Anglo American Annual Report 2012

Safety and environmentIn 2012, De Beers recorded threefatalities (2011: 7) and a lost-timeinjury frequency rate (LTIFR) of 0.13(2011: 0.15). Safety remains the firstpriority for De Beers and the companycontinues to drive improvement insafety performance through theongoing roll-out of a standardisedsafety management system that aimsto embed a safety culture across thebusiness. Following a slope failure andtragic loss of life at Jwaneng in June,pit operations were suspended fora period of seven weeks to allow fora comprehensive geotechnicalreview, ensuring that it was safe torecommence mining.MarketsDemand for diamond jewellery in thekey markets of the US, China andJapan grew, albeit at a slower pacethan in 2011. This, together with higherpolished stock levels, resulted in adecline in polished prices particularlyin the third quarter of the year.Although rough diamond pricesremained broadly stable in the firsthalf of 2012, a combination of weakerpolished prices, high levels of cuttingcentre stock and tightening liquidityin the mid-stream, resulted in a pricecorrection during the third quarter.By the end of 2012, rough diamondprices stabilised, reflecting a modestimprovement in consumer demandduring the holiday sales season in mostmajor diamond jewellery markets.Operating performanceMining and manufacturingDe Beers’ full-year productiondeclined by 11% to 27.9 millioncarats (2011: 31.3 million carats). Inlight of prevailing diamond markettrends, as well as operationalchallenges, the company’s statedstrategy of producing to demand hasbeen maintained. Operations continueto focus on maintenance and wastestripping backlogs, while a number offactors impacted production at specificsites. At Debswana, this included theJwaneng mine slope failure in June.DBCM saw lower grades from Venetiaand production was also impacted bythe disposal of Finsch in September2011. Canada’s Snap Lake showedsignificant improvement during 2012as work continues on optimising themine to enable economic access tothe promising, though challenging,orebody.Debmarine Namibia’s Grand Banksmining vessel was re-commissionedin 2012 and Namdeb’s Elizabeth Baymining area in Northern Bay wasbrought back into operation duringthe year.Element Six experienced a challengingyear, with weakness in a number of keyend-markets, particularly in the secondhalf of the year. In response, ElementSix focused on cost containment andimproved operational performanceand made significant progress on anumber of its strategic milestones,including improved customer serviceand innovation.SalesDe Beers’ total sales decreased to$6.1 billion (100% basis), primarilyas a result of diminished demand forrough diamonds, changing productrequirements from Sightholders andreduced availability of some goods.BrandsForevermark continued to growstrongly in 2012, particularly in the coremarkets of China, Japan, India and theUS, and was launched in South Africa,Canada and the UAE. It is now availablein more than 900 retail partners in12 markets. Since the launch ofForevermark, more than 500,000diamonds have been inscribed with aunique identification number showingthat they have met the brand’s highstandards of quality, ethical integrityand provenance.DBDJ faced the challenging marketconditions experienced by mosthigh-end jewellers in 2012, butcontinued to focus on expanding itsstore network in China, a market ofsignificant opportunity for high-endjewellery brands. New stores wereopened in Shanghai and Nanjing,giving DBDJ five stores in China, withan additional store scheduled to openin 2013. Franchise partners will openfurther stores in Kuala Lumpur, Bakuand Vancouver in 2013. DBDJ currentlyhas 43 stores in leading diamondconsumer markets around the world.OtherThe agreement entered into byDe Beers in the US in 2006 to settleall outstanding class actions against itbecame unconditional and effective inMay. The $295 million settlement, plusinterest, held in escrow since 2006 isnow being distributed in accordancewith the court ordered plan.De BeersDiamondJewellerscurrentlyhas 43 storesin leadingdiamondconsumermarketsaroundthe world.ProjectsIn Botswana, construction of theinfrastructure at Jwaneng’s Cut-8project is largely complete. Cut-8will provide access to approximately95 million carats of mainly high qualitydiamonds and extend the life of theworld’s richest diamond mine to atleast 2028.In South Africa, the Venetiaunderground project was approvedby the De Beers and Anglo AmericanBoards. Environmental authorisationwas granted in July and theEnvironmental Management Planwas approved by the Department ofMineral Resources in October. Thefinal outstanding regulatory clearanceswere obtained in February 2013 andthe project will commence shortly.De Beers will invest approximately$2 billion to build the new undergroundmine, which will extend the life of theresource until 2042 and replace theopen pit as South Africa’s largestdiamond mine.In Canada, the Environmental ImpactReview documentation for theGahcho Kué project has beensubmitted for review and the ReviewPanel is expected to issue a decisionreport in 2013.OutlookDe Beers expects moderate growthin diamond jewellery demand in 2013.This will be supported primarily by amore positive picture emerging fromChina and India compared to 2012.Some upside is possible in the US,while trading conditions in othermarkets are likely to be challenging.The rough diamond manufacturingsector closed 2012 with high levelsof inventory, particularly in thehigher-end categories of diamonds,and faces continued pressure in termsof liquidity. In the medium to longterm, industry fundamentals areexpected to strengthen as diamondproduction plateaus and demandcontinues to increase.Anglo American plc Annual Report 2012 85Operating and financial review