ANGLO AMERICAN PLC AMERICAN ANGLO ANNUAL REPORT 2017 ANNUAL REPORT 2017 REPORT ANNUAL BUILDING ON FIRM FOUNDATIONS DELIVERING A SUSTAINABLE FUTURE INTRODUCTION BUILDING ON FIRM FOUNDATIONS DELIVERING A SUSTAINABLE FUTURE In 2017, Anglo American’s centenary year, our relentless focus on driving cost and productivity efficiencies through the operations, and on continuing to upgrade the quality of our portfolio, resulted in a step-change in operational performance and profitability. Our ability to maintain strict capital discipline and drive down net debt has substantially restored our balance sheet. In 2018, we expect to continue strengthening the balance sheet to ensure sufficient flexibility through the cycle – with our focus on further improving operational performance and consistent cash flow generation. We will build on the firm foundations we have put in place – considering the appropriate balance between cash returns and value accretive growth options from within our substantial undeveloped mineral endowment. As we look forward to our next 100 years, we aim to lead in an industry that remains vital to the development of modern society. With our innovative approach to sustainability and the application of technologies to reduce the physical impacts of mining, our goal will be – as it always has been – to deliver value to all our stakeholders and continue to make a real and positive difference. ANNUAL REPORT 2017 BUILDING ON FIRM FOUNDATIONS FOR A SUSTAINABLE FUTURE 3 1 Throughout the Strategic Report we use a range 2 of financial and non-financial measures to assess our performance. A number of the financial measures, including underlying earnings, underlying EBIT, underlying EBITDA, underlying earnings per share, net debt, attributable return on capital employed (ROCE) and attributable free cash flow are not defined under IFRS, so they are termed ‘Alternative Cover images 2. Innovation – 3. People – Other sources of information Performance Measures’ (APMs). 1. Portfolio – At Mogalakwena At Venetia You can find this report and others, including the Los Bronces platinum mine in diamond mine in Sustainability Report and the Ore Reserves and Management uses these measures to monitor (50.1% owned) in South Africa’s arid South Africa are Mineral Resources Report, on our corporate website. the Group’s financial performance alongside IFRS the Chilean Andes Limpopo province, (left to right) process measures because they help illustrate the underlying is one of the world’s technical lead Dean plant monitors For more information, visit financial performance and position of the Group. great copper mines. Bothma inspects Aggy Majadibodu www.angloamerican.com/reporting We have defined and explained the purpose of each In collaboration fibre-optic sensing and Riaan Tlou and of these measures on pages 194 to 197, where we with prominent equipment, enabling ore processing provide more detail, including reconciliations to the specialists, we accurate, real-time superintendent Basis of reporting closest equivalent measure under IFRS. have developed a monitoring of Lindsey Miyen. The Anglo American plc Annual Report for the year ended climate-scenario mine water flows. Women make up 31 December 2017 is produced in compliance with UK regulations. These APMs should be considered in addition to, and model, which is Mogalakwena is a nearly 20% of the Additionally, and for the first time, we have compiled this report not as a substitute for, or as superior to, measures of being fed into a pioneer in using this Group’s workforce; using the Guiding Principles and Content Elements set out in the financial performance, financial position or cash flows life of mine plan type of distributed many roles formerly International Integrated Reporting Council’s <IR> Framework. reported in accordance with IFRS. APMs are not designed to make sensing technology, the preserve of men uniformly defined by all companies, including those the operation more which represents an are now undertaken Integrated Reporting aims to demonstrate how companies create in the Group’s industry. Accordingly, APMs may not climate-resilient. important step on by women. value sustainably over time, for a range of stakeholders – consistent be comparable with similarly titled measures and our journey towards with our own business approach and strategy. This report, therefore, disclosures by other companies. waterless mines. includes a comprehensive overview of our material matters, in the eyes of our stakeholders, and the impact they have on the value we ‘Tonnes’ are metric tons, ‘Mt’ denotes million tonnes, ‘kt’ create. More detailed information on our sustainability performance denotes thousand tonnes, ‘Mct’ denotes million carats is provided in our Sustainability Report. and ‘koz’ denotes thousand ounces; ‘$’ and ‘dollars’ denote US dollars and ‘cents’ denotes US cents. PERFORMANCE HIGHLIGHTS CONTENTS GROUP PERFORMANCE Strategic report reportStrategic ◊ UNDERLYING EBITDA OPERATING PROFIT 02 At a glance 04 Chairman’s statement 06 Our business model $8.8 bn $5.5 bn 08 Chief Executive’s statement 10 The purpose to reward journey 11 Marketplace review 2017 $8.8 bn 2017 $5.5 bn 14 Our material matters 2016 $6.1 bn 2016 $1.7 bn 16 Strategic element: Portfolio 20 Strategic element: Innovation 29 Strategic element: People 32 Capital allocation UNDERLYING EARNINGS PROFIT ATTRIBUTABLE 34 Key performance indicators PER SHARE◊ TO EQUITY SHAREHOLDERS 36 Group financial review 40 Managing risk effectively 46 De Beers 49 Copper $2.57 $3.2 bn 51 Platinum 54 Iron Ore and Manganese 2017 $2.57 2017 $3.2 bn 57 Coal 2016 $1.72 2016 $1.6 bn 60 Nickel 62 Corporate and other Governance NET DEBT◊ TOTAL DIVIDENDS PER SHARE 63 Chairman’s introduction 65 Directors 68 Executive management 70 The Board in 2017 $4.5 bn $1.02 78 Sustainability Committee 79 Nomination Committee 2017 $4.5 bn 2017 $1.02 80 Audit Committee 2016 $8.5 bn 2016 $0 84 Audit Committee report 88 Directors’ remuneration report 92 Remuneration Committee 93 Directors’ remuneration policy ATTRIBUTABLE FREE GROUP ATTRIBUTABLE 102 Annual report on Directors’ remuneration CASH FLOW◊ ROCE◊ 116 Statement of directors’ responsibilities 116 Responsibility statement Financial statements $4.9 bn 19% 118 Independent auditor’s report 122 Primary statements 126 Notes to the financial statements 2017 $4.9bn 2017 19% 181 Financial statements of the Parent Company 2016 $2.6 bn 2016 11% 184 Summary by operation 185 Key financial data 186 Exchange rates and commodity prices TOTAL RECORDABLE CASE Ore Reserves and Mineral Resources NUMBER OF FATALITIES FREQUENCY RATE (TRCFR) 188 Estimated Ore Reserves 190 Estimated Mineral Resources Other information 9 0.63 192 Glossary of terms 194 Alternative Performance Measures 2017 9 2017 0.63 198 Production statistics 201 Quarterly production statistics 2016 11 2016 0.71 202 Non-financial data 203 Directors’ report 206 Shareholder information IBC Other Anglo American publications Alternative Performance Measures Words with this symbol ◊ are defined in the Alternative Performance Measures section of the Annual Report on pages 194-197. Anglo American plc Annual Report 2017 01 STRATEGIC REPORT AT A GLANCE OUR BUSINESS AT A GLANCE Anglo American is a globally diversified mining DIAMONDS COPPER company with a portfolio of world class competitive DE BEERS COPPER mining operations and undeveloped resources. As we provide the raw materials on which the $1,435 million $1,508 million world’s developed and maturing economies Underlying EBITDA◊ Underlying EBITDA◊ depend, we do so in a way that not only generates 16% 17% Group EBITDA◊ Group EBITDA◊ sustainable returns for our shareholders but that 8 3 also strives to make a real and lasting contribution Mining assets(1) Mining assets(1) to society. 33.5 Mcts 2 Production Projects (100% basis)(2) Finland (Sakatti) Peru (Quellaveco) For more information See page 46 579.3 kt Production For more information See page 49 2 FINLAND CANADA UNITED KINGDOM 1 COLOMBIA SINGAPORE BOTSWANA ZIMBABWE PERU BRAZIL 2 1 1 2 5 3 NAMIBIA CHILE 2 3 6 6 AUSTRALIA 2 SOUTH AFRICA (1) Number of operating mining assets at 31 December 2017. Reflects the Eskom-tied thermal coal and Union (Platinum) disposals. De Beers’ mining assets include Orapa, Letlhakane and Damtshaa which are managed as one operation, the ‘Orapa regime’. Namdeb includes Northern Coastal Mines, Southern Coastal Mines and Orange River Mines. The Group’s 40% share in Samancor, classified as located in South Africa, is considered to be one asset within the portfolio. (2) With the exception of Gahcho Kué, which is on an attributable 51% basis. 02 Anglo American plc Annual Report 2017 Strategic reportStrategic PGMs BULK COMMODITIES AND OTHER MINERALS CORPORATE AND OTHER PLATINUM IRON ORE AND COAL NICKEL MANGANESE $866 million $2,357 million $2,868 million $81 million $(292) million Underlying EBITDA◊ Underlying EBITDA◊ Underlying EBITDA◊ Underlying EBITDA◊ Underlying EBITDA◊ 10% 27% 32% 1% (3)% Group EBITDA◊ Group EBITDA◊ Group EBITDA◊ Group EBITDA◊ Group EBITDA◊ 7 4 12 2 United Kingdom Mining assets(1) Mining assets(1) Mining assets(1) Mining assets(1) (Headquarters and Marketing), 2,397 koz 45.0 Mt 19.7 Mt 43.8 kt Australia, Production platinum Production iron ore – Production Production Kumba metallurgical – export Brazil, Chile, 1,557 koz For more information Singapore Production palladium 16.8 Mt (wet basis) 29.2 Mt See page 60 (Marketing hub), Production iron ore – Production South Africa For more information Minas-Rio thermal – export See