Anglo American plc

Stuart Chambers - Chairman Mark Cutifani - Chief Executive Stephen Pearce - Finance Director

Jason Fairclough - of America Merrill Lynch Sergey Donskoy - Société Générale Ian Rossouw - Barclays Matt Hasson - Numis Liam Fitzpatrick - Deutsche Bank Myles Allsop - UBS Alon Olsha - Macquarie Fraser Jamieson - JP Morgan Menno Sanderse - Morgan Stanley Paul Gait - Bernstein Sylvain Brunet - Exane BNP Paribas Tyler Broda - RBC Kieran Daly - UBS

Good morning, ladies and gentlemen. My name is Stuart Chambers and I’m the Chairman of Anglo American.

It’s my great pleasure to welcome you all to our 2017 full year results presentation. Let me first please just mention about the fire alarms and exits.

There are no drills this morning. So, if it goes off, it’s real.

I’m assured they will follow an announcement, just in case we haven’t spotted that it’s a fire alarm, but there are four exits; there are two at the back, two at the front. The simplest way is to go back out this way you came and follow the signs, and you’ll be shepherded out I’m assured.

Just before I hand over to Mark and Stephen, let me just quickly refresh you on Board changes that we had last year. So, Stephen, of course, who you know very well already, took over from René Médori.

We had two new non-executive directors join us, Nolitha Fakude, a South African businesswoman; and Ian Ashby, a long serving mining -- very experienced miner. And finally, myself, who had the great privilege and pleasure to take over from Sir John Parker, as Chairman of Anglo American.

And, I think that’s enough for me. Let me hand over to Mark, who is going to kick off our results presentation.

Thanks, Stu. Welcome ladies and gentlemen and thank you very much for taking the time to join us.

As always, I’d like to acknowledge Stuart and welcome. Obviously, Jim Rutherford up there in the audience.

Jim? Another Board member.

And my collogues, my executive colleagues that are scattered around the audience. What I would encourage you to do again is to catch them after the presentation.

From them, you will find the real story. I think it’s important that you hear from them, what changes are occurring.

And certainly from our perspective, I think, it’s important to get to know who is actually running the business. So, again, thank you very much for joining us here today.

From our point of view in terms of the agenda, I will kick away with very short business overview, Stephen will pull apart the numbers and try and help people understand what’s behind the results. And then, from my perspective, I will focus on where to from here and in particular, I will be focusing on quality of our asset portfolio, number one; I will talk about our capabilities and the work we’re doing to continue to improve the business; and then, finally, pull apart our capital allocation and the discipline that I think has been very important behind the performance improvement over the last five years, and talk about how we’re thinking about the future in terms of capital allocation.

So, to the numbers. I think, the simple message is we’ve done what we said we’d do.

Production volumes are up 5%, reflecting improvements and the commissioning of new projects. Consistent with the performance improvement, we’ve also exceeded our cost and volume improvements that we targeted for the year that was $1 billion; we’re at $1.1 billion.

Earnings and cash flow reflect both the continuing improvements in the business, and yes, we saw some help from prices but almost half of that improvement has been delivered on the back of the improvements we’ve seen in the business, what we’ve delivered in the business. Cash flow of $4.9 billion has been very important in terms of improving our debt position.

EBITDA margins are up 15% at 40%. And for us, a very important number, return on capital employed now at 19%.

For us, the disappointment in the year, safety. We’ve improved our fatality frequency rate by 40%, but one would never say that’s a good number, nine fatalities in the year, exceptionally disappointing for us.

We have established an Elimination of Fatalities taskforce, working across the business looking to drive the next level of performance to zero. And for us, we’ve still got a way to go.

Six of those fatalities were in platinum and three in coal in South Africa. So, in particular, the focus in South Africa is going to be very important for us.

And so, a lot of work is still to be done. Across occupational health and the environmental issues being well managed through the course of the last few years, we continue to improve the business as our planning and execution disciplines have been improved.

So, still some work to do on safety, other areas making good progress. In terms of driving the results, productivity improvements since 2012 have been significant, around 80%, half coming from portfolio changes, the other half coming from internal efficiency improvements.

The most pleasing aspect of the 2017 year was the 28% improvement in productivity, and that’s a significant improvement and explains a good part of the cost reduction performance during the course of the year. Yes, again, we’ve got some price pressures, or we got some price help but some of that was taken away by foreign exchange and inflation, and Stephen will talk to that.

So, the 28% productivity improvement has been very important in supporting the improvement work. Over the same time, we’ve seen 26% reduction in unit costs.

And from our point of view, the real cost improvement has been something like 40% when I take inflation and foreign exchange movements into account. Despite the sale of 30 odd assets, we’ve actually delivered 9% more production from what we were doing in 2012.

And I think that gives you a sense of the scale of the improvement inside the business. In terms of EBITDA margins, we’re up to 40%, and that’s the see-through margin, based on the mining business itself.

And again, the key drivers, productivity improvements, the efficiencies that we’ve also achieved through the implementation, the operating model and the technical changes that we talked about back in 2013, 2014 and we made significant improvement. And with our marketing, the focus on high quality products, and we’ll talk about some of our niche positioning in the bulks in particular has helped us improve the realized prices, particularly in the bulks area.

And so, with that, I’ll hand across to Stephen.

Thanks very much, Mark. Just before I get stuck into the numbers, just a quick anecdote, if I may.

So, for those of you that were here back in July with my first half year presentation, Mark was trying to convince me to go blue and go with Chelsea. So, I have made a decision.

It was based around two things. One was color.

So, the team I batted for back in Australia wears yellow and black. So, I had to find the team with yellow and black because I’ve got some of the gear.

And the other one was being a good finance person I am about capital discipline and cash flow management. And so, I’ll try to apply those same principles that we do in corporate life into my personal life.

And one of the other executives, so one of my colleagues at work has membership tickets for Watford, so I thought -- and he travels a lot, so I thought I got to be a fair chance to at least pick those tickets up at some stage through the season. So, I will declare my colors; they’re yellow and black.

And it’s the Mighty Hornets that I am going for. Okay.

So, let’s get into the real business of the day. So, it is a good set of numbers as Mark said.

And importantly for me, it’s a clean set of numbers. So, the things that we have been focusing on through the business, simply showing through the numbers and the outputs.

The other important thing for me and for Mark and the whole executive team is really that we’ve been delivering on our commitments, and that’s a really important step for us. I’m going to whiz through about nine slides this morning relatively quickly.

I will touch on EBITDA and how that flows into cash flow, what we did with that cash flow, particularly in terms of capital allocation, EPS and dividends, and we also are providing a little more data in terms of how we are looking forward and how we are thinking about the business in the years to come. Clearly for ‘17, the priorities has been de-gearing the balance sheet and you’ve seen that how we’ve allocated the cash flow and the reduction in net debt.

We’ve maintained a sensible spend in terms of stay-in-business capital. And it’s really the combination of those things that sets us up also for very, very strong 2018.

So, let’s have a look at EBITDA in the first case. So, there is really two key things that you can see on this slide.

So, the left hand side is really about the macro things. So, we have had some sort of upsides from commodity prices; they’re up about 16% on the prior year but offset by strengthening currencies and underlying inflation in the regions that we work.

On the right hand side, as you can see, more of the self help thing. So, continuing on the work we’ve done over the recent years, the cost, the volume, the productivity improvements.

If you recall, at the start of the year, we had indentified $1 billion challenge, and at that stage we had identified about half of those initiatives and we backed ourselves to deliver the other half. So, really pleasing, we delivered 1.1 for the year.

I’m just going to touch on inflation briefly. I know there has been a lot of sort of new talk about inflation.

Some of you guys are writing about it as well. And while it’s maybe an emerging theme in the UK, Europe and U.S., it’s really been part of our lives now for a couple of years in terms of the regions that we work in the countries that we operate in.

So, it’s been vital that we really focus on the productivity and inefficiency, so that we are outpacing that in terms of the things that we are focused on. We haven’t had the benefit of low inflation.

And even in areas like the Pilbara, you’re probably seeing deflation in recent years. And obviously, that hasn’t applied to us.

I think, the other thing I would just remind you all, often in a period of higher inflation, it’s driven by increased activity, which is fundamentally good for commodity prices in most cases. And obviously, the third leg of that is really currencies.

And as we look at the detail, and obviously it’s a fifth straight year for us in terms of delivering those improvements, $4.2 billion since 2013. Now, the next dollar gets harder than the last dollar.

And similar to last year, we’ve indentified about half of what we are going to look at in terms of our go forward targets. We did have some headwinds this year.

So, we had Cyclone Debbie in the first quarter, we had extensive rains through Southern Africa in the first quarter. So, we were able to overcome those and deliver the $1.1 billion.

So, I would just remind you that that’s a run rate; the $4.2 billion is a run rate number for us of improvement per annum in underlying EBITDA. So, we are not going to stop there.

So, we’ve identified $800 million in terms of our target for 2018. And as I mentioned, we’ve identified a bit less than half in terms of specific initiatives.

We’re going to back ourselves to deliver the balance. It will be sort of a normal theme of operating cost, productivity.

And as we look forward then across that period to 2022, we’ll really start to pick up some of the themes of innovation and technology. Now, we often get asked what are the things you’re going to focus on.

And really, it’s the sum of a lot of little things. It is hard work.

It’s not just one sort of key area of focus or key initiatives, it’s the sum of an enormous numbers of paths that help us deliver this. So, as we look at underlying EBITDA and the key numbers here.

It really reflects what we’ve done with the portfolio, the improvements we had in marketing, the cost out, all the efficiencies that we try to focus on. And that’s really delivered the step change in underlying earnings up 48% to $3.3 billion.

Free cash flow up 93% to $4.9 billion, and obviously the measure that we absolutely all love is the return on capital employed up 73% to 19%. For those of you that need to balance your books in terms of looking forward, effective tax rate is the low 30s as we go forward.

The year also saw us focus on continued capital discipline. You recall at the start of the year, we’ve guided to $2.5 billion; we revised that guidance down to $2.3 billion and we came in a whisker under that at 2.2 for the full year.

Focus for me, as I mentioned, the half use is really two-fold. One, when we spend it, we spend it well on the things that we need to spend it on.

But also, are we spending enough, are we spending enough to maintain the assets in the condition that we want to maintain? So, look forward to 2018, our guidance of 2.6 to 2.8, so up a smidge on last year, up a bit 0.2 on what we originally guided for 2017.

Couple of reasons; there is a little bit of rollover from 2017 for things that still need to get done, some stronger currencies that we’re assuming as we look forward. And then, there is some stay-in-business capital for some of those new projects that we’ve delivered or for assets that we’ve maintained within the portfolio.

As we look beyond that in terms of some long-term guidance, 2.6 to 2.9. Just to note that that excludes on unapproved projects but it does include things like the Venetia underground that are already sort of in the system.

So, focusing on the balance sheet, net debt almost half, down to $4.5 billion that flowed very directly into the EBITDA, the cash flow ratio, 0.5 and obviously into the gearing or leverage ratio down to 13%. For me, it’s the combination of all of these three measures that I suppose I really focus on rather than just one in particular.

They sort of have their place at different points in the cycle. Obviously, absolute net debt, a real priority for us and we will continue in 2018.

We’ve guided in terms of a net debt to EBITDA ratio 1 to 1.5 times but it’s really at that low point in the cycle that we wouldn’t want to exceed that 1.5 or any sort of extended period, we look to bring it back inside that guideline. Then obviously gearing or leverage, really the strength of the underlying balance sheet but largely to keep that consistency of strategy, no matter what point we’re in the cycle.

Priority for us is to continue to de-gear. This is really a once in a financial director’s life cycle that you get to fundamentally reset the balance sheet in a way that we have that opportunity now.

We are seeing strong bulk prices in particular continue, and that’s generating fairly significant cash flow for us. So, we do intend to continue to de-gear the balance sheet as we go forward.

As we look at returns to shareholders, I suppose this is for us a really good example of just simply doing what we said we’d do. So, we’ve reinstated the dividend early at the half year and we announced the 40% payout ratio policy.

And what that has done is really exactly as we intended, we had a high profit in the second half, so dividends are up $0.06 to $0.54, brings the total payment for the year to $1.02 or $1.3 billion to shareholders after 2017 results. And just to note that that’s the highest dividend we have paid in 10 years.

So, finally, for me really, this slide coming back to my little anecdote at the start, this is what it’s all about at the moment in terms of how we are thinking about running the business. So, sustainable cash flow really underpins both the balance sheet and the returns to shareholders.

That strength of balance sheet has really been driven well and rapidly over the last two years, in particular, but particularly the last 6 to 12 months. That’s enabled us to return, dividends to payments and significant returns to shareholders and obviously then we consider the discretionary options we have post hitting those first lot of key targets.

We will consider additional returns to shareholders as part of that evaluation. So, it is as part of our choices, I’d just say across the bottom.

Right now though, we think we have got the right balance in terms of returns to shareholders, continued de-gearing of the balance and sensible growth where it suits us within the portfolio. So, how did we go?

You can see sort of report card on the right hand side, won’t talk to the numbers. You can see clearly the priority was allocating cash flow to strengthen the balance sheet and appropriate returns to shareholders.

As we look forward, what should you expect? And the answer is pretty much more the same.

So, we are going to continue to focus on cash flow, balance sheet, and returns to shareholders, and should expect that to continue next six months, six months beyond and in the years following. Mark, back to you.

Thanks, Steve. For those that know our organization pretty well, you would be aware that we have actually got two Watford supporters sitting on the executive, Duncan and Stephen.

With the amount -- with the frequency that they change their coaches, either of you may get a phone call in the next few weeks, given performance. I think, we’ll move on.

I think, the most important point to make in talking about the future is to draw a line on the where we are today. It is a fundamentally different business.

47% less assets, yet we’re producing 9% more product. That productivity improvement and the efficiencies that go with it has helped us reduce our costs by 26%.

Our EBITDA margins are 33%, and this against the 2013 performance, and that’s against a backdrop of an 18% lower price basket today compared to when we did that comparison back in 2013. So, a 33% improvement in our industrial margins against an 18% lower price basket.

As a consequence, cash flows and returns were substantially improved. And much importantly return on capital employed at 19% remains a number that we focus on as the measure whether we delivered those cash flows the right way.

In talking about the future, I want to focus on three points. Firstly, we’ll outline the key points in the transformed business as it is today, which builds off that foundation tagline.

I’d like to also talk about how we think about capital allocation in the context of the future evolution and improvements we see available to us in the business, and then beyond that where we see further scope for material continuous and step change improvements that will help deliver the $3 billion to $4 billion improvements that Stephen mentioned earlier. So, first on the portfolio upgrading.

Gahcho Kué delivered on time and budget, Grosvenor completed its first longwall at the end of last year. During the changeover, Seamus and the team corrected some technical problems with the hydraulic supports, we started in the New Year with the second longwall and so far so good.

Minas-Rio, 26th of January is a very important date in terms of our stage 3 licensing. During the course of this year, we’ll complete the preparations for the next phase of expansion.

We require a confirmation that we’ve built the asset consistent with the stage 3 license at the end of the year, and that will help us then start the next phase of ramp up through ‘19 into ‘20. On disposals and closures.

We’ve done a lot of cleanup work through the year and you’ll see some of those transactions confirmed in January. And I think that demonstrates that continuing focus on making sure that it’s focus on the assets, the focus on margins, the focus on continuous improvement with where we’re going with in terms of all the assets.

But, I want to be clear. We like what we have in terms of the assets, and now we’re focused on making our current businesses improve in terms of the margins and the performance in terms of delivery of returns.

As a consequence of the focus on asset quality, and again, I’ll make the point that it’s about the quality of the assets that we have in the portfolio. We have a business that is diversified by commodity, and by geography, our job as leadership team is to bring the capabilities that we have within the business to bear on those assets and with the unique nature of the portfolio, provide what we think is a very unique value proposition to our shareholders.

And consistent with the geographic conversation, I should make a couple of points on South Africa. In the last three years, we’ve gone through major restructuring of all of our businesses in South Africa.

We’ve gone from 31 assets to 17 assets. And with the efficiency improvements that we’ve also delivered across the portfolio, our EBITDA margins around 35%, we generated $2.3 billion free cash flow last year, and we delivered a healthy return on capital employed of 23%.

We’re encouraged with the leadership changes in the country and certainly we are encouraged with the hand that the President has offered to the industry, the deferral of the court case around the Mining Charter I think is a very important development. And so, from our point of view we’re very focused on working across the portfolio and with the government and with other stakeholders to make sure that our South African business remains competitive and continues to improve.

South Africa is like all other jurisdictions. From our point of view, we want policy certainty and we make sure that we are doing a right things in the country to make sure that we’ve got a competitive industry.

And when it can be demonstrated, we can make returns in the country, then investment follows. It is very simple thesis and one that drives our behavior across the global portfolio.

In terms of capital allocation, Stephen has outlined our broader approach to capitals and how we think about capital. I’d like to add some further shape to that conversation.

Daily, with both discipline and our allocation priorities, our track record over the last five years has been one of discipline and delivery, and we are determined to repeat that in terms of the next five years. One statistic that I think is very important to reflect on, in 2012, our sustaining capital was $2.9 billion; in 2017, it was $1.8 billion, and our production was actually 9% higher than it was in 2012.

And yes, there is always a bit of lumpiness in some of those capital numbers. But, from a sustaining position, the efficiencies we’ve improved or we’ve achieved in our capital spend, reflect the efficiencies we have achieved throughout the operations with the applications of the operating model.

On the portfolio, the focus again is on asset quality. Second, any expansion object or any expansion proposal that we look at is subject to intense competition for capital and scrutinized against strict investment criteria at each stage.

In copper, we’ve got significant growth options both inside the assets that we’ve got operating today and with our greenfields potential in the Quellaveco. We like the commodity, we like the resources we’ve got, we like the assets we’ve got, and we believe we’ve got the potential to continue to improve the copper business.

On De Beers, as we would expect, we continue to supply to market demand. And as we see demand growing, we have the capacity to respond to the market in a sensible way without significant capital allocation.

On platinum, we are still in a business improvement journey and we are in a market that doesn’t require more product. So, the focus has to be on continuing efficiency drives and incremental improvements, and that journey is continuing.

On bulks, we’ve developed Kolomela, Grosvenor and Minas over the last few years. There has been significant capital applied.

So, today, we are working hard to continue to improve our margins and make sure those are delivering on the potential. And whilst we will continue to spend money on incremental improvements, that business is playing a very important role in generating significant cash, helping us with our debt and it certainly has turned out to be a great on making sure that we stayed focused on value and kept the quality of the assets.

And from our perspective, the teams has done a great job in delivering on the expectations that we saw and the ability that we see or the potential we see in those assets. Now, continuing with the capital allocations theme, it is important to make a few points in respect of important markets, from our point of view.

We will allocate capital to De Beers, if the demand is there for our products. We certainly have incremental improvement opportunities that we will encourage and support Bruce to pursue.

But in terms of understanding the business and where it sits, I will give you sense of how we think about the business. On trading conditions, recent conditions -- or recent indicators are the trading conditions, particularly in the U.S.

are pretty strong. Although, we also see opportunities in other markets.

One of the most standout features of what we’ve seen in the market over the last 18 months is the amount of diamonds that millennials are buying. And the 45% represents the amount of diamonds bought by millennials in our four most significant markets.

People say that may be buying patterns are changing. From our point of view, millennials are our single most important buyers of that product.

And so, I think from that point of view, that’s a great outcome and certainly shows that people are still buying diamonds for engagement rings but they are also buying diamonds to celebrate other significant events in their life. And they are looking for something that’s special, that’s unique and that says something special about the event and the person which they’re celebrating that event with.

The other significant change in the market dynamics is that self purchases by women are growing, and a few years back it was around 22%; today 33%. So, the autonomy and the change in the demographics and purchasing behaviors is very much related to women.

And certainly, from our point of view, the work Bruce and the team have done in terms of the UN female conversations and positioning the business in a very different way been very effective and the marketing certainly. Geographic demand, again, the U.S.

remains our most important market and certainly in the last three months we’ve seen encouraging trends. We will continue to commit to marketing expenditures.

And from our point of view, we think that’s very important in making sure that we promote our goods and see growth in the market. And on the other side of the coin in terms of synthetics, I think, certainly deserve a comment as we had a few questions from people in the market.

The way I think to characterize synthetics is there are very different market offerings, like complete in a different market, whether it’d be with crystal or other products such as costume jewelry. From our point of view, it’s important that we continue to differentiate the value propositions for diamond.

It’s unique, it’s rare, and from our point of view, that proposition still holds. The responsibility of us at De Beers and the industry is to make sure that that proposition is continued to be articulated in a very clear way.

On PGM and electrification of the drivetrain trend, certainly something that we’re aware of and watching very carefully. But let’s put it into context.

The drivetrain or the small vehicle, electric vehicles or the small diesel vehicles in Europe represent about 16% of the market for our products. The overall growth in demand for vehicles continues to outweigh the switching from diesel to small scale electric vehicles.

We expect that those trends will hold reasonably well up to 2030. The question we have in our minds is how much will fuel cells play into that market and counterbalance and drive growth across the sector.

Certainly, as an industry, we have to do more to promote our products but from our point of view, we think the prognosis for our products is very solid as of the next few years. And in terms of the longer term, hydrogen and fuel cells will be the game changer.

We are just not sure of the timing. So, we have to make sure that we remain and continue to move to the left cost curve, in our industry.

And we think from our perspective there are a lot of things that we can manage and improve and certainly help demand prognosis for us in the industry. Consistent with our overall thesis on quality of assets, in all markets, we see challenges to the demand for our products.

The good thing about our position, particularly with the Mogalakwena is that even today where people would say it’s a pretty tough market to PGMs, we’d deliver the 54% margin in 2017. And when you look at the character of our revenues, 40% platinum, 40% palladium, and overtime, base metals and other products will play a more important role in the revenue streams.

So, 54% margin of a diversified revenue mix is a very important position and we have still got a lot of improvement that we can deliver to the operating improvement programs that we see and the application, new technologies that both Chris and Tony, across the asset. Amandelbult, significant resource needs to continue to improve its cost.

Chris is targeting a 25% cost reduction. That will be important in terms of our business focused on both safety and productivity.

Now, processing operation is arguably the most efficient in the industry delivering a stable 9% margin. We need to continue to improve to make sure we stay there.

But for us, we think we are very well positioned in the industry, right to the left, protect your margins. And the long-term prognosis is pretty good when you think about the new technologies and fuel cells and hydrogen that could impact us in the very positive way.

Again, capital allocation, bulks, we’ve been very targeted in the why we’ve developed the bulks portfolio. And going from 68 assets down to 37 assets, we did sale a number of coal and smaller scale assets.

So, today we have niche positions Kumba, Minas-Rio metallurgical coal, quality assets, good margins and we continue to improve our performance in each one of those areas. Seamus and Peter are partners in positioning those products at the top end of the revenue scale.

And so, as a consequence, our margins in those businesses are challenging the lower cost, lower quality producers out of the Pilbara. And for us, margins drive returns, so making sure we keep our capital allocation tight, we drive our revenues and our costs.

And our margins and returns are challenging the major players in the industry. Again, I’ve got to acknowledge the bulks team.

They have been through a time in the last four years but the performance that they’ve delivered, while going through some uncertainty has been exceptional. And the fact that we’ve kept those assets as a reflection of the great work they’ve done in improving the cost and efficiencies across the business.

With an asset suite of around 35 assets, we’ve got lots of opportunities to improve the business on an incremental basis that is small-scale capital, quick return projects that add cash flow and returns to the business. A couple of examples, Moranbah Grosvenor, by de-bottlenecking the processing plant, we get ourselves another 25% capacity, continues to help improve our cost position, it’s a no brainer with $200 million.

In De Beers, some of our highest value diamonds delivered from our marine operations in Namibia, another ship, less than a three-year payback, again, a very strong business case that Bruce and the team are developing. We’ve a number of other options across the portfolio, copper, De Beers, PGMs, Mogalakwena, met coal, a number of options that we can kick into place, depending on market demand and the margins that we see can be delivered from those assets.

So, again, an exciting range of portfolio options across the business. In terms of greenfields, Quellaveco remains a very important resource in the context of Anglo American.

We are currently finalizing our feasibility work. So, we’re going through the verification processes post the feasibility.

We expect to bring the project to the board for review at the midyear. It’s a significant resource.

We believe there are significant additional resources that could be added to improve the 30-year life that we see today, potentially doubling that life. The current estimates on operating costs are around $1.10 a pound and we’ve done a lot of work, derisking the asset base, both from a geotechnical point of view or the key permits were in place.

We’ve built our relationship with the local community, we’ve built our relationship with the government, and certainly from our point of view we’re doing the final work so that we can bring the project to the Board at the middle of the year. We would expect, during the course of the year, to make a final decision, but I certainly don’t want to preempt the decision the board would make.

And so, again, we are planning to take the project to the Board midyear. If there’s work to be done to complete, I wouldn’t expect to be significance during the course of the year, we’d expect to be moving forward.

The syndication of the project is also an important principle or important point to make. We believe it’s appropriate for these types of projects to bring in partners that add value, that can support the development of these types of projects, both from a risk point of view, and to bring value forward.

So, in syndicating or thinking about syndication would be on the basis of value, so getting that balance right is something that we’ll talk to the Board and we’re talking to the board about us part of the process. As the last five years, we’ve restructured the business, I talk about an 80% productivity improvement, half of that productivity improvement has come from portfolio changes, half of that productivity improvements come from actual underlying efficiency improvements.

We expect to continue to improve the business. As Stephen, said, we’ve identified 3 to $4 billion worth of cost and volume improvements that we’d expect to deliver by 2022.

Now that’s a run rate number. So, for us, we still see a lot of opportunities to improve.

On the continuous improvement front with our operating model, we’d expect most assets to improve in the range 3% to 5% a year. And certainly we’re factoring some of those improvements in our numbers.

On a broader front, the technical team led by Tony and with the business unit leaders, we’ve got loftier ambitions in terms of step changes. They’ll tend to be a little backend loaded given the innovation work and where we are progressing with energy, water, the concentrate, the mine, coarse particle flotation, but they certainly -- they will certainly start making a contribution inside that timeframe.

Embedded in a culture of continuous improvement, every person in the business is responsible for identifying and improving their part of the business. And for us, it’s a way of life, and an everyday conversation across the business.

So, we are confident we can deliver at least 3 billion to $4 billion worth of run rate improvement over the next five [ph] years. With that type of culture, the quality of the portfolio is important.

And one measure of quality and potential we have is that we’ve got a lot of mine average across those assets of around 30 years. Our job in the next five years is to continue to identifying improvements and work that potential, so that every year we are getting better across the asset suite.

It also it provides us with the flexibility to think about where we are in the market and make judgments inside those assets in terms is the best way to operate them on the various market conditions. That’s not about high grading assets; that’s just about making sure we are delivering on their potential and responding to market conditions which is a lot tougher when you’ve got high cost assets.

And with that, we believe with the internal opportunities we have, we can continue to grow profitable production around 16% over the next five years. And that includes continuous improvement in some of those projects that I’ve talked about in terms of opportunities.

So, finally, in terms of our investment preposition, we characterize Anglo American today, first off the asset base. We’ve got a portfolio of high quality assets that have the potential to continue to improve as we get smarter.

Second, we’ve built the people capabilities to get the best out of those assets. And three, we’ve instilled and operating in capital discipline that understands our job is to deliver cash flow and returns, on a sustainable basis.

We’ve put ourselves in a position where we don’t have to do anything outside our portfolio to continue to improve or provide you with quality enhancement opportunities. So, with that, very happy to take questions.

Jason Fairclough Bank of America Merrill Lynch. Mark, two related questions, I guess.

First, Minas-Rio, I mean, it’s taken a really long time to get this thing ramped up, why? And then, just from that you are looking to care back.

So, it sounds like we’re reaching a decision point. How do you think about the readiness of Anglo American as an organization to do another mega project because to be frank it didn’t really cover itself in glory with Minas-Rio?

Two good questions. Firstly, on Minas-Rio, and maybe if I reflect for one minute on Minas-Rio, we overpaid for the resource.

We bought a project that was at constant level. Permits were in plus and we underestimated the purchase costs.

And number of those and I’m just saying we turned that upside down and inside out and to make sure we understood every lesson that can be learnt. And that process has been very thorough.

On Minas-Rio today, the license, the final license has remained a constraint on that foot print for the mine. So that stage 3 license has been very important.

So, with the completion of the license process, we can then step out the mine and mine at the 26.5 million ton rate. So, now it’s just physical constraint on the footprint.

If you remember, the Samarco incident, anything that had anything to do with the tailings dam stand in Brazil become an issue. And so, we lost probably 18 months of service, and that final approval is a consequence of Samarco.

So, we’ve got through that process. It’s not finished.

But, certainly, I think the fair point to make is the technologies that used, so the tailings dam at Minas-Rio is very different to the Samarco. It’s a downstream, so a different engineering principle.

So that’s the key issue. Now, going into Quellaveco, as I’ve said, the learnings have been applied.

At Quellaveco, we have all of our major permits; we’ve been through all of the process with the locals, with the government, very supportive of the project. We’ve gone three times back through the engineering, we’re doing a final external review.

If anything they are arguing, we may have been little be conservative in the prices. That’s good news but that’s why we see what the final outcome is in terms of the review.

All the project disciplines have been renewed and under Tony and the team, between Tony, Duncan and their teams, we’ve pulled apart the organization and we reconstructed the business. In the last five years, against, all the major projects that we had when it started back in 2013, we’ve delivered all of those projects on time for a $1 billion less than the estimate I gave you back in 2013.

So, the disciplines are there, the learnings have been applied. We’ve got a different team looking at this business -- this is a different business and the approach to Quellaveco is very different to what you would assume with Minas-Rio.

I have few questions. First on net debt, which I think was a big positive surprise coming about $1 billion below consensus.

I wonder, to what extent this could be because of one off factors? I think there was a $900 million working capital release.

And I think the taxes paid where else about $600 million below a figure on the income statement. So, the total about $1.5 billion.

So wonder, on normalized working capital and excluding this movement in deferred taxes, what will be the adjusted net debt figure for the year? That’s a question number one.

Second, you expect CapEx to increase by about $500 million next year. You could give us an idea which divisions, which projects will be the main drivers here.

Third, the diamond production guidance, you expect 2018 to be a bumpy year and then production to go down to about 32 million carats. Is this because this is the physical constraint, you cannot go higher or is this how you see the markets - just don’t see more demand.

And finally, just…

I think, you’re going to have to spend an extra penny. I’ll let Mr.

Watford pickup the two capital numbers.

Yes. So, firstly, on net debt, this really plays with the outcome, and I suppose we appreciate it, it’s a bit lower than what people were expecting.

But really, I suppose, the thing we’re pleased about is the translation of EBITDA into cash flow. That’s probably been the primary focus.

So I’m pleased about that. Yes, working capital has been a focus and I think I flagged that at the half year as well.

So, I can’t promise we are going to continue to reduce it. What I can promise you is that we will continue to understand it better and better in terms of days et cetera.

So yes, we saw a probably a little bit of price increase flow-through in the receivables towards the end of the year. Inventories in fact were probably little bit higher than we’d hoped in a couple of years.

So, in Kumba and in Met Coal in particular we couldn’t quite get all the tons to the port that we wanted. But offsetting that was probably really a positive moving creditors which is probably little more than what people were expecting.

And one of the biggest things in that has been the prepayment that we have through the platinum business, increased again this year, and also some of the change in the arrangements as we have moved some of the operations in joint ventures into sort of processing of concentrates have POC contracts. You’ve seen that translating to some working capital movements as well.

So, I’m pretty comfortable with where it is from working capital point of view. Through I wouldn’t be banking on major, major steps forward from that, from a dollar point of view.

On the tax front, so yes, there is a couple of timing things. Probably the major one I’d point out would be Met Coal in Australia, where we probably have a bit of -- probably about 400 million pool, pickup I think towards the tail end of 2018.

And that’s just timing, as we have come out of constructions and lower prices into profits. So, that will true itself up through 2018.

On CapEx, so, again, just a reminder, our original guidance is 2.5, our guidance into next year is 2.6 to 2.8. Again, carryover from ‘17, FX and some additional projects that we’ve either brought on or kept, and probably the man influences.

The majority of the CapEx though is really around stay-in business, pre-stripping and mine development. So they’re really the key things that we are focused on.

And some of that’s really the continuations of projects that we have already got in play, so Venetia underground is a great example. That’s probably about the major point of that was this year and next year in terms of what expansion [indiscernible] type capital.

But there’s still some more to do and call it in terms of actually getting ready for next long hauls and those sorts of things. So it’s a combination.

It’s broadly spread. So, nothing I’d particularly sort of pull out there.

Mark, I am going to let you to comment on diamond production, but obviously the switch in Venetia from open pit to underground plays out in sort of years three to four.

And in terms of the diamonds, we sort of run a two to three-year look ahead. If you think back we had a big kick up in sales really last year, which was the release of the lower priced carats.

This year, Bruce has set the organization up to deliver against what we think the demand will be. We’ll continue to adjust as we go.

Stephen made the point about the Venetia switch. What Bruce is doing at the moment is looking in the sequencing of some of the other operations to see that if that demand remains strong, what he can do to bring a bit more production forward to get more balanced in the second year.

But, I think you have got to go with the guidance as it is today, knowing that Bruce and the guys are working hard to watch the demand carefully. And if there is an opportunity to make more sales, so we don’t want to miss the sale.

And so, the team is very focused on balancing up, depending on where the market is.

Mark, I’ll add. It’s not something we have traditionally guided out years two and three in terms of market demand for diamonds.

So, I suppose, we’re trying to provide a little bit of extra clarity.

Good morning. Ian Rossouw from Barclays.

Two questions, first question is just on unit costs. How can we relate these cost improvements that you equate to unit costs given that they’ve been going up every -- for the few years and it’s guided to go up.

I understand FX is obviously a key driver in that. But, should we just accept that given your geographical exposure that unit costs should just be higher than peers?

And then, maybe looking at the 3 billion to 4 billion cost improvements you’re targeting out to 2022, do you actually think you can bring unit costs down in nominal terms over the period? And then the second question is just on South Africa.

You mentioned that I guess in the past that it is now much smaller part of your overall capital employed base 25%, yet it generates almost 50% of your free cash flow. I mean, obviously, this is an imbalance that as you’ve said should normalize over the time.

But shouldn’t you monetize or may take opportunity of this imbalance to monetize some of those assets?

Firstly, on the unit costs, we’re going to continue -- for us, the imperative is to continue improve our costs. And we look at two moving parts, firstly, reducing our costs so that we are actually doing better than inflation on a global basis.

And we’ve done a pretty good job of that. In fact unit costs on a nominal basis were down 26% over the five years.

Clearly, inflation is becoming a bigger issue. But we’ve to deal with inflation in the jurisdictions we’re in over the years whereas others have done got a little bit of a free kick with deflation in Australasia.

As know, they’ve also had depreciating currency. So, maybe that’s starting to turn.

So, on that basis, we might get a more level playing field in looking forward. We don’t want to rely on rising commodities.

Because the one thing that comes with inflation is that is better commodity price. We don’t want to rely on that.

We want to do better than inflation in improving our cost structure. So, on a real basis, you’re chasing 3% to 5% a year.

that’s where that 3% to 5% continues improvement and that’s very important. Secondly, you want to try and run faster than your competitors.

So, they’ve two imperatives that we talk about on a monthly basis. So, the continuous improvement stuff and then the step change work that occurs later in the period which then stands us in good stead beyond the five years would be very important.

So, we’re very focused on the things that we can control. We’re not relying on commodity prices or byproduct credits to give us a free pass.

It’s cost that we control, but that’s what our job is, make sure the business is set up well. In terms of…

So, the unit cost guidance that we’ve given in the appendix, just to be clear on the assumptions that underpin that, so we’ve set out the currency assumptions in that appendix. What we have embedded in there in terms of cost improvement is only those things that we have specifically identified.

So that’s a little bit less than half of the 800 million. And obviously as we’re still identifying those, we’ll allocate those across business units and operating sites as we complete that exercise.

So, obviously, we’ll report against it. Currency does play a part.

Probably the other thing -- it’s just some time and maintenance or moving of long hauls and those sort of things, influences a little bit of volumes through 2019. So, we can take you through the detail later in terms of some of the individual assets in that but there’s some subtle influences there in there that is just influencing some of the volumes as they drop out in 2018

On South Africa, over five years, we’ve almost half the number of assets and we’re delivering better results today than we were five years ago, in a better price environment. So, the restructuring Chris, Tim, Seamus, the rest of the crew, in all parts of the business have done has been very successful.

So, we are not shy about saying, the guys have done a good job in South Africa. I think, it’s great, the political changes, the leadership, the hand that’s been extended by the government, continues to encourage us.

But there is still a lot more work to be done. And what I would say is we are starting to see more significant contributions outside our portfolio.

So the balance is starting to swing. And certainly from that point of view in terms of earnings, I think it’s about 70 to 30 or...

Roughly that. So, the split of the EBITDA is South Africa is 3.7 and the rest of the world 5.2.

So, you can see the sort of the rebalancing that’s starting to occur.

Yes. So, 25% of our capital employed is in South Africa.

We are at the moment probably spending more of our capital base outside of South Africa because that’s where we see significant opportunities, but that doesn’t mean we are not looking after the assets putting capital in the assets to make sure they deliver. So, it’s a normal portfolio conversation.

But again, we are very pleased with the progress we’ve made and with the restructuring. South Africa is in a very competitive position.

But, there is more to be done.

Hi. Matt Hasson from Numis.

Have you taken any steps to mitigate the strength of the rand just on your sensitivities? It looks like it could cost you sort of $750 million, the rise in the rand, recently.

And just a tiny little anecdote from last summer, Mark. And I believe I saw you at Lordswood in England.

Is that true?

That’s another bet I lost. So, I’ve lost the bets in the rugby and the cricket.

So, I’m not doing well. Yes, I do have an English hat.

I’ve got two children and now I sound like they are English. So, the family is transforming.

I’ll let Stephen talk about the rand and then I’ll talk about some other things we are doing on the operating cost side.

Yes. So, no, just to be clear, we do not hedge currencies, in terms of the operations of the business.

I wouldn’t pretend to be the smartest person in the room in terms of speaking when the right point to do those things are. We view ourselves as the long-term price taker in that includes currency as well.

I’ll come back to the point I made when I was earlier -- encourage you to think about the other things that move with currencies and inflation, and that’s normally commodity prices. So, as you’ve seen this year, the impact of prices far outweigh the impact of FX on inflation.

So, just encourage you to think about all of those three moving parts as you think about the currency.

On South Africa in particular, Seamus with Kumba and the team has got a very focused business improvement program looking forward, and I think that’s going to be really important. And we are still not way we want to be in terms of benchmark productivity, so work to be done there.

PGMs, you would have seen, I hope noted the comment [ph] of 25% cost reduction that Chris and the team are chasing, plus improvements at Mogalakwena, and in thermal coal. July, Seamus again, and the team, are focused on driving our cost improvements ahead of the inflation rates and taking into account that the FX is going to move.

So, we’ve got to run twice as hard, but that’s where the guys are focused.

It’s Liam Fitzpatrick from Deutsche Bank. Two questions.

Firstly, coming back to South Africa maybe a bit more directly. If the outcome of the mine, potentially new mine policy is positive for the industry or acceptable, does that mean you are committed to your three big South African businesses Kumba, Coal and Platinum?

And then, on the 3 billion to 4 billion target, can you break that down between costs and volume, and how much of that is approved already and in your volume targets out to 2020?

On the Mining Charter, firstly, let me make it clear that we’re committed to the assets we have as I said today, in South Africa. We always will asses, if there is a change in policy somewhere, how we will think about capital allocation across the group.

But, with Kumba, with PGMs in terms of Anglo platinum and in terms of thermal coal, good assets delivering good returns, we want to make those businesses better. The Mining Charter however it frames up, will impact our capital allocation decisions as they should.

As we’ve seen other jurisdictions across the world, policies change. And you can name a few that we’ve seen in the last few months both inside of Africa, outside of Africa.

So, we’re encouraged by what the President has said that he understands for mining to invest, there has to be policy certainty and then encouraging environment where we can make returns. We believe that that’s a good start to the conversation.

But, I wouldn’t want to preempt where those conversations will go. We’ll make decisions as we do with any jurisdiction we have in the portfolio.

But, we’re very pleased with what we’ve seen so far. And we’re encouraged; we’ll wait and see what we get out of the policy conversions.

Stephen, do you want to make…

The 3 billion to 4 billion, so rather than, we saw it survive the first 800 million this year. So, without being specific on dollars against each initiative, let me give you a flavor of the things that you will see that will feed into that, and some are volume and some are costs and productivity.

So, you’ve got Minas-Rio ramp. Clearly that will go from where it is and we’re forecasting this year to upto its capacity through that time frame.

Moranbah Grosvenor debottlenecking, the Debmarine that Mark spoke. Long haul hours and cutting rights through each of the met coal operations amended [ph] that cost out, and efficiencies, improvements in Mogalakwena, Khwezela one of the coal assets getting back on track and had a pretty tough year in 2017.

Copper grades moved across the years which should be a bit better next year. And then there is all the operating efficiencies.

So, whether that’s truck hours digger rates, process recoveries, automation, use of data, particularly feeding into maintenance programs. There is a lot of things that are going to come through and feed through our business as we are getting more disciplined and then adapting and running with technology and innovation.

And then particularly on the innovation side, the things that Tony’s previously spoken about, about our water use, our crushing technology, our recovery and our use of energy all of those things will probably freed slightly more into the longer term a Mark mentioned, probably more into the three to five-year. And then there is marketing initiatives that Peter will be focused on in terms of quality products into the market, remembering a dollar extra on revenues just as good as a dollar add on cost.

So they really is no one individual thing. It’s the sum of all of those parts and there is a lot of other things I haven’t mentioned but it is the confirmation across volume and cost and we will be working really hard and backing ourselves to deliver.

We’ve run a portfolio of opportunities, on a continuous basis and on a step basis into the innovation and then smaller capital options. So, we’re always looking at ways to best bang to be had for our buck, and for the time these two guys spending on improving the business.

So, we keep that portfolio running. So, it’s across a range of opportunities, depending on where we see the market is going at one particular time.

So, it’s a good range of opportunities and Stephen has probably touched 30% of them in what he’s just said. So that’s our job to look at everything we can see and then allocate our resources to the best opportunity.

Myles Allsop, UBS. Just maybe following up on South Africa to start with.

How -- I mean, Chris mentioned three to six months is the potential timeframe to see new charter. Do you that’s realistic?

Also, ANC is going to win the general election next year. Are we getting ahead of ourselves in terms of thinking it’s all rosy in South Africa?

And the industry’s going to have to comprise, I presume, with the new charter, whether it’s around, so 26% in power or whatever. But, could you just give us a sense of how are you thinking about what compromises you are prepared to make and the industry is likely to make?

And then, maybe for Steve as well on net debt, very impressive deleveraging in a relatively short period of time. Is $4.5 billion the right number?

Should we be thinking about spot free cash flow? I’m not sure you gave us a number on that.

How much spot free cash flow you’ll be returning to shareholders? Is the swing now very much back to shareholders?

On South Africa, I’ll give Stephen a chance to put his thoughts together. Very simply put, the future of the industry will be determined by the policy framework the government puts in place.

The one thing that I think characterizes Anglo American is the quality of the assets we’ve got across the globe. And we make the point, very simply put, investment follows returns, not the other way around.

And we’ve made that directly. And I think the reason that the President has identified the mining industry as one of the great opportunities is we all got that last conversation wrong.

And the elements that we are in that charter document from our perspective didn’t provide a climate for returns. And therefore, capital allocation or capital spend basically drive up across the industry.

So, I think we got to give you a minute of time to settle in the chair, have the right conversations, we will come to the table looking for and providing ideas on how to make the country and the mining industry better, so it will attract returns. That’s out job.

And I think, based on what we have seen so far, they are in the same place. So, it’s a matter of finding what works, and what works for the long-term, because, our industry is a 30, 40-year industry.

When we make investments we make it for the long term. We want to see policy certainty that we can bank on.

We have got a long way to go yet. And I think, the toughest thing for the President is the expectations that have been built up and the expectation over a very short period of time.

We’ve got to give them. It’s going to take time.

So South Africa is going to require a lot of work.

So firstly, on net debt, yes, I would love to see it lower and I think we have got a real opportunity across these 12 months to continue that journey. How fast will it be, or how far would it go depends where prices are and all that sort of things.

So, a little hard to exactly forecast. But, what I would love to say, another couple of million dropped out over the 6 and 12 months, yes, absolutely.

And as I said, we have got this real opportunity where we have few calls on our cash flow outside of sort of sustaining and stay-in business capital where we can complete that journey and fundamentally reset the balance sheet. And I think, the industry generally and us in particular really appreciate the value of a strong balance sheet.

And it’s happened quickly, and that’s great, but it has go a little deep further that want to take it. How do we consider that versus some incremental shareholder terms?

Yes, we’ve got around the wheel, exactly as you’d expect. So, we had discussions this full year, we will have discussion at the half year.

Right now, we think we’ve got the right balance in terms of the 40% higher; it did what it supposed to do. It was a bit higher than the first half based on higher profits, balance sheet priorities and returns to shareholders, we think we’ve got that balance about right from where we sit today, but we’ll always consider that as we go forward.

Spot free cash flow?

Spot free cash flow? Yes, the spot prices probably year-to-date are bit up from when they averaged through ‘17, so you could conclude from that that maybe EBITDA and a reasonable flow into cash flow, we’d see some similar numbers too this year.

So, I’m voting for price to stay higher.

Good morning. Alon Olsha from Macquarie.

Three questions, firstly, just on diamonds. Could you give us an indication of the mix of stones you’ve sold so far this year certainly versus last year where you seem to have had greater demand for lower quality goods.

How is it shaping up this year and what’s your expectation for that mix going forward, notwithstanding of course the lower carat stones coming from Gahcho Kué and Orapa? Second question just on Minas-Rio, you got the installation license in place.

You’re still waiting for bigger kind of the final permit, environmental permit later on this year. Could you give an update on the timing around that?

And the receipt of that license, would it impact guidance for Minas-Rio at all this year or next year? And then, finally, in Quellaveco, is a syndication of that project bringing in a strategic partner, is that a requirement for this project to go ahead, would you consider doing it without a partner?

And I am sure you won’t give me your long-term copper price assumption, but is it higher or lower than when you last time you evaluated this project?

In terms of goods, last year, there was about 3 million carats gross, very early in the year that were sold, so obviously impacts the quality. This year, we’ll do a bit better.

On a production basis, so you’re right in pointing out that Gahcho Kué and Orapa will drop the headline quality number; but also remember they’re low cost carats. So, even though the quality number of the pricing that we get for those carats would drop, and we don’t like to put a number on that, because obviously there’re commercial negotiations that go on, so we don’t want to flag where we are but we still think they’re wonderful products.

From our point of view, they will have an impact but certainly our margins are in good shape because they’re lower cost carats as well. So, without giving you a forecast forward just…

Early ‘17 was more of the anomaly because we were clearing the lowest stuff that had hung over from India demonetization et cetera in ‘16, we really are back to normal mix now, so clearly simply that’s probably the high level answer.

In terms of Minas-Rio, the important thing for the final approval at the end of this year means that this year the production is reasonably flat. And we forecast something similar, although we start to ramp up during the course of next year off that, and then we start hitting our straps in 2020.

In terms of the approvals, there’s a process that we can go through to try and bring a little bit of that movement forward to try and mitigate a balanced production, but we won’t forecast that; that’s an opportunity, not yet realized. So, there is work going on to look at brining things forward.

But, I think the safe thing at the moment is to forecast that flat production as we have done in the forecast. On Quellaveco, we already have a partner.

We will only syndicate for value. I think that’s important.

From our point of view; that’s where we prefer to be, syndication. We think the right number is in the range, 50% to 70%.

But at the same time, a lot of debate with the Board about getting that balance right. So I wouldn’t like to preempt anything other than to say, we believe we will syndicate somewhere in that range.

It’s a great project. The debate is obviously, should you take a bit more of a great project or should you balance that takes and profits early.

That’s the debate with the Board that we’ll have at the midyear.

Anything on the long-term copper price?

No.

It will go up or go down, we’re not sure in which order.

Fraser Jamieson from JP Morgan. So, another quick one on Minas-Rio, obviously still challenges to overcome there and the priority is to get upwards of 26.5 million tons.

Having said that, price achievements are very good, it feels like there is a structural element coming into some of the pricing premiums et cetera, so very long-term thoughts Phase 2 and Phase 3. Is that plausible at all?

I notice, it wasn’t on any of your slides talking about future growth options et cetera. Should we forget about that forever or is it something that may come back in?

And then, second one, just wonder, Stuart might be willing to answer a question. Coming into the organization and the industry from outside, what do you see as your key priorities in terms of guiding the Board and for the key challenges for Anglo to be addressing over the next few years?

So, I’ll go ahead with the Minas question first. From our point of view, the focus 100% is get ourselves to the 26.5 and the cost target.

Good news is, the quality looks good. And we think the quality premium from a number of perspectives is both cyclic and structural.

We think there is a bit of both occur. So, we think the project is well-placed for the long-term.

Yes, we have options for the future, but we are not going to get ahead of ourselves. We are going to deliver the project, the costs, the margins and the returns.

From our point of view, let’s get there first, let’s not think about the next phase, just make sure we get to -- we deliver and make sure we are delivering returns. At the moment, we’re actually delivering cash flow.

That’s encouraging thing. Our costs, I think are about 15% below what you would have normally expected at this sort of volume.

So, the guys have done a great job on the cost front. It’s good to focus on what’s been important and we will deliver and talk about the future when it’s appropriate to talk about the future.

Mr. Chairman?

Thank you for the question. I think, in terms of observations, let me say the first thing, it’s interesting that -- and we had a Board meeting next week, as you’d expect, it’s interesting that the Board delightfully continues to challenge itself and beat itself up about what we are doing, everything we can and we are doing the right thing.

But, it’s interesting, if you come in new and you look back, this business really is a fundamentally different business than it was five years ago. I think, that really does need to be remembered.

Therefore, what are the priorities? I think, first of all, whatever happens to the market, whatever happens to prices, whatever happens at the various commodity areas, the one thing that you can never excuse yourself on is not doing everything you can which is in your control.

And I think this annual drumbeat of continuing to drive cost efficiency productivity improvements, volume improvements while actually running our mines the best way we know can, we know how better than the previous year and better than the competition is an annual drumbeat. And I think that’s a really, really important thing to do.

I think, the other think I would say is safety and environmental is so crucial to the mining industry and not from somebody who is coming new in. I’m very familiar with the manufacturing environment.

But, you can’t choose where these mines are; they are where they are. So, the environmental and the kind of community engagement thing is just so fundamental to success.

And I was pleased to see Mark talking very early on about how disappointed we are in our safety performance. That step change remains to be required.

In terms of priorities going forward, other than those, run things the best you can. I think you have to look at our business through an asset lens.

And assets include mines also grams. And that’s the most important thing.

You can -- it’s clear to me can’t market or talk your way out of a fundamental cost curve problem. So, I think driving all of our assets regardless of which commodity they happen to sit in to the left and continuing to invest in those which can be brought there and can stay there is key.

They will therefore result in us being in the commodities we’re in. And we will be -- continue to be a successful, diversified major mining company.

And that’s kind of few words from me.

It’s Menno at Morgan Stanley. Just two questions, one clarification.

First on copper, clearly the resource endowment is enormous but the Company doesn’t seem to be fully in control. Because the [indiscernible] Los Bronces requires the corporation of Quellaveco to go through that wall between two mines and clearly for Collahuasi, you need to convince Glencore that is a good idea and they have plenty of growth elsewhere, so why would they commit more capital.

How do you extract yourself from this kind of slight dilemma? And secondly on diamond and I’m a bit confused.

When we talked about it last two years, the capability was always to put at 36 million to 37 million carats from a production prospective. I understand we may be talking about 32 now because it’s so far out and you don’t give guidance that far that out.

So, how should I look at that gap of 5 million? Has it come down to capability or is it just you being cautioned on those.

Firstly, let me pick up the diamonds point. We’ve got the potential to hit 37 million carats but there is a timing as we swing from open cap to underground mine.

And we’re doing some other incremental work. So, those numbers are in Bruce’s forward looking forecast.

So, I won’t say when and how, but we have that capacity. And in fact, we know where those numbers are.

What he is doing is making sure that we’ve got some flexibility in how we respond to the market. So we don’t want to bring that capacity on today when the market’s still reasonably well balanced.

So it’s a phasing issue as opposed to an absolute quantity issue, first point. Two, on copper, we’re in and have been in very constructive conversations with Codelco around the [indiscernible].

Those conversations continue. One of the difficult issues we have is that with change of government, the senior management of Codelco changes, but there has certainly been a good base established now.

So, we are going to continue working that through. And we think that’s important.

We think there is a pathway. On Collahuasi, we believe there is still a lot more improvement available and we acknowledge the team’s effort, Duncan, in terms of the improvements they’ve made.

We want to keep seeing improvement. But we also believe, with the technical work Tony and Duncan are working on, there are some compelling new technologies that will really shape a different future for our copper business in Chile.

And we think those arguments, they don’t need major capital lifts in terms of delivery of improvement by reduced water consumption, which no brainer in that sort of environment. So, we think any partner, we have an asset that is sensible and rationale and wants to make a lot in terms of returns, we would consider that opportunities but it’s up to us to build the case, and we think we can.

Paul Gait from Bernstein Two questions, if I could. First on Kumba.

So, you’ve upped your guidance in terms of production. I’m just wondering, we used to talk a lot about the changes on the mine plans that have been made there.

Should we sort of regard those production increases now as the sort of sustainable into the longer term or is that sort of going to come back down after the next sort of couple years? And are you able to make those changes without sort of compromising the grade or the sort lump fraction that you sort of distinguish that mine?

The second question is outside South Africa, I mean obviously political change is there. We are also seeing Zimbabwe declaring itself open for business.

Obviously, the Great Dyke there is really significant PGM resource. Do you think about moving outside of South African footprint into Africa more broadly?

On Kumba, I think in many cases, when I talk to people, I don’t say people recognize how significant the changes were in spinning the mine around 90 degrees. When you say it quickly, it doesn’t sound like much.

And as Tony pointed out, it was a fairly significant change, which took about two years to execute. As a consequence, that’s been the major shift and the focus on equipment productivity, I think, we are up by factor of 150% on our major shovels now.

So, the reason we are delivering additional tonnage is, one, the big change in the mine; and two, the underlying productivities of equipment. We’re operating track -- it used to be 4,000 hours a year, it’s now 6,000 hours.

So our sustainable capital is also down there. So it’s sustainable right -- it’s a sustainable right pull.

I think the life of mine is 12 years to 15 years, Duncan. What Tony and Seamus and the team are working on now, what are the new technologies to try and enhance that resource base and build more life in the asset.

So, that’s where the focus is now, Pau, and continuing cost reduction. We’ve got a great product, we have got a lump premium.

Our margins are matching the Pilbara as we spoke today, how do we do better and protect that cost base with ongoing improvements. So, it’s cost and life, the two areas of focus for the business.

The only thing I would add there is infrastructure capacity. So, yes, we’re working closely with Transnet, who provide the rail, and so making sure we are as efficient as we can onto the train down the train line and through the port, is a real area of focus for us.

So, we don’t own and operate all of that aspect, but we are bumping up against some of those capacity constraints. And so, obviously then, the focus for improvement can be around grade and quality and which tons you do move down the line, so we’ve got all those options in front of us.

Don’t forget Kolomela’s making when, we started the work we were about 10 million off a design of 9 million, it’s up near 14 million now. So, again, underlying productivity improvements have been quite significant in the operation.

So, in terms of the [indiscernible] making each year a better year in terms of the underlying performance, so they’ve done a very, very good job. On Unki, or Zimbabwe, I think, there’ve been a number of statements.

I think, there’s a still a lot of work to be done. We need to see a lot more in terms of the policy framework, infrastructure, those sorts of things.

So, we’ll continue to nurture Unki. I know Chris [indiscernible] has mastered in terms of the quality of the resource.

In fact, I think Chris and Tony agree it’s a great resource. But, we’d like to see a lot more color buoy before when we think about taking any further steps.

But we’re continuing to nurture that operation and make sure we’re doing the right things.

Good morning. Sylvain Brunet with Exane BNP Paribas.

First, on diamonds, we know that first quarter is always quite important for the midstream where they make their decisions. We’ve seen a couple of bankruptcies in the third quarter.

Could you give us a sense of what happened in the force and what is your perception of the mood in the midstream right now? Another question on diamonds, when we see a number of mines still ramping up until 2020, do you believe that this industry could secure enough pricing power before then?

Another question on the working cap, to understand clearly, the change in the payables and the prepayments you mentioned, should we treat them as one off, as a runway from here or not? And lastly, on the 6 billion of cash you reported in your consolidated accounts, last month, out of the 6 billion, how much is in South Africa?

So, I’ll pick up the diamonds and I know Stephen will have the numbers off the top of his head. In terms of the mood, the sentiment, yes, there’ve been some bankruptcies.

I’d like to make a point that one of the bankruptcies, and there’s been a fraud case that’s been broadly reported, has nothing to do with De Beers. It’s a separate entity and involves banks.

But, there’re no relationships with our business. And in fact, the financial reporting transparency piece that we have put in place is designed to identify and help us identify where those things may have occurred.

And so, there’s been a big change in De Beers over the last 15 years, as you know. So, they’re not connected to us.

Two, the mood generally has been pretty good. I think, most importantly, the U.S.

selling season was very positive and the mood coming back has been quite strong. There are always a few that may be struggling for different reasons, but so far the feedback has been good and certainly encouraging from our perspective.

And again looking forward, we are cautious and slightly optimistic. I’ve learned in this business not to get too excited by one or two sites.

So, but so far so good, and certainly the feedback has been pretty solid. In terms of mood, or in terms of new mines being built, remember, the diamond industry is really -- has really got a supply problem, ‘20, ‘21, ‘22.

So, we don’t think those new mines will disrupt. The industry needs more mines.

I think, as an industry, the key is investing in new demand. And I think, the commitment ourselves have made and are also to the creditors made, those programs are going to be very important in making sure our product is front and center in terms of customer choice.

I think that’s the key for us. From our point of view, we don’t think those new mines will materially impact, given what we think we can do with the demand.

Yes. So, firstly, on working capital, I suppose, broadly happy with where the levels are at today.

So, there will be movement across whether it be creditors, prepayments, dealers, stock levels at different points in time and at different times through the year actually come through either weather patterns or diamond buying patterns and timing of sites, all those sort of things. So, you see, it’s a small part of the mine, but generally happy with the overall level.

I shouldn’t be probably mention, on the debt capital structure and the cash and net debt. So, net cash in South Africa, 3.4 billion and net debt in rest of the world is 7.9 billion.

So, that’s how you get to that net 4.5. What you’ve seen, I sort of spoke about more the half year and there is a slide in the appendix there in terms of the debt capital structure.

So, we’ve been progressively doing a number of things, extending the maturity, shaping the profile of maturities and also then looking at how we think about the cash we have on hand, the undrawn facilities. And as we get control over our CapEx, as we get certainty over our cost performance and cash flow, just brining all those things down and progressively just tightening up, and they don’t all come for free.

And so, we can save let’s a $100 million as we work through that strategy to tighten those things up. So, that’s our focus is on that front.

Okay. I’ll take one more question and then we’ll go to South Africa for a question.

Tyler Broda from RBC. I guess, the results from all of the companies have sort of shown that having amazingly a strong balance sheet is no longer thing a scarce thing, which is…

But still very valuable.

Yes, still very valuable, I guess, definitely. But, in terms of the syndication thoughts around Quellaveco, whether or not, is the Company sort of entertaining any thoughts of recycling that capital that’s going to come in for what is a scarce growth, high return growth project in copper?

So, any thoughts about recycling that capital into another opportunities, sort of keep the total exposure, but just have it structured in a more different way?

As you would expect, we’re thinking through all the things you would think we would sort of think about the investment decision and ultimate percentages. So, some of it’s about value, as Mark mentioned, and some of it is about how do we think about our balance shape, both this opportunity and for the suite of other opportunities that may emerge, largely within our existing portfolio or from without, and making sure that we do have that flexibility through all parts of the cycle without overstretching on anyone particular project or looking ourselves out of other value creating opportunities.

So, we think about all the things you would expect, CapEx, cash flow returns, other opportunities, sovereign risk, et cetera, et cetera. So, they all are factored into our decision and will help inform where we eventually land.

For us, syndication of major project is a strategic choice. In the end, we’ve learned a lot of lessons from Minas-Rio; we’ve applied those lessons to the project.

But at the same time, we don’t know what we don’t know, irrespective of the amount of work we do. The oil and gas industry worked out a long time ago, with these types of bets were near this lumpy, best to share that risk.

So, it’s a strategic choice in the first instance. And we’ve made that point a number of times and we’ll keep making that point, because Minas-Rio was also 100% bet.

It would have been a lot more easier to handle if we had shared some of that risk. And so, again, we’ve got Duncan and Tony and the guys absolute, brilliant work on Quellaveco, but there are still things we don’t know, we don’t know.

So, it is strategy. And I think secondly, when we’ve got capital -- when we’ve got the business, the allocation model is absolutely critical.

So, debt, dividend, investment in the right palace, and every dollar capital goes through justification, competition, stage guiding process, I’ll keep saying it. Because it’s a disciplined way as an industry, haven’t demonstrated to our shareholders and for five years we’ve been there and we’re going to stay there.

South Africa? I do owe one back here, but I’ll go to South Africa, if I can take South Africa.

Mark, we are at that point in the cycle where companies start to look at their and even list in their presentations on the potential growth projects, many brownfields. You obviously had Quellaveco as your sort first cab off the ranks, so we say in terms of growth.

It was interesting to see that you put more Moranbah South in the brownfield, slide that you have there. I just wonder what’s the latest on Moroanbah South?

I mean, I suppose to some extent it is brownfield, little tie in with Grosvenor Moroanbah North, as I understand it. But just wondering what your current thinking around Moroanbah South is.

And also obviously you have partner there that was looking to sell out a fair share, but it doesn’t look like they are going to right now, so just some thoughts on that please?

Yes, certainly, Quellaveco is the most advanced. And certainly, from our point of view, it’s a great project in what appears to be a very good commodity position.

So, very excited but there is still work to be done. What we’re trying to demonstrate is we’ve got portfolio -- or good opportunities across the portfolio.

Seamus and the guys have had a run at some money in terms of Grosvenor. We’ve got Minas-Rio that we’re still working through.

I think, as you broaden -- for people to understand, we’ve got other options, but the term’s got to demonstrate delivery, getting the margins, delivering on cash flow, and in the future, we have other options in the portfolio that the guys are thinking about. And that was the point we wanted to make is, we’ve got a portfolio of opportunities that will compete for capital.

And at some point when it’s appropriate, we will look at all of those options, that was the point we’re making. We certainly not, on the -- we certainly not got at the stores ready to go, just making point of opportunities.

Some are more long-dated than others back here.

Thank you, ladies and gentleman. I believe we have a roundtable.

Thank you for joining us today, very much appreciate your participation. And again, focus on the assets, capabilities, and making sure that we continue to hold our discipline in terms of delivering returns.

Thank you.