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AGL
ANAAL
AGL - Anglo American plc - Annual financial report & notice of meeting 2010
Anglo American plc
Incorporated in the United Kingdom
(Registration number: 3564138)
Short name: Anglo
Share code: AGL
ISIN number: GB00B1XZS820
12 March 2010
Annual Financial Report & Notice of Meeting 2010
Following release on 19 February 2010 of its preliminary results for the fourth
quarter and year to 31 December 2009 (the Preliminary Announcement), Anglo
American plc announces that the Annual Financial Report and Notice of Meeting
2010 have been published today and are available on our website at
www.angloamerican.co.uk/aa/investors/reports/2010rep/
Copies of these documents, together with:
* the proposed new articles of association and current articles of
association marked up to show the changes being proposed at the Annual
General Meeting (AGM); and
* the proxy forms for the AGM
have been submitted to the UKLA, and will be available shortly for inspection at
the UKLA`s Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel: 020 7066 1000
In accordance with the FSA`s Disclosure and Transparency Rules, additional
information, including certain information in the Anglo American plc Annual
Financial Report for year ended 31 December 2009 (the Annual Report) is set out
in this announcement.
Additional Information
The Preliminary Announcement includes a condensed set of financial statements.
Audited financial statements for 2009 are contained in the Annual Report. The
Independent auditor`s report on the consolidated financial statements is set out
in full on page 95 of the Annual Report. The Independent auditor`s report was
unqualified and does not contain any statements under section 498(2) or section
498(3) of the Companies Act 2006
The following information is extracted from the Annual Report (page references
are to pages in the Annual Report):
1. Principal risks and uncertainties
"Understanding its key risks and developing appropriate responses to those risks
is crucial to Anglo American`s success
Average commodity prices and currency sensitivity analysis in respect
of currency and commodity prices
Commodity Average price(1) 10%
sensitivity
US$ million(6)
2008 2009
Platinum(2) $1,585/oz $1,211/oz 137
Metallurgical Coal(3) $190/t $142/t 103
Thermal Coal(3) $79/t $68/t 147
Copper(4) 315 c/Ib 234 c/lb 222
Nickel(4) 953 c/Ib 667 c/lb 39
Iron Ore(5) $88/t $65/t 80
Palladium(2) $355/oz $266/oz 17
ZAR/USD 8.27 8.41 293
AUD/USD 1.17 1.26 110
CLP/USD 524 559 29
GBP/USD 0.54 0.64 32
(1) `oz` denotes ounces, `t` denotes tonnes, `c` denotes US cents, `lb` denotes
pounds.
(2) Source: Johnson Matthey plc.
(3) Group average realised FOB price of metallurgical coal and thermal coal.
(4) Being the average LME price.
(5) Average price represents average iron ore export price achieved.
(6) Excludes the effect of any hedging activities. Stated after tax at marginal
rate. Sensitivities are the average of the positive and negative and reflect the
impact of a 10% change in the average prices received and exchange rates during
2009. Increases in commodity prices increase underlying earnings and vice versa.
A strengthening of the South African rand, pound sterling, Australian dollar and
Chilean peso relative to the US dollar reduces underlying earnings and vice
versa.
Anglo American is exposed to a variety of risks and uncertainties which can have
a financial, operational or reputational impact on the Group and which may also
impact the achievement of social, economic and environmental objectives. The
principal risks and uncertainties facing the Group have been categorised into
headline risk areas. The Group`s approach to risk management is set out in the
corporate governance section on pages 75 to 79.
Key headline risks
Commodity prices
Commodity prices are determined primarily by international markets and global
supply and demand. Fluctuations in commodity prices give rise to commodity price
risk across the Group. Historically, such prices have been subject to
substantial variation as illustrated by the volatility of prices in key
commodities over the last two years shown below.
The impact of such volatility can result in material and adverse movement in the
Group`s operating results, asset values, revenues and cash flows. If the global
economic environment remains weak for the medium to long term, the ability of
the Group to deliver growth in future years may be adversely affected.
Falling commodity prices could prevent the Group from carrying out certain
transactions that are important to the Group`s business which may have an
adverse effect on the Group`s financial condition. An example would be the
inability to find buyers for businesses or assets the Group may wish to sell.
Leveraging the diversified nature of the Group, the general policy is not to
engage in commodity price hedging. The Group manages this risk through constant
monitoring of the markets in which it operates and continuous review of capital
expenditure programmes to ensure they reflect market conditions. A continuous
focus on operating expenditure is also an important method of mitigating this
risk.
Liquidity and counterparty risk
The Group is exposed to liquidity risk arising from the need to finance its
ongoing operations and growth. If the Group is unable to obtain sufficient
credit due to capital market conditions, the Group may not be able to raise
sufficient funds to develop new projects, fund acquisitions or meet the Group`s
ongoing financing needs and, as a result, revenues, operating results, cash
flows or financial position may be adversely affected.
The Group is also exposed to counterparty risk from customers or holders of cash
that could result in financial losses should those counterparties become unable
to meet their obligations to the Group. Cash deposits and other financial
instruments, including trade receivables due from third parties, give rise to
counterparty credit risk.
The Group has an experienced Treasury team who are responsible for managing the
funding requirements of the Group and managing liquidity risk. Treasury also has
a role to play in managing counterparty risk, particularly with banks where
Anglo American places cash deposits. The Treasury operations of joint ventures
and associates, including De Beers, are independently managed and may expose the
Group to liquidity and other financial risks.
Currency risk
Because of the global nature of its business, the Group is exposed to currency
risk where transactions are not conducted in US dollars or where assets and
liabilities are not US dollar denominated. Fluctuations in the exchange rates of
the most important currencies influencing operating costs and asset valuations
(the South African rand, Chilean peso, Brazilian real, Australian dollar, euro
and pound sterling) may adversely affect financial results to a material extent.
Foreign exchange hedging is limited to debt instruments and capital expenditure
on major projects.
Inflation
As the Group is unable to control the market price at which the commodities it
produces are sold (except for any forward sales or derivative contracts), it is
possible that significantly higher future inflation in the countries in which
Anglo American operates may result in an increase in future operational costs
without a concurrent depreciation of the local currency against the dollar or an
increase in the dollar price of the applicable commodities. Cost inflation in
the mining sector is more apparent during periods of high commodity prices as
demand can exceed supply. In addition, any lag in the reduction of input costs
against falls in commodity prices will have a negative impact on profit margins
and financial results.
The Group manages costs very closely and during 2009 has reduced costs through a
combination of headcount reduction, asset optimisation and supply chain
initiatives.
Health and safety
Mining is a hazardous industry and is therefore highly regulated by safety,
health and environmental laws. The failure to maintain the required high levels
of safety management can result in harm to the Group`s employees and communities
near the mines and damage to the environment. This could result in fines and
penalties, liability to employees and third parties for injury, impairment of
the Group`s reputation, industrial action or inability to recruit and retain
skilled employees. Failure to provide a safe working environment may result in
government authorities forcing closure of mines on either a temporary or
permanent basis or refusing mining right applications. Changes in laws,
regulations or community expectations can result in increased compliance and
remediation costs.
Occupational health risks to employees and contractors include noise induced
hearing loss, occupational lung diseases and tuberculosis. The Group provides
occupational health services and continues to implement measures to monitor and
limit the incidence and severity of such diseases. Anglo American sets a very
high priority on safety and health matters, investing considerable resources in
seeking to improve the safety performance of the Group`s operations. The Group
is constantly reviewing practices to improve safety performance and works
closely with unions and governments, striving to produce a safer mining
industry.
The Group recognises that the HIV/AIDS epidemic in sub-Saharan Africa is a
significant threat to economic growth and development in that region. There is a
risk that the recruitment and retention of skilled people required to meet
growth aspirations may be adversely affected. Anglo American provides anti-
retroviral therapy to employees with HIV/AIDS and also undertakes education and
awareness programmes to help prevent employees and their families becoming
infected or spreading infection.
Environment
Certain of the Group`s operations do create environmental risk in the form of
dust, noise or leakage of polluting substances from site operations and
uncontrolled breaches of tailings dam facilities. Failure to manage
environmental risks may result in harm to the Group`s employees, the communities
near the Group`s operations and the environment, government authorities forcing
closure of mines on a temporary or permanent basis or refusing future mining
right applications. The Group could face fines and penalties, statutory
liability for environmental remediation and other financial consequences which
may be significant.
The Group is a large user of energy and one of the key commodities it produces
is coal. Regulatory measures aimed at reducing emissions of climate changing
gases may affect energy prices, demand for carbon intensive products such as
coal and reduced margins on sales of coal.
Policy developments at an international, regional, national and sub-national
level, including those related to the 1997 Kyoto Protocol and subsequent
international agreements and emissions trading schemes such as the Emissions
Trading System of the European Union, could adversely affect the profitability
of the Group.
Assessment of the impact of climate change regulation is uncertain. The impact
of climate change on the Group`s operations is also uncertain and will depend on
circumstances at individual sites. Potential impacts could include increased
rainfall, flooding, water shortages and higher average temperatures. These may
increase costs, reduce production levels or impact the results of operations.
The Group implements a number of initiatives to monitor and limit the impact its
operations have on the environment. It also continually seeks to reduce energy
input levels into its operations and the asset optimisation programme includes a
number of energy saving initiatives.
Political, legal and regulatory
The Group`s businesses may be affected by political or regulatory developments
in any of the countries and jurisdictions in which the Group operates, including
changes to fiscal regimes or other regulatory regimes which may result in
restrictions on the export of currency, expropriation of assets, imposition of
royalties and requirements for local ownership or beneficiation. Political
instability can also result in civil unrest, nullification of existing
agreements or mining leases and permits. Any of these threats may adversely
affect the Group`s operations or the results of those operations. The Group has
no control over changes in local market interest rates or political acts which
may deprive the Group of the economic benefits of ownership of its assets.
In January 2008, Minera Loma de Niquel (MLdN) was notified of the intention of
the Venezuelan Ministry of Basic Industries and Mining (MIBAM) to cancel 13 of
its exploration and exploitation concessions due to MLdN`s alleged failure to
fulfil certain conditions of the concessions. Further details are provided in
the Nickel business unit overview section.
The Group recognises that its licence to operate through mining rights is
dependent on a number of factors, including compliance with regulations. For
example in South Africa, the Mineral and Petroleum Resources Development Act
2002 (MPRD) provides for conversion of existing mining rights (referred to as
`Old Order Rights`) to `New Order Rights`, subject to the implementation of
certain conditions. Failure to fulfil the specific terms of any of its licences,
permits or other authorisations may result in withdrawal of mining rights, with
resultant impact on financial performance.
The Group actively monitors regulatory and political developments on a
continuous basis.
Supplier risk
The inability to obtain strategic consumables, raw materials, mining and
processing equipment in a timely manner could have an adverse impact on results
of operations and the Group`s financial condition. During strong commodity
cycles, increased demand can be experienced for such supplies, resulting in
periods when supplies are not always available to meet demand or cost increases
above normal inflation rates materialise. Any interruption to the Group`s
supplies or increase in costs adversely affects the Group`s financial position
and future performance. Anglo American has limited influence over manufacturers
and suppliers, but takes a proactive approach to developing relationships with
critical suppliers and improving the effectiveness of the Group`s purchasing
leverage through the One Anglo Supply Chain initiative.
Reserves and resources
The Group`s mineral resources and ore reserves are subject to a number of
assumptions, particularly the price of commodities, production costs and
recovery rates. Fluctuations in these variables may have an impact on the long
term financial condition and prospects of the Group.
The Group`s policy on reporting of ore reserves and mineral resources is
expanded on pages 148 to 170.
Exploration
Exploration and development are speculative activities with no guarantee of
success, but they are necessary for future growth. Failure to discover new
reserves of sufficient magnitude could adversely affect future results and the
Group`s financial condition.
Anglo American invests considerable sums each year in focused exploration
programmes to enable resource discovery and development to reserves.
Event risk
Damage to or breakdown of a physical asset, including risk of fire, explosion or
natural catastrophe, can result in a loss of assets and subsequent financial
losses. The Group`s operations are exposed to natural risks such as earthquakes,
extreme weather conditions, as well as the failure of mining pit slopes and
tailings dam walls, fire, explosion and machinery breakdown.
Specialist consultants are engaged to analyse such event risks on a rotational
basis and provide recommendations for management action to prevent or limit the
effects of such a loss. In addition, the Group seeks to purchase insurance to
protect against the financial consequences of catastrophic event, subject to the
availability and cost of such insurance.
Employees
The ability to recruit, develop and retain appropriate skills for the Group is
made challenging by global competition for skilled labour. The failure to retain
skilled employees or to recruit new staff may lead to increased costs,
interruptions to existing operations and delay in new projects.
A number of strategies are implemented to mitigate this risk, including
attention to an appropriate suite of reward and benefit structures for existing
employees and ongoing refinement of Anglo American as an attractive employee
proposition.
Employees in the key countries where Anglo American operates are unionised and
the risk of strike or other industrial relations disputes may have an adverse
effect on the results of operations. Anglo American mitigates this risk through
a process of constructive dialogue with trade unions and the maintenance of
effective working relationships.
Contractors
Mining contractors are used at a number of the Group`s operations to mine and
deliver ore to processing plants, for example. In periods of high commodity
prices, demand for contractors may exceed supply, resulting in increased costs
or lack of availability of key contractors. Disruption of operations or
increased costs can occur should there be disputes with contractors or
unavailability of certain skills.
Business integrity
Many countries where the Group`s operations are located have increased
their emphasis on enforcement of laws to which the Group is subject, including
safety, environmental, antitrust and anti-corruption. The Group has provided
clear standards of conduct to promote full compliance with laws; however,
non-compliance with these standards may lead to prosecution and other l
itigation and adverse effects on the Company`s profits, licences and reputation.
Operational performance and project delivery
Failure to meet production targets can result in increased unit costs, which are
pronounced at operations with higher levels of fixed costs. Variable unit costs
may also exceed forecasts, adversely affecting performance and the results of
operations.
Failure to meet project delivery times and costs could have a negative effect on
operational performance and lead to increased costs or reductions in revenue and
profitability.
Increasing regulatory, environmental, land access and social approvals can
result in significant increases in construction costs and/or significant delays
in construction. These increases could materially and adversely affect the
economics of a project, the Group`s asset values, costs, revenues, earnings and
cash flows.
A number of strategies have been implemented to mitigate these risks, including
management oversight of operating performance and project delivery through
regular executive management briefings, increased effectiveness of procurement
activities through the One Anglo Supply Chain and other business improvement
initiatives to reduce unit costs and improve delivery of capital projects.
Acquisitions
The Group has undertaken a number of acquisitions in the recent past. With any
such transaction there is the risk that any benefits or synergies identified at
the time of acquisition may not be achieved as a result of changing or incorrect
assumptions or materially different market conditions or deficiencies in the due
diligence process, resulting in adverse effects on financial performance,
production volumes or product quality. Furthermore, the Group could find itself
liable for past acts or omissions of the acquired business without any adequate
right of redress.
Rigorous guidelines are applied to the evaluation and execution of all
acquisitions that require the approval of the Investment Committee and Group
Management Committee and, subject to size, the Board.
Infrastructure
Inadequate supporting facilities, services and installations (water, power,
transportation, etc.) may affect the sustainability and growth of the business,
leading to a loss of competitiveness, market share and reputation. The potential
disruption of the ongoing generation and supply of power is a risk faced by the
Group in a number of countries in which it operates, including South Africa.
Anglo American`s approach to addressing this risk is to work jointly on
developing sustainable solutions to these problems with suppliers of
infrastructure services and facilities.
Anglo American relies upon effective rail and port facilities for its products
and will be expected to provide shipment of product in some circumstances to
customers` premises. Failure of rail or port facilities may result in delays and
increased costs as well as lost revenue and reputation with customers. Failure
to procure shipping costs at market rates may reduce profit margins, thus
reducing profit levels.
The Group seeks to work closely with suppliers of rail and port infrastructure
to mitigate the risk of failure and establish contingency arrangements. Services
are provided to customers who require product to be delivered to them and
purchase of shipping capacity is aligned to the needs of Group companies.
Community relations
The Group operates in several countries where ownership of rights in respect of
land and resources is uncertain and where disputes in relation to ownership or
other community matters may arise. These disputes are not always predictable and
may cause disruption to projects or operations. The Group`s operations can have
an impact on local communities, including the need, from time to time, to
relocate communities or infrastructure networks such as railways and utility
services. Failure to manage relationships with local communities, government and
non-governmental organisations may disrupt operations and adversely affect the
Group`s reputation, as well as its ability to bring projects into production.
The Group has developed comprehensive processes to enable its business units to
effectively manage relationships with communities and actively seeks engagement
with all affected communities impacted by the Group`s operations.
Joint venture relationships
Some of the Group`s operations are controlled and managed by joint venture
partners, associates or by other companies. Management of non-controlled assets
may not comply with the Group`s standards, for example, on safety, health and
environment. This may lead to higher costs, lower production and have a negative
bearing on operational results, asset values or the Group`s reputation.
Anglo American seeks to mitigate this risk by way of a thorough evaluation
process before committing to any joint venture and implementation of ongoing
governance processes in existing joint ventures.
Critical accounting judgements and key sources of estimation and uncertainty
In the course of preparing financial statements, management necessarily makes
judgements and estimates that can have a significant impact on the financial
statements. The most critical of these relate to estimation of the useful
economic lives of assets and ore reserves, impairment of assets, restoration,
rehabilitation and environmental costs and retirement benefits. These are
detailed on page 67. The use of inaccurate assumptions in calculations for any
of these estimates could result in a significant impact on financial results.
Useful economic lives of assets and ore reserves estimates
The Group`s mining properties, classified within tangible assets, are
depreciated over the respective life of the mine using the unit of production
(UOP) method based on proven and probable reserves. When determining ore
reserves, assumptions that were valid at the time of estimation may change when
new information becomes available. Any changes could affect prospective
depreciation rates and asset carrying values.
The calculation of the UOP rate of amortisation could be impacted to the extent
that actual production in the future is different from current forecast
production based on proven and probable mineral reserves.
Factors which could impact useful economic lives of assets and ore reserve
estimates include:
* changes to proven and probable mineral reserves;
* the grade of mineral reserves varying significantly from time to time;
* differences between actual commodity prices and commodity price assumptions
* used in the estimation of mineral reserves;
* renewal of mining licences;
* unforeseen operational issues at mine sites; and
* adverse changes in capital, operating, mining, processing and reclamation
costs, discount rates and foreign exchange rates used to determine mineral
reserves.
The majority of other tangible assets are depreciated on a straight line basis
over their useful economic lives. Management reviews the appropriateness of
assets` useful economic lives at least annually and any changes could affect
prospective depreciation rates and asset carrying values.
Impairment of assets
The Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets are impaired. In
making the assessment for impairment, assets that do not generate independent
cash flows are allocated to an appropriate cash generating unit (CGU). The
recoverable amount of an asset, or CGU, is measured as the higher of fair value
less costs to sell and value in use.
Management necessarily applies its judgement in allocating assets that do not
generate independent cash flows to appropriate CGUs, and also in estimating the
timing and value of underlying cash flows within the value in use calculation.
Factors which could impact underlying cash flows include:
Commodity prices and exchange rates;
Timelines of granting of licences and permits;
Capital and operating expenditure; and
Available reserves and resources.
Subsequent changes to the CGU allocation or to the timing of or assumptions used
to determine cash flows could impact the carrying value of the respective
assets.
Restoration, rehabilitation and environmental costs
Provision is made, based on net present values, for restoration, rehabilitation
and environmental costs as soon as the obligation arises. Costs incurred at the
start of each project are capitalised and charged to the income statement over
the life of the project through depreciation of the asset and the unwinding of
the discount on the provision. Costs for restoration of subsequent site damage
are provided at net present value and charged against profits as extraction
progresses. Environmental costs are estimated using either the work of external
consultants or internal experts. Management uses its judgement and experience to
provide for and amortise these estimated costs over the life of the mine.
Retirement benefits
The expected costs of providing pensions and post retirement benefits under
defined benefit arrangements relating to employee service during the period are
charged to the income statement. Any actuarial gains and losses, which can arise
from differences between expected and actual outcomes or changes in actuarial
assumptions, are recognised immediately in the Consolidated statement of
comprehensive income.
Assumptions in respect of the expected costs are set after consultation with
qualified actuaries. While management believes the assumptions used are
appropriate, a change in the assumptions used would impact the earnings of the
Group going forward.
Basis of disclosure
This operating and financial review (OFR) describes the main trends and factors
underlying the development, performance and position of Anglo American plc (the
Group) during the year ended 31 December 2009, as well as those likely to affect
the future development, performance and position. It has been prepared in line
with the guidance provided in the reporting statement on the operating and
finance review issued by the UK Accounting Standards Board in January 2006.
Forward looking statements
This OFR contains certain forward looking statements with respect to the
financial condition, results, operations and businesses of the Group. These
statements and forecasts involve risk and uncertainty because they relate to
events and depend on circumstances that occur in the future. There are a number
of factors that could cause actual results or developments to differ materially
from those expressed or implied by these forward looking statements."
2. Statement of directors` responsibilities
"The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. The directors are required by the IAS Regulation to prepare
the Group financial statements under International Financial Reporting
Standards (IFRS) as adopted by the European Union. The Group financial
statements are also required by law to be properly prepared in accordance
with the Companies Act 2006 and Article 4 of the IAS Regulation.
International Accounting Standard 1 requires that IFRS financial statements
present fairly for each financial year the Company`s financial position,
financial performance and cash flows. This requires the faithful representation
of the effects of transactions, other events and conditions in accordance with
the definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board`s `Framework
for the preparation and presentation of financial statements`. In virtually all
circumstances, a fair presentation will be achieved by compliance with all
applicable IFRS. However, directors are also required to:
* properly select and apply accounting policies;
* present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information; and
* provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
entity`s financial position and financial performance.
The directors have elected to prepare the parent company financial statements
in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law). The parent company
financial statements are required by law to give a true and fair view of the
state of affairs of the Company. In preparing these financial statements, the
directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent; and
* state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the parent company financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company`s website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions."
3. Note 38. Related party transactions
"38. Related party transactions
The Group has a related party relationship with its subsidiaries, joint ventures
and associates (see note 39).
The Company and its subsidiaries, in the ordinary course of business, enter into
various sales, purchase and service transactions with joint ventures and
associates and others in which the Group has a material interest. These
transactions are under terms that are no less favourable than those arranged
with third parties. These transactions are not considered to be significant.
Dividends received from associates during the year totalled $616 million (2008:
$609 million), as disclosed in the Consolidated cash flow statement.
At 31 December 2009 the Group had provided loans to joint ventures of $93
million (2008: $20 million). These loans are included in financial asset
investments.
At 31 December 2009 the directors of the Company and their immediate relatives
controlled 3% (2008: 3%) of the voting shares of the Company.
Remuneration and benefits received by directors are disclosed in the directors`
remuneration report. Remuneration and benefits of key management personnel
including directors are given in note 6.
Information relating to pension fund arrangements is disclosed in note 27.
Related party transactions with De Beers
At 31 December 2009 the Group held $88 million (2008: $88 million) of 10%
non-cumulative redeemable preference shares in DB Investments, the holding
company of De Beers Societe Anonyme.
Set out below are details of certain transactions and arrangements entered into
by the Group with, or for the benefit of, certain related parties of the Company
for the purposes of the United Kingdom Listing Authority Listing rules, being
Central Holdings Limited (and certain of its subsidiaries, together `CHL`) and
DB Investments SA and De Beers SA (together, `De Beers`) which are related
parties for the purposes of such rules by virtue of being companies in which
Mr N.F. Oppenheimer, a director of the Company, has a relevant interest for the
purposes of such rules.
It was agreed that the dividends declared by De Beers to the Group and the other
shareholders in De Beers (including CHL) would be exchanged for loan
obligations. The total amount of dividends exchanged amounted to $118 million in
the year ended 31 December 2008. This total has increased during 2009 by $24
million. The loans are subordinated and are interest free for two years at which
point they become interest bearing in line with market rates at the dates of the
initial reinvestment.
In April 2009 the shareholders of De Beers provided an additional loan to De
Beers, proportionate to their shareholdings, totalling $500 million. Anglo
American holds a 45% interest and therefore provided a loan of $225 million.
The loan is interest free for two years, at which point it reverts to a rate
of interest equal to LIBOR plus 700 basis points until April 2016 and then,
provided all interest payments are up to date, reduces to LIBOR plus 300 basis
points. In the event of a rights issue or other share issue by De Beers, the
Group would have the option to apply amounts outstanding under the loan in
subscribing for ordinary shares in De Beers at the issue price applicable to the
relevant share issue, which will be determined at the time of the relevant
issue. The loan is subordinated in favour of third party banks/lenders and
preference shareholders (including Anglo American) and is repayable after ten
years. These loans are included in financial asset investments.
In February 2010 the shareholders of De Beers agreed, as part of the De Beers
group`s refinancing, including third party debt refinancing, that additional
equity was required by De Beers. The shareholders of De Beers (including CHL)
have accordingly all agreed to subscribe, in proportion to their current
shareholding, for $1 billion of additional equity in De Beers, subject to the
fulfilment of certain conditions. The Group`s share of such additional equity,
in line with its equity holding in De Beers, amounts to $450 million. CHL`s
share of such additional equity, in line with its equity holding in De Beers,
amounts to $400 million. The shareholders have further agreed that the
subscription does not constitute a subscription event under the 2009
arrangements.
Pursuant to the refinancing of De Beers and to satisfy the requirements of the
lenders to De Beers, the shareholders of De Beers, including the Group, have, as
applicable, agreed to:
(i) defer the receipt of dividends or capital on their ordinary shares until
certain financial tests (`Normalisation`) are met and this is currently
anticipated to be during 2011;
(ii) defer the receipt of dividends and mandatory redemption under the
preference shares in De Beers SA until Normalisation. The total amount
deferred by Anglo American is approximately $96.5 million. The dividends
(or interest in respect of such dividends) will continue to accrue on the
preference shares until they are paid and the preference shares redeemed;
and
(iii) enter into an agreement which effectively formalises, in favour of the
lenders to De Beers, the deferral of the rights to dividends or other
distributions in respect of their respective ordinary shares, and, as
applicable, preference shares and payments under the shareholder
loans, until Normalisation; and the subordination thereof.
As part of the process of facilitating the agreed equity subscription by
all the shareholders of De Beers, a temporary re-ranking of distribution
rights was agreed which will result, following Normalisation, in a $20
million distribution to the shareholders of De Beers (including the Group
and CHL), pro rata to their individual equity subscriptions as referred to
above, which will be paid in priority to existing preferences on
distributions under the terms of the preference shares in De Beers. The net
effect of this re-prioritisation on Anglo American, in the event of there
being insufficient cash to pay all dividends then due, is a deferral of
approximately $8 million of dividends, which will continue to accrue
interest until paid."
4. Responsibility statements for the year ended 31 December 2009
"We confirm that to the best of our knowledge:
(a) the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of Anglo American plc and
the undertakings included in the consolidation taken as a whole; and
(b) the Operating and financial review includes a fair review of the
development and performance of the business and the position of Anglo
American plc and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and
uncertainties that they face.
By order of the Board
Cynthia Carroll, Chief executive
Rene Medori, Finance director"
The report of the auditors on the statutory accounts for the year ended 31
December 2009 has been delivered and is unqualified.
Nicholas Jordan
Company Secretary
Anglo American plc
Sponsor: UBS South Africa (Pty) Ltd
Date: 12/03/2010 16:30:09 Produced by the JSE SENS Department.
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