Anglo American Annual Report 2012

Leading nickel consumers(2012 estimated refined nickel consumption)2012 estimated world total: 1,700 ktktChinaEuropeJapanN. America144South Korea79India66South Africa22163Rest of World58Taiwan57404Source: Brook Hunt – a Wood Mackenzie company705export ban imposed by the Venezuelangovernment from the beginning ofJune, resulting in the cessation ofproduction in September. Theunderlying operating result for BarroAlto was capitalised throughout 2012.Safety and environmentRegrettably, a fatal incident occurredat the Barro Alto mine, ending Nickel’srecord five year fatality-free period.The incident has sparked renewedefforts to prevent further harm.The business’ lost-time injuryfrequency rate (LTIFR) improved by52% to 0.11 (2011: 0.23).MarketsAverage nickel price(c/lb) 2012 2011Average marketprice (LME, cash) 794 1,035Average realisedprice (c/lb) 765 1,015Despite LME nickel pricestrengthening at the start of 2012, withthe nickel price reaching 983 c/lb atthe end of January, prices droppedto a low of 689 c/lb in August owingto the worsening macroeconomicenvironment which affected stainlesssteel production and nickel demand.The nickel market recorded a surplusof 50,000 tonnes for the yearcompared with a surplus of 32,000tonnes in 2011. Nickel consumptionincreased by 4.9% to 1.7 million tonnes(Mt), but supply also rose following theramping up of a number of new nickelplants. The growth in supply was lowerthan expected as a result of problemsat many new operations.Operating performanceAttributableproduction(tonnes) 2012 2011Nickel 39,300 29,100Nickel production increased by 35%to 39,300 tonnes, with the increasingproduction profile from Barro Altooffsetting the lower output fromLoma de Níquel.Barro Alto, which produced its firstmetal in March 2011, delivered around21,600 tonnes of nickel in 2012.Production and the ramp up scheduleat the new operation was, however,affected by three major stoppagesduring the year in order to address kilnperformance issues and to rebuild thesidewalls in line 1’s electric furnace,following a partial collapse.Since the end of the final stoppage,with the furnace returning to atemperature which can support normaloperations in mid-December, line 1has achieved a feed rate averaging85% of nominal capacity.As a preventative measure, line 2’selectric furnace sidewalls are now alsobeing rebuilt and following this, theoperation is expected to completeits ramp up to nominal capacity.Issues in the furnace hearths werediscovered during the year. Thesituation is being closely monitoredby the operation, together with thesupplier, and since discovery hasnot worsened. With continued closemonitoring this is not expected to alterthe ability to reach nominal capacity.Barro Alto,which producedits first metalin March 2011,deliveredaround 21,600tonnes of nickelin 2012.Production from Loma de Níqueltotalled 8,100 tonnes in the year, 40%lower than 2011, as a result of thecessation of operations, exacerbatedby the extended export ban.Codemin’s production was stable ataround 9,600 tonnes, with a decline ingrade being offset by a series of assetoptimisation initiatives.ProjectsThe unapproved projects in thepipeline at Jacaré and Morro SemBoné have the potential to significantlyincrease the Group’s total nickelproduction. The pre-feasibility studyof Jacaré was completed in the yearand we will focus on obtainingenvironmental licences during 2013.OutlookProduction in 2013 is expected to behigher than 2012 as the increasingcontribution from Barro Alto more thanoffsets the loss of Loma de Níquel.Barro Alto is targeting to reach fullcapacity during 2013.Both demand and supply are expectedto increase further in 2013 and asurplus of 13,000 tonnes is forecast.The market is expected to remainrelatively challenging owing to theprevailing macroeconomicenvironment and ramp up of newnickel supply, including NPI – thoughany further underachievement interms of the ramping up of new nickelsupply could provide some upside tocurrent forecasts.Operating and financial reviewAnglo American plc Annual Report 2012 75