Anglo American Annual Report 2012

AMAPÁAmapá generated an underlyingoperating profit of $54 million,a decrease of $66 million on theprior year.Production increased significantly,in line with planned ramp up andalso due to higher mass recovery inthe beneficiation plant as a result ofthe plant’s improved stability. Theoperation is now at design productioncapacity. Higher sales were alsoachieved following fewer delaysassociated with transportable moisturelimits. Transhipment at Trinidad andTobago from smaller capacityHandymax to the larger capacityCapesize vessels for onward shipmentto the Middle and Far East wassuccessfully implemented in thesecond half of 2012.The favourable impact of improvedproduction and higher sales, however,was more than offset by a sharpdecrease in prices during 2012, thoughtight cost control and improvedoperating efficiencies, partlycompensated their effect. Underlyingoperating profit also benefited fromthe reversal of penalty provisions,which were in place at the end of 2011,as a result of contract renegotiations.Regrettably, one fatality occurredat Amapá iron ore system in Brazilduring 2012. The LTIFR hasimproved over the past six years,and encouragingly, the severity ofinjuries also continues to decline.On 4 January 2013, Anglo Americanannounced an agreement to sell its70% interest in Amapá to ZaminFerrous Ltd. The transaction is subjectto regulatory approval and is expectedto complete in 2013. We have alwaysmaintained that we did not envisageholding our interest in Amapá over thelong term and, in July 2012, reportedthat we had transferred responsibilityfor Amapá to our Other Mining andIndustrial business unit and stated thatwe were exploring the possibility ofdivesting our interest.Anglo American has transformed theoperational performance of Amapásince acquisition in 2008, increasingannual production from 1.2 Mt in 2008to 6.1 Mt in 2012.TARMACTarmac reported an underlyingoperating profit of $73 million,compared with a loss of $38 millionin 2011. Tarmac’s underlying EBITDAwas $148 million, 44% higher thanin 2011.Quarry materialsThe business’ profitability was athigher levels than last year, mainly asa result of the operation being treatedas ‘held for sale’ from the end of July2012, and the subsequent cessationof recorded depreciation. There hasbeen a decline in asphalt volumes, withfew major road schemes commencingin 2012 as a result of the UKgovernment’s austerity measures.Private-sector growth remainedmuted throughout the year, thuskeeping pressure on ready-mixconcrete prices and volumes, but wasoffset in part by the resilient centralLondon market. A continued focuson maximising the use of substitutefuel and recycled asphalt materialsis helping to mitigate the impact ofrising hydrocarbon costs and tosupport margins.On 7 January 2013, Anglo Americanand Lafarge announced thecompletion of their 50:50 joint venturewhich will combine their cement,aggregates, ready-mix concrete,asphalt and asphalt surfacing,maintenance services, and wasteservices businesses in the UK. Thejoint venture will be known as LafargeTarmac. Completion of the LafargeTarmac joint venture followed finalclearance from the UK CompetitionCommission, predicated on thecompleted sale of a portfolio of Tarmacand Lafarge construction materialsoperations in the UK, which alsooccurred on 7 January 2013.Building productsPerformance was affected bythe continued general economicdownturn, compounded by disruptionto building activity followingunseasonal wet weather duringthe summer months.The weak building products marketresulted in a highly competitivepricing environment affecting salesvolumes, although cost reductionprojects and improvements inoperating efficiencies are helpingto mitigate some of the impact.In early 2013,Anglo Americanand Lafargeannouncedthe completionof their 50:50joint venture.A number of initiatives continue to bedeveloped to ensure improved longerterm performance, but the short termremains difficult owing to the prevailingweak market conditions.SCAW METALSScaw Metals experienced a 32%increase in underlying operating profitto $49 million for the 11 months toend November 2012 compared withthe full year 2011, mainly as a resultof the company being treated as‘held for sale’ from 24 April 2012,and the subsequent cessation ofrecorded depreciation.Cast Products showed a markedimprovement, owing to firm demandacross all segments and a reductionin costs following the closure of aloss making foundry in the prior year.Grinding Media reported a decreasein underlying operating profit as aresult of lower demand from themining sector owing to industrialaction in the second half of 2012.This business is expected to recoveras mining operations revert to fullproduction. The performance ofWire Rod Products suffered as aconsequence of a decline in miningactivity, but nevertheless reportedstable earnings. Demand forconstruction products remainedweak, but in spite of this the RolledProducts business, through costcontainment measures andoperational improvements, wasable to minimise its losses.Total production of steel productswas 611,600 tonnes for the 11 monthsto end November 2012, a decreaseof 9.7% over the full year 2011.On 24 April 2012, Anglo Americanannounced the sale of its interestin Scaw South Africa to an investmentconsortium led by the IndustrialDevelopment Corporation ofSouth Africa and the Group’spartners in Scaw South Africa,being Izingwe Holdings (Pty)Limited, Shanduka Resources (Pty)Limited and the Southern PalaceGroup of Companies (Pty) Limited.On 23 November, the sale ofScaw South Africa and relatedcompanies completed for a totalconsideration of ZAR3.4 billion($440 million) on a cash- anddebt-free basis as announced.Operating and financial reviewAnglo American plc Annual Report 2012 89