ANGLO AMERICAN plc ANNUAL REVIEW 2006 Annual Review 2006 Anglo American – a global leader in mining Anglo American: Our diversifi ed products are Delivering essential parts of modern life Anglo American is committed to operating in a profi table, our strategic goals sustainable and responsible way Contents Highlights of 2006 01 Chairman’s statement 02 Chief executive’s statement 04 Delivering on our strategy 08 One of the strongest pipelines in the industry 10 Driving operational excellence 12 Anglo American plc 20 Carlton House Terrace London SW1Y 5AN Financial review 14 16 England Operating review Executive Board 21 Meeting our wider responsibilities 22 Telephone +44 (0)20 7968 8888 The Board 24 Fax +44 (0)20 7968 8500 Delivering on Registered number 3564138 our strategy Summary directors’ report 26 www.angloamerican.co.uk Consolidated income statement 27 Summary consolidated 1 p08 balance sheet 28 Throughout this review, ‘$’ and ‘dollar’ Summary consolidated denote United States dollars. 2004, 2005 28 One of the strongest cash fl ow statement and 2006 fi gures are presented under Summary remuneration report 29 IFRS. Figures for the years 2002 and growth pipelines in Independent auditors’ statement 32 2003 are presented under UK GAAP. Key fi nancial data 33 the industry The 2006 Annual Review, the 2006 2 p10 Annual Report and the Notice of Annual General Meeting, together with the The business – an overview 34 Driving operational 36 shareholder information booklet, are Shareholder information available on the corporate website: excellence www.angloamerican.co.uk 3 p12 ANGLO AMERICAN plc ANNUAL REVIEW 2006 Annual Review 2006 Anglo American – a global leader in mining Anglo American: Our diversifi ed products are Delivering essential parts of modern life Anglo American is committed to operating in a profi table, our strategic goals sustainable and responsible way Contents Highlights of 2006 01 Chairman’s statement 02 Chief executive’s statement 04 Delivering on our strategy 08 One of the strongest pipelines in the industry 10 Driving operational excellence 12 Anglo American plc 20 Carlton House Terrace London SW1Y 5AN Financial review 14 16 England Operating review Executive Board 21 Meeting our wider responsibilities 22 Telephone +44 (0)20 7968 8888 The Board 24 Fax +44 (0)20 7968 8500 Delivering on Registered number 3564138 our strategy Summary directors’ report 26 www.angloamerican.co.uk Consolidated income statement 27 Summary consolidated 1 p08 balance sheet 28 Throughout this review, ‘$’ and ‘dollar’ Summary consolidated denote United States dollars. 2004, 2005 28 One of the strongest cash fl ow statement and 2006 fi gures are presented under Summary remuneration report 29 IFRS. Figures for the years 2002 and growth pipelines in Independent auditors’ statement 32 2003 are presented under UK GAAP. Key fi nancial data 33 the industry The 2006 Annual Review, the 2006 2 p10 Annual Report and the Notice of Annual General Meeting, together with the The business – an overview 34 Driving operational 36 shareholder information booklet, are Shareholder information available on the corporate website: excellence www.angloamerican.co.uk 3 p12 Highlights of 2006 UNDERLYING EARNINGS OPERATING PROFIT EBITDA COST SAVINGS AND EFFICIENCIES $5.5 bn $9.8 bn $12.2 bn $583 m Record underlying earnings of Operating profi t up 54% to $9.8 billion, Cash generation at a record level: Cost savings and effi ciencies of $5.5 billion, a 46% increase over 2005. with record production levels at ongoing EBITDA of $12.2 billion, up $3.2 billion. $583 million. operations for platinum group metals, zinc, nickel, coal and diamonds. UNDERLYING EARNINGS EBITDA By business unit $m By region % US$m 4,792 4,785 7,031 8,959 12,197 • Platinum 1,265 • Americas 41 • Diamonds 227 • South Africa 35 • Base Metals 2,647 • Europe 11 • Ferrous Metals and Industries 583 • Rest of the world 13 • Coal 640 • Industrial Minerals 266 • 274 Paper and Packaging 02* 03* 04 05 06 • Gold 178 UNDERLYING EARNINGS PER SHARE DIVIDENDS PER SHARE 33 67 US$ 1.25 1.20 1.87 2.58 3.73 US cents 1536 15 39 19 51 28 62 33 75 • Special • Final • Interim 02* 03* 04 05 06 02 03 04 05 06 *UK GAAP Throughout this review unless otherwise stated, operating profi t includes share of associates’ operating profi t (before share of associates’ tax and fi nance charges) and is before special items and remeasurements. See footnote 1 to the key fi nancial data for the basis of the calculation of underlying earnings. See footnote 2 to the key fi nancial data for the defi nition of EBITDA. Anglo American plc Annual Review 2006 | 01 ANGLO AMERICAN plc ANNUAL REVIEW 2006 CHAIRMAN’S STATEMENT ‘Another strong year for the Group with record profi ts and laying the foundation for signifi cant future growth.’ 2006 was another strong year for Anglo American. The Group returned record profi ts and laid the foundations for further growth. A number of major projects were initiated, adding to the strength of the pipeline and a $7.5 billion return of capital was announced in 2006, underlining the Group’s strong balance sheet Progress was made in delivering Tony Trahar has made a on our strategy of becoming a pivotal contribution to Anglo more focused mining group. American’s growth and A number of the steps required development at a crucial time to complete the restructuring in its history. Over the last involve complex regulatory seven years he has presided issues but I am confi dent that over a major streamlining of the these will be successfully Group’s interests, including managed and substantive through a signifi cant programme further progress made by the of acquisitions and disposals. middle of 2007. Moreover, through some shrewd acquisitions, organic growth An important development opportunities and improved will be the appointment of cost control, shareholder Cynthia Carroll, who will succeed returns have been signifi cantly Tony Trahar as chief executive improved. He leaves the on 1 March 2007. The Board Company in good health and was seeking a candidate with poised for a new phase in its experience in a capital intensive development. The Board industry with long investment is grateful to him for his horizons. It identifi ed three contribution over many years that the intensive training drive signifi cantly during 2006 critical factors: a track record of with the Group. undertaken at all management amongst policy makers and operational excellence and of and supervisory levels during the public. Business must growing a global business; an The fi rst three quarters of 2006 the year to embed the Anglo play its part in driving more ability to give new momentum saw a signifi cant improvement Safety Way will yield results effi cient energy use and in the to our work in transforming the in our safety performance in 2007. Some 20 sites have adoption of new technologies. culture of the Group, within South but the record once again undertaken safety peer reviews. However, this involves Africa and beyond; and an ability deteriorated in the fi nal quarter. The lessons emerging from substantial long term investment to work well with governments Despite the strong focus on these will be acted upon across and greater certainty about the and other stakeholders. Cynthia safety during the year only the Group. post Kyoto policy framework is Carroll met these criteria a small improvement in the urgently needed. admirably. She was the number of fatalities was Perceptions of the need for unanimous choice of the Board achieved and much remains a more energetic response In the interim, Anglo American after a very rigorous process. to be done. The Board expects to climate change grew is continuing to improve its 02 | Anglo American plc Annual Review 2006 See also Meeting our wider responsibilities p22 Financial review p14 The business p34 At a glance • The Group achieved record profi ts and laid the foundations for further growth • Progress was made in delivering on our strategy of becoming a more focused mining group • Cynthia Carroll appointed as successor to Tony Trahar • Evolving strategies to combat climate change – with major programmes in IN DETAIL South Africa and Chile – and Our performance implementation of our Socio- Economic Assessment Toolbox (SEAT) process, which has taken place at over 50 sites in 15 countries. Anglo American’s share price outperforms the FTSE 100 At an international level, we were during 2006 the fi rst private sector investor in the Investment Climate Anglo American vs FTSE 100 Facility for Africa, have played a 2006 (Indexed) leading role in the mining sector • Anglo American in the Extractive Industries • FTSE 100 130 Transparency Initiative and 120 participated in programmes 110 on business and development 100 through the International 90 Council on Mining & Metals and 31/12/05 31/12/06 the World Business Council for Sustainable Development. We see action to improve the Anglo American’s lost time and management of our impacts fatal injury frequency rates and to contribute to good governance as fundamental LTIFR and FIFR to our licence to operate and • LTIFR • FIFR access to resources. 2.5 0.04 2.0 Many commentators expect 0.03 1.5 to see some softening of 0.02 1.0 commodity prices, and 0.5 0.01 especially of base metals, in 0 0 2007 compared with the highs 00 01 0203 04 05 06 achieved in 2006. Nonetheless, prices are likely to continue to energy effi ciency with hundreds Australia’s diesel requirements be relatively high for the of site level initiatives. We have as well as a major investment immediate future, underpinned established two methane in carbon capture and storage. by demand from the BRIC capture and use projects in We are also participating in the economies and the anticipated ■ Australia which between them FutureGen project to achieve strength of the world economy.