Operating performance

Copper division 2007 2006
Operating profit ($ million) 2,983 3,019
Attributable production (tonnes) 655,000 643,800

All of the division’s mines, with the exception of Mantos Blancos, increased production. In addition, Mantos Blancos, Mantoverde and Collahuasi all successfully renegotiated collective bargaining agreements without any disruption to the operations.

Los Bronces increased output by 2%, principally due to a 14% increase in cathode production. Despite the attributable loss of 9,200 tonnes of production owing to the shutdown of the SAG mill number 3 (for replacement of its stator motor) and planned lower oxide and sulphide grades, Collahuasi increased its attributable production by 3%. El Soldado lifted production by 6%. Output from Mantoverde was marginally up, while Mantos Blancos was affected by planned and unplanned maintenance shutdowns as well as an earthquake and was unable to offset the impact of lower grades with higher throughputs, leading to a marginal production decline. Molybdenum production rose 8% to 4,400 tonnes, primarily as a result of increases at Collahuasi. Chagres’ output fell by 5% mainly due to the lower average grade of concentrate treated. Adverse exchange rate movements and further rises in the costs of energy, labour and most key consumables impacted all Chilean operations.

Nickel, niobium, mineral sands and phosphates 2007 2006
Operating profit ($ million) 786 426
Attributable nickel production (tonnes) 25,600 26,400

At Codemin, output moved up marginally, but sales were 5% lower following a slowdown in stainless steel producer offtake. At Catalão, niobium production was flat, with higher mill throughput being offset by lower metallurgical recoveries arising from a change in ore characterisation. Copebrás had a spectacular year, with much improved prices and fertiliser sales climbing by 14% to exceed 1 million tonnes for the first time. All of the Brazilian operations saw costs increase as a consequence of adverse currency movements and cost increases in fuel oil, aluminium powder and sulphur.

Anglo Base Metals production

Loma de Níquel’s production declined by 5% due to heavy rains and strike action, while tonnage processed was affected by a planned maintenance stoppage and a series of refractory and equipment failures. These also had a bearing on operating costs which were impacted further by numerous cost and indirect tax increases within a fixed exchange rate and increasingly difficult operating environment. Sales fell from 16,900 tonnes to 14,500 tonnes arising out of a combination of administrative delays by the Venezuelan authorities and weakening stainless steel customer demand.

The Venezuelan Ministry of Basic Industries and Mining (MIBAM) commenced administrative proceedings in January 2007 in relation to the 16 nickel exploration and exploitation concessions held by the Company’s subsidiary, Minera Loma de Níquel (MLdN), alleging that MLdN had failed to fulfil certain conditions of its concessions. MLdN submitted a timely response to MIBAM’s administrative writ in February 2007. By means of a series of resolutions published in two Official Gazettes made available in January 2008, MIBAM declared the termination of 13 of MLdN’s nickel concessions. The 13 concessions do not include the concessions where the current mining operations and the metallurgical facilities are located. MLdN is in the process of filing administrative appeals seeking the annulment of all of these resolutions and requesting that their effects be suspended pending a final decision by MIBAM.

As at 31 December 2007, Anglo American’s interest in the book value of MLdN, including its mineral rights, was $616 million (as included in the Group’s balance sheet). In the 12 months to December 2007, MLdN’s production and contribution to Group operating profit were, respectively, 15,700 tonnes of nickel in ferronickel and $370 million. The average price of nickel in 2007 was 1,686 c/lb. As of 19 February 2008, the price of nickel was 1,259 c/lb.

Anglo American is proud of its record in Venezuela, where it has invested substantial amounts in exploration and subsequently the construction of the country’s only primary nickel producer. It is a major contributor to, and employer in, the Venezuelan economy as well as a significant taxpayer. The operation continues, as it has always done, to work constructively with all stakeholders – employees, local communities and government – and to the highest sustainable development, social and environmental standards.

Anglo American and MLdN are seeking further clarification from MIBAM, with which they have maintained a constructive working relationship in the past. Anglo American and MLdN believe that there is a valid legal basis to reverse the notices of termination and will pursue all appropriate legal and other remedies and actions to protect their respective interests both under Venezuelan and international law. As a result, the Group continues to consolidate MLdN and no impairment has been recorded for the year ended 31 December 2007.

Zinc division 2007 2006
Operating profit ($ million) 654 516
Attributable zinc production (tonnes) 343,100 334,700
Attributable lead production (tonnes) 62,100 71,400

Skorpion operated at design capacity throughout the year, producing a record 150,100 tonnes. Mine operating unit costs fell, reflecting tight cost control and higher volumes, partially offset by increases in royalties and the costs of key consumables. At Lisheen, zinc production decreased by 4% while lead output was down 13%. Higher than anticipated water inflows and poor ground conditions limited mining flexibility, resulting in lower tonnages, grades and metallurgical recoveries. At Black Mountain, mining difficulties related to limited stope availability were compounded by a slower than anticipated ramp up of the infrastructure and ore handling systems of the new Deeps shaft, as well as seven weeks of industrial action. Overall, declining mill throughput and lower grades were only partly offset by material improvements in metallurgical recoveries and 28,300 tonnes of zinc and 41,900 tonnes of lead were produced.

The previously announced sale of Namakwa Sands (R2.0 billion subject to contractual adjustments), and 26% of each of Black Mountain and Gamsberg (combined R180 million subject to contractual adjustments), to Exxaro Resources has yet to be completed, awaiting the approval of the conversion of old order to new order mining rights. The sale is expected to be completed in 2008.