Anglo American : 2021 Interim Results (transcript)

2021 Interim Results

Announcement

Thursday, 29 July 2021

2021 Interim Results Announcement	Thursday, 29 July 2021

Overview

Mark Cutifani

Chief Executive

[Mark Cutifani] Slide 1 - Welcome

Good morning, everyone, and good afternoon to those a little further afield. Thank you for joining myself and Stephen Pearce today.

[Mark Cutifani] Slide 2 - Cautionary Statement

Please read carefully but in your own time.

[Mark Cutifani] Slide 3 - Agenda

Our order of play is consistent with our established routine. I will touch on performance and highlight a few key points. Stephen will then run through the numbers to provide the detailed insights and to reinforce our focus on capital discipline, which is reflected through our returns to shareholders and our capital spending priorities. To close, I will take you through how we are positioning the business for the future and as you have seen from our thermal coal announcements in the half, lots happening on this front.

[Mark Cutifani] Slide 4 - Record first half earnings and ROCE

On results, a record half for us - our highest ever EBITDA in a reporting half, somewhere in the 70% range. The result was delivered despite us running at around 95% of full production capacity. COVID remains a factor and is being carefully managed with our people and across all our jurisdictions. We were also impacted by our current Met Coal constraints, although Moranbah was producing again at the end of the half and development work has restarted at Grosvenor.

Our growing EBITDA margin of 61% tells much of the earnings story, a function of both solid costs and improving product prices. Our focus on quality and delivering value-in-use credit in our product pricing is also part of the difference we are making in those margins.

Return on capital employed was 49% - and if we adjust the capital base for the Quellaveco and Woodsmith projects that impact the denominator - we were at a very pleasing 56%.

Of course, with higher commodity prices has come higher costs - unit costs were up 15% - largely a function of stronger FX. Excluding the FX impact, unit costs were up 6%, reflecting our 5% productivity pause through COVID protocols and some higher input costs as commodity prices have some negative consequences. Stephen will give you a bit more colour in his discussion.

But all-in-all a very encouraging result, reflected in our additional shareholder returns of $2billion, on top of the base dividend of $2.1 billion. That reflects a 77% pay-out, just short of the 80% and from our point of view, if you add in Thungela, the returns look very good.

[Mark Cutifani] Slide 5 - SHE performance - focus on continuing improvement

On safety, health and environment we continue to focus on our improvement journey. Looking at safety first

• we have had no fatalities in the first half of this year. I am pleased with the progress, which reflects the great work of the Elimination of Fatalities Taskforce that we put in place a few years ago. Our injury frequency rates reflect an immediate preoccupation with matters associated with COVID - as you would expect. However, we are working with our teams, to make sure we keep ourselves close to the detail in planning and executing safe work.

2

2021 Interim Results Announcement	Thursday, 29 July 2021

Health cases, ongoing improvements in controls and our focus on eliminating hazards at source are having a positive impact. On the environment - no incidents in the first half. Again, a good result and reflects the work we have done to improve our planning and operating disciplines across the business. But we need to sustain this performance and that requires constant focus, to ensure we are doing the right things, the right way, all the time.

[Mark Cutifani] Slide 6 - Driving a healthy environment & thriving communities

Looking at our broader ESG performance, we continue to make good progress on the critical targets that underpin our Sustainable Mining Plan. We are targeting an absolute reduction of 30% in both energy and GHG emissions by 2030 (and that is from the 2016 levels)., The recovery from COVID has been patchy and require improved operating stability to drive total energy efficiencies.

We have also made pleasing progress towards decarbonising our operations, both on the energy efficiency work and by switching power sources, particularly in South America - from traditional fossil fuels to renewables. As of next year, with the agreement done in Peru on Quellaveco, and recent changes we have made in Brazil and Chile, we will be 100% green mains supply electricity across South America from next year. We also plan to generate hydrogen from electrolysis at our mine sites across the globe, using renewable energy sources. The move to eliminate diesel in our operations starts with these changes and if we are able to get our truck fleets done by 2030, that in of itself would be a ~15% reduction in our operational greenhouse gas emissions.

As you know, last year, we designed our new Social Way 3.0 programme - that is our package of social standards and practices. We are working to fully transition to this new set of standards and processes by the end of 2022, implementing this new higher bar and industry benchmark for community engagement and social performance is very important to us. Our new Social Way package helps underpin our ambitious 2030 target of 5 jobs offsite for every job onsite, demonstrating our commitment to partnering with our host communities and governments.

[Mark Cutifani] Slide 7 - 'WeCare': COVID and the third wave

Throughout the COVID-19 pandemic, our WeCare programme has enabled us to mount a responsible, holistic and coordinated effort to protect people - both in the business and in our host communities, while also making sure we secure and maintain the integrity of our operations. In many ways, the pandemic has proven even more challenging this year than last, particularly in those countries where vaccination levels remain low. We continue to follow a well-planned and managed approach to controlling the spread of the coronavirus and mitigating impacts

A comprehensive suite of robust operating protocols and controls remain in place in our operations and certainly I would expect those controls to remain in place for the balance of the year. The investment we have made in our own testing laboratories helps us rapidly identify new sources of infection and take action to limit the spread. And again, that has been very much appreciated in our local communities, and at the national level. In a few countries that we operate, we represent the most significant privately-run testing programme in those countries. That has certainly been appreciated.

We are firmly committed to vaccination and to supporting governments in rolling out national vaccination programmes. We have already got a programme in South Africa is supported by the government.

[Mark Cutifani] Slide 8 - Substantial contributions benefit all stakeholders

In terms of contributions and benefits to all stakeholders, I am also very pleased to announce today that we will be making a $100 million special endowment to the Anglo American Foundation, providing further support to long term health, education, livelihoods and environmental projects that contribute to our

3

2021 Interim Results Announcement	Thursday, 29 July 2021

sustainable mining targets across the globe, which, as you know, are aligned with the UN Sustainable Development Goals. The funding will go to a broad range of projects, spanning climate change initiatives, health infrastructure, childhood nutrition, clean water and sanitation, early childhood development, as just a few examples.

This investment in the future builds on the comprehensive contribution that we make to our stakeholders that totalled over $25 billion in 2020. It is not just a shareholder story, it is about the good we do on a much broader basis. Having worked in this industry for longer than I care to remember, I am deeply proud of the contribution that both Anglo American, and the mining industry more broadly, makes to the countries and communities in which we operate. We make a real difference to the lives of local people, acting as catalysts for positive change. I do not think many industries can demonstrate such a positive contribution to the countries where they generate their profits as we can in mining.

[Mark Cutifani] Slide 9 - Operational performance - recovery continues

Looking across our key business sectors:

At De Beers, we saw good sales in the first half - a big move against last year. Consumer demand for polished product continues to recover, driving a strong pull for our product, and this is despite the devasting COVID wave in India on sight 4. Longer term fundamentals for diamonds remain strong. Our restructuring work is ongoing and will help us to capture even more value in the future as we reduce the time from mine to finger, increase our own jewellery offerings and do more to capture the full value of the De Beers brand. Whilst we talk about the big contributions from iron ore, copper, PGMs, and other parts of the business, it is important to remember that De Beers is in recovery mode and so in the second half, and into next year, we think it will continue to improve its contribution to the business.

Copper has continued to deliver a consistent operating and cost performance. The near-term water management initiatives we put in place at Los Bronces are delivering results and we are continuing to work on the longer-term solutions to reduce our water footprint across the country. In this price environment, you may see many different stakeholders, including governments, looking for a bigger share of the pie. We need to remember that our contribution to Chile, Peru and other countries is significant and will become more significant. We have been involved in a lot of programmes and dialogues with both government and stakeholders in both countries and those conversations have been very positive - helping people understand the contributions we are making. We think that will help shape some of those debates, particularly in both Chile and Peru, where we think the conversation is becoming quite sensible.

PGMs, a solid mining performance despite the impact of COVID protocols on the underground operations. The ACP is running very well, 18% above plan in the first six months, reflecting both a higher operating rate and some of the technical changes we made in the last refurbishment. We are also seeing much better maintenance availability. So again, a reflection of the due care and attention that Natascha and the team are putting into the unit. The B unit maintenance is on track to be wrapped up in H2. Strong pricing is supporting record margins and cash generation - despite the impact of higher US dollar costs.

In Bulks, we have generated record iron ore margins during the first half, reflecting the quality of iron ore that we produce from both Kumba and Minas Rio with our H1 realised iron ore price at $210/t FOB. Operationally, there was some unplanned maintenance at Minas-Rio but the team there are working to safely recover most of those volumes in H2. At Kumba, the team managed the impact of the much-needed rain in the first quarter very well and continue to work closely with Transnet on the rail.

In Met Coal, Moranbah restarted at the beginning of June - we will take things carefully there as we are still in a tough set of geological conditions. At Grosvenor, work restarted underground in April and the inquiry

4

2021 Interim Results Announcement	Thursday, 29 July 2021

released its findings in May - numerous learnings for both ourselves and the wider Queensland coal mining industry. We are working through those as we prepare to restart the operation towards the end of the year

[Mark Cutifani] Slide 10: Leading competitive position

Over the last few years, as we restructured Anglo, the big headline was 50% less assets; and excluding COVID, we are producing more today out of half the assets than we were back seven or eight years ago with unit costs around 25% lower in nominal terms over that period - and if we exclude thermal coal, we have 60% fewer assets today.

The longer-term improvement approach has been driven by portfolio restructuring, our technical reconfiguration, the Operating Model and P101, which is about focusing and improving on industry benchmarks for shovels, trucks, right across the board.

So today, we are, per the chart, operating at about the 28th percentile on average across the portfolio - an improvement from the 49th percentile a few years back. If you then compare that to our top four peers, they operate somewhere between 33% and 46%. This is based on the inverse margin curve, which takes into account product quality and looks at a breakeven cost in each of our commodities. So our focus on both cost improvement and price improvement for the quality of the products that we produce, delivers that margin, which is the breakeven position.

One example, Kumba, was operating top end third quartile, almost in the fourth quartile. We have taken almost 50% out of the cost - shovel productivities are up 40%, truck productivity load factors are up 10- 15%. So that's moved us to the left. But our focus on going from ~62.5% quality product to ~64.5% quality products, along with the introduction of the new technologies, has kicked our price realisations up at the same time. And the Marketing team is selectively selling to those steel producers that pay for quality.

Putting all those factors together, Kumba is now a first quartile producer and Minas-Rio is at the front of the curve. It shows that it is not simply about cost. It is about cost, it is about quality, and getting value in the marketing - a three-dimensional strategy that is driving margins and driving returns.

The Numbers

Stephen Pearce

Finance Director

[Stephen Pearce] Slide 12 - H1 2021 financial results

Turning to the first half numbers, EBITDA at $12.1 billion; a great result. That has driven a record EPS of $4.30 per share for the half. That translated into $1.71 per share base dividend at the 40% pay-out ratio.

Clearly, the balance sheet strengthened further through the first half off the back of the very strong cash flows with net debt at 0.1x EBITDA - allowing us to announce an additional $2 billion of returns, taking the total returns to $3.31 per share.

This nicely demonstrates the three key themes that I would like you to take away from today's presentation - capital discipline, balance between growth and returns, and continued focus on operating performance.

We are seeing some upward pressure on costs, as you expect in this price environment, largely from strengthening producer currencies and commodity input costs - up 6% on an FX neutral basis and I will talk through costs in some more detail shortly.

5