Anglo American Annual Report 2012

OPERATING AND FINANCIAL REVIEW OTHER MINING AND INDUSTRIAL01 Phosphates stockpilein Cubatão.02 Processing plant andwater-treatment areaat Cubatão.FINANCIAL ANDOPERATIONAL OVERVIEWSafety and environmentIn 2012, no fatalities were recorded inPhosphates and Niobium, however theLTIFR increased to 0.39 (2011: 0.15).All 14 injuries were of low potentialseverity and most involved injury tohands and feet. The lessons learnedfrom the incident investigations arebeing used to improve riskassessment, promote safe behaviourand prevent unsafe operatingconditions.Water consumption was marginallyreduced as more water was re-used,particularly at the phosphate operations.While energy consumption decreasedyear on year, CO 2 emissions increaseddue to an alignment of conversionfactors with Group standards.MarketsPhosphatesFertiliser demand in Brazil rose around4% in 2012, reflecting the strongfundamentals of the Brazilianagricultural sector. Brazilian fertiliserconsumption has been growing fasterthan the global average and thisperformance is expected to continue infuture years, supported by favourableweather conditions, plentiful accessto water and the widespread use ofadvanced farming techniques byBrazilian farmers. Continued highprices of soybean and corn have alsoincentivised farmers to increase grainproduction through more intensivefertiliser application.This favourable market scenarioresulted in Phosphates reporting arecord fertiliser sales performanceof 1.2 Mt for the year.NiobiumGlobal steel mill activity was subduedin 2012, with producers reluctant toresume idle operations, replenishstocks, and to commit to furtherinvestment in their businesses. Despitethe challenging environment, however,increased production of HSSA in bothemerging and developed countries,ensured that niobium demandremained strong for the year.Operating performancePhosphatesDespite record fertiliser sales,underlying operating profit decreasedby 32% to $91 million, driven mainly byunfavourable international fertiliserBrazilianfertiliserconsumptionhas beengrowing fasterthan theglobal averageand thisperformanceis expected tocontinue infuture years.prices, coupled with increased labourcosts and general inflationarypressures. DCP sales were alsoadversely affected by difficulties in thecattle industry, which had a negativeimpact on the operating results.Phosphates production increased by5% to a record of 1.1 Mt, due to anumber of asset optimisation initiativeswhich improved overall performanceat Catalão and Cubatão.NiobiumNiobium generated an underlyingoperating profit of $81 million, a 56%increase over 2011. Sales volumes ofniobium rose by 15%, mainly due toan increase in production arising froma better performance at the tailingsplant and improvements in theconcentration process at the Boa Vistamine. Unit production costs declinedowing to lower aluminium and powerprices and more efficient use ofconsumables, combined with theimpact of higher production.ProjectsNiobiumThe Boa Vista Fresh Rock projectcontinued to make progress, withadditional capital expenditureapproved in June 2012. The existingplant will be adapted to process newrock instead of oxide ore, leading toan increase in production capacityto approximately 6,500 tonnes ofniobium per year (2012: 4,400 tonnes).OutlookPhosphatesStrong grain prices continue tosupport fertiliser demand, and fertiliserprices are expected to remain highduring 2013. The market expectsfarmers to expand the area given overto agriculture, as the current ratiobetween fertiliser and grain pricesremains positive.In addition, the high level of cornprices will be a motivating factor foran aggressive ‘mini crop’ (a smallersecondary crop, mainly corn, grownin the first half of the year) in the firstquarter of 2013.NiobiumDemand is expected to remainsubdued in Europe and in PacificRim/East Asian countries, such asJapan, South Korea and, to a lesserdegree, China.Production is expected to declinein 2013, owing to lower grades andrecoveries as lower quality ore isextracted from Boa Vista mine as itapproaches the end of the weatheredore and encounters lower gradesand higher contaminants. Tailingsproduction is also expected todecrease as a result of lowerniobium grades contained in thephosphate tailings.010288 Anglo American plc Annual Report 2012