.Operating and financial reviewAnglo American plc Annual Report 2012 61