Anglo American plc (AAL) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you very much indeed for joining us this late in December. I'm going to hand over to Mark now to take us through the presentation. And as ever, we'll have Q&A with Mark, Stephen and Tony at the end. Thank you very much, Mark. Take it away.

Okay. Thanks, Paul, and welcome, everyone. The order of play today nothing different to what you've seen from us before. Well, I'll take you through just a quick update on performance. Stephen will then run you through the numbers to help you with your models. And finally, I'll take you through the projects and give a sense of where things are heading from here. In terms of the photograph from the slide that you can see there, some people suggested, that might be from the back of Tony's new hydrogen truck. So happy to answer questions a little bit later. Tony is on the call. And so if you've got any questions, happy to take those questions as well. So Rob, if you can take us to Slide 2, then 3. Okay. We always start with safety, health and environment, no different today. We have been pleased with the consistent improvement across the business. Although, as you can see, we're not getting 0 and so there's always more to do. Since 2013, we've recorded a 97% reduction in fatal incidents, obviously, again, if you don't get 0, it is not good enough. And so still work to be done. We've seen a 93% reduction in health exposures and a 97% reduction in environmental incidents. And if you look at the top 25-odd companies, our improvement in safety and health has been at twice the average industry improvement rate. Some would rightly argue that we came off a more difficult base, but we've continued to improve at a healthy rate. And obviously, for us to target the first stage we want to achieve is 0 fatal incidents, and we're getting close. We can touch it, but we're not quite there. And so still more work to be done. On health, our WeCare program has been our central focus in 2020. Obviously, as part of the -- dealing with COVID, and I'll talk a little bit about that in the next couple of slides, and that's really the focus around lives and livelihoods. And on environment, the emerging maturity in our planning and our associated processes has certainly helped us to improve our performance in the environmental side. In particular, the work we've done on our operating process has really been the key, and that comes with the operating model. And given that we're probably only 60% of the way through that implementation because it is a long implementation program and is very much about culture as well in the way we plan our work and execute work. The focus is very important. And the focus has sharpened up through our environmental work and the program we have, as we call it, Environment 365 has been a key part of that process. So making good progress, but more to be done. So when we talk about safety and health, from our perspective, it's not a box tick. When we talk to our targets for a business, it's all part of the sustainability that we need to build into the business and making sure that the business is both delivering value to shareholders and we're resilient. That is with the portfolio of assets and with our approaches, we are delivering and can deliver consistently through cycles. We look at effectiveness. So when shareholders judge us, we say, the first thing we need to deliver is free cash flow from our operations, obviously, to return some capital to shareholders, to invest in the business and to invest in new opportunities in the business so that we're continuing to give you a balance in terms of value and returns and Stephen, you now will talk about that balanced approach, but it starts with the ability to be able to generate better than 10% sustainable free cash flow through the cycle. And that's our key metric. That puts you in the top quartile of businesses across the mining industry. And we've been up near 12%, 13%. If you can get to 15%, that puts you at the top of the industry through the cycle. In measuring how we got those cash flows, we think it's very important to focus on what equally is important to focus on efficiency measure, which is our return on capital employed. Now, obviously, the marketing difference, return on equity is a little bit different. And we understand those nuances. But overall, as a business, we're looking to deliver better than 15% through the cycle. And that then gives you comfort that we're using your money appropriately in generating sustainable free cash flow. And then finally, across our 7 pillars, safety and health, environment, social performance, people and making sure we've got the talent pool to keep building the business and improving the business, the production based on the resource basis, our unit cost position being competitive. And then having a flexible balance sheet, absolutely key in making sure we can deliver those opportunities are long-term is critical. And then as you know, in today's world, where ESG issues are becoming more and more of the focus, making sure that we're reducing our physical footprints, our energy footprints, reducing our greenhouse gas emissions and making sure that we're doing all the things you are expecting -- expect us to do in terms of navigating and being a leader in the industry across all those rigs and water as well. We'll talk a little bit more about water in the course of the presentation. That's all about creating a sustainable business. In terms of specific challenges we've had in the year, obviously, COVID has been a word that we've all learned to try and understand and cope with in all of our lives, all aspects of our lives. We have applied a very holistic approach, which is consistent with our overall approach in terms of our social engagements and connection with our local communities even through to our federal governments and obviously, through our employees. Our WeCare program, we believe, has been the benchmark for the industry in terms of how we focus on protecting individuals, employees, local communities and how we protect livelihoods for both employees and our communities and on a broader basis have been very important. And certainly, being well recognized right across the globe in all of the jurisdictions we've had to do -- that we actually work in. In making our operations safe, our processes, we were the very quick off the mark in engineering new processes, which came through our operating model, make sure that we're keeping people healthy on our projects. We've got everyone back to work, again, social distancing. So all of this work and all of the things we've done with those communities has really helped build an even stronger relationship with our local communities. And for us, it's been very much about building on the themes, the ESG themes, the connection in terms of communities, all the way through the federal governments, making sure that when people think about the soft issues, they look at Anglo American and say, there's a company we can do business with, whether it's a government whether it's a local community, whether it's an indigenous community or whether it's through our employees, we have to be front and center, and we want to be the go-to company in terms of those partnerships for the long term. And we think that's the only way you can build a resilient business, protect the delivery of returns to shareholders for the long term. We want to be the favorite partner for all of our communities. If you go to Page 6, please, Rob. For those that have watched us carefully over the last few years, we are, as we say, a very different business today. We are still actually in progress. And you can see that through the portfolio restructuring, the operating model implementation, the technical improvements, our focus on the ESG work and our capital discipline, we've gone from a 30% EBITDA margin to 42% in 2019. And the way things are looking, we'll do that at least for this year. So the guys have done a fantastic job in the operations in protecting the business, keeping our cost tight. And with the projects and the work and the cost and volume improvements, we believe our margins will be in the range of 45% to 50%, as we head into 2023, and Stephen will talk a little bit about what we're doing. But certainly, from our point of view, we're on track to deliver on our targets, and that's very important. And certainly, it continues the transformation for us as a business. In terms of portfolio, just looking across the portfolio very quickly, at De Beers, we're seeing some very promising early signs on the demand recovery after what was obviously a tough year. We're closely watching the U.S. selling season, a bit early to call how the Thanksgiving, New Year selling season will go. But so far, quite encouraging despite the obvious COVID issues in the U.S., China has been very strong. So far, things are going pretty well. From our point of view, good work with Botswana in terms of negotiations, getting a 1 year extension. So from our point of view, it recognizes the impact of COVID during 2020 and will allow us time to finalize our conversations in an appropriate way. In stepping back from the current situation, Bruce and the team had been looking to transform the business to align to modern markets. They're in that process as we speak. And from our point of view, it's about making sure that we've got the best business we can in Diamonds -- sorry, and the other point is -- and certainly, the most significant emerging issue is the tightening supply across the industry. Of the 30 million carats we've seen drop out of the market, I'd say at least 2/3 of that probably won't come back into the market given the Argyle closure and other issues. In copper, the team has done a great job continuing to drive efficiencies with strong performance across our operating portfolios, despite continuing water challenges, but they've been able to mitigate through improving their water consumption efficiencies and gaining access to other sources, so that we were able to maintain our guidance. And the guys have done a great job and our unit costs are around $1.10 a pound. And by the way, that's all without the help of by-product credits. The operating model in the P101 work is nicely embedded in the operations. And it certainly sets us up for the next wave of technology implementation that we have through Tony and the team supporting the operations. In PGMs, obviously, a tough start to the year, but the second half being much stronger. We've been able to tiptoe through the tulips with the ACP B unit. And obviously, the news this week that we've got the A unit up and running 3 weeks ahead of what we had originally forecast. And the gearing up has gone really well. The commissioning, they've done a great job. New design parameters, 8 different control systems that we've been able to put in around the bringing up of the ACP, and that's obviously all worked very well. So really pleased with what Natascha and the team have done. And so from our point of view, making good progress, but obviously, still a lot more to be done. In Bulks, clearly, tough year in the early part of the year in met coal but balanced off with some really strong performance by Minas-Rio, best year yet. The Pig Iron has gone really well. The guys had forecast where we have to make some pipe replacements. I think we had 4 lengths of pipe, all planned, all done, all finished on time. Best production ever. Costs have been really strong. And Kumba made a solid contribution for the year, working well with transit, and making sure that we can keep going forward and delivering strong numbers. So with that, I'll hand across to Stephen.

Thanks, Mark. And if we go to Slide 9. So just picking up on some of Mark's points, it's a combination of maximizing revenue through the marketing team's focus, that continued focus around productivity and costs, a strong and flexible balance sheet, returns to the shareholders and disciplined growth. And these have been and remain our focus areas as we go forward. And as you know, one of my favorite sayings that Mark mentions is, it's all about balance and getting that balance consistently, right, even though it may move suddenly over time. So we've continued to generate good cash returns, $5 billion returned to shareholders since '17. We've maintained our strong balance sheet and even after a particularly tough first half. We are looking to add around that 20%-plus growth in copper equivalent volumes over the next few years. That's around 20% by the 2023 mark. And then a year or 2 after that, as we bring on things like the MG debottlenecking, Moranbah-Grosvenor expansion, bring us up towards that 25% growth in volumes by 2025, and we think that really helps to set us apart. So alongside this, again, a combination of cost of productivity, some of the technology and automation brings our margins up towards that 45% to 50% mark. If I can now move on to Slide 10 and some more detailed guidance around the 2020 year. So calculated and spread sheets at the ready please. So looking at the likely full year 2020 numbers, CapEx will be very much at the low end of the range that we've guided. It's driven by a few items that have been necessarily sort of rephased or rolled over to 2021 and '22. And we highlighted some of that in our July half year. So also continued dollar strength for much of the second half, the impact of those exchange rate helping to bring the amount down, although I do note it's somewhat normalizing at the moment. Of that $4 billion, about $2.6 billion is in sustaining capital. And we do include Lifex expenditure in that sustaining capital, perhaps a bit differently to others and about $1.4 billion in growth, the majority of which is Quellaveco spend. So in terms of inventory, we have seen an inventory build in half 1 as we flagged at the half year results, and we were hoping to wind that down a little bit in the second half but as we said on last month, with a small gap between bringing the ACP B unit down and the successful start-up of the A unit. It means that in PGMs, we have seen a further build in the second half. We've also elected to take some advanced purchases of diamonds from Debswana to position us well for Q1, if we do see that continued recovery in demand. So we are expecting a build of around that $1.7 million for the year. We'll try to work that down a little bit between now and the end of the month, but really the major rundown of that will happen over that next 18 to 24 months. So alongside all of that, pleasing performance on costs. So all the business units are on track except met coal, that have a slightly higher outcome around that $85 rather than the $80 a tonne that we previously guided. But overall, the teams have worked incredibly hard through the year consistently, tirelessly. We've had a little bit of help from FX. But where we land is even despite 9% lower production unit costs are better than those in '19 by 3%, which I've got to say, I'm very pleased with that outcome from all the hard work that the team have done. A few other guidance points, depreciation at $2.7 billion, so a touch lower than we originally expected. Again, FX, probably the main influence there. Cash interest around that $400 million, in line with last year. The P&L is a touch higher because you got some of the fair value type accounting and things that come through that line these days. Tax rate for the year around 32%, though we would expect that to come down more into that 30% to 33% range going forward. And as always, just to remind you, while always subject to Board approval, our dividend policy remains at a payout ratio of 40% of underlying earnings. So if we go to Slide 11. With all these moving parts, still good underlying cash flow, a good balance sheet as we move into 2021, and we continue our growth and transformation journey. So on the capital front, we've seen some work deferred from this year, and we're guiding then that will carry over around $300 million into each of 2021 and then subsequently 2022. In 2021, we're now incorporating a $500 million planned CapEx spend for Woodsmith in 2021, predominantly around the tunnels and shafts where we continue to make really good progress. There's also around $100 extra million spending on gas and water management. And so that takes our '21 guidance to that $5.7 billion to $6.2 billion range. As we look further forward into '22, largely up just driven by those rollovers that I spoke about earlier, and we're now anticipating the construction of a desal plant at Collahuasi and while it hasn't yet been formally approved, it's a good example where we're sort of pre investing for that next phase of growth enabling initiatives. But also underpinning existing operations and those future projects in a more sustainable way. We'll pick up a little bit of debottlenecking in PGM's processing and I do note that in 2022, we've shown this number before, any Woodsmith CapEx, and we'll come back to you with a firm estimate on that once we have completed our review through the first half of next year. As we've said previously, you will see a start to spend some moderate amounts of money on sustainability initiatives, particularly in the areas of water, management, gas management, as well as bulk ore sorting and coarse particle flotation. All good initiatives from a sustainability perspective, but also very much from an economic returns perspective. From 2023, we'll be investing in value-adding Lifex spend and principally around Diamonds, Kumba and PGMs and I expect we'll also start to move the hydrogen truck initiative forward once we have completed that initial phase of testing. Also, just to remind you that we will be delivering that 20% growth in copper equivalent production across that '23 period, that also comes with a dollar spend to sustain it. And then with an attractive range of brownfield projects coming, Collahuasi, Mogalakwena, Moranbah-Grosvenor et cetera, pushing to that 25% range by 2025. So on to the next slide, please Rob, Slide 12. So improvement initiatives. So I want to really emphasize here, it's not just about growth. It's the only part of our story, but the growth, I think, does set us apart but I just briefly wanted to touch today on that -- those blocks of value that we have been focusing on over the last couple of years and the guidance we gave out to 2022. So we continue to drive operational improvements through the operating model and the P101 work. We've seen great performance Mark touched on this year at Minas-Rio and copper in particular. We will unpick these numbers in a bit more detail when we deliver the year end February results, but the operational work very much on track to deliver those underlying run rate improvements of $1.5 billion. On the technology and innovation side, you heard from Tony back in October on some of the progress that we've been making, bulk ore sorting is rolling out, going well. See the first of the CPR, the Coarse Particle Recovery units is in construction at El Soldado, and that's due to commission in the first quarter of '21. We're also seeing some really good results from some of the digital technology that we've been implementing, advanced process control, really helping to drive some of those planned efficiencies. So on the project side, again, on track, and Mark will cover some of those specifics shortly. So in combination, very much on track for that $3 billion to $4 billion run rate of improvement in performance and really good confidence that with the initiatives we're working on, you'll see that continue also into that '24, '25 period. So in summary, as we move to Slide 13, really good growth in the near term, and I encourage you to look at the production guidance in the appendix, particularly regarding Quellaveco and put those numbers into your models. And for 2021, a further 3% improvement planned in unit costs next year. It continues that improvement in cost journey around cost, volumes and margins. Mark, back to you.

Thanks, Stephen. The conversation around our growth. From our perspective, value-added growth is really where the focus is. At Quellaveco, the buildup of activity in the second half has been pretty solid as we remobilize the majority of the workforce. We're currently running at about 10,000 people on site. So the productivities are picking up. And as we look forward, we believe we're on track based on all of the reforecasting work that's been done, so very pleased with the progress that's been made. We've implemented a whole range of social distancing requirements. We talked about the cost provisions that we've made for that being in the numbers, no changes to any of those numbers. We expect to spend around $1.3 billion to $1.6 billion in 2021. Of which, our share will be $800 million to $1 billion. Again, that capital range remains in the $5.3 billion to $5.4 billion range. And whilst we were running probably closer to 6 months ahead when we were hit by COVID, the guys have done a fantastic job in holding our original target schedule and so we expect to have a real good run at that. And certainly, from our point of view, based on the full manning on so. And based on what we've seen so far at testing the way the guys have managed the processes, we're pretty confident that we can continue to manage through even on the expectation, there will be a few more bumps across the globe in terms of COVID. But situation has been very well-managed by the guys. More widely in copper, we're working through the permitting for the Collahuasi expansion and the Los Bronces underground projects as well. So the position in copper is fantastic for us heading towards 1 million tonnes of copper. And so from our perspective, in good shape and very excited and very pleased to see pricing going where it's going. So we're hoping that in 2022, we've got our timing pretty well right in terms of bringing additional production to market. Clearly, the ESG transitions continue to underpin that growth. We think they are real. We think they are solid. Look, if anything, we think the transition will continue at pace and benefit those metals that will support that transition. And fortunately, we're in a good -- pretty good place with copper, nickel PGMs and so from our perspective, a good place to be. Again, very pleased to be on the front foot. And if you look beyond Quellaveco, Collahuasi, Los Bronces, we've also got our polymetallic project up North in Sakatti. And so again, lots of opportunities, and we're going through the permitting process for Sakatti as well. On crop nutrients, Woodsmith, I've got to make a simple observation here when we've been asked about approvals and going forward. I think the way to think about what we've done is we bought a developing project when we acquired Woodsmith. And so we've been encouraging the team, supporting the team going forward with the project execution and the different parts of the project are in different places. And so you've got the mining and the development of the mining strategy and the tunnels, and they're doing extremely well. We are not far off starting the shaft. So the infrastructure side is starting to come together. You've got the processing area, which is not big in the scheme of things, but it's very important in terms of the product we produce. And obviously, you've got the marketing. Each one of those are progressing as we go forward. But in our technical reviews, and we had seen these issues through our pre due diligence work, we are supporting the team with some changes to concepts in mining. We're helping them on the infrastructure side, setting up for the shafts and making sure that we've got the technical issues covered there. Processing looks pretty solid. I think question do we have enough capacity in a couple of areas. And again, in our acquisition model, we made the right provisions for those sorts of things. And we've got 200 farms testing our product as we speak. And the feedback on the marketing side has been very strong. So our commitment or our decision to increase the spending, as Stephen said, reflects our focus on and understanding of the critical path being tunnel in the shafts. So we're going to keep those moving forward. We will be at a way point in February that we'll update you on regarding the technical side. And we'd expect to be going to the Board with the next phase or the more detailed execution plan that we expect on a go-forward basis. So I don't want people to be confused in terms of are we going to go ahead or not. We are going ahead. We are in process, but we're making sure it's done well. It's executed to the plan and we deliver on that potential, making sure all of those 4 elements come together the right way. And again, we're very excited with what we see. We believe that what we thought we bought, we've got and if anything, on the marketing side, it's looking more encouraging. So I don't want people to be confused about whether they think we're going ahead or not, we are. And we're doing it the right way, and many lessons have been applied in terms of what we've seen over the last few years to our experience and the way we're working with the Woodsmith team. In terms of the future and connecting a whole range of other dots, we already have a very different portfolio. And Rob, sorry, I'm on Slide 18. We've got a very different portfolio to many of our peers, as you know. Our suite of product, suits demand from a consumer-driven world with growing population, an increasingly electrified world and a greener world as a focus on preserving our environment leads to changing behaviors in a range of areas. It's increased renewables, the growing hydrogen economy, which we've been talking about for a number of years, tighter emission standards and more modern cleaner steel-making. More than half of our output is focused on consumer-led and environmentally led demand, and that number will increase. As you can see from the chart, we go to a 65% of the latest cycle products. One of the key areas of our strong and value-adding organic growth in our copper business is also that focus on those other parts of the portfolio. And clearly, Woodsmith as a swap for thermal coal looks today to be a really good move in terms of the portfolio. And from our point of view, has the potential to be a much more significant contributor than our thermal coal business. So again, we think we're making the right choices from a portfolio perspective. Our steel-making raw materials are high grade, both in iron ore and met coal, and therefore, less wasteful than lower grade peers. We are positioned to run the business sustainably and being disciplined with our capital to grow the business in terms of cash flow and returns and improving right across the portfolio. And again, the thinking around balancing the portfolio, investing capital in the right time frames, growing the business, growing margins and growing in those areas where we believe the market will support positive outcomes in terms of the sale of those products is absolutely key business at the future. In terms of the Bulks, we talk about high-quality Bulks for a developing world. Part of that portfolio shift actually comes from the Bulks business. And again, our focus has been on high-quality competitive cost positions on which we think will be advantaged over time in the markets we operate. If you look at this chart, you can see where we were in 2012 with our thermal coal, met coal, iron ore mix. Clearly, the pathway out of thermal coal has been pretty clearly set in terms of our intention to demerge the South African thermal coal operation, certainly within the next couple of years. And the feedback so far from our stakeholders have been very positive. Again, at Cerrejón, we would -- we are currently looking at the best way to take our position forward. Clearly, not a straightforward exit, given we have 2 other partners. But again, we'd expect to be out of the asset within 1.5 to 2.5 years. So the Bulks portfolio is then high-grade iron ore, high-grade met coal. And if you look at the revenues and the EBITDA contribution for that portfolio against where we were in 2012, you'll pretty quickly work out that the EBITDA contribution is much more solid, much more robust and certainly much more robust on a go-forward basis compared to where we were in 2012, even though the tonnes of material that we're putting out is reduced. It's about the quality, it's about the focus and it's about the focus on margins. And so from our point of view, the business is well positioned and if you look at our EBITDA contribution in 2012 versus today, we're generating more EBITDA at 25% lower prices for those commodities compared to where we were in 2012. So that also shows you how much we've improved the quality of our business and our costs across the business. And that's certainly driving a very different and very positive performance across the Bulks position. De Beers, at the consumer end of the portfolio, just worth highlighting the early signs of recovery in the second half of the year. Sales have picked up in the last 3 sites, in particular. And as we said, we will wait for the key selling season results in Thanksgiving and New Year. So far, looking solid. But certainly, we can't give you any better feedback until we get through the New Year. Clearly, COVID is having an impact on the U.S., but it does look as though people are still buying. So we'll update, obviously, in the new year, but so far, things have looked pretty positive. What is the most important thing, we think, in terms of the industry is the fact that we've seen destocking in both the midstream and the downstream. More so than we've seen since any time I'm aware of and certainly since 2008. And so we estimate the destocking the midstream is about 25% and that leaves a pretty solid diamond value chain, well positioned to pull demand through pretty quickly as sentiment improves. And on the other side of that, you've also got the situation in supply, where you've got 30 million carats, the Argyle position coming out of the mix. And we're guessing 2/3 of that $30 million probably won't come back. So you're now moving into a market where we think there is potentially a supply deficit. Yes, we've got incremental production available that we can bring on. But it will be brought on responsibly and consistent with what we see as appropriate for the market. And certainly, the one thing I did want to say is you'll know we'll be a responsible producer and we'll look to protect and improve our margins, and we expect to see pricing to reflect those challenges in the market. And so from our point of view, we like the look of diamonds, a little bit more to be done and we hope that the -- and we expect that the investments we've made in marketing will certainly yield positive impacts as well as we focus on our brands and continuing our restructuring through the business. PGMs, pricing has also been very strong. It is based on fundamentals, and that's the important point to make. It's not a bubble. Tighter emission standards in Europe and China, in particular, are driving demand for palladium and rhodium. And also a diverse range of other demand sources continues to emerge: food storage, glassmaking, 5G technologies being some of those new examples. The key point here being that these are young metals with unique properties and the fact that we're putting money into venture capital organizations and driving new demand opportunity or the understanding of new demand opportunities tells you something about us as a company in investing in the products that we produce and investing in their future demand, and that's critical. And from our perspective in diamonds, in precious metals, and where we can in other metals, we will look at all parts of the value chain to look to drive the demand for our products as well. Consistent with identifying an opportunity and consistent with our whole technology platform, Tony and the team have done a wonderful job pulling together and designing a new hydrogen battery hybrid truck. We expect that, that will be in play early next year. We certainly believe that, well, it is the first of its kind. And to start or to have a standing start 3 years ago or less than 3 years ago and to be building a truck and have it on the ground within 3 years of first concept is something remarkable. And for those that have tracked some of the developments of high-profile electric vehicle companies, no one's done it as quick as Tony and his team have done in this case, and so we're looking forward to that prototype being on the ground next year. And certainly, a whole range of other technical developments we have are really driving the business towards a different set of outcomes, which also underpins our approach in terms of energy reductions and carbon neutrality objectives, both in 2030 and through to 2040. And so for us, and to Stephen's point about ESG investment making good business sense, we think the technology developments and the position we're taking across the industry will help us drive our cost and efficiency improvements, but also take us into a very different place in terms of ESG. And certainly, we believe that we can take and are taking a leadership position across both technology and ESG development perspectives. Rob, Page 23, hydrogen trucks are part of that pathway to a greener world in terms of our grid strategy. This fits with our commitment towards the environment and minimizing our impact and footprint. We've also committed, as I said, to making the business carbon neutral by 2040. And from our perspective, we have a pathway. Tony and the team have developed the strategies and are working on the plans in terms of delivering the 2030 targets and the 2040 targets. But we've also got to point out that it's also about water. And about our physical footprint. When you go back and look at where we came from in 2012, with almost half the operations, we're producing 15% more product. And as a consequence, the physical footprint that we occupy in delivering that production is significantly higher. That is the capital intensity has increased -- well, the capital intensity is reduced. Our production intensity has increased and that's how we've driven a better than 30% nominal cost reduction across the portfolio or somewhere almost about 46%, 47% real cost reduction. The ESG energy reduction goes with efficiency, improving margins and returns. They fit together it's about the same conversation. We've been saying it for the last 5 years, you can see it in the numbers. And from our point of view, that's how we believe we can continue to improve our margins to that 40% to 45% to 50% range that Stephen's been talking to. We're also making good progress on bulk ore sorting, coarse particle recovery and a range of other technologies and also the P101 work. So certainly, we think those initiatives are really positioning ourselves in a different place. And the fact that we're building the relationships with our local communities in a very different way as well. And I have to say a lot more work to be done, but that's also a differentiator from our perspective in terms of where we're building, where we're developing projects and what we believe we can do with our local communities. And then finally, to Page 24, Rob. Just a simple final message. From our point of view, our investment proposition is about the portfolio and our assets, making sure that we've got assets and resources that can be made competitive and we've demonstrated the ability to transform those assets into assets that are competitive at any level, and we're right up with the best in the industry in terms of our costs and our productivities. Our capabilities, we've worked hard to differentiate those capabilities around understanding resource endowments. Understanding technologies and technical changes across the group that have been significant and connecting that to our sustainability strategy and making sure that we're producing the products to support the world's growth in a way that can be supported, and that does create a resilient business, high value adding, resilient business for the long term. And as Stephen says, we're trying to make sure we've got that balance right so that people will continue to support us and our growth story for the long term. So with that, happy to take questions.

Right. Thanks, Mark. Let me just remind everybody how to ask a question. If you go to mentee.com, I'm hoping it's familiar to all of you, enter the code please 5035129. [Operator Instructions] We'll try and get through as many of the topics as we can, we may group some together. Just please bear with me while we get the first questions coming in. Right. Mark, first question from Jason at Bank of America on Tech. Rolling out ore sorting that can impact 100% of feed at 3 mines, big uplift to greater mills. Should we take the benefit of that as increased metal output? And is it reflected in the new guidance, similarly on coarse particle flotation, please?

Yes. Thanks, Jason. The P101 work and the technology improvements are part of the growth you've seen going forward and the cost improvement that we expect to see going forward. Whether we've captured all of those I suspect we haven't because Tony and the team are doing some really good stuff on a whole range of fronts that aren't in there. But yes, they have been reflected in the numbers, and they support the numbers. Tony, is there anything you wanted to add to that?

In the budgeting process, the coarse particle recovery, the bulk ore sorting are included in the numbers. So where we've got the technology, in our view, is stable. It's in the numbers. The newer technologies coming through behind this, and there are a number of them are not in the numbers.

And Mark, I would just add that some of these benefits as we implement the technology and roll it out across different plans, you'll see more strongly through that probably in the end of '22, into '23, '24's financial numbers in particular. So there's a lot more to come as well.

Yes. So Jason, to Stephen's point is an important one. And Tony and Stephen are talking to 2 sides of the same point. They're working together on the things that we include in these ore cast are things we have planned for and delivering in our budgets. There's a whole range of other things that Tony is working on that we think can overlay and improve but we won't bring those out and talk to those until we're comfortable that we've got an outcome. It's a bit like testing vaccines. Until you're comfortable that you don't have any adverse impact. You won't say that they are going. So that's where we are at the moment. So if vaccine testing some new stuff that will probably hit the numbers, 24, 25, 26, and that's Stephen's point.

Second one, Mark?

Yes.

Collahuasi desalination plant, is this to underwrite existing production or for growth production or for both?

It's actually both, and it goes with the coarse particle flotation as well. So it provides us for both. What it does is we thought now is the time to get both in place so that it gives us a lot more headroom in terms of what we want to do going forward. So we think it's prudent, we think it makes sense and certainly, with copper where it's going, we think it's a great place to be.

And Mark, it does, as we've highlighted on that slide, does account as well as the rollovers, that a little bit of step-up in the capital across those years, too.

Yes. Thanks, Stephen.

Supplementary on that, Mark, how should we think about time line to approval of the Collahuasi expansion projects?

I'm thinking closer to '22, '23, Steve, Tony, you want to add to that? It will be about '24, '25 before they come through physically it's around that range. Steve, what do you got on that point?

Mark, yes. I would hope that we, with the partners at a position for taking this forward by the end of '21. There's certainly a lot of work being done, looking at the different size options. And I think as some of these technologies come through, they're changing and actually improving the options. And that's -- if we take a little bit longer, that will be the reason, but I suspect that there will be better outcomes than we originally imagined.

And therefore, Mark, yes, that production will be more in that time frame that you'd indicated that sort of '24 time frame.

So if you take the approvals into '22, as described by Tony, Jason and give yourself an 18-month to 1 year lead, the earliest would be '24 with the bulk of the full year -- first full year benefit, probably '25, Steve?

Correct.

You'll get a bit of it in '24 into '25.

Next question. On Lifex, can you clarify on this? Should we not be modeling sustaining CapEx of $4 billion in the long term rather than $3 billion?

Stephen, do you want to pick that up?

Yes. So in the sustaining capital, so we've sort of indicated that $3 billion, and that's probably broadly split $2 billion staying business type projects and $1 billion stripping mine development to make up that $3 billion. You will get some timing with Lifex from time to time, right? So sometimes, you'll end up doing 2 life extension projects at the same time, and so that will be a bit higher. We do try to include that in our sustaining type numbers, right, rather than growth. Because we just think that's a fair representation. If you're not really adding materially to production, it's really just about replacing existing production. I know other people might do it a bit differently, but we think that's a better representation. It will vary a little bit from year-to-year in just how some of those things grow. Some of them that will come through, I don't have huge dollars in any given year. So if you're doing an X cutback at one of the diamond mines, it might only be $100 million in any 1 particular year as you do it over a number of years. So it does vary a little bit. I'd be surprised if it wasn’t that much in any 1 year.

Yes. I think -- Stephen, we said it, it's probably close to $3.5 million on a run rate basis. But don't forget, we're increasing our production by, call it, 25%. So you would expect higher contribution. But Quellaveco will add about $100 million per year on sustaining capital. So the contribution from Woodsmith and Quellaveco in terms of sustainable capital is actually quite low. And in fact, it's well below the average per unit of production that we produce so the unit contribution to the unit sustaining capital to which production unit is actually lower as we grow in our current configuration. So it's probably around $3.5 million, but it's a little lumpy, as Stephen described. Stephen, are you comfortable with that?

Yes, very comfortable. Thanks, Mark.

Thank next question, Alain at Morgan Stanley. How should we think about the PGM volume risk in 2021 and assuming that you -- that the Phase B plant will not be fully available as a backup?

Yes. Look, I think it's at lower risk. And let me explain it. So we basically commissioned the A unit and Natascha oversaw with her team, that process with the 8 changes she made to the whole control system. There were some hard controls, and there were some south controls. And Tony and his team was right in the middle there with her. So I think we've certainly improved the integrity of the process. And the efficiency of the process given they've got away so quickly. So I'm really pleased with what I've seen. In the rebuild of the B unit, they have some new technologies that we've introduced in this current unit, which means that for the next 6 months, we'll be going through the rebuild. But by the way, we do this every 3 years anyway. Then after that, so I still think that the way we're running the A unit with the controls we have, probably lowest of risk that we've had previously that you've not been able to see. And on the next cycle, she'll then be able to break out the rebuild into 2-month lots so that if at any time you have a problem, you're able to reconstitute the old unit and get it back online if you've got a problem with the operating unit. So I think the next 6 months, it's much lower, given the controls we've now got in place on the A unit. And then on a longer-term basis, the strategy, when we're doing the rebuild of the off-line unit will be very different to what's been done in the past so that you were able to box things up very quickly and have an effective unit for that 6 months where you don't have that full unit available. And then for 2.5 years, you've got the second operating unit fully available. So I think it's very manageable in the next 6 months, no different to what we've done over the last few years, but we have a very different strategy that will change that profile as we look forward. Tony, are you happy with that description?

Well, if I'd like to add to it, Mark, because I think it's a broader question. So on -- if we look at next year, we would hope that our P101 program is largely complete next year. And we've got the business to these much higher operating levels. So -- and our key focus next year will be starting to work on stability at a much higher level. And so we're starting granular programs around that using the operating model. I suspect, if anything, you'll see a much more stable business and more productivity again. But it was too early to predict anything, but the other one part from the innovation, if you like, they are the 2 major technical pieces next year.

Alain, that's why I said that we only think we're about 60% of the way through the operating model work. It's the service strategy stuff now. And the stability staff that Tony talk to that's a big opportunity now to improve the business going forward.

The next question comes from Sergey at SocGen, both on Los Bronces. One was the outlook for the water availability? And two, can you give an update on the permitting process on the underground? And when would it be realistic to have the project green lighted?

On the water, Tony, do you want to talk to the water, you're happy to move that?

No, you carry on Mark.

Okay. On the water, we've been able to work with CODELCO and we're able to take off their excess water. So we've got a good source of water there. We've continued to improve the efficiency of our water consumption. And so at the moment, it's not a material constraint on the operation. The guys have done a fantastic job this year. So at the moment, we're doing pretty well. Precipitation for the year is about 60% -- I think it's about 70% of a normal year, and that's enough now given how we run the place to keep it going forward. So we don't see it as a constraint this year or in terms of -- we'll certainly do well in our numbers. And we're in pretty good shape for next year. But with the introduction of coarse particle flotation, that improves our position again. So we're in pretty solid shape. In terms of the underground, we have started the process, but it's a 3-year process. And what you're doing is the mining method protects the glaciers or the brand glacier area. So I think it's all consistent with the environmental requirements to make sure that we're protecting those structures. And that's around about a 3-year process. Tony, did I get that right?

That's correct, Mark.

Steve, do you want to add anything?

No, all good. Thanks, Mark.

Okay.

Next question, Daniel at Bernstein. Diamond production guidance has been lowered in '21, '22 and kept low in 2023. Is this Anglo's exercising conservatism or has there been a structural market change?

Thanks, Daniel. We have been prudent given -- if you look back to '18, we had the Indian financing issue. That's -- that has been sorted. So you're starting to see refinancing of the midstream financing issue seems to have been sorted. We've had the U.S. uncertainty last year, the year before, when the government was shut down that knocked us around in the Thanksgiving U.S. period. So Daniel, there is an appropriate degree of prudence being exercised in what we're forecasting going forward. And we certainly aren't going to be a contributor to overstocking across the industry. Now given the supply situation, we're going to watch that very carefully. We think that will be the key. And we won't push more production out there unless we're comfortable prices are going to increase. Current prices, in my view, will put additional pressure on producers and production and you'll see production fall away at these sort of levels because the industry in many parts of the industry can't support or can't be supported at these prices. I'm expecting prices to improve just through dint of demand. But again, I think the prudence we've shown in that forecast is appropriate. I'm hoping we do a lot better, and we can if the market is there, but we just want to make sure that we're on the right side of these conversations and we see a recovery in pricing, which we think is critical in terms of the industry. And you'll see it anyway because the supply will continue to drop away price and then pick up. So again, I think we're being appropriately prudent.

Mark, just to add there. Obviously, we've been carrying a little bit of excess working capital through this year, in particular. I commented in my notes, we bought a little bit of extra stock off to Debswana to start next year. And so with a little bit of adjustment between production and sales, you should see those things play out quite nicely.

Yes. And I think you've got a -- if you have a weakening U.S. dollar, it's certainly supportive of diamonds as well. So we'll wait to see how those moving parts play out, but we're hopeful but we don't want to get ahead of this.

Next question from Ian at Barclays. With higher CapEx guidance over 2022 and beyond, what do you see as maximum CapEx you would consider to spend in any 1 year? And with further project approvals, could guidance increase further?

Look, it's a function of debt and what we see on a look forward basis and what projects we've got. So Stephen, do you want to just talk about how you think about the debt?

Yes. So nothing has changed in terms of our sort of mantra of one major project at a time. So it will depend where and what scale that project would be. As Quellaveco gets closer to completion, potentially Woodsmith steps up into that breach as being the major development program. I think as we've said, some of the sustaining type capital levels will just step up a little bit given the production is stepping up so significantly. Yes, the sort of 20% to 25% out of that 3 to 5-year period. So some of it is for a very, very good reason. And what will follow from that? Well, it depends on the opportunities that we decide to pursue, which depends on markets, on balance sheets, on readiness, et cetera. The great thing that we have spoken about is that we have a nice suite of projects that potentially line them themselves up over time. Not all of them are that mega multibillion-dollar project, a lot of them fall below that level Moranbah-Grosvenor expansion, even a Collahuasi expansion is like a $5 billion type Quellaveco project. So we think we're well placed. We will balance out those things as markets and capacity makes sense. So I can't really give you a number because it will depend on circumstances. We'll always try to be transparent several years out. But always conscious of the capacity that we can afford and this require.

Yes. Maybe if I help in that conversation, Ian, and I'll give you a different angle on it that complements what Stephen says. If you think of it this way, if you look at Quellaveco this year, our share will, let's call it, next year is about a bit -- call it round numbers $1 billion. We'll put $500 million into Woodsmith, and you've got a sort of a natural progression where Woodsmith would follow Quellaveco, but there's always a tail and a lead. So between the 2, you've got $1.5 billion. We've got the capacity organizationally to be in sort of around the $2 billion quite readily in those types of projects. But as Stephen said, the idea is you have 1 big 1 open at a time. You don't get yourself in a position that the company got itself into 2012 and 2013 when we came in. So I think that number is an important one. You've also got Tony's $200 million to $500 million on incremental improvements, technology stuff, which is a different team in the organization, implementing that stuff. And then you've got your sustainability stuff that will move in and out. So if you sort of reconstruct those numbers, you have a better sense of our organizational capability to spend those funds sensibly, appropriately and efficiently then that will give you a number or a ballpark number. And that is absolutely consistent with what Stephen is saying into then what we look at in terms of debt and affordability in the portfolio. So we sort of looked across all of those dimensions in making sure that we're managing the organization in control and not letting ourselves get ahead of ourselves and get out of control. So that means you can do a Sakatti and you could do a Mogalakwena at the same time because they're not big projects in of themselves, and we've got the capacity to do that sort of work. But if you go big $5 billion or $6 billion type of project, then that takes a lot more resources. Does that give you the color and the dimensions you were looking for it?

Obviously, he can't speak back to that, Mark.

Okay. So if you say so. Yes, Stephen, I'll take that as a yes.

Absolutely. He's highly satisfied, highly relevant.

Tony, from an organization perspective, are you comfortable with that?

Yes. No, I am, Mark. I think, yes, that's good.

Ian, the only thing I'd encourage you, and you obviously have to make your own judgment here is if you're putting the CapEx and make sure you put the production in as well. Thank you, Paul.

Thank you. Next question is coming from Myles at UBS. Myles, I think we've answered some of these. So just the bits that we haven’t, please. How much flexibility is there in CapEx 2022-2023 if we see weaker commodity prices?

My view is on Quellaveco, we will continue to the finish line. And so from our point of view, it's important to get Quellaveco done. We're also -- and Tony and the guys have done some really good work on making sure that we tighten up the commissioning period, and we'll talk about that in February. But looking at how we can tighten that up to improve the production and cash flow position in '22 to '23 is an important part of our thinking. I think that's a real positive. But again, we'll put more shape to that in February. But so far, the work looks really good. On Woodsmith, you've got more flexibility, but we'd still like to continue to drive for the filling market. So there is some flexibility, but we would be watching the shafts fairly carefully there. And on some of the other work, you'd push the [ Cate ] back a little bit. You pushed Los Bronces underground. So you'd be pushing those early phase capital pieces back. So you could certainly pull back $500 million to $1 billion if you had to or if things were pretty tight, I would think. Stephen and Tony, happy for you to contradict. You don't think I've got to the right ballpark.

No that's right. I might add a couple of other points, Mark. The reason why we've been so carefully managing the balance sheet is so that you don't need to make uneconomic decisions through the cycle. So that would be my starting point, yes. Right at the minute, commodity prices, and I'm not saying they're going to stay exactly where they are today, but they certainly seem to be running in the other direction, which gives us a chance even through this investment cycle to come out of this investment cycle with a very strong balance sheet. So again, you can make the right decisions. Obviously, if commodity prices are weakening, then potentially, you'll see currencies move back from where they have. And the last point I'd make is we've worked very hard over the last 3 years to totally de-link any refinancing risk over the next 4 years, and we'll keep that period rolling forward so that we can -- we've got capacity and we can keep a lot of these projects that make great economic sense moving forward through the cycle.

Tony, can you add like a point -- can you add a couple of points, Tony? Because I don't think people are getting that we're improving our cost position through your work. And therefore, we're improving our ability and margins through lower cost -- lower price period. I don't think people have yet understood. We've been a cost reduction story for 7 years. We're going to keep going. Can you help us with that as well, Tony?

Yes. But if I just stay first with the conversation from Myles. Apart from the major projects I mentioned, the rest of the portfolio is, as Mark said, is relatively small, discrete, high-returning projects. And we've deliberately structured in that way. So if push came to shop, some of them could be put out. There's no question about that. So I think we've got the ability to flex quite readily actually around that area. Look, our renovation program, and Mark mentioned business improvement in my area, took a little bit offense to that. Because we don't really want to look at anything that doesn't basically give us 40% to 50%, basically improvement on what we're looking at. So if the numbers are out there, that Mark and Stephen put of the contribution of P101 on technology, I disagree with them again because I think they lied. But the fact of the matter is I think there's basically a really good business performance around stability. But this technology piece has really played into the difference this company's now in from where it was 5 years ago. I mean, and that's a reality. And we can see a pathway over the next 3 to 5 years to keep going.

Costs me a beer every time I offend Tony. So it looks like I'm up for at least 2 beers.

For kick.

[ Grab you own ] minus.

Couple more from Myles, guys. Quick one on diamonds. Is 36 million carats still possible? And second question on POLY4. What prices are you expecting for POLY4 when valuing the Woodsmith project. What countries do you expect to sell the product in? And is Brexit a concern for sales to Europe?

Okay. Firstly, 36 million carats, yes. Our underlying production capacity could potentially exceed that. So I've got no doubt at the right time if it's appropriate and price is justified, we can push there a little bit further. So that's a yes. In terms of Woodsmith, I don't think what we've talked about is value in use of $200 a tonne. We see more opportunities than that, but that's still a work in progress. In terms of what we priced, we priced very conservatively, I think, and we were talking about some product being sold, product being sold between $125 and $140. And we were at the bottom end of that, just in terms of how we thought about the value point, making sure we stay on the right side of that equation. And what Chris and guys have been doing is thinking about how we can shandy up the product, I call it and improve it. So you can actually add cobalt and other products that get you a much higher value in use. That's the beauty of the product we're producing. And so we think there's lots of flexibility and the real issue for us is, how much production do you bring in? And what's the balance between price and volume. And we've got a pretty good idea where we know exactly what the balance is between the 2. And in the early days, we're going to really work hard to make sure we get pricing right because we think if you get that right and get the product priced well in the market, then our potential for margin growth over time is exceptional. And so that's going to be really important to us. And I'm not going to say too much more because in the end, we end up in a commercial conversation that we prefer to keep to ourselves. And in terms of Europe, look, the good thing about what we're producing is it's a low cost. It's a bulk, run-of-mine product that can literally go into any agricultural market around the world. We can target high-value fruit crops or we can target bulk consumption depending on how we make the product and how we set it up as a blender for the distributors that we're working with. So we'd love to have – and they’re selling into Europe. We don't think tariffs will make that much of a difference to what we're doing. And in any case, we can market this product all around the world. That's why it's so different to potash. It's not potash. It's very different to potash. It's got a much smaller carbon footprint. It's got so many more positives from our perspective. But people keep thinking about potash when they think about this, you shouldn't be. You should be thinking multi nutrients low chloride, low carbon footprint product that can literally go anywhere in the world because it's a bulk run of mine product. We don't have to do all the processing downstream. That the other guys have to do to get a potassium. We've got potassium at a pretty solid level, but we've got the other nutrients, and it's a great blending product.

Yes. Can I add to -- Mark and I went up to size, what, 3 months ago, I think probably the first time since COVID hit. What struck me coming back was, I think we underestimated the optionality of this ore body. This ore body, in my mind, is a lot higher quality than we actually -- we anticipated when we went into it. I think over time, this, there will be far more options coming available to us to play into what Mark's talking about different markets, far more options than we probably had our head around it.

Steve, do you want to? Steve?

Yes. Mark, I'm just going to add, we're working closely with the relevant departments and ministers of the U.K. government. This obviously has their attention, given the importance of the project to -- particularly to the northern part of England. So we're working closely with those authorities to make sure that we get the right registration and processes in the years ahead.

And we've obviously given that good thought too, Stephen. I think it's fair in our due diligence work prime. We said, what we did the what ifs. And in the end, we didn't think it was a material risk to the project, to be honest.

Next question from Tim at Standard Bank. Two questions. Any more color on the current diamond market? To what extent are you seeing diamond to restock the pipeline? Do you expect rough prices to increase? First question. And then the second question is, can we have an update on progress to restart Grosvenor, please?

Yes. Firstly, diamonds continue to improve, the sentiment continues to improve, you've seen that I think the sites have been very, very solid into last year and prior year's pretty solid. Now clearly, there is some catch-up buying but demand in China has been very. very good on the jewelry side. U.S. has been solid given it is still in the middle of COVID and everything we've seen is pretty solid. Now when I talked about destocking, people are going to remember, in '18, in particular, around '18, '19, there was a lot of destocking going on in the U.S. market from segments and these groups who are closing stores and switching to online platforms. So they don't need to carry the stocks. And there's probably been about 40 million carats that came out into the market at that point. So that destocking has gone right the way through to the end holder were polished. So I think this is the most significant flesh out we've seen on stocks since 2008. And so I think that's really important. And how that then manifest in how the mid and downstream then deal with the pull back through in terms of stock is something we're not, we don't have an answer to, other than we get a feeling that the demand is pulling. And so that's very important. And we'll see over the next 3 or 4 sites, I suspect how strong that has been. But so far, we've been very pleased with what we've seen. And I need to be careful from a competitive point of view in terms of what I say. But look, when you see a 30 million-carat contraction in supply, most of which is structural and you've still got the demand that looks pretty strong. And it's pretty clear light box hasn't had -- not light box sorry, lead by diamonds hasn't had the impact that people thought it might. It's still small into the scale, 60% to 70% discount in the smalls is probably not a factor in the large, not a factor. Only really competitive area is probably in the 1 or 2-carat area. And even then not significant. I think the industry is shaping up into being in a much better or stronger position that I've seen in my time in South Africa and around. So that's since 2008. But again, you've got to wait to see that come through, and that's why we're being making appropriately prudent. And in my view, ultimately, that's got to come through prices. Given where we've come from, and if you look from 2014 down to 2020, we've seen something like somewhere between 20% to 30% reduction. From our perspective, a healthy diamond industry requires supply, and there's getting a lot less of that. And it requires a healthy price. And so from my point of view, I would expect to rebound, but how quick that comes, I think we have to be careful. We have to manage it carefully. We have to think about our customers as well, but making sure that we supply our customers with the right product in the right time. So we're being careful. But I'm very hopeful and quietly confident that I think De Beers is going to see a good 2 or 3 years.

And growth update on Grosvenor, please?

Sorry. So we're -- we've come through the first part of the inquiry, no surprises in observations. Some issues we have to correct for their observations of us, but nothing major. It will still be the second half. We will have the technology, the equipment to operate very early in the second half. But remember, we are subject to a public inquiry process and a government process. So we are, to some degree, following that process as well. So at this stage, Tim, we're on track to start early second half, but that's not saying that's when we'll get the green light. It might take a little bit longer. So it might be later in the half, depending on the inquiry and anything that may come out of the inquiry. But so far, we haven't seen anything that's surprising and our investigations were pretty well -- were probably about 85% of the way through our investigations and on track to deliver on that second half production.

Next question is from Tyler at RBC. Can you describe some of the specific Lifex projects in '21 and '22? And should we expect this to be roughly a similar level into the long run?

Stephen, have you got those -- the list you want to go through there?

Yes. Happy to, Mark. Just to give you a few examples across '21, '22, obviously, moving the nature from open pit to underground. The mining vessel with classes growth. I mean, Kapstevel South, met coal, we've got the Aquila project.

Mototolo, Stephen?

Yes. Yes. Mototolo, some of the different cutbacks that we're doing at different of the operations already that have been approved. So it's those style of things. Each of them in their own right are only the 0.1, 0.2. So they're not sort of big dollars in any particular year. Which then just a question of timing as to when they start and when they conclude. Sorry, Paul, what was the sort of second part of that question?

Should the expose to be roughly a similar level into long run, Stephen?

Yes, subject to timing is probably the best answer.

Yes. Pretty clear. I think with most of these spread into 2 years anyway. So it's right.

Remembering that sort of that sustaining CapEx for '21, the main difference from the previous guidance is the $300 million rollover from the current year. And then obviously, the growth CapEx on Woodsmith in the growth category. So there's not that much else that's moving dramatically through the period.

The main one that got pushed back, Steve was Grosvenor-Moranbah.

Yes, that will go beyond '21 too. That won't come until probably '22.

Yes, yes.

Okay. Moving on to next question from Jack at Goldman Sachs. Can you give us a breakdown of what is driving the higher unit cost guidance in 2021 for copper? So we've gone from $110 million to $120 million on the guidance.

Yes, great. Tony?

Yes. These unit costs are actually doing a little bit better.

But Tony, P101 work, you'll be at the top end of the shovel productivity. So the actual unit cost per tonne move are continuing to improve. And as Stephen said, Los Bronces grade is probably the main thing, Stephen?

Yes, we just get a little bit of a dip, Paul. You'd probably know these numbers better than I do off the cuff, but we got a little bit of a dip in grade in '21, '22. I think it is -- we've known about for a while, but it's just way the deposit presents.

Yes. And probably, I think off the top of my head, Stephen, it hits the -- it hits EBIT about $300 million to $400 million on a relative basis. But we get it back in '23.

That's right.

Tony, you agree?

So that's right. And look, it's been in the plans for 5 years. We've known it is coming but their productivities are world-class.

Two additions from Jack. Can we have an update on South African thermal coal, please? I'm assuming it means the exit. And view on palladium prices through 2021 as supply returns and given inventory levels.

Tony, do you want to do the thermal coal? Do you want to give an update?

Yes. So you recall, I think it was back in April of this year, May of this year, we've sort of indicated that, yes, we would, I suppose, more formally indicated that we would look to exit. It would probably be over a 2 to 3-year time frame. Obviously, we're coming up towards a year of water under the bridge, and we've continued to work hard at that and the preparations for that. So that would bring us down to sort of a 2 issue year type time frame, and we believe we're on track for that. I'd love to see healthier prices that we're seeing out of South Africa continue over the next 12 months. I think that would feed nicely into that work stream, but we are progressing quite well on the major work streams.

On palladium prices, palladium, rhodium, platinum, I'm going to give you 2 positions. Firstly, we're starting to have a sense, it’s not in our forecast, that activity into the new year with vaccines and everything else going are going to pick up. And palladium loadings increasing as the various new jurisdictions need to make sure they're managing their emissions in new car sales. And so there's a real pull for product that could and should underpin prices. Now one question, and we're not sure of the answer is how we still think there'll be a bit of switching from palladium to platinum. And the fact there, I don't know, $1,000 are a bit higher on platinum that's probably -- that's part of it. But we're not sure how quickly that occurs. So we're still very strong on palladium and demand. And we're debating, in some cases, arguing how much switching will occur into platinum during the course of the year, but we think there will be some. Rhodium looks pretty strong. But again, we think global demand looks very, very robust on a whole range of fronts. And we also think maybe little weakening in the U.S. dollar relative to what's happening elsewhere. It will also be helpful for prices. So we're still pretty happy with what we see. The current levels -- we're happy with the current prices, and maybe it might be a bit of movement between palladium and platinum. But on a basket basis, we've budgeted for a little less than you see out there at the moment. But demand -- the risk, I think, generally is to the upside.

Yes, there's not a lot of stocks around, Mark, I think so, provided that demand is reasonably healthy, then you could see a fairly healthy palladium price for the next couple of years.

And I think generally, mining production across the globe, if you look back over the last 5, 6, 7 years, the focus on development and growth and everybody trying to deliver and outdo each other in terms of returns, I think might start catching up with a few of them. And we've tried to keep our developed inventories in good shape. But I don't think we're a common story across the industry. And I think in the next year or 2, some of that will be tested in terms of the ability of the industry to actually deliver product into the market, particularly post-COVID where some players have probably taken a few extra shortcuts on development to try and keep the current production levels in reasonable shape. So again, you guys are probably as good as anyone to be able to tell us what that would look like. But I think that's a real issue for the industry at the moment as well.

We're almost up to the hour. But we've got 2 final questions, an ultimate one. Any update -- this is from Brian at Morgan Stanley. Any update on the relaxation of foreign exchange controls in South Africa, please?

Look, I'll be in South Africa next week. But from our point of view, the government in everything they've said and done has been supportive. We've been able to do what we've wanted to do through the administration process and may go again -- Stephen, you might want to say something. But they have been absolutely consistent on the policy front. It's become an administration process as opposed to going through the politics. So very constructive, very positive, and they really are focused on improving. They're attractive as a destination for FDI, and I applaud them for that. Steve?

Yes. Thanks, Mark. So we've had permission to move money regularly and outside the dividend for dividend sort of restrictions that we had in the past, consistent with their announcements back in last February. We've maintained a terrific working relationship with a sort of reserve banking, national treasury, and they seem very committed to moving down that policy path of moving to a more OECD type normal regime, where it's more about monitoring in an allowed regime rather than preventing in control in a disallowed regime. So it's quite a significant shift of bias. And I would like to think we'll see further announcements -- I think the budget announcements at February. So I'd love to think that we'll see continued progression as they've done at last year in the midyear. I'd like to think we'd see further commitment and announcement through that February period as well. And we're working with them. We are required, and they understand our views of the world, and they seem very, very committed to that, journey, which is terrific.

Also, so from both of us, it's -- their behavior has more than matched the conversation and the intent and so today, there's nothing that we've seen would suggest that's going backwards. If anything, their behavior has been absolutely consistent with what they've been saying. And that's really been impressive.

And last question ending on a more light hearted note, I think Myles asked, Stephen, are you interested in the [ rears ] job? And Jason asked Mark, you have been suggested as a potential new CEO at Rio Tinto. Now hearing that it could be Stephen. Why do other mining companies want to hire Anglo American executives all the time?

You are going to answer -- the real reason is because we know Tony O'Neill.

Guys, look we haven't got through to everyone's -- all of your questions that you sent in, but hopefully, we've got around to everyone. If we haven't, then please come back to IR, and we will help. And Mark, would you like to make any closing remarks?

Well, guys, firstly, thanks very much for the questions. If you've got more questions and follow up, Paul is always available. From our point of view, the first half was a half that we'd all like to forget was, from my point of view, my most disappointing in the group. But I tell you what, the response of our teams to COVID in every location, made me as proud as you could be in terms of people living our values and really making a difference in those local communities. And literally, from the GMC down, everybody swung into making a difference. But beyond the humanitarian aspect of what was done, we also worked hard to get our operations back up. And we literally led the South African industry with the processes and procedures that we've developed in negotiating with the government to allow the mining industry to come back up because we are an essential service. We do provide power or water. So even with COVID with us, I think there's a real understanding now how important we are to those communities and to those countries. And I think in many ways, mining in respect of its response to COVID has demonstrated to many communities and countries that we really are important to those countries. I still think, clearly, we've got some ESG things to deal with and get much better at as an industry. But again, as Anglo, we're working hard. We're not perfect. We've still got a lot of work to do. And from our point of view, we think the way we're pitching the business, the way we're developing the business is consistent with what you'd expect to see in terms of value, in terms of margins and resilience over the long term. And our ESG strategy, I think, is leading. And certainly is turning out to be a really great place to be, given the way the world is shaping up. So thanks for giving us the time. Thanks to the opportunity to go through the story. Thanks for the questions. And again, if we can help you understand our story better, we're always available. Thanks, Paul.

Guys, look, on behalf of everyone at Anglo American, Merry Christmas, Seasons Greetings or happy holidays keep safe and well. And thank you very much indeed. All the best.

Thanks, too.

Thanks, guys.