Anglo American plc

Okay well good morning everyone and welcome to our half year results and as some of you know by now over the years my tradition is to kick off the full year results I don't normally come at half year but there are a couple of reasons why I wanted to introduce today and I'll come back to those but as ever let's start with safety and I must say how delighted I am and all of the board are I know this will continue to be at the top of mind of Duncan and his team as he moves on and as he takes over indeed the helm at Anglo Tech in due course. I'm also very pleased, as I hope you are, with the solid performance of the current business and the benefits of our major portfolio restructuring, which is starting to come through in the numbers. Returning now, why do I want to introduce this session, albeit briefly? Two reasons really. Firstly, if things go to plan, which I'm pretty confident they will, the close of Anglo-Americans merger with tech to form Anglo-Tech will happen. And this could mean, therefore, if the timing is as we expect, that it will indeed be my last chance to introduce. So that's one reason. The second reason is I did want to say just a couple of things about Anglo-Tech. and you know an enormously exciting endeavor which is going to bring you know really strong benefits to all of our respective shareholders and eventually collective ones and all of our wider stakeholder groups. I have spent nine years as chair at Anglo and I will be handing over that baton to my oppo at tech, Sheila Murray, and on the closure of merger of course, not before, but I'd like to say just a couple of things about Duncan, our CEO, who will become CEO of AngloTech. Now in him we have a CEO which I can tell you is utterly determined to deliver all that he has laid out for us and will set out to deliver over the next several years and indeed delivering on all of the cost and the industrial synergies which we have already announced to you. Post closure I'll be watching from the sidelines as he does that and I will of course He'll be ably supported by John as the CFO and Jonathan Price who will join the, as previously announced, Duncan's executive team. That's all from me. Thank you very much for your continued interest in all that Anglo American is doing. Let me now hand over to Duncan and then John to take us through the results today. Duncan.

Thank you Stuart. I am indeed very determined to deliver this. All right good morning everybody for those that I haven't seen outside. It does of course continue to be a very busy time here at Anglo American and I think the overall headline is that we have made yet more progress on our operational, our financial and our strategic plans over the last six months. We delivered another period of solid operational stability and that translated into operating results being on plan across the business despite a number of external challenges particularly related to weather. Market conditions were pretty tough in diamonds but De Beers delivered a very robust operational performance and our steel making coal business continues to make great progress with higher production rates now bedding in at Moranbah. We also made progress on two of the lowest capital intensity copper opportunities of scale in the industry and we received final approvals for the Los Bronces and Dino joint mine plan and have now advanced early stage preparatory work for the integration of Coyowati and Quebrada Blanca. In terms of our strategic plans, we took a big step forward on the outstanding portfolio work with the announcement of the sale of our steelmaking coal business to Dilmar for up to $3.9 billion. We continue to pursue the sale of De Beers and I'll come back to that a little bit later on in the presentation. The planning for our merger with tech has been moving ahead well in parallel and once we receive our final approvals the two companies will come together to become a strong global mining champion with a compelling set of lower cost long life copper assets alongside high quality iron ore and zinc. This will be accompanied with a track record and the resources to grow the supply of the metals and the minerals that the world is counting on for decades ahead, led of course by copper. Now safety remains the foundation of absolutely everything that we do at Anglo American. While our injury frequency rates have stayed at record lows, I believe that there is still room to bring them down further by focusing our activities on planning, Thank you very much. Turning to sustainability, we launched our updated sustainability strategy and targets for the simplified portfolio in February of this year and we're now embedding that strategy and the businesses are making good progress to delivery against their plans. We are beginning to start to see now the benefits of a model that balances group level ambition and direction with locally relevant targets tailored to the priorities of each of our underlying businesses. This approach allows us to deliver consistent outcomes at scale while creating value and driving tangible impact and value on the ground in our countries of operation. We are now three years on from moving the accountability of our assets performance closer to the site and the evolution of that operating model is an important driver in consistently achieving our production targets. We also kept costs under control despite inflationary pressures stemming from the knock-on impacts of events in the Middle East and John's going to unpack those costs for us just a little bit later on today. The copper business produced 344,000 tons in the first half and we're bang on track for our full year guidance of 700 to 760,000 tons with higher volumes half and half to come from both Koyawase and Kiwako. Los Bronces was a real highlight for us. The restart of that second plant has added profitable tons and the mine is gaining more flexibility with each quarter. In May, the permit for the desalination plant at Kwewasi was set aside by an environmental tribunal five years after it had been granted. Production, however, from Kwewasi has not been affected because we do currently have access to alternative water sources. We are hopeful that a review of the Environmental Assessment Services or the SEA's decision will allow us to restart the ramp up of that plant later on this year. We do continue to work very hard with the Chilean authorities to make that happen. Still at Coyahuasi, the team is managing the variability as we transition through the lower grade and oxidized stockpiles and indeed the recoveries have improved in the second quarter of the year. The mine is on course to access the fresh ore from the fourth quarter which will be an inflection point after two years of limited flexibility. Now next year the mine plan is characterized by much higher grade benches but also some more complex faulting that we will need to navigate. But the mine has worked through this many times before and we remain confident in our 27 and our 28 copper guidance. Beyond that, this oil body has so much potential and I'm going to come back to that a little bit later on in the presentation. Kiweco remains the leading contributor of cash flow to the group and it is great news to be able to report that we have now paid back the initial investment that we made in building that mine. They had another very strong quarter, recoveries have picked up well and we've also benefited from very healthy by-product revenues there. Our iron ore business posted another period of steady performance despite some big challenges with higher costs from both diesel and freight. Performance at Coomber was notable insofar as it had to manage through some of the highest rainfalls that both the mines, Sishen and Colamella, have seen in decades. And they suffered that over April and May. Over in Brazil, Ministrio continues to have some of the highest productivity rates that we have in the group. Now one of the management team's main priorities since the start of this year has been working with tech on planning the integration for our merger. We are cracking on at pace here with all of that integration work and there is a lot of work to do as you can imagine. We're particularly focused on getting the business position to stand up on its own on day one post closing and getting ready for the two new listings in New York and Toronto and all of those associated regulatory processes. We set up an integration management office very early on, essentially a team of senior leaders from both companies that can work closely with me to drive the planning and the state of the readiness forward. They have done an excellent job so far and we still have plenty to do of course, but I'm very confident now that we will hit the ground running on day one. As the combined portfolio comes together, we will be ready to realise the material value and the synergies that we have identified, and I am clear that all of the assets can play a meaningful role in doing that. As far as the future growth path is concerned, we will get into that once we have full visibility of all of the information of both companies post completion. Clearly, that's not possible to do currently given the antitrust and gun jumping rules. So in terms of what that means for market disclosure going forward, we'll start out with the details of the essential architecture that we need to manage the business from day one, and then get through the more detailed planning that is enabled by full integration. So the initial disclosure will likely cover organizational structure, the group's key financial policies and accounting, as well as the disclosure frameworks. We will then update the market in the ordinary course thereafter and continue to evolve as we have more information. On the timing of completion, the final regulatory approval we need is, of course, as everybody knows, from China's State Administration for Market Regulation, or SAMR. And we've been continuously engaging with them and cooperating with them over the last six months. We are of the view that the formation of Anglo-Tech can only be positive for increasing global copper supply, and it is therefore also a positive for our customers. We believe that we will be on track to complete later this year or early next as we announced at the outset of the merger. I am conscious that many of you are going to have loads of questions related to the detail of these interactions and what that might mean but as I'm sure you can appreciate this is a confidential process and a really important one and we don't want to misstep anything in the way to getting these final approvals so I'm afraid I'm really not going to be commenting anymore on that at this stage. As I mentioned, we have moved forward on the portfolio transformation. The sale of our steelmaking coal business to Dilmar for up to $3.9 billion was an excellent outcome from a highly competitive process that gives us both cash upfront and the ability to participate in price upside over the coming years. We are working towards satisfying all of the closing conditions and targeting close by Q1 of next year. On nickel, we are continuing to work through the EU antitrust process on the proposed sale to MMG for up to $500 million. This has taken a lot longer than we had anticipated but we now have some positive momentum following that protracted delay. and we believe that there are no market supply issues that arise from this transaction and supply has increased and diversified in fact further since we agreed this deal and so we are optimistic now that we will receive this final regulatory approval and complete in the coming months. Now that takes me on to the last leg of our portfolio transformation which is the sale of De Beers. Now the team there has been working incredibly hard in a terribly complex environment over the last few years to achieve a responsible separation of that business and I am pleased to say that things are advancing. That said we are now in the final phases of our process and that also is the most challenging phase of our process given the number of parties that we need to take along to the final point and get signing of the final agreements. Our focus remains on bringing this process to a conclusion within an acceptable terms during the second half of this year and with that I'll now hand over to John who'll take us through the financial results.

Thank you Duncan and good morning everyone. I'm once again pleased with the financial performance for the first half of the year. We remain on track to deliver our annual production guidance, we've managed costs well in what's been an inflationary environment and we've further strengthened the balance sheet. As we continue to progress through our portfolio transformation the financial reporting of course remains complex. As we've done at our recent results on this first slide, I've set out as simply as possible the basis on which our numbers are presented. As a reminder, our continuing operations include both the simplified Anglo-American portfolio and De Beers. Our discontinued operations include steelmaking coal and nickel. Our simplified portfolio focused on copper and premium iron ore delivered EBITDA of $4.1 billion, an EBITDA margin of 46% and underlying earnings of $1 billion, all showing significant improvement on prior year, driven by favourable commodity prices and good cost control. De Beers incurred a marginal EBITDA loss of 0.1 billion dollars reflecting the continued challenging market conditions mitigated by our restructuring actions. Discontinued operations reported a loss during the period mainly due to lower volumes at SMC as a result of poor weather and the ramp up of Morneby North which is now again operating at normal levels. Combining continuing and discontinued operations the group delivered total earnings per share and a dividend of 23 cents per share in line with our 40% payout policy. Net debt has continued to decrease ending the period at 8.2 billion dollars down from 8.6 at the end of December last year although that does reflect some favourable timing which I'll come back to later. I'll take you through each of these items now in a little bit more detail. Starting with the simplified portfolio. Our basket price was up 22% reflecting significant increases in copper partly offset by small reductions in iron ore. Iron ore price realisations were impacted by the diversion of Middle East bound product to other markets due to the Iran conflict and rising freight costs on an FOB basis. Production increased 1%, as Duncan mentioned, with slightly higher copper offset by lower iron ore. The higher prices supported a 22% increase in revenue and a 31% increase in EBITDA to $4.1 billion, with around 70% of this EBITDA being driven by copper. The tax rate in the simplified portfolio was 40%, slightly lower than last year, due to the relative mix of profits and reduced impact from loss-making businesses following our restructuring programme. This all resulted in a 60% increase in underlying earnings to $1 billion and return on capital employed improved by 4 percentage points to 19%. It's pleasing to see these higher margins and higher return on capital materialise as that was exactly the basis of our portfolio restructuring. Turning now to costs where we've got quite a lot to unpack with actual costs increasing due to macro factors and volume while copper unit costs reduced significantly due to by-product credits. Starting with total operating costs for the simplified portfolio you can see here total costs increased by 0.6 billion dollars to 4.8 with the most significant factors being fx cpi and fuel there were then a number of smaller impacts including freight as well as movements in peru related to the rehabilitation provision and employee profit share provision Finally, the restart of the Los Bronces plant and the return to higher activity at Manganese had an associated impact on costs. But of course, both of those were EBITDA positive. Moving on to unit costs, we saw a gross 13% increase. However, that is before the impact of by-product credits and TCRCs. The combined effect of which was a credit of 0.6 billion dollars compared to 0.3 last year with all of that benefit in copper. The 0.6 billion credit is roughly evenly split between Chile and Peru and is driven by molybdenum and silver. Given the scale of the relative cost bases with Peru gross unit cost being about half that of Chile this meant that the credits had a much more material impact on Peru than Chile. Copper unit costs with the credit benefit therefore reduced by 12% from 155 cents to 136 with copper Peru at 45 cents and Chile at 206. Iron ore unit costs increased by 17% to $41 per tonne reflecting the underlying cost position that I've just described with most of the FX impact being related to iron ore. This left total net unit costs up 4% versus last year. Bring everything together now in the EBITDA reconciliation for the simplified portfolio. As you can see, the vast majority of the increase from $3.1 to $4.1 billion is due to macro factors. Our favourable basket price driven by copper and by-product credits resulted in a $1.2 billion price benefit, partly offset by FX on the South African Rand and Brazilian Real, as well as CPI to take EBITDA before controllables to $4 billion. Moving on to the controllables, sales volumes were slightly lower, mainly reflecting timing of shipments in copper. The lost bronzes and manganese cost impacts from the plant restart and increased manganese activity respectively totaled £0.2 billion and are spread across each of volume, cost and the other category. These and the other incremental costs I described previously are then offset by the final corporate cost savings, lower TCRCs and manganese volume to leave this controllable side of the chart a small net positive in the first half of the year taking EBITDA to $4.1 billion. Moving now to our exiting businesses and starting with an update on the actions we're taking at De Beers. The diamond market continues to face both cyclical and structural challenges but we have taken and continue to take proactive action to preserve value and reduce the net impact to the group. This is evident in the results which show an EBITDA loss of 0.1 billion dollars compared to 0.2 last year even as prices have moved lower. This reflects the impact of cost savings but more materially a lower cost inventory base as recent purchases have been at lower prices. Although the losses have been stemmed we're not resting and restructuring action continues while ensuring that we retain upside optionality as markets recover. The most significant action is at Venetia where production will be paused for around two years and capital expenditure on the underground project will be re-phased. This protects near-term cash flow and will allow us to reduce capex in 2026 by $300 million, while preserving the long-term value and future production potential of the asset. Phoenicia was also contributing loss-making carrots in the first half, so pausing this production will also assist forward profitability. Alongside this, De Beers is reshaping its corporate structure, simplifying the organisation and reducing the central cost base. This builds on the progress already made to remove overhead costs and improve efficiency across the business. Overall, these actions demonstrate a clear emphasis on cash preservation, cost reduction and value protection, while also setting the business up for a successful divestment. Briefly now on discontinued operations. EBITDA was a loss of 0.2 billion reflecting principally driven by steelmaking coal while nickel was broadly breakeven. I'm pleased with the operational progress at steelmaking coal with Moranby as I said having a successful ramp up and now effectively back at normal operating levels. The equity shareholder's loss of $1.2 billion reflects the underlying earnings plus a $0.9 billion impairment of SMC to reflect the terms of the Dilmar transaction. Applying a consensus based annual pricing to a DCF calculation doesn't attribute any value to the price link consideration when in reality of course we would expect there to be option value from price volatility with payments being calculated on a quarterly basis for five years. Meanwhile we've initiated arbitration proceedings against Peabody in respect to the previous transaction which is ongoing. Capital expenditure reduced to $0.1 billion, primarily reflecting the removal of PGMs from the portfolio. And the net debt impact was a $0.2 billion outflow, including the cash received from the steelmaking coal deposit from Delmar. Looking at capital expenditure, we've maintained a disciplined approach, with CapEx and continuing operations decreasing by 6% to $1.5 billion. This reduction was driven primarily by lower sustaining capital expenditure as the Ministerial Filtration Plant completed and the Colawassee Desalination Plant approached completion. We do expect higher capital expenditure in the second half but we've made some cost efficiency gains which I'll touch on in the guidance section shortly. Growth capex increased modestly year on year reflecting investment in a small number of projects including the first phase of the Koiwasi de-bottlenecking initiative and Coomba's UHDMS project along with Woodsmith. Moving now to cash generation which as always remained a priority during the period. EBITDA of $4 billion translated into $3.5 billion of cash flow from operations. Working capital remain flat with the adverse impact of rising prices largely offset by a number of timing benefits across multiple categories including receivables, payables and marketing activities. I wouldn't expect all of these timing benefits to endure and therefore anticipate an increase in working capital through the second half. The £0.3 billion outflow from other operating cash flows is primarily due to timing of market derivative settlements which offset in EBITDA and working capital. Cash tax and interest payments distributions to minorities and sustaining capex totaling $2.3 billion resulted in a £1.2 billion of sustaining attributable free cash flow up around 90% compared to last year. Similar to working capital where we will see some increase in the second half, both cash tax payments and distributions to minorities were lower than the income statement charges and this will reverse to an extent in the coming periods. Nonetheless, it is pleasing to see the business continue to generate increased cash flows. Looking at net debt, we've seen a further reduction to $8.2 billion. The $1.2 billion of sustaining attributable free cash flow during the half was more than sufficient to fund growth capex of 0.4, the dividends paid to Anglo-American shareholders and the outflows from discontinued operations. And I'm pleased that our net debt to EBITDA ratio is now at one times while the group continues to maintain a strong liquidity position. Looking ahead now for the balance of the year the business remains in a strong position with all operations and controllable costs trending as planned. The only change to unit cost guidance relates to a reduction in copper unit costs which is a reflection of the by-product credits which I described earlier. As I noted in February, our original guidance was conservative on by-product pricing and foreign exchange, given we were in the very early stages of the Middle East conflict and the associated macro uncertainty. In Peru, with updated full year guidance of 65 cents compared with the first half of 45, we continue to be somewhat conservative on pricing of molly and silver relative to current spots, reflecting the sensitivity of unit costs to the size of the credits in Peru as I described earlier. In Chile, where the size of the cost base means their unit costs are less sensitive to those credits, we've guided full year at 210 cents compared to 206 in the first half. In iron ore, we've kept cost guidance the same for the second half, however we would note that these businesses are more susceptible to oil price movements and do not benefit from the by-product credits in the same way as copper. As you will see in our usual sensitivity analysis, which is in the appendix, for every 10% move in oil prices, we would expect a 43 million impact to six month group EBITDA. Moving on to CAPEX, our projects team is continuing to deliver optimised outcomes and the work on both the filtration plant at Minas Rio and the plant de-bottlenecking at Kiev Echo have come in under budget. which allows us to reduce our capex gains for the simplified portfolio by 0.1 billion dollars And as I mentioned before, now with the temporary suspension, Phoenicia, we've reduced our expected spending at De Beers in the second half by $0.3 billion. Therefore, collectively, for the continuing portfolio, this amounts to capex savings of $0.4 billion, bringing our total 2026 capex guidance now to $3.2 billion for the year. Finally as I've mentioned previously for 2026 we will incur 0.2 billion of special costs for the restructuring and merger and we will have 0.5 billion of non-cash increase in our net debt arising from lease for the infrastructure related to the Los Bronces desalination plant which will complete in the second half of the year. So to finish let me briefly recap on those key financial messages. We delivered strong profit growth with EBITDA from our continuing operations up by 35% to $4 billion, aligned with our portfolio restructuring and a higher exposure to copper. We managed the controllable costs well and stronger by-product pricing enabled us to reduce copper unit cost gains by 12% to 136 cents per pound. Our focus on capital management and project execution has allowed us to reduce planned 2026 capital expenditure by $0.4 billion which should further underpin higher return on capital employed which is now at 19% for the simplified portfolio. The balance sheet also continues to strengthen with net debt reducing to $8.2 billion and leverage reducing to one times EBITDA while of course retaining significant liquidity. Overall the simplified portfolio continues to provide resilient earnings with attractive exposure to copper-led growth and delivering higher margins and returns. Thank you very much and I'll now hand back to Duncan.