Anglo American Annual Report 2012

over 2011 and was attributable tovisible and proactive leadershipand accountability at all levels, afocus on contractor management,and a reduction in the number ofrisks associated with vehiclesand machinery.MarketsAnglo Americanweighted averageachieved salesprices ($/tonne) 2012 2011Exportmetallurgical coal 178 251(FOB)Export thermal coal(FOB)96 101Domesticthermal coal 37 35Export metallurgical coal productionincreased by 24% to 17.7 Mt, withrecord production in the second half,and the full year, while thermal coalproduction was in line with the prioryear at 13.0 Mt. Production improvedat both underground and open cutoperations by 29% and 22%respectively, with record run of mineproduction achieved at all of theexport open cut operations. Increasedproduction was driven by assetoptimisation programmes and areduction in rain-related stoppages,supported by rain mitigation initiativesimplemented during 2011.Record coal production wasachieved at the Capcoal open cutmine, with a 28% increase over theprior year, driven by best in classrates on large capacity shovels andoptimal alignment of equipment topit conditions.Dawson delivered a notableturnaround in performance with totalproduction increasing by 18% to arecord of 4.6 Mt. This was due toimproved equipment performance andthe optimisation of the terrace minedesign that was implemented in 2012.Peace River Coal in Canadasignificantly lifted its coal productionby 47%, underpinned by productivityimprovements and upgrades to thecoal handling and preparation plant.At the underground operations inAustralia, production increased by29%, driven by improved longwallperformance. Moranbah delivered a45% increase in volumes as a result ofa recovery from the partial drift failureand a 47% increase in cutting hours inthe second half of the year comparedto the first half.Thermal coal production was impactedby wet weather in New South Walesand industrial action in the first quarterat Drayton.ProjectsPhase 1 of our wholly ownedGrosvenor project continues tobe developed on schedule. All keypermits and licences are in placeand engineering and procurementactivities are progressing to plan.Construction has commenced on site,with the access road complete andbulk earthworks well under way.Production of longwall coal is forecastto commence in 2016.Record coalproductionwas achievedat the Capcoalopen cut mine,with a 28%increase overthe prior year.Studies for the next phase of ourinvestment programme includeGrosvenor Phase 2, a 6 Mtpa secondlongwall; and Moranbah South,a 12 Mtpa (on a 100% basis),50%-owned joint venture, comprisingtwo longwalls. Exploration andenvironmental approval activities tosupport these projects are in progress.Concept studies are also under wayto develop options to further expandour operations in Australia and BritishColumbia. The Drayton South projectis planned to replace export thermalcapacity for the Drayton mine inNew South Wales.OutlookStrong production from Australiacombined with exports from the USled to oversupply into the weakenedmarket during 2012, resulting insubstantially lower spot and monthlysettlement prices in the third andfourth quarters. It is anticipated thatthere will be a rebalancing of themarket during the first half of 2013,with demand recovery from Chinaand idling of some high cost USand Australian production. Pricedifferentiation between premium andlower quality products is expected toremain, with continued supply ofsecond tier products from the US.Metallurgical Coal is positioned totake advantage of any future coalprice increases as a result of thefocus on delivering high margin,low cost capacity, and thedemonstrated benefits of assetoptimisation initiatives.Operating and financial reviewAttributablesales volumes(’000 tonnes) 2012 2011Exportmetallurgical coal17,413 13,983Export thermal coal 6,043 6,274Domesticthermal coal 6,921 7,455Prices for seaborne metallurgical coaldropped sharply in the latter half of theyear, resulting in the average 2012 hardcoking coal price falling by 27% to$210/t from the 2011 average hardcoking coal benchmark price of$289/t. Overall supply of metallurgicalcoal was ahead of 2011 levels, owing toincreased exports from the US, whileAustralian hard coking coal supplyremained below 2010 levels.Hard coking coal prices fell, withlower quality PCI and semi-soft pricesfalling more significantly. The majorityof Anglo American’s metallurgicalcoal sales were placed against termcontracts with quarterly negotiatedprice settlements.Hard coking coal accounted for67% of Metallurgical Coal’s exportmetallurgical coal sales in 2012.Operating performanceAttributableproduction(’000 tonnes) 2012 2011Export17,664 14,190metallurgical coalExport thermal6,046 6,064coalDomestic thermal6,925 7,362coalAnglo American plc Annual Report 2012 63