Anglo American plc (AAL) Earnings Call Transcript & Summary

Okay. Good morning, good afternoon and good evening to everyone on the call. You have myself here in London, in fact, Cobham, actually. Tony O'Neill in London; Paul Galloway, I think somewhere in Asia; and Stephen Pearce out of Perth in Western Australia. So Tony and I are on our tenth coffee. And Stephen, I think he's on about his third G&T. So pleased to have you here with us. The order of play today is that I'll take you through an update on our second half performance. That'll be first up. Stephen will then run you through some of the forward-looking numbers. And to close, I will run you through the projects, exploration positions and also give a sense of where things are heading from here, both in terms of the operations and the projects as well. So next slide, please. Again, on the -- and now I can't say if that slide's change. So I'm just checking to make sure the systems are working. Are we on the second slide, guys? Okay, just making sure I've got the system working. I got sound credit. Okay. So the second slide is the cautionary statement. So I assume that you've all read that or will read that in your own time. I'm on Slide 3, talking to our WeCare program, and that is our holistic and coordinated, I see some activity there, so I'll keep talking, that we put in place, the response to the pandemic, which is focused on protecting both lives and livelihoods for employees, extended families and our host communities. In many ways, the pandemic has proven more challenging this year than last, particularly in those countries where vaccination rollouts have been slower. So our work this year has been focused on keeping employees and community members safe and encouraging vaccination at the earliest possible opportunity. Oh, there we go. We're on the right slide. I'm assuming you can read the slide, so I won't read off the slide. We've also been doing a lot of work on mental health, also addressing gender-based violence and doing a lot of work in our local communities with our employees and with local communities to make sure that we're connecting, addressing the real issues that they're feeling and making sure that we're supporting wherever we can. That might be food parcels. It might be providing help of a different kind, making sure that people are looking after each other and doing everything we can with community leaders to be part of broader solutions in those communities. And the feedback we've had from that work has been really good. I think it's going to be important to continue those programs. Clearly, COVID is with us for a little bit longer or will be with us for a bit longer, and the work we do in the communities is really important. And for us, we've made sure that everything we've set up and the work we do next year, that is for 2022, will include a continuing focus on that work and people will also be aware of our position on vaccines and trying to make sure that we're doing things the right way. But we're doing that in a very collaborative way to engage with all of our employees in terms of the way we do the transition and making sure that we do that in a constructive way. So next slide, please. And to start the more structured part of our conversations. I'll start with safety and safety first specifically. While we're all pleased with the progress we've made over the last few years, and it does reflect the great work of the team on the Elimination of Fatalities task force and the work of the operations in implementing those programs, it is still sad to report that we've had one fatality in the year. Carlos Gonzalo Rodriguez tragically lost his life in a vehicle incident at the Quellaveco project in Peru. And for me, the only blemish for us on the project has been the loss of Carlos, and we had one previous incident. And so for me, that's been disappointing. But at the same time, the other aspects have been very well done. But I know for Tom and the team, it has been a real disappointment. And we've done a lot of work with the communities, family, making sure they've been looked after. So with all of that, we'll continue working to improve. And again, Tom and the guys have done a wonderful job in the community on COVID and the other elements. But our general or our broader injury frequency rates, we've bottomed out a little bit in the last 12 months. In fact, the last quarter, we started to improve again, focused -- I think, so much, the preoccupation with COVID, some of the detail and the planning has suffered and the changes we've had to implement have impacted, I think, some of that performance both from an attention point of view and just the different way you've had to do things. We are coming out of that, seem to be improving, but there's a real focus on making sure we drive that trend back in the right direction. But on other parts of the business, I think you guys have done a great job. Health cases continue to reduce, and that's really encouraging, taking people out of harm's way is the real focus, see. So you can see the progress we've made over the last few years. Environment, for those who can remember the '13 statistics we had, in 2013, 34 reportable incidents. We've had 1 year-to-date, and that was intermittently in the base metals refinery, in platinum. Natasha and the guys are on top of that, looking at what we've learned and how we can prove some of our inspection process. And so you've got the data tracking, but sometimes these leaks are small that you've got to make sure your physical inspections are being done the right way, and that's being tightened up as well. Next slide, please. Okay. In terms of, yes, the next. Yes, good. In terms of driving towards a sustainable future, the conversation around portfolio has been very important. I don't want to spend too much time on this slide. You've seen it a few times now. But just to remind you about why we think our transition sets us up for a sustainable future and that our product will help enable the transition to a low-carbon economy. The most important message, the world needs the metals and minerals we produce. And certainly, we think the work we've done in the portfolio over the last probably 8 or 9 years has set us up for a very different future, I think, to most mining companies. And certainly, those companies that are somewhat captive to a single or 1 or 2 single operating assets or commodities, we're certainly a much broader and allowed ourselves to step into a broader range of opportunities. And I think that's a real differentiating item for us for both now and the longer term. Of course, met coal is currently an important high-quality input to steelmaking. And so today, very important, but it's likely, what I call, a transition product into the 2030s as green steel technologies are implemented at scale. But again, we think that transition occurs probably mid-2030s. Our resources are timed to deplete just short of 2040. So I think there's a good match there, but we'll continue to work and make sure we improve the business, and we will continue to improve the portfolio as we develop and grow into those future-facing commodities. Next slide, please. On climate change and the global energy transition, our pathway to carbon neutrality and our Scope 3 ambitions are now out there. At the end of October, we showed our detailed pathway to meeting our target on operational carbon neutrality, that's Scope 1 and 2 by 2040. And we announced our ambition to reduce our Scope 3 emissions by 50% by 2040. The carbon neutrality pathways detailed and includes milestones around renewable energy. Our FutureSmart Mining technologies are the key to reducing energy use and increase in efficiency, again, have been out there for a number of years. And certainly, we've made significant gains in tackling the challenge of methane emissions in our met coal operations. It's probably the single most challenging technical issue, but we expect to have that solved by 2030. Tony and the guys with the met coal team are working on that with other partners, and I expect that to be solved. And so we believe the pathway that we've set out is pretty clear. On Scope 3, we're confident we can deliver the ambition, and the steel industry is able to decarbonize in line with the 1.5-degree Paris-aligned trajectory. We believe we could reduce our Scope 3 emissions by as much as 80% by 2040. So we're going to encourage that pace of change as much as we can, and that is the push into green steel, high-quality iron ore, high-quality met coal and then with the transition, the iron ore and the high-quality iron ore becomes even more important. So again, we think we're advantaged by that push, both in the medium and longer-term. From our baseline today to 2030, we expect our Scope 3 emissions to rise marginally, driven by a combination of the growth in our portfolio, which is positive, and the pace of which we will outstrip the rate of decarbonization, the value chains, and that's specifically steel. It's important to point out that even with our 35% growth in production by 2030, our Scope 3 increase is only a fraction of that growth. And that indicates that the growth is coming into lower carbon intensity areas of the business. That's a real positive. And again, as we drive through the '30s, that will continue to drop as we continue to drive the business forward and grow, we believe, with the new projection. Woodsmith's a good example of that, that really does change the look and feel of the company into the '30s. And again, an amazing set of opportunities with assets such as Woodsmith, Quellaveco, Collahuasi, all underpinning the future of the business. It's a very different-looking Anglo American today than it was even 5 years ago. From '20 to '30, I expect a steep reduction in Scope 3 emissions will obviously follow those pathways. And again, the growing impact of the investments we've made through the 2020s will also have that payoff in the 2030s. So again, I think we're positioning very strongly. And where many are still trying to work out how they might get to their targets, we've got pathway -- pathways to our targets on 1, 2 and 3. And many of those pathways are now being developed into detailed execution plans. And I think that really does put us ahead of most. On the piece that is more in our control in the Scope 3, and that's shipping, we're confident we can meet our ambition to achieve carbon neutrality across our controlled at freight Asian activities by 2040 with an interim 30% reduction in emissions by 2030. There's still a debate in the organization whether you can take some credits for third-party programs and movement of materials. At the moment, they're not in the numbers. But certainly, from our point of view, there are opportunities for us to improve, and we'll think about how to report and make those numbers more transparent in the next cycle of reporting. We've had a COP 20 -- we have had COP 20 since our last sustainability presentation, and we think that what we put forward before the event seemed to land well. We thought it was appropriate. and if anything, played into the key themes that we saw coming out of COP 26. Our assessment of COP 26, we think it was constructive. And really, the real transformation that we saw was in changing the conversation from the why and the what to the how. And so we believe the how is really the critical conversation that we'll see over the balance of this decade. And to be honest, I think we've got a 5-year start on most in terms of those conversations and what you'll see from the group is a continuing dive into more detail as we flesh out those programs and plans. I'll talk about the truck, the hydrogen truck a little bit later, but seeing the key part of that being delivered in South Africa in the last few weeks, it really is an exciting time to be in the industry and to be part of how the industry is going to help bring society on a broader basis. And certainly, we the pacing of the themes that we've been talking about for our company and the mining industry and playing its role in society. And I think there's an opportunity for us to present ourselves in a very different way. Next slide, please. Focusing on our 4 key business segments. At De Beers, consumer demand for polished product continues to recover, driving a strong pool for our product. Our site sales have been strong, averaging better than $500 million per site so far this year. A very solid year. Longer-term fundamentals for diamonds remain strong. Our restructuring work is ongoing and will help us capture even more value in the future as we reduce the time from mine to finger. I love that term for Bruce and the guys. And with our marketing thrust, we'll be increasing our own jewelry offerings and do more to capture the full value of the De Beers brand. And we really do see that as being critical. We've seen a 23% increase in prices since November last year. If you remember, I made the statement that we'd expect to see a 30% increase over 2 years. So we're running well ahead of that schedule, and it really does reflect the supply issues in the industry and the opportunities that we see and the good work Bruce and the guys have done in getting ourselves out there. So very enthusiastic in what De Beers can and should do in the next few years. On the copper business, consider -- the team is considered to deliver consistent operating and cost performance through '21. The near-term water management -- the near-term water management issues we've put in place are delivering results with production up at Los Bronces despite the lower grades. Continuing work is focused on the longer-term solutions to reduce our water footprint. And we know this is an area where we face increasing challenges, which I'll come to in a bit later on. We have experienced some recovery issues in the last few weeks at Los Bronces. Tony, the team, Ruben, they're all working on those issues. I think it's more a transitory issue, but it does need to be addressed. And so some of those pressures will see us delivering through the year at the bottom end of the 650- to 660-kilo tonne guidance range for this year. And the cost impacts that you see next year, we generally forecast in terms of grades, but water is obviously making a difference as well. But again, I'll pick that up a little bit later. On PGMs, a solid mining performance despite the COVID protocols in the underground operations. And Natasha and the team have really done a good job in the ACP, It runs well. We should finish the maintenance work on the B unit by the end of the year. We've reduced our work in progress from 1.9 million ounces at the end of 2020 to 1.3 million ounces, which we consider to be a more normal working level of inventory. And the consistency that Natasha's achieving has really been impressive considering the early 2020 event. We're almost 18 months away from that, and the team has done a great job. And considering that recovery in the performance had been done through COVID has been remarkable. And you will have seen Amplat announced the approval for Mototolo-Der Brochen project will extend the mine life to over 30 years at a capital cost of $300 million. It's a low-cost, high-quality operation, fully mechanized, so very excited with that commitment. And again, it continues that transformation. In Bulks, we generated record INR margins during the first half of the year, reflecting the quality of our product and our success in reducing costs over the medium term. Even with prices coming off in the second half, we continue to see good realized prices due to the premiums that our products attract and that's a reflection of both some adjustments to mining strategies that will work really well and the good work of our marketing team. So the teams are working really well across the business, and you can see that in the numbers. Operationally, there was some unplanned maintenance administered, partly a function of working around some COVID issues as well. They certainly picked up during the second half -- or the last quarter has been picking up. So much happier now with the operations settling and doing a good job. At Kumba, the team managed to impact the -- the impact of the rain earlier in the year, and that was really the dominant feature in the first quarter. And we continue to work closely with Transnet on the rail debottlenecks but the work in the last quarter, and the performance with Kumba has been quite solid in the last quarter. So very pleased, and they've again done a good job on the COVID side. In met coal, I'll give more details in a later section. But to note that Moranbah is making steady progress in the current level. It's been a pretty tough one, actually, with geological conditions being tough, and Grosvenor is ready to reach that pending regulatory approval. So our promise to have the operation ready has been fulfilled. Now we are in the dialogue with the regulators in terms of a restart. So again, Seamus, Tyler and the team have done really good work in bringing that back together. And some of the stuff they've done at Grosvenor is remarkable. And I really do think it sets a new benchmark in terms of what a modern new era future's mine really does start to look like. And I think it's a very exciting time for us in terms of the business. With that, I'll hand over to Stephen.

Thanks very much, Mark. If we can go straight to my first detailed slide. Thank you. So to start, from me, a familiar message. I mean it's all about that strategic balance in terms of priorities that we have set up in recent years. We've returned over $10 billion to shareholders since 2017. And we offer near-term attractive high-margin growth focused on future enabling products. We remain confident in our long-term target of a 45% to 50% EBITDA margin through the cycle. But importantly, ensuring that we're delivering this in a sustainable manner that preserves both the integrity of our assets and contributing essential products that support the global transition. Next slide, please. So looking at our full year '21 guidance standards. CapEx is coming in lower than the range that we previously guided at about $5.2 billion. It's been driven by some COVID delays and supply chain disruptions. We haven't been able to catch up as much of this as we'd hoped when we spoke to you with the first half results. Of that $5.2 billion, $3.4 billion is sustaining capital, including life extensions and $1.8 billion is growth. And I'll touch more on CapEx on the next slide. Just to highlight the amount of cash that's been returned during the second half of the year in total. So at the Anglo American level, the dividends paid and buyback comes to just a tick under $4 billion. But the groups also paid out an additional $2.8 billion to our minorities during the year. And obviously, that's mainly in Platts and Kumba. But the combination of shareholder returns, higher tax payments and lower commodity prices in the second half means that net debt will increase from the very low level that we saw at the half. We previously flagged at the half year that costs were up about 6% on an FX-neutral basis, and this will be around 10% for the full year, as well as some cost inflation. There was the impact from production disruptions that we saw in met coal and Minas-Rio. But if we would strip those production impacts, our costs are up about 6% on an FX-neutral basis. And as Mark mentioned, all BUs remain on track with the 2021 unit cost guidance that we've provided at midyear. So a pretty pleasing performance on production overall, particularly in refined PGMs and diamonds. Just a few other guidance points. Depreciation at $2.9 billion, just a touch lower than we originally expected, and our tax guidance now a touch high for the year at 31% to 33% for 2021. Just to note, we do expect that rate to increase going forward as a result of the profit mix moving towards higher tax rate jurisdictions such as through our copper assets that, as always, dependent on actual prices. Also, just to remind you, and, as always, subject to Board approval, but our dividend policy remains at a payout ratio of 40% of underlying end. Next slide, please. So CapEx. CapEx is expected to come in at approximately $5.2 billion for the year. As I said, COVID has continued to have some impact on our ability to execute some of the noncritical works during the year. So we have slightly underspent compared to the previous guidance as we prioritized key maintenance work. We had expected to catch up a reasonable proportion in H2, but not all. And so we're carrying over about $800 million of spend into future years that will then schedule itself out in '22 and '23, but this is simply timing rather than cuts for spending. Looking forward, we've included the next 3 years of updated CapEx guidance. And for transparency, you can find the previous guidance in the appendix. At this stage, we have given you an initial estimate for next year for Woodsmith of around $0.7 billion, and that's consistent with the approach that we took last year. You will have seen our release this morning that sets out the changes we're making to upgrade the project configuration, and Mark will talk to this later. But the technical review now largely completed has confirmed certain further work that we plan to do to improve the project. And we expect to complete our design, engineering, capital budget and schedule at the end of '22. So we'll provide further updates once that's done. Just to highlight that once again, we've shown the Collahuasi desalination plant costs separately, just as we did last year. We'll be spending this across '22 to '24, which is just a subtly different profile than what we had previously. The current cost estimate has also been updated to reflect enhanced engineering estimates, which -- and general cost revisions to reflect the inflationary environment. Just to note, we have classified the desal plant as sustaining CapEx, but it does support an element of future growth. And it's critical to supporting the operations in Chile given the water availability pressures that we've been discussing. Our sustaining CapEx is up over the next few years as we spend on relatively significant discrete projects such as platinum processing and water and tailings in South America, but we do expect this to come back down to the long-term levels that we've previously guided. Next slide, please. So looking at cost and inflation, I know a popular topic across the industry. And consistent with the broader industry, we're seeing some general inflationary pressures at the moment. We see some impact on input costs and also some supply disruption with impact -- with -- and that impacts both operating costs and CapEx. A reminder, as always, though, that we see significant benefit on the revenue line from higher commodity prices and some relief as currencies also adjust. Also a reminder that through volume growth, and the operational improvements such as P101 and technology on a per unit basis, so a unit cost basis, we aim to offset more than the impact of inflation, and that's where growth becomes really important. We expect inflation pressures to remain in the near term, but hopefully, I'll start to settle down towards the back end of next year. Off the back of that will clearly be record results for the full year and our tax and social contributions for the second half will be significant, and really importantly, paid in the countries where we operate. We have given a full breakdown of next year unit cost by business unit in the appendix. And please, I'd encourage you to speak to the Investor Relations team if you want to drill into any detail. Just a couple of quick points, and Mark will talk to this later. But we do expect there to be increases for copper Chile due to the expected grade declines and water availability issues. Remembering also, it's a part first year operation for Quellaveco. This should be partly offset by improved unit cost for met coal and broadly flat costs for De Beers and iron ore. And so overall, '22 is only expected to see modest group increase. Next slide, please. We spoke to you at the half year results. We noted that we've seen some delays to our cost and volume targets, and that's simply due to COVID. So we told you that we're pushing the target back a year to 2023. And since then, we've also increased that target as a result of that extra time, up by a further $0.5 billion. So we expect to have made some further progress here by year-end, and you can see that on the left of this slide. But we've always said that these would be loaded towards the end of the time line. And so it is worth noting that these are weighted to 2023 in particular. And technology and innovation gains importantly go well beyond 2023. Our operating model and P101 initiatives have delivered some really pleasing results to date. Just to give you a few examples in iron ore, Minas-Rio has again delivered strong improvement in throughput at the beneficiation plant. In platinum, targeted improvement programs have delivered increased mine volumes from our Dishaba mine at Amandelbult, further debottlenecking at the Mototolo concentrator and strong ACP performance, all contributing to refined PGM production, and there are similar examples in copper and De Beers. Across the operating model, P101 and the technical innovation space, by 2023, we now have higher confidence and expect to see some significant benefits on a gross basis as the vast majority of that gross value by 2023 is now embedded in a detailed business unit plans. However, we are facing some potential headwinds that may offset part of these benefits such as grade declines, which means that the net improvements delivered may not show that full gross picture. Example of that increased -- for example, increased recoveries and throughput driving an increase of about $1 billion in copper alone, but with the grade drop off next year that we've known about for a while and a couple of the water downsides will partially offset that in '22. Ore increased recoveries and volumes from improvement initiatives and platinum are being partly offset by lower processing performance and inventory lockup as we progress through some scheduled maintenance programs. Next slide, please. So turning to growth. Our growth projects remain broadly on track with more than 90% of our growth CapEx allocated to future enabling products. We are seeing some slight delays to some of the capital projects, whether that be from factors such as COVID or impact from things like the Moranbah-Grosvenor disruption to operations. The timings above have just been slightly adjusted since the half-year results. However, the key message is that we still expect about 35% growth over the next 10 years. Importantly, in the near term, Quellaveco remains on track for next year despite all the challenges with COVID. That in itself delivers about a 10% uplift in our copper equivalent volumes. And as we have discussed, we also have several smaller quick returning projects coming on stream in the next 2 to 3 years, including the diamond vessel in Namibia delivering some of the highest value carats. In the Sishen, UHDMS technology project, delivering more of that premium iron ore product and debottlenecking at Minas-Rio and incremental expansions in copper at Collahuasi. A little further out at Mogalakwena, we're finalizing our review of the best configuration, size of expansion and technologies to integrate into that project, and we expect to decide on the way forward in half 1 next year. And that project could then come on stream in the middle of the decade. In met coal, the near-term focus is obviously looking to safely restart and stabilize operations at the long hauls. We will then look at the low CapEx, high margin expansion option that we have there. And on Woodsmith, as I said, more details to follow, but we're very much expecting this to play a key role in our growth over the next decade. And with that, I'll hand back to Mark.

One's got to do it every time anyway. I'll try and give a bit of a scoot along, but thanks Stephen, and trying to get -- make sure we've got enough time for Q&A. So to start with on innovation. Our work continues although at a little -- it's a little tougher or a little tougher in the world impacted by COVID. And the main issue there is your access to sites being a bit restricted. So getting the people on the ground, Tony's people and supporting people has been a little bit more difficult during the course of the last 18 months in particular. But that's improved. We've spoken about our innovation projects and the importance these projects will play from an operations improvement perspective. So it provides us with the ability to manage against some of these input cost pressures. We're committing to $500 million per year on these initiatives, and they will transform the way we mine and reduce the footprint we make. And again, they make a contribution on the cost side, which is very important in a world where we see inflation probably impacting us for a little while longer. But at the same time, you've got to improve productivities, improve your efficiencies to make sure you stay ahead of that, too. We've all got to run a little bit faster, in my view, to stay ahead of where inflation is going. Now projects are progressing. And certainly, it's worth highlighting that we really see the benefits from these key programs, probably hitting the bottom line in '24, '25, particularly once they can be combined. So a few projects that connect a number of processes in an integrated way. And the way we optimize the businesses are now on holistic program through our VOX3L program, which is quite unique and different in terms of the way we operate and optimize our business across the processes. So that really brings the digital technologies into play, and Tony and Arun and the team have really done some fantastic work. That's not all that transparent at the moment, but the results that you'll see coming through will be material. On Bulk ore sorting, we have 3 operating sites and we're in optimization phases, each with a different set of value opportunities, advanced process control. Again, the work that Arun has done with the team and supporting the team has been really positive, and we're seeing material improvements across the operations at Orapa, for example. We've gone from 2 operations to 1 operation, reducing the same material in the processing side. So those shifts are really material and will continue to help improve our underlying productivity and cost position. Of course, part of recovery has been approved at Quellaveco and will form part of the working model there. Our hydraulic dry stacking approach builds off the benefits of coarse particle flotation or recovery and supports delivery of further water savings. And so the work at El Soldado has a much broader and longer-term perspective. And our hydrogen truck and the major components have been delivered to Mogalakwena and currently being constructed as we speak. We saw those a few we expect personally, so that's really exciting. And it will be commissioned during Q1 next year, which is also very exciting. We have a number of different players all arguing about who's going to be the first one to drive the thing. I suspect the President of the country is right up there on the list as well. Next slide, please. On metallurgical coal, we've clearly had a couple of tough years. Moranbah restarted at the beginning of June, and we are taking things quite carefully with the geotechnical challenges we've had on this particular block is what we call a seam roll that seems to dissipate and disappear in the next longwall so we'd expect the next wall to be much more of a kick along. For us, it'll take till the end of the year to finish the current longwall. We'll actually do the longwall relocation and it'll be back and running until capacity from February onwards. The Grosvenor work restarted underground in April, and the inquiry released its findings in May with numerous learnings for both ourselves and the wider Queensland coal mining industry. We've taken the opportunity now to reimagine literally how longwall mining should be done, brought in new technologies and really reset the bar in terms of the way the business should be set up. We're going to work through the regulators with what we've done, and this is really something quite different. Remote control surface operation, quite a different game plan and again, a real industry benchmark setting exercise. And so very excited with that work. And so from our point of view, the process with the regulators is going constructively, and we expect to be ready to go with their approval at year-end or in early '22. But again, all the things we needed to do have been done. The teams delivered on plan, on schedule. And we're just working through the regulatory now to -- start to get the funds up together. But again, really interesting. And I'm very positive on whereto from here. The Moranbah and Grosvenor debottlenecking project has been pushed back to make sure that we get Moranbah up and Grosvenor settled in terms of the new configurations. But we still expect to put the project to the Board over the next couple of years and it should be in operation for 2025. The project will increase wash plant capacity by 3.5 million tonnes, which will need another 2.5 million tonnes clean coal, high-quality clean coal going into the markets. It remains high-margin, low-risk, quick payback project. And so from our point of view, it's still on the agenda, and we'll kick in, as soon as we're comfortable, the 2 mining operations have settled. Aquila, still on track to start up next year and replace volumes from Grasstree, which will reach the end of its mine life. Again since '13, we've delivered on our projects, our major spends, and I'll talk about Quellaveco. But again, Aquila is another tick in the box in terms of doing that sort of work across the business. And again, we really have transformed the way we plan, develop and then execute our major projects and Aquila's another good example. So the met coal business should start seeing more positive and stable performance from next year. And the high-quality met coal, such as ours, is really well valued in the market. And the prices that we've seen in the last year or so have really been something almost eye-watering in some respects. Whilst I don't think the Australian coal relationships, the -- Australia-China relationship's going to get much better in the short term, one hopes that we get to a steadier, more constructive equilibrium, and I'd expect that to at least make some progress during the course of next year, but it's not going to change too quick. And therefore, for us, met coal will be, I think, a material contributor over the next 2 or 3 years, in particular. On copper, next slide, please, sir. On copper, we believe we're building something to be proud of in the business. We are navigating a couple of the obstacles that we expected to navigate with lower grades at Los Bronces. But again, in the forecast, in Quellaveco, we have a global scale, long-life, low-cost assets, which will be up and running on time and on budget next year. I'll talk about that in a minute. There are some challenges in the Chilean assets, which I talked to in Los Bronces. Water, tough for everybody. Again, the guys have done a fantastic job in still doing better than anticipated at Los Bronces, but has been very dry and it has impacted on next year's forecast and obviously, having an impact in costs as well. And with the lower grades and the lower coverage at the moment, we have taken those forecasts into '22 to make sure we give ourselves enough time to correct. Quellaveco will make a positive contribution to the overall copper business at $1.25 for the year. Don't forget it's still in commissioning phase, but it will make a contribution to improving our cost, which is great. So the overall average cost for copper will be $1.40 next year. I'd expect it to then continue to improve. As the things at Los Bronces are settled, we Quellaveco to full capacity, then ultimately, we start moving the incremental projects, Collahuasi and other possibilities going forward so that the copper business ends up being a great long-term low-cost proposition and certainly a very important part of our portfolio. And we would then add Sakatti in Finland, where we're going through all the approval processes now and again. It would be another exciting addition to the portfolio. So we're in a great position in copper, albeit a couple of things to deal with, but that's the nature of mining and certainly the guys will get through those and continue the great trajectory that we've established in Quellaveco will help us with that momentum. And with that, I'm on the next slide. Thank you. Talking about Quellaveco. The key message on Quellaveco is that I'm really pleased to say that the project remains on track and within budget, and the team there are doing a brilliant job despite the impacts of COVID. Remember, we lost 6 months to COVID, and that had probably $0.5 billion overall impact. But because we were 6 months ahead and tracking at least $0.5 billion below the budget in terms of project execution, we've been able to hold basically the timeframe and the budget. And that's a tremendous endorsement for Tom and the team. And I think the work that Anglo American has done in transforming its projects work and making sure we get the detail right before we press the accelerator. And that will be an important part of the point I make on Woodsmith, but again, in Quellaveco, I think the guys have done a great job. And for those that weren't aware of it, we didn't talk about this at the start of the project, Quellaveco is, actually by measures of volume of concrete, at about almost 600,000 million cubes plus earthmoving, the largest ever mining project developed in South America. And we believe if it's not the largest in the world, it's right up there with the largest in the world. So for the team to be where it is today, given the scope and scale of the project, biggest we've seen ever in South America, and to be on track and on budget and commissioning major items. So the freshwater dam is done. It's a net positive fresh water provided to the communities. The flotation cells, SAG, ball mills, shells and motors are in place, started tailings dam, all conveyor, kernel, primary crushers starting to commission this month. Pre-strip began April '21. First ore delivered October '21, beating all of the key milestones with some up-and-coming milestones, first mill line crushers, conveyors and associated infrastructure all ready for commissioning in Q1. First, production mid-'22 despite COVID, a remarkable achievement. And so from my point of view, I'm happy to be standing down in April 19, knowing that we will have delivered on the commitment we made to the Board to one, retool the whole business; two, retool our efforts in understanding how to deliver projects, which are the real value drivers for any mining business and that we're handing the business across, that is a transformed business, and into a very capable leader's hand in terms of Duncan. We've also got contracts for 100% of the operational electricity to come from renewable sources, which results in a 70% reduction in CO2 emissions. So for us, a really exciting period. Next slide, please. In terms of looking forward, the CapEx we're spending should be in the $5.3 billion to $5.5 billion range. Production guidance has been increased through '22, '23, and we've now provided you with '24 guidance as well. If you compared what we were expecting at --on -- at full notice to proceed, we're up considerably. Almost 400,000 tonnes over the first 5 years, excluding the impact of COVID and at a lower expected unit cost as well. We also expect a 12-month ramp-up versus previous 7 -- the 12-month ramp-up versus the previous 17 months schedule. So the guys have done a great job. Unit costs is expected to be $1.25 next year, '23 less than $1 and to be about $0.95 a pound average over the first 5 years. So again, all of those bidding our targets. Grade over the next few years will have an incremental positive impact around 1% compared to 0.6% average over the reserve line. So that's the good news. You've also got data for these over the average reserve life in the appendix. So you can put that full picture together. Looking a bit further ahead, about 5 kilometers away, we've got the [ Mamut ] prospect. There are a number of short- to medium-term expansion options that are being evaluated already, and we will be well supported by the current resources and reserves that we have around the project. So I'd expect to see this being an incremental improvement journey for the group and really is -- and really sets the business up for the long term. Lastly, I also think we should mention the Peruvian political environment. Clearly, it's something we're very close to. We've established a good relationship with the President, the ministers in the cabinet, albeit there has been some change. We are keeping the relationships at the right place. Our local relationships are very strong. People in Peru talk about the Quellaveco model, which recognizes what we've done on the social side, improvements to water supply and a whole range of things. So I think we really have established a partnership arrangement. And so while we're on the call, I'd like to thank the 10,000 workers and the 6,500, [ the key ] wood workers that have made such a fantastic contribution to the project. We're very pleased and proud to be a partner with Peru in this wonderful project. Next, watch list and looking at the future and how we apply the lessons of the past to the next level of development in the group. As you know, we've been conducting a detailed technical review of the Woodsmith polyhalite project since mid-2020 following the acquisition. And a lot of good work, and the guys will finish the review on time. The focus of the review is to ensure that the technical and commercial integrity of the full scope of the initial design provided us with a good base to work and look at how we want to shape the business going forward. That review, largely done, has achieved those objectives and has provided us with the basis of really defining what we believe the project should be, and it's very different to where Sirius had the project would be our first comment. Now that's not to say the concepts and the approaches we're on. What we're saying is with our work, we see a different scope and a different approach as we take the business forward. And as a consequence, that will take a little bit longer to define in the detail, and that's why we're saying we'll be pushing the estimate and doing the detailed estimates to the end of '22 on the basis of the work we've done. They are doing the engineering work, and there's still quite a bit of work to be done, particular attention, and I said this right from the start at the acquisition time, the sinking of the 2 main shafts would be the key area of focus. And I think we said at the time that we've incorporated a very different timeframe to the Sirius team in our financial acquisition model. The guys are working on that at the moment. We've just started the shaft excavations using what we call the sinking units, the SBR units. We've actually got a couple of people that have used these units before working with us. And we want to put a few months under our belt before we start putting final schedules together, and we'll do that as part of the work next year. And by the time we get to the end of the year, we'll have some good experience and I think a pretty good handle on the scheduling side of the business. And I think that's very important in defining the final cost and the ramp-up program that matches to the marketing side. We've said from the outset that we wanted to make improvements. We want to make sure it was an Anglo American project and that we deliver on our commitments once we commit to the acceleration of the project. And as I said, the detail will take a little bit longer. It has taken us a bit of time to unpack what we call the lump-sum turnkey projects. There wasn't as much detail in those projects as we'd anticipated. So we've had to take a bit of time to unpack, clean those up and get the detail done, and that's a work in progress through into early next year. So that's the important part of that work. But again, from our side, the resource looks good. The concept was right. The scope of care is generally right. It's really in the detail and making sure that we get the detail to a standard that we're comfortable with that when we press the button we deliver. We deliver the product, we deliver the quality and we deliver to the market, and we make sure the 2 are connected. On the positive side as well, we've got a price where when we bought in, the polysulfide price was about $125 a tonne. Today, it's trading at $225 a tonne. Value and use opportunities have increased because of the way we see this material impact in certain markets. So we're very excited in terms of the full package. And we think we've got a high-quality exciting project which scale in quality, 50-year life, Q1 operating cost position, strong margins. We think, great returns, still very likely in terms of the project and the scope. But again, a bit more detail to make sure it gets up to ore is an Anglo American designed and executed project, which is really what we've established as a new benchmark with Quellaveco. And yes, we've been delivering a whole range of projects over the last few years. But again, this is another one where you've got to make sure you take the time, get it right and deliver. So very excited. We think it's great news from our point of view in terms of scale. We're increasing the scale over time. And from our point of view, we think the project is positioned to be very successful. It's a matter of getting the detail right. We've also announced Tom McCulley now moving from Quellaveco at the end of the year to Woodsmith. Tom's track record at Quellaveco has been outstanding. We've been building a team to do the execution work. So I guess, in a very simple way, it's a demonstration of our commitment to the forward look. And we're also putting a team that have got a great track record in delivering projects. I'd also like to acknowledge Chris Fraser's contribution on the project. His vision for what could be, I think, a little more than 12 years ago, has really created something very different, we think, very exciting. And Chris will come into the corporate center and work with us on some projects around business development and looking at how we continue our work as a material solutions company. And again, I think an exciting opportunity for Chris. He will continue to provide feedback and support as we go forward at Woodsmith. But again, we're now moving into a different phase and Tom and the guys will take the project forward. Next slide, please. I think with Quellaveco coming on, Woodsmith in the pipeline, Sakatti and other projects to follow, we're in a good place. We've got a quality portfolio, complemented by high-value growth opportunities. We still expect to move forward with projects at Moranbah-Grosvenor. As I said, Mogalakwena, Natasha's actually done a good job outlining the work to be done on Mogalakwena earlier today. Collahuasi, going through the work now. We're moving forward with the saline plant -- the desalination plant rather. And Sakatti would also fit into the portfolio in the future, and we're currently progressing the prefeasibility work and the studies there as well. Next slide, please. Last and certainly not least, I wanted to talk a bit about exploration. I'm hoping that we'll see a continuing stream of exciting results during the next year or 2. I think John Vann and the crew under Tony have really done some great work in positioning in the right places. Our exploration effort is consistently funded through the cycle, has been since 2015. And certainly, we think we're positioned to help us bring into the inventory, the project's inventory to help us support the business through the 2030s. We think transformative discoveries represent the foundation of value creation for Anglo American industry and society. They also provide the potential to materially improve the size and quality of the business, while diversity -- while diversifying the company's portfolio and commodity mix. And again, I think that's another differentiator for us. We've got strong positions in Australia through Africa, South America, North America and again, very exciting prospects and ground positions, and that's something that you'll hear more about over the next 12 to 18 months. And then finally, next slide, please. To remind you of our investment proposition as a group, with Steve and Tony and I here, we can talk about the portfolio, differentiated capabilities, sustainable returns, a very different proposition, we think, in the mining industry and one that we're very proud of. And I'm sure the team will take forward over the next 10 years and continue to improve returns to shareholders and provide a very different experience for all of our stakeholders across the industry. With that, happy to take questions.

Thank you. Before we get -- begin with the first question, Paul Galloway would like to say a few words.

We're almost there. Thank you. So yes, please look at the bottom of the screen for the dial-in. A friendly reminder, please try to keep your questions to reasonably concise, so no 3 or 4 parters, please. We'll do our best to get through as many as we can before 12:45. Dolce, can I hand over to you to introduce the first caller, please.

And your first question comes from the line of Alain Gabriel from Morgan Stanley.

Two questions from my side. I'll start with the first one. Mark, the delay in giving the update at Woodsmith and the management changes there could be interpreted, by minus CapEx, that there's something that's not going well in that project, waiting for another 12 months or so for some better visibility on spending ramp-up appears quite a long time. What has changed over the last 3 months? So have you changed this time line? And what are the elements of that project that are keeping you up at night from this point onwards? That's my first question.

Okay. Thanks, Alain. Firstly, nothing is keeping up at night. I've been around the industry for a long time. And in my view, I'm actually more excited about Woodsmith than I'm worried. And so I think the acquisition and what we've seen in the review confirms the potential that we saw in the acquisition. Geology, resource, rate, the overall strategy and execution approach, good. We flagged very clearly that the timing of the shafts and the time frame around the shafts was a key issue for us. . We also want to make sure that the production ramp-up matched the marketing. The marketing information that we've had been very positive. So I'm really pleased with the feedback. And in fact, if you look at the pricing of product, and we think the value and use of the product, that's been a real winner. So the guys are trying to work out what price do we use, but it's certainly going to be well north of the prices we used in the acquisition. And so they're working that through a lens. So that's a really important point and a very positive one. So all of those things are good in shape. Now what was a little tougher than we anticipated, the turnkey lump sum contracts assume the level of detail in engineering of the contractors, which done to the right level of detail. Now if you're a Sirius where the funding is more difficult, that's the right type of contracting strategy to go. But from our point of view, it leaves a lot or leave you in the hands of your contractors. So we've really pulled apart every 1 of those contracts going through the detail. And in our view, there wasn't enough detail to be confident that the execution strategy would be delivered, both in terms of quality, timing and cost, actually. And so we're redoing some of that work and doing the detail that we think is necessary for this to be an Anglo project. So that's the first point, and that's really important. And that includes with the SBRs, the configuring them for U.K. conditions needed more time than was originally scheduled. But again, we'd forecast both issues in our acquisition model. And so they weren't a surprise but there was more work to be done than we anticipated. But again, in mining, these are the things you do see from time to time. And so I'm not worried by that because we know exactly what we have to do and the guys have done a really good job on that. work. And then setting the time frames up looking forward, we've also said the mining methods, we want to go all continuous miners. So it's a much more productive and efficient mining approach. That's very important, and I think a positive change. As a consequence, we'll bring ventilation shaft forward to make sure we've got more air so that we can be more productive and reduce our operating costs, again, another positive enhancement. We also are looking at ramping up to a higher level of production and producing a higher quality, more consistent product over the longer term. And so that requires a different approach in making sure the processing side is matched to that and making sure that the production is matched to the markets and how they develop. So we've done all the work you expect us to do and to be as frank and as clear as I can. This is not the project that had been previously presented to the market before Anglo took over. This is now morphing into an Anglo project, which if you go back in time at Quellaveco, Quellaveco when I first looked at Quellaveco back in '13 and '14 was an interesting prospect that had lots of potential. But it took us 2 or 3 years to get that really defined in terms of what we wanted it to be. And today, what you're seeing delivered is very different to what we looked at back in '13, '14. And so the same disciplined approach has been applied to Woodsmith. And so when we come out with the detail at the end of next year, you're going to see a project that looks very different to the one that was originally proposed by Sirius. So different scale, different approach. Concepts are still same, but this is now being transformed into an Anglo project. It's going to take a little more time, a little more detail, but we're very excited, and I think this is a great follow-on to Quellaveco. So we're excited. We're positive. And from my point of view, I don't lay awake at night worrying about it. I lay awake at night being excited about what we think the potential will be when we come to the market and explain what the project is. We expect to be going to the Board in early '23, post that review. The $700 million we've committed this year is also a demonstration of our ongoing commitment on the critical path items. And obviously, in putting Tom and the team in place, it's also a statement about intent as well.

That's very clear. And my second question is around -- is that Amplat. The cut and refined output has been more meaningful than what consensus was expecting or versus what you have guided previously. Has anything changed in how your plan saying at Amplat -- and are there any factors that you did not expect previously that we need to consider going forward? And is there a particular reason why the lost volumes due to maintenance are not really caught up in subsequent years?

Yes. Look, I think the way to think about Amplat’s is the previous peaking was biggest, better volume. What Natasha was really focused on is value over volume. And the development strategy for Mogalakwena, the underground developments high grade and under grades are quite remarkable. In some areas there, you've got grades that are equivalent to Norilsk in Russia. And we've got that through open cut and through highly mechanized decline development. So I think it's an exciting time for Mogalakwena as well. Tony and Natasha have worked together very closely on developing the strategy. And so it'll be about quality. It'll be about value. It'll be about margins, and the volumes will follow as they progressively work their way up the ramp-up. So I think it's the right way to deliver things. And for us, it's about margins, values, returns and returns to shareholders and I think that approach is the right way. And so we're not too worried about the volumes, but we are worried about cash flow margins, cash flows and returns.

And your next question comes from the line of Jason Fairclough from Bank of America.

So you know I'm a bit of a sucker for Tony's technology projects. I'm just looking at Slide 16. Can you talk to us a little bit about the CapEx associated with these initiatives near term? What sort of production EBITDA uplift we expect? And ultimately, is this a near-term production guidance? And then second part, very specifically, have you taken into account use of any of these technologies at Quellaveco?

Okay. I'm just going to make -- I'm just finding my Slide 6. Okay, got it. Thanks, Jason. Well, firstly, Jason, from our perspective, and I'll say a few things, then I'll pass across to Tony. The work that has been done across the group has really been about changing the whole flow sheet. And the work, as you know, occurs in packages, and it's really about transforming the whole business. And so these elements are all in different places and phases, but it's very exciting. And the budget of $300 million to $500 million generally incorporates these projects being phased over the next 3 to 5 years, and they help deliver the returns and improvements. So they're all within that context. Now the only exceptions to those would be probably some of the bulk sorting work where it's a real shift. But if I let Tony talk to that and working off the $300 million to $500 million a year, he can give you a sense if something might adjust left or right. Tony, can you take us through that approach incrementally and anything else you want to add?

Thanks, Mark. Jason, good to hear from you. Firstly, I think the way I'd look at it is you've got roughly $2 billion a little bit more coming out of essentially P101. If you look over the next 3 or so years, I think that the technology starts to come through and we expect another one uplift basically coming out of the technology. If we look at Quellaveco, we've included coarse particle recovery at the back end that will be done when the main project is broadly finished. The project itself is our first digital mine. So you've got the -- the whole thing is digitally controlled with digital twins. We've got automated haulage in there. So it's basically a reflection of all the appropriate new technologies that we've got. I would say, just in general, where we are now with the whole innovation program, we're not ran-out-of-ideas. I think there's another generation of ideas coming through. And I would think that apart from hydrogen trucks and carbon neutrality-type projects. The next area that you'll see some really significant work coming through is around heap leaching.

Okay. And just a push, sorry, and I'm not sure if it's for Tony or for Mark. So your production guidance, does it include the debottlenecking from the technology?

So the answer is -- and I think Stephen spoke to this, Jason, that our programs are all included in the business unit budgets. There's been a real take up. So all the technology that we think is production-ready is included.

And Tony -- the only thing I'd add to that, Tony, is obviously the benefit from a lot of this technology, in particular, flows well beyond '23. And obviously, we haven't given guidance past that point, but we are expecting those benefits to continue to ramp post that timeframe.

So Jason, for summary, the $300 million to $500 million a year is the capital cost that you were scratching at. Tony's then covered the EBITDA benefits that flow through from the improvements, so the $1 billion to $2 billion, plus the one that comes in the forward-looking stuff. And then Stephen has just tried to make sure that you see that we've guided in the numbers to '23, '24. But there's a continuing and improving benefit that goes beyond that and Tony's saying there are new things that will back that up as we go forward as well. Is that clear?

Yes. So it's $500 million CapEx for an extra $1 billion a year of EBITDA? It sounds like a good investment.

We think so.

As your next question comes from the line of Liam Fitzpatrick from Deutsche Bank.

Two questions. Firstly, on the cost side, looking at copper and PGMs, the cost guidance for 2022 is higher than at least I expected. How much of that, if we forget about grades, et cetera, should unwind if we're looking into 2023 for those 2 divisions? And then secondly, just back to Woodsmith, I know you're not going to give us any kind of numbers on it, but you have compared it with Quellaveco, where you did partner to de-risk it. Given that from what you're saying, it sounds like scope is changing, CapEx higher, probably volumes higher. And given this is a new market for Anglos, would you consider a minority stake sale for this project further down the line?

Okay. I'll have a crack at both, Liam, but I will give Stephen the last word on costs as well. Firstly, the -- I think your point's right. From our perspective, the grade issue is always a structural cost at Los Bronces, so you're right. Put that aside, I think the other challenges unwind progressively over the next 2 years for our Los Bronces as we improve the recovery work, the P101 and technology programs kick in. So it's a combination of water addressed the P101 improvements and the technology work that improves the position. And you've got the water availability and more consistent operations going forward. It's the Chile conversation. Quellaveco will keep improving and there'll be incremental opportunities there. So over a couple of year period, and I think we'll get ourselves in good shape. And then you're starting to kick in to the Collahuasi contribution. And I think that's very important. And then secondly, on Woodsmith, again, scope, making sure we've got that right. Making sure we've got the detail right is really important to execute with consistency. We keep the option open on looking at a partner. I guess the way to think about that is in looking at a partner, we'd be looking for someone if we decide to go down that route. If we decide, that could add value. In our particular case, we don't see the balance sheet issue as being a concern. It's whether we believe we can bring a partner in that can actually add value in the process. And the project phase of Woodsmith, where Tom and his team are really the key players, it's probably around a 4-year period. So we understand what that looks like. And so that option remains open. So the question is, will we have added enough value in the eyes of a potential shareholder? I still think we've got a couple of years. And I'm only saying that in that you've got the next 12 months, you're doing the detail. But the real value will really start to hit people, I think, in '23. So that would be the timeframe to start looking seriously at a partner, but they have to add value would be my view. Now -- and with that, I'll hand over to Stephen. And remember that you will have a new CEO in '23, and Duncan's being absolutely key in developing the strategy. So I don't think there'll be a big shift in the strategy. But how he sees that value in '23, '24, Steve and [ Anthony ] will be obviously part of those conversations. But that would be my perspective on it. Steve, both the cost and Woodsmith perspective, please?

Yes. Thanks, Mark. You covered some of the main points on copper. It's really just a function of the maths in '22 if you look at Quellaveco, I'll pick a point, 150,000 tonnes of $1.25 versus 350,000 tonnes at $0.95 the year after. So it's really just that commissioning and ramp-up phase across the portfolio. It actually hangs together quite nicely. I think Mark covered the Los Bronces points, so nothing to add there. On PGMs, yes, listen, there's a subtle increase '21 to '22, an attachment [ crate ] doing an enormous amount of work on both cost efficiencies, but particularly stability. And I think that's the point just to pick up on one of Alain's questions earlier. That's really been the thing that's been quite pleasing through the ACP since it came back up is that stability and consistency of operation has helped drive some of that inventory run out this year and the great refining numbers. But just in the cycle through '23, '24 of some of the programmatic rebuilds in some of the parts of the operations, particularly in some of the smelters and some of these things are like once in a 12-year or once in a 15-year rebuild. We just happened to be in a couple of those cycles just as you would ideally like to release some of the inventory. So I'll just take that a little bit longer. So nothing to be concerned about. And again, we look at maximizing value and options and alternatives there. It's just the way some of the timing and the numbers drop. So nothing to be too concerned a lot of focus Mark. Nothing too much to add on the wood side front. I think you -- the Woodsmith front, I think you answered that.

And your next question comes from the line of Ian Rossouw from Barclays.

I just wanted to follow up on Woodsmith just around your comments previously. Tony, I think you were saying that you were expecting the overall CapEx budget to be in the same ballpark as previous estimates. I mean, obviously now with the scope change, which to me is analogous to much, much higher CapEx increases. And Mark, I guess you've previously talked about bringing the ventilation shaft into -- or earlier into the plan. I guess I didn't realize that previously, it was included in the CapEx plan. So maybe just give a sense of -- I mean, are we looking at significant increase in CapEx? And I mean is that just now phased over a longer period? If you can give some indication on that. And then maybe just, I guess, you were saying on previous sort of detailed engineering, I mean, by the time you will be done with this review, I guess you would have spent close to $2 billion on the project. Is that -- I mean are you comfortable continuing with the spending on the critical path now? And I guess what you currently see as a sort of returns of the project going forward?

Thanks, Ian. Let me frame the points you've made, and then I'll hand across to Tony. Firstly, the focus on the critical path items, the tunnel and the shafts, we think is the right thing because we believe the project's a very good project. And the work we've done so far, I think, has confirmed that belief in the project. So we're very happy. And by the way, product has gone from $125 a tonne to $225. We're not -- that doesn't mean we're going to shift our pricing to $225, but it does give us a lot of confidence that we've probably picked a good place to be. So that's the first point. Second point, doesn't necessarily mean there's a massive increase in capital. So I think you've got to just pull that one back. The capital estimates that Sirius provided were estimates to the pierce point of the ore body. And we had said right from the get go that we had different numbers to Sirius -- higher numbers than Sirius and that the likelihood would be that the time frame would push back because the detail needed to be done and that we thought they would probably -- we didn't say a bit, probably quite aggressive on the timing of the shafts. Those things have all proven to be correct. And so we're happy that we looked at those things the right way in the acquisition and in the model. In looking at the ore body, looking at the market, we think there is scope to drive towards the bigger project earlier than was originally envisaged, which means the capital spend does, at time, takes us to a bigger scope and a bigger project and more of the granulated thing. Because the original Sirius scope only had 7 million tonnes of granulated material, and then they had ungranulated. Well, we think you're better off going all granulated because the feedback from the market has been really positive on that form of the product. And that also plays into a higher price. So we think the marketing strategy has to be taken proper account of. So we think it's a very different look. We'll give you this capital schedule for the longer term, not just up to the pierce point, and that actually shows you what's needed to take us through the 4 projects cut. So we think it's a good story. We think it really does look like a long-term Anglo American project, but it has to be done the right way and the detail needs to be done the right way. So Tony, what do you want to sort of chip at in that conversation?

Look, I think. Mark, we had a lot of learnings, particularly out of Minas-Rio. And if we had our time again at Minas-Rio, the key piece of infrastructure that we would have put more flexibility into would have been the pipeline. And so in looking at Woodsmith and when you look at resources that are so long life-d and got such quality is how do we ensure that we've got flexibility and optionality longer term. And that's really where the work is focusing. And then how do we put the level of design. And then with Quellaveco, the reason that it's been so successful is that when we really kicked off Quellaveco, we had about 70% engineering done. So if you combine those 2 elements, that's really what we're focusing on at Woodsmith. We've also had the ability to watch other projects using same technologies, and what are the learnings from them that we've been able to put into our own project at a really early phase. So I think it's the level of engineering, planning, scheduling and project control is what you'd expect from a company, from us -- like us. So the tunnel, to date, has gone very well, to about 17 kilometers, and that's in good shape. We expect to start cutting, in seriousness, from January next year in the service shaft, production shaft, the machine is already positioned in the shaft. Once we have a bit of experience next year, we will -- I think the cutting rates and the shaft rates are the determinant of the project duration. And at this point, we're not quite sure what that will look like. We're confident that we've got all the right work basically being done. Mark, I'll hand back to you.

Thanks, Tony. Ian, if I then just do a simple summary of where we are. We've been there for 18 months, and that's a relatively short timeframe, I guess, compared to many others that have made acquisitions or decided to work in this industry. We have remained committed to the critical path items on the project because we saw what we think is a world-class development and certainly, everything we've seen so far confirms that. We've made sure we understood the market and the potential scope that services that market and gives us the best return. That's being done now. And now we're doing the detail so that the execution of the project lives up to the standards we expect as a business. And it is a different scope. It is a larger scale project. It is an Anglo American-type project. So what you've seen previously was a starting point for a conversation. But when we made the acquisition, I made that pretty clear. It's a starting point. Guys have done a good job. It is going to take longer. We will spend the money differently, and we're pulling the detail apart. We're now putting that detail and start -- better start putting all the detail back together again so we'll be ready by the end of next year. And so in hitting a Board presentation mid-'23, we'll have done all of that work within a 3-year period, and we'll be driving forward beyond that, given where other -- I guess other big players in the industry have been on these sorts of things. I think that puts us a long way ahead of most in terms of getting it in the right place and in the right framework.

Right. And then just 1 follow-up on the nickel guidance. There was quite a big reduction in 2023. I recall previously, you had some plans there to change the product sort of qualities to improve. And I think it's also a bulk ore sorting. Has that now changed the plan?

I think you'll find that some of the technical work, that kill optimization has been pushed back a bit. And the application of bulk ore sorting is where we want a real kicker on grade, and that might take just a little bit longer. Tony, do you want to add anything to that?

Bulk ore sorting, we're assuming an 8% kicking in grade. That's in -- when the capacity is there, we're -- that's what we're assuming. We see some further potential around sizing and potentially screening that's not included at this point.

So we're looking to try and do a bit better than that, Ian, but a little bit more work to be done.

As your next question comes from the line of Tyler Broda from RBC.

Just wanted to -- just a question on the emissions -- Scope 1 and 2 emissions there and the move towards the carbon neutrality. I guess, you got a pretty consistent downslope through the 2020, through the 2030. Just wondering sort of what sort of levels of CapEx are required for this? And I assume that's already in sustaining for the -- at least the guided period. I'm just wondering is there any scope to accelerate this? Or sort of how are you thinking about that path to 30% down by 2030 at this stage?

Okay. Thanks, Tyler. Firstly, Scope 1 and Scope 2, we're targeting 30%, and that includes energy efficiencies. If we could get to 50%, and this is not a target, this is a conversation around our thinking, we'll get there. So we're trying to get to that 50% because that then aligns with the Paris accord. But we're not quite in a position to commit to that. But that's what the guys are working on and Tony and the guys have been well ahead of the curve. And as you'd expect, they're already trying to work out if we can get there. And some good work, the methane work in Queensland would be critical. That would be the first point. We are already at 36% renewable. The only significant cost we've borne in getting there was a $200 million cost on one of the old contracts that we had to flip, but we then had operating cost reductions that have already paid, that have paid that back in the time frames up to now. We'll be 56% by 2023. And the investments required, which includes the whole configuration change in South Africa, which was partly about the South African grid with Eskom and about things we will do inside defense. The investments required to get to those positions and achieve our objectives is either in the sustaining capital of around $3 billion a year, the technology budget in the $300 million to $500 million a year under Tony's leadership, or it's part of the growth projects that we flagged, this Mogalakwena and the other expansions that we're doing in the business. Now the second part of that, which then drives us towards 2040 or the third part, I should say, which is the replacement of diesel with hydrogen technologies is then framed again as part of those budgets in the period '24 through '34. And so they're all covered in those areas. Now there'll be some different things we do at different times, but they're all covered within those budgets. So Tony, do you want to give more shape and explain, for example, how you fund the hydrogen fleet? And then Stephen, if you want to add something on the cost beyond that? So Tony and then Stephen.

Look, I'll actually let Stephen talk to the funding because I might give you my heart attack. But look, let me, technically -- look, technically, we -- there is -- we have all the plans that we can meet the targets that we're talking about. The issue, really, is timing, and that's really driven by Stephen. So I'll leave it with Stephen.

Thanks, Matt. So timing, not a lot to add from was it 6 weeks ago, I think, when we had the Sustainability Day, particularly around the hydrogen fuel trucks and the South Africa renewable. We're working really closely with the teams. Those plans or the concepts are now feeding into more detailed plans, timing, execution strategies. Whether some of those things will be multi-user, single-user will all depend how they're funded. So you're going to need to just bear with us a little bit. So none of the key themes and messages that hopefully we've got across in the Sustainability Day have really planned, have changed. Mark's correct in the way he expressed the capital numbers in the $300 million to $500 million over the sort of the '22, '23 period. So that's all in that guidance. And then, obviously, as we refine the plans and particularly, the execution strategies in the next year or 2, we will give clarity as to how that sits and how that plays. Do we buy stuff across the fence? Do we build it ourselves and put it on balance sheet? There's some of that just to be refined in the next year or two.

Tyler, does that answer your question? Does that cover that?

Yes. No, it definitely does.

And your next question comes from the line of Sylvain Brunet from Exxon BNP Paribas.

Two questions for me. Now we are hopefully past the worst on the pandemic period and that challenges on the production for the industry, for yourselves are quite visible. I mean, the inelastic nature of the supply response in mining is now obvious to everyone. We can see capital intensity rising. Have you updated your long-term pros assumptions? Any changes you've made or are we as where you think , are doing the -- of -- some more updates, we could see some uptick there would be my first question.

Sorry, can I just make sure I got that right. Are you saying or are you asking us if we think commodity prices will kick up or input costs will kick up or both?

Just wanted to get a sense of whether you've changed any of your long-term price assumptions market, right.

Okay. Okay. Okay. Well, firstly, if I'll give a view and then Stephen will give his view because he's probably a bit more conservative than me. Firstly, in De Beers and diamonds, we think the risk is to the upside in that the world is running out of diamonds. There haven't been any major discoveries. We said 30% in 2 years, and we've seen 23% in just every year. We're putting more money into marketing. We're really changing the way we're marketing segmenting products. So I think the upside or the risk is to the upside in diamonds. But again, we've got to be careful because we are competing with other products in the luxury market. And so it's not simply about supply dance. It's also about the markets you're in. But the pressure will be to the upside because there are less diamonds around, first point. Copper, very strong, I think. We haven't adjusted our numbers on the basis that in the end, the copper price will be what it will be. And we certainly don't want to have any comfort or relax operationally on the basis of prices will help us out. So we've been pretty tough. We're still around the $3. But quite honestly, I think it could be quite stronger because again, supply is going to be hard-pressed to match demand. So I think the risk is to the upside, but we've not adjusted our numbers yet. We would prefer to plan more conservatively and keep driving our costs and know-how to flex a bit up on the upside. Nickel again, probably pressure to the upside. We don't think Indonesia will come on as quick and as hard as some people think. H power developments are very finicky. They are orebody specific. They're technology-specific. They will be challenging. And the environmental impact in Indonesia of the Chinese developments will need to be watched carefully. And so that will be a bit more challenging than people think. I think iron ore, quality iron ore, we think will do very well. We think the curve will change shape where quality will become more important. So we think we're well-positioned there. And I think they are the key issues. I mean, I won't go through all the comments. But I think the risk is to the upside because I think supply will be tough, getting approvals done is going to be tough. So I think generally, the risk is to the upside. And so as a company, we're working really hard to keep people focused on the costs. And Tony and the team are really driving hard on the technology developments. And if we can keep delivering and pushing most through those -- that $0.5 billion that Stephen added and the extra $1 billion or two that Tony was talking about become real differentiators, we think, in the 3- to 5-year timeframe. Steve, do you want to add your own perspective?

Thanks, Mark, and [ I ] never disagree with anything you say. Listen, we are watching the supply and sort of watching the supply and demand situation closely. But I think there's an important difference between a short- and medium-term forecast and a capital allocation decision. And that's where we really stick to the longer-term views that Mark spoke to. So I actually share Mark's view in terms of the short medium-term forecast. I think as you -- I think it's behind your question, the supply and demand dynamics are pretty tight at the minute. And yes, we may tweak our long-term assumptions around the edges, but nothing that significant. And certainly, nothing feeding into any changes in the way we're thinking about capital allocation. That's really pinned that longer-term capital investment cycle and discipline that we've often spoken about.

Okay. Sorry, I should add one that I didn't, and it was an obvious one. If you look at crop nutrients, the fact that we've got an organic product, low carbon intensity and the value and use issues becoming to the -- coming to the fore in agriculture, we think the crop nutrients position is quite a special position on the revenue side as well. And so I would say that we are materially or we are changing our view to the upside on the pricing side in crop nutrients. So that's one that it still needs some work, and we still need to think about carbon and soil consistency and health and how that gets priced. But I think that's one of the real positives that the guys will be working and talking to in 12 months' time around the project, 12 or a little over 12 months' time. But that's something we're trying to make sure we get right. And as Tony said, getting the infrastructure right, getting the optionality right in the ore body is -- we're doing a lot of thinking because we see a lot of opportunities in the marketing that probably weren't clearly surfaced. And so we're very excited on that front as well.

Mark, can I just comment very quickly before we go to the next question, please. We've got 3 more questions coming from Dominic, Richard and Carsten, and we've got about 7 minutes. So just to keep us on track, please.

Your next question comes from the line of Dominic O'Kane from JPMorgan.

Just quick question on copper, the Chilean copper guidance. Could you maybe just give us an indication of what contingencies you've got in the numbers for 2023, 2024 around water? And then following on from that, if -- are we into a situation given the water scarcity issues where we should start thinking about a desalination plant for Los Bronces longer term?

So I would say the water opportunity is probably 30,000 to 40,000 tonnes. If we get a [ whack ] of water, I think there's real upside. I think the downside is reasonably low because I think the guys have been quite conservative in the way they forecast the numbers forward. So if you said 5 or 10, I'd be comfortable in that range. I'll ask Tony from a physical point of view if he's in the same ballpark and also for his comment on the Los Bronces' approach to water. And then after Tony, Stephen, if you wanted to add anything.

I think your comment about water over the tonnage, Mark, is about right. I'm hopeful there's actually some upside that we can deliver that we won't put in yet around recovery. And we have been looking at water solutions to give us a long-term fix now for 18 months. And hopefully, over the next 12 months, we can daylight some of that.

Steve?

The team have done a terrific job looking at all sorts of alternatives, in particular, water efficiency, which sort of Tony's touching on as well in terms of recycling, et cetera. And some of the technology plays into that space. Ultimately, we're going to have to come up with a long-term solution. And yes, will detail be a part of that, possibly. But I think in combination, it will be a little bit different to what we're doing at Collahuasi would be my suspicion at this stage.

Yes. And I think the -- looking at Los Bronces underground, the water requirements' part of that -- will be part of that project assessment, but they've also done a good job on the third-party sources. They're a little more expensive. So the better economic options. So whatever we do with water above and beyond what we've already got would be on a cost justified basis. It wouldn't be a project enhancement. I think you've got the downside in the forecast. I think we can probably do a bit better. But to be fair, we need to give that a little bit more time before we start to put those numbers back in and improve the numbers. Is that okay, Dominic?

All good, thank you.

And your next question comes from the line of Richard Hatch from Berenberg.

Questions on costs. Can you just give us a bit more clarity on what's going on with nickel costs. They're up 25% year-on-year versus the 5% production increase -- sorry, decrease. And also just in Kumba, kind of costs have kind of moved from those sort of low 30s to the kind of the high $30, $30, $40 per tonne in an environment where the rand kind of sort of weaken a bit. So I appreciate you got inflation coming at you. But can you just give us a little bit of steer on what's going on with those nickel costs and then -- and your thoughts on Kumba cost long term? And then just lastly, just on Grosvenor, just to be clear, the Q3 production report talked to you about restarting longwall operations at the end of 2021. I just sort of picked up on your comment there that it might take a little bit longer as you just really kind of -- really go at this thing to do it in the best way possible. So should we just assume a slightly slower ramp-up for Grosvenor?

So let me be clear on Grosvenor. We're ready to go. The issue is the time taken to get approval from the government. And we're hoping to have that by year-end. And so our forecast going forward, we think, takes into account those moving parts. And Stephen, if I'm right, and Tony, we haven't included much production in the first quarter from Grosvenor. So I think our forecast going forward looks pretty good and takes into account the regulatory risk. But we're ready to go. So just to be clear. So all of that stuff I said about good work being done is done. We had the presentation with the Board 2 days ago. The guys did a fantastic job. I think blew everyone's socks off in terms of what they've done. So I think we're in good shape, but we do have to wait for the regulatory approval. Hopefully, that would be by year-end. Steve, do you want to pick up the cost points?

Yes. Thanks, Mark. On Kumba, I think everyone would realize South Africa is a slightly higher inflationary environment, but it's a combination of energy, labor and volumes. You will note we've just tweaked the Kumba guidance down a little bit, and that's just working with Transnet and how we can maximize the volume flows there. On nickel, one of the main cost drivers is they use coal as part of their process. Tony might want to touch on that. But obviously, we're assuming a more elevated coking coal input price for them. While it's a cost for them, obviously, it's a revenue for the met coal business. So overall, it's more than a positive. That would be the main points I'd make. Thanks, Mark.

The coal is used in the firm, so it's part of the smelting process. The only thing I'd add on Grosvenor is we will not overproduce. We're going to stick to the ramp-up plan to make sure that we bring everybody along with us on the process.

As your next question comes from the line of Myles Allsop from UBS.

Maybe a question for Steve on cash returns. I mean, I think the comments in the presentation suggested a fairly high likelihood we're back at a 40% payout. I just want to make sure that's the right way of thinking, given obviously net debt has stepped up materially in the second half. And also just looking forward as well. Obviously, CapEx is going up by over $1 billion in 2022 and probably close to $1 billion in '23, depending on what you spend, Woodsmith on top of the $1 billion increase in '22. It wouldn't take a huge amount in terms of lower commodity prices, whether it's copper or PGMs to see the business moving to cash negative. How much flexibility do you have around that CapEx plan as we look out the, say, 3.5 sustaining CapEx and so on if we do move into a kind of weaker commodity price environment.

Do you want me to kick that off, Mark.

Yes. One thing I would -- I'd make 1 point there, Steve. The Woodsmith spend rate that you're scratching at or the Woodsmith point on their forecast, remember, Woodsmith spend rate is reasonably consistent. It's not significant. And so it's around the shaft. So even with an accelerated -- or the approval, it's not that big a kicker on the spend. It's not a Quellaveco concentrated program. It's actually more of a spread-over-time thing. And so I don't think people have got it in their heads yet how Woodsmith plays out over time. And we'll do a better job with that once the engineering, the detail is done. But it's actually a slower buildup over time when you get revenue back. So it's quite different. So I'm actually very relaxed on that side, Steve?

Just a couple of comments across a broad range of topics, Myles, probably in that question. So yes, listen, I would encourage you to use the 40% assumption at the moment. When you do get to look at the net debt number at year-end, just a couple of points to note. Obviously, at that point, it would include something like $1.5 billion of the Mitsubishi share of the CapEx spend and some of the how that works as per usual, is included in the appendix. There's probably at least $0.5 billion of finance leases in there. So just to help you interpret that number when you get it. Part of what we want to try to set up here is investing through the cycle, and that's been a big part of the discipline and the balance that we've tried to make. Obviously, as we grow the business, even in a slightly lower-price environment, then with Quellaveco coming on stream and the other volumes and efficiency improvements, you would expect to see those things flow through to the bottom line. But we stick to the view, the 1 major project at a time. You always have flexibility around the smaller projects as to when you keep them off, et cetera. We are in just a slightly elevated capital intensity just for the next year or 2, but we do expect that to come back. And at different times, mining businesses go through those little bits of cycles. We just happens to be in one at this point, as we've sort of flagged for a while now. So pretty comfortable overall with where we sit. It's something, obviously, we always keep an eye on. We always have levers to pull if we need to, but we are trying to set up something that invests very much through the cycle. Thanks, Myles.

If I could come in, guys. Dolce, I'll take over, if I may. Thank you very much. Look, we haven't managed to get to 2 questions. Apologies. We'll come back to you directly on those. But we are a little over our 12:45 close. So I'd just like to say thank you very much to everybody for your time, your interest and your questions. If there is any follow-up, please let Juliet, Michelle or myself know. If not, we wish you all a safe and healthy Merry Christmas. Thank you very much indeed.

Thanks, guys.

Thank you.