Outlook

The global economic outlook for 2008 is clouded by uncertainty. While it seems clear that US economic activity will be weaker in 2008 than in recent years, it is less clear how economic growth will be affected in the rest of the world, especially in those emerging markets whose growth has been largely responsible for the strong demand that has underpinned commodity prices.

In South Africa, electrical power supply problems are causing disruption to mining operations across the country. At present, it is difficult to accurately forecast the medium term impact of power shortages on Anglo American’s business. We are working with Eskom and the South African government to implement solutions.

Global commodity demand remains strong and seems likely to remain so throughout 2008. Commodity supply worldwide continues to be constrained by skills shortages, rising capital and operating costs, longer permitting processes and strong exchange rates in many of the countries where key operations are located. Industry inventories are therefore likely to remain low and continue to underpin prices.

The medium to long term secular trend of strong commodity demand growth – embracing, as it does, the industrialisation and urbanisation of developing nations, especially China and India – will continue to support prices over a longer time horizon.

As a result, significant new mining investments will be needed to satisfy that demand. Anglo American is well placed to benefit from this favourable backdrop as the Group continues to realise its exciting growth prospects.

Cynthia Carroll

Chief executive