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Other Mining and Industrial Map

Other Mining and Industrial

$ million (unless otherwise stated)   2009 2008
     
Operating profit   506 1,082
Tarmac   101 229
Zinc   175 136
Scaw Metals   131 274
Copebrás   (40) 217
Catalão   106 78
Coal - Americas   (8) 29
Other   41 119
EBITDA   878 1,513
Net operating assets   5,029 5,231
Capital expenditure   268 603
     
Share of Group operating profit   10% 11%
Share of Group net operating assets   13% 16%

Tarmac generated an operating profit of $101 million, a 56% decrease, reflecting a $1.5 billion, or 35%, decrease in turnover resulting from both a fall in demand and the weaker sterling exchange rate, mitigated by significant cost reductions. Volumes showed a further significant decline in the year, with overall demand 20% lower, although Tarmac's leading market positions were maintained. Capacity was mothballed and production curtailed to align with falling demand, which resulted in considerable reductions in fixed costs. In addition, improvements in operating efficiency and a programme of overhead reductions were deepened and accelerated, helping to maintain the EBITDA margin at 11%. Total fixed and support costs were reduced by $464 million, or 29%. Despite the substantial decline in turnover, Tarmac generated net cash inflow from operating activities after capital expenditure of $88 million, compared with $97 million in 2008.

2009 saw a deepening of the difficult market conditions faced by the construction industry in the UK. Driven by the wider economic issues, industrial and commercial construction spending decreased significantly. Continental Europe did not suffer as severely as the UK in 2008, but in 2009 saw declines in construction activity comparable with those in the UK.

Significantly lower demand in the housing and commercial sectors resulted in UK volumes declining by 24%, including asphalt volumes, which had shown more resilience in 2008 than other products. On a like-for-like basis, UK operating profits decreased by 71%.

On a like-for-like basis, Tarmac International's underlying operating profits were 52% lower, with worsening market conditions in France, Poland and the Czech Republic offsetting resilience in Germany and cost savings of $9 million.

Total cost savings of $82 million were achieved by Tarmac in 2009, including headcount reductions of more than 1,200 made across Tarmac during the year, representing a reduction of 11%.

During the first quarter of 2010, Anglo American agreed the sale of Tarmac's aggregates businesses in France, Germany, Poland and the Czech Republic and its Polish concrete products business, with expected total proceeds of approximately $400 million.

Average market price (c/lb) 2009 2008
Zinc 75 85
Lead 78 95
Attributable production (tonnes) 2009 2008
Zinc 350,400 340,500
Lead 68,300 62,900

Zinc generated a 29% increase in operating profit to $175 million, despite lower zinc and lead prices during the year, largely as a result of improved production and sales, as well as lower costs. Production at Skorpion increased by 3% to 150.4 kt, a record production year, where nameplate production was exceeded. While electricity constraints, cathode crane failure and cell repairs were again experienced, the combined impact was negated by various asset optimisation initiatives. Tight cost control and record production resulted in mine operating unit costs being 9% lower than 2008.

At Lisheen, zinc production increased by 3% to 171.8 kt due to higher grades and tonnage mined, while lead output increased by 21% due to higher grades, improved recoveries and tonnes mined. Asset optimisation initiatives in the mine and mill resulted in a record production year.

At Black Mountain, tonnes milled increased by 7% as a result of increased ore production from the Deeps mine. Zinc production was 1% higher at 28.2 kt, while lead production increased by 5% to 49.1 kt with the higher tonnes milled being offset by lower feed grades. Zinc and lead metallurgical recoveries, however, improved by 1% and 3% respectively.

Despite the tough operating conditions in the steel industry during the year, Scaw Metals generated an operating profit of $131 million. The 52% decrease in operating profit was due to the difficult economic environment across all operations, with reduced demand in some key markets resulting in downward pressure on prices. Lower steel prices and the impact of high input and consumable costs resulted in pressure on margins. However, the integrated nature of Scaw Metals enabled the rolling mills to continue to supply the downstream businesses with product, at a time when most major steel mills were curtailing capacity and running at losses. In addition, the careful management of working capital and capital expenditure resulted in strong cash generation. Total production of steel products was 1,411 kt, with the South African operations producing 693 kt and the balance of 718 kt from the international operations.

Copebrás delivered an operating loss of $40 million, due principally to reduced fertiliser prices, partially offset by a 30% increase in sales volumes to 1.06 Mt following good weather conditions in the second half and the depressed fertiliser prices, leading farmers to either restock or increase consumption.

Catalão generated an operating profit of $106 million, 36% higher than the previous year, with sales volumes of 5.2 kt, a 12% increase, resulting from increased capacity at the tailings operation.

Canada

Peace River Coal generated an operating profit of $13 million for the year, having successfully completed its $102 million transition to owner operated mining, resulting in a 16% improvement in mined waste volumes, part of which constituted overburden waste pre-stripping for 2010 and 2011. Metallurgical coal sales increased by 14%, though lower average realised prices, arising from generally weaker market conditions, offset the tonnage increase. Drilling, definitional modelling and environmental approval work were substantially progressed on the Roman Mountain project, which targets the construction of the 4 Mtpa brownfield operation adjacent to the existing Trend Mine.

Venezuela

Carbones del Guasare (CdG) was subject to further economic uncertainty and delivered an operating loss of $21 million in 2009. Sales and production volumes of 0.7 Mt were 30% lower than 2008 and significantly below the performance potential of the mine.

Duncan Wanblad
Group Director Other Mining and Industrial

Duncan Wanblad

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Annual Report 2009