Anglo American plc (AAL) Earnings Call Transcript & Summary

Well, good morning, everybody, for those of you who I haven't spoken to in person. Welcome, and thanks for joining us again today. So a pretty busy first half following on from a pretty busy last year, but a very exciting one nonetheless for us, and I think definitely marking the transition as we deliver this accelerated strategy for Anglo American. On a go-forward business in both copper and iron ore, I think we continue to deliver excellent operational performance, which is building now on the groundwork that we laid over 2 years ago. This focus on operational excellence is, by and large, driving stable and cost-effective production. In a world that is just getting more and more complex with some unprecedented volatility, it is more important than ever that we remain focused on what we can control, which includes driving operational excellence to get the most out of our business. I really am very pleased to say that completing the first and the biggest component of our portfolio simplification, which was the demerger of Valterra has been really successful, unlocking material value for all of our shareholders. It took a tremendous effort from both the Anglo and the Valterra teams, and this was a really big step forward towards the goal of becoming a focused, high-quality copper and premium iron ore producer with substantial growth options. We're going to talk a little bit later today about the coal transaction with Peabody. But regardless of the outcome of this specific deal, the portfolio simplification is progressing well, and we continue to work incredibly hard to unlock what we believe remains substantial inherent value within this company. The new Anglo American provides an exceptionally high-quality base and sets us up to benefit from high return growth in the right commodities with our collection of Tier 1 mines, our vast resource endowments and further long-term asset optionality. Safety is, of course, our #1 priority and the primary focus in everything that we do. So of course, it saddens me greatly to report the loss of two colleagues in two separate incidents in the first half of this year at our managed operations, one in Brazil and the other at Unki in Zimbabwe. This is a profound reminder of how deeply safety matters. Although we still have a lot of work to do on this front, we have indeed though made some significant progress in reducing our injury frequency rates across the whole of the business. In the first half of this year, these rates were reduced by 24% from the end of last year and have actually almost halved in the last 3 years. At the same time, our high potential incidents have continued to decline, which is a result of disciplined execution, some strong risk analysis and mitigation and the commitment of our teams on the ground. As a result of our efforts to simplify and prioritize work, our leaders are able to spend much more time now in the field, engaging directly with their teams, fostering this accountability that we were after and encouraging now a culture of proactive reporting. Our commitment to safety is unwavering. It's a journey. We still have a long way to go, but I am confident that we are making progress. And we intend to end up with an environment where it is safe to come to work and leave work every day in the same way in which you arrived. Our operating model is the foundation of operating excellence. It is a structured approach, which underpins the development and the delivery of our plans by connecting our strategy directly with the underlying assets. This disciplined execution ensures that we deliver the right work at the right time, but more importantly, in the right way. It also allows us to better understand potential problems much sooner and lets us address these proactively in order to maintain and drive longer-term value maximization. The operating model is underpinned by our commitment to sustainability and also extends into our capital management capabilities, and this enables us to translate our endowments into -- and our wider exploration program, of course, into value at the right time. Our operating model translates more into stability and in turn, supports safety in the operations and options to pursue incremental improvements, and this helps us to generate the higher margins that we're now seeing, and the return on capital employed as well as enabling the delivery of value-accretive growth and capital returns. I really am delighted by the performance of both our copper and iron ore businesses during the first 6 months of this year, and our guidance is unchanged for the rest of the year. In Copper Chile, we've seen some strong performance from Los Bronces, which has come in actually ahead of our plans as we continue to open up the Donoso 2 area and put that mine back into the right shape. The strong performance at Los Bronces is increasingly setting us up well as we head into an even better version of this mine once it adopts a joint mine plan with next door Andina as part of our agreement with Codelco. We're continuing to work on getting that agreement finalized and hope to do that later on this year. Los Bronces has performed -- Los Bronces' performance, and in fact, El Soldado's performance alongside Los Bronces has fully offset the variability in the grade and the recoveries that we saw coming out of Collahuasi, which is, I think, a remarkable achievement in and of itself, considering that both of those mines are overall lower grade, and it shows how much the team have turned both of those assets around in the last couple of years. Lower copper production was planned at Collahuasi for 2025 as the mine transitions between phases in the main pit, which is Rosario, and this is expected to be complete by the end of 2026. The stockpiles, which we had planned to use to supplement production during this period, turned out to be quite a lot more refractory than was expected. And as a result of that, we ended up with lower recoveries. This was compounded in the first half by the variability in the metallurgy and the water constraints that the mine suffered, which affected both throughput and recoveries. Now in terms of the water, Collahuasi has started to receive additional water. So we've just commissioned our own desalination plant. And as of the end of June, we are now using that water. And of course, that plant will ramp up during the course of this year and on into 2026. And this should help to mitigate this issue of lower grades as we go through the development work on the mine itself for the rest of this year. So therefore, we are expecting significant improvements from the second half -- in the second half from Collahuasi. We're also now having a look at next year's plan from the independent joint venture team and are working with our partners to see how we can best optimize the ore feed and minimize the impact of these recoveries until we get that next phase into production later on in 2026. Now this may include having to accelerate the mine development to manage ourselves through this transition. But let's not forget that Collahuasi is one of the world's very best copper endowments with over 2.6 billion tonnes of reserves at almost 1% copper. It is an outstanding asset by any measure. Now our newest mine, Quellaveco in Peru continues to perform very well. In just its third year of operation, it's still reaching above capacity throughput rates. Great cost management from the team on the ground there and strong byproduct credits helped to bring the costs in at Quellaveco at just $0.88 a pound, which shows the very high-margin nature of this particular asset. Our high throughput rates are now unfortunately putting some pressure on the recoveries from the coarse particle recovery plant, and we are continuing to work on debottlenecking and drive improved stability and recoveries there. And then turning to our premium iron ore assets. These assets underpin a very solid business, generating strong cash flows with upside optionality as the world steel industry moves to higher quality iron ore as an input to help them manage their own emissions. Our Brazilian iron ore operation at Minas-Rio is delivering stable production, showing continuous improvement quarter-on-quarter. In South Africa, Kumba's performance benefited from improved rail availability and port performance, supporting very strong sales volumes. We also are continuing to realize the benefits of the reconfigured mine plan there with some excellent cost control by Mpumi and the team. And we still have, of course, the UHDMS margins to benefit from as that project is going into implementation. So turning now to our portfolio simplification. Really pleased that we've delivered the biggest single element of this transformation journey with the successful demerger of Valterra on the 31st of May this year. And that was, as we remind ourselves, only just a year after having announced the accelerated strategy. We worked extremely hard to structure this demerger, including the prior distribution of part of our holding, the retention of the 19.9% stake and in parallel, an Anglo American share consolidation. The Valterra team has also been on an extensive marketing campaign, including global shareholder engagement and the Capital Markets Day, which I believe showcased that business extremely well. All of the elements here structurally and proactively have addressed the flowback concerns and have helped, I think, to set Valterra up to succeed in the capital markets. I am delighted that we've also been able to share directly in their success alongside our shareholders with the residual stake having benefited now from quite a material rise in PGM prices in the last couple of months, increasing by value of about $0.5 billion to around $2.6 billion as of yesterday. And as previously stated, we are looking to responsibly exit that position over time and hope that the Valterra team can continue to move from strength to strength. The PGM's demerger was clearly a major milestone on our simplification journey, but our efforts continue unabated on the remaining processes. In Nickel, we signed a definitive agreement with MMG back in February of this year for proceeds of up to $0.5 billion, and we are now working through the final regulatory approvals. And in Steelmaking Coal, we completed the sale of Jellinbah for $1 billion at the start of the year, too. Now as you know, at the end of March, we had this unfortunate incident underground at Moranbah. Most importantly, the mine was safely evacuated with all of our processes and procedures working exactly as they should have. The incident itself caused no damage to the mine, and there's no damage to any of the equipment in the mine either. And we are now going through a very rigorous process to work out the right approach to restarting the mine with all the appropriate regulatory approvals and safety considerations every step of the way. Our team in Brisbane has gone about this work in an excellent manner, I believe. So we have now over 2 decades of experience in operating this mine and the team in Australia, combined with the technical capability and the experience across the group are working diligently on the restart in partnership and in collaboration with all of our stakeholders. So as part of that process, we've set up a tripartite industry forum. So that's basically a forum that's constituted of business, government and labor stakeholders to discuss this incident and be sure that we are transparently sharing the learnings from this incident. This is a first, I believe, for the mining industry in Queensland and sets a new benchmark for both transparency and industry collaboration. We will continue to work very closely with our workforce here, with the industry safety and health representatives as well as with Resources Safety & Health Queensland under a commonly agreed set of principles to progress a staged approach to recommencing production as soon as is feasibly possible in a fully risk-assessed manner. Now I want to be very clear that as we have worked through the different options, our primary lens, as it always is, has been safety. We got back underground in mid-April, and we developed the plans for a staged restart. We had approval to start maintenance and development activities in early June, and work is now well progressed to prepare the longwall panel for a restart. Just last week, we received the approval to move the shearer from the tailgate, which is where it was at the time of the incident, all the way back to the main gate, and that is in order for us to undertake some specific longwall maintenance activities. And in so doing, of course, we're going to get the benefit of the provision of some very useful data for validating our control systems as we move towards a safe and a structured restart of production. Now subject to the final approval from the regulators, we intend to use remote operations at the restart for a period of time just as part of this plan. In regard to the sale process for Steelmaking Coal, Peabody was, as we know, the successful bidder and signed a definitive sales agreement at the end of a highly competitive process. While the Moranbah incident is unfortunate, and we are working constructively with Peabody, knowing what we know today in terms of the condition of that mine, the equipment as well as the progress that we are making on a daily basis with the various stakeholders, as I've described, we remain confident in our belief that the event does not constitute a material adverse change under the sales agreement. We have been constructive, flexible and open with Peabody as we work towards completion. And should Peabody ultimately decide not to complete, we remain confident of that legal position under the contract. We ran a very competitive process last year and the strong inbound interest that we have received over the last few months, I think, is a reflection that these may very well be the last Tier 1 Steelmaking Coal assets to come to the market for the foreseeable future. And I think it also underpins the fact that the supply-demand fundamentals remain very attractive for that industry. Therefore, if we are forced to remarket the assets, we are confident in a successful sale process, but this would potentially push back completion into 2026. Lastly, on De Beers, our commitment here to exit De Beers is unwavering, and we are progressing with both a trade sale and listing options in parallel. Primarily due to the complexity of the shareholding agreements and more importantly, the challenging diamond markets over the last couple of years, this was always expected to be the final step in the portfolio transformation journey. We continue to make good progress here on both tracks. The finalization of the sales agreement and mining licenses extension for Debswana with the government of Botswana back in February was a critical enabler to move forward with the separation process. On the trade sale route, we are currently engaging with a credible set of interested parties in a formal process now. In parallel, we have been engaging with the government of Botswana in respect of its interest to increase its shareholding in De Beers. A trade sale absolutely remains our preferred exit route for the business, but only if we can find the right buyer on the right terms. In parallel, we are progressing preparatory activities for a capital markets process should that become the preferred route for our shareholders. As far as diamond markets are concerned, we have started to see the early signs of stabilization, we certainly hope so anyway, over the last 6 months. I think this is notable considering the increased volatility in the sentiment from potential tariffs. We continue to monitor the situation really closely and remain focused on managing De Beers business to optimize cash -- the cash generation of that business while at the same time, preserving the value of the iconic nature of this business. The De Beers team has a clear response plan ready to ensure that cash generation would be preserved should the market take a lot longer to recover. De Beers is such an important company to the country of Botswana and indeed, to the other countries where De Beers operates. And so throughout the process, we are, of course, engaging with all of these stakeholders with regards to pathways forward as you would expect us to do. With some of the best diamond mine resources and best marketing capabilities in the world, De Beers, I believe, is well positioned to emerge and thrive as the market recovers. We continue to believe that there is significant upside potential in this business for the right combination of owners, and we will continue to keep the market abreast of developments as appropriate. And with that, I'll hand over to John, who will help us make sense of some of the financials in a really noisy half, and then I'll come back and close out. Thanks, John.

Thank you, Duncan, and good morning, everyone. I'm pleased with the underlying operating and financial performance during this period. But of course, as we transition to our new end state, the financial reporting does become very complex. And so I've tried to set out on this first slide as simply as I possibly can, the basis on which our numbers are presented. Firstly, accounting rules require us to present our businesses as either continuing or discontinued depending on where in the sales process they sit. At this period end, that means that PGMs, SMC and Nickel are discontinued while De Beers continues to be a continuing operation. I've then set out our own defined pro forma, which is our best estimate of the ultimate end state for Anglo American, including the divestment of De Beers and associated corporate cost savings. The results are clear. Our discontinued operations have suffered losses in the period, and this reflects the South African flooding earlier in the year affecting PGMs in the 5 months before demerger and the non-operation of both Grosvenor and Moranbah in SMC. Meanwhile, our continuing operations have performed well, albeit down slightly on last year, with that shortfall being almost completely due to De Beers and the continuing weak diamond market conditions. The combination of continuing and discontinued operations resulted in total group earnings of $0.15 per share and a dividend of $0.07 per share, in line with our 40% payout policy. This lower payout reflects the losses from those discontinued operations. Looking at our results on a pro forma basis clearly shows the higher-margin nature of our go-forward business. Lastly, on this slide, on net debt, there's been a slight increase in the period to $10.8 billion. And with EBITDA from discontinued operations excluded from the calculation, this results in net debt-to-EBITDA of 1.8x. Of course, that ignores the expected proceeds from the sale of our remaining 19.9% stake in Valterra and sales proceeds from SMC, Nickel and ultimately De Beers. Adjusting for those, we see our net debt-to-EBITDA below 1x. Moving on and starting with the results for the continuing operations. Production was down 9%, mainly due to De Beers managing production to match lower demand and the second plant at Los Bronces being on care and maintenance since the middle of last year. Our basket price was down 1%, largely due to lower iron ore prices. While EBITDA at $3 billion was lower than last year, largely due to De Beers, with margins similarly impacted. And that translated into a continuing earnings per share of $0.32. Drilling into a little bit more detail now on that continuing EBITDA. You can see De Beers had a $0.5 billion negative impact compared to the first half of 2024. This reflects the prior year inclusion of a royalty sale of $0.1 billion and ongoing challenging market conditions. Our focus on reducing inventory in the period also resulted in some diamonds being sold at lower margins. But while De Beers' overall EBITDA was negative $0.2 billion in the period, our focus on working capital meant that the business was cash neutral. The lower volumes that you can see here were mainly in copper due to the smaller Los Bronces plant being on care and maintenance, together with lower volumes at Collahuasi as the mine transitions phases and realizes lower recoveries on the ore from stockpiles. I was delighted once again with the strong cost focus. Commercially, our supply chain teams are doing well to manage CPI, while our cost savings are coming through exactly as planned. The net $0.2 billion cost benefit shown here reflects $0.3 billion of gross cost savings, offset by $0.1 billion of higher costs, mainly at Collahuasi, as we accelerate development work to ensure we minimize this period of lower recoveries. Staying with costs, you can see here that we remain firmly on track to deliver our committed $1.8 billion of cost savings. In February, I said we would realize an incremental $0.5 billion savings in 2025, $0.3 billion from run rate savings achieved in 2024 and $0.2 billion from new savings to be delivered as we further streamline our corporate costs. At the half year, we've realized $0.3 billion of that full year target of $0.5 billion. And with restructuring activities continuing, we are exactly where I would want us to be. Standing back, you can see here that all of our EBITDA in the period came from copper and iron ore. Copper EBITDA represented $1.8 billion with margins at 48% as higher prices largely offset lower sales volumes. Notably, Quellaveco delivered a standout performance with unit costs at $0.88 per pound and an EBITDA margin of 68%. Iron ore EBITDA was $1.4 billion, flat on this period last year, but this holds a strong underlying performance, considering that lower prices were offset by higher sales and a strong cost performance at Minas-Rio. And as you can see here, the cost focus that I've just talked to is evident in our unit costs with iron ore down 5% and copper just slightly higher, reflecting the reduced contribution from the lower-cost Collahuasi in the period. The underlying effective tax rate for the continuing business for the first half was 49%, reflecting the mix of profits with a higher proportion from Peru, where effective rates inclusive of mining taxes are around 41%, while still carrying corporate costs in the U.K. and we expect the full year ETR to be between 44% and 48%. Over the longer term, we expect the ETR for the end-state simplified portfolio to be somewhere between 38% and 42% as Collahuasi gets back to normal volumes and U.K. corporate costs are reduced. Touching briefly now on discontinued operations. Firstly, PGMs had a weak first 5 months before demerger, mainly due to the flooding in South Africa in the first quarter. The insurance costs associated with that flooding will also result in a cash cost to Anglo American in the second half of around $0.25 billion, given that it was self-insured. Secondly, SMC was loss-making in the first half, reflecting the fact that Grosvenor was not operating throughout the period and Moranbah has not operated since the incident at the end of March. And finally, you should note the loss on the demerger of PGMs. This reflects a gain of $2.9 billion on the assets demerged, being the market value on the date of demerger, less the net asset value at that date. This gain was then offset by a recycling of historic foreign exchange losses of $4.6 billion on the translation of rand underlying assets to dollars as required by accounting standards as well as taxes and transaction costs incurred of $0.5 billion, and all of that was in line with our previous guidance. You will also note in our balance sheet that we have a financial asset investments of $2.3 billion in respect of our residual nonstrategic 19.9% holding in Valterra, which was the value at the 30th of June. The net debt impact from discontinued operations was an increase of $0.1 billion, and I'll come on to that in a little bit more detail shortly. Looking next at our cash generation from continuing operations, which is another area of focus of mine. We again saw an inflow from working capital of $0.4 billion. As expected, our go-forward businesses managed to maintain the good working capital position achieved at the end of 2024 with the inflow largely driven by a reduction in diamond inventories in De Beers. This reflected a combination of diligently matching production to demand and a focus on selling down all categories of diamond inventory even if some lines were at lower margins. While we continue to manage the situation closely, De Beers' diamond inventories are getting closer now to normal levels. The working capital inflow and close management of sustaining CapEx resulted in conversion of operating profit to cash of 108%. After tax, interest and distributions to noncontrolling interest, our sustaining attributable free cash flow was $0.6 billion. From the sustaining attributable free cash flow from continuing operations, we then funded growth CapEx of $0.3 billion, mainly comprising the debottlenecking initiatives at Collahuasi, the UHDMS project at Kumba and the Woodsmith spend to progress the critical studies. We then also paid the 2024 dividend. Proceeds from the Jellinbah disposal were $0.9 billion, while the impact of the PGMs demerger was an increase in net debt of $0.4 billion. This reflects a neutral outcome on the demerger itself, reflecting the net impact of the debt demerged and the special dividend received. We then paid taxes and transaction costs of $0.4 billion in the first half with a further 0.1 billion still to come, all in line with the guidance that we gave earlier this year. There is then a net $0.5 billion impact from discontinued operations. This reflects the trading results and CapEx for SMC and Nickel as well as Platts up to the point of demerger, offset by the transfer of SMC and Nickel finance leases to held for sale. So this all left net debt at $10.8 billion and net debt to EBITDA at 1.8x. And as I mentioned earlier, this is largely an arithmetic output rather than indicative of the group's position. This excludes EBITDA from exiting businesses and the proceeds for those businesses have yet to be received, including the monetization of the $2.6 billion as at today's value stake in Valterra. As those transactions conclude, I would expect to see leverage come down below 1x. Just touching briefly now on CapEx. We took decisive action last year to reduce the CapEx, and you're seeing that come through here in these numbers. CapEx at $1.6 billion is $0.5 billion lower than this time last year. We've been rigorous in our capital allocation and prioritization of spend without, of course, compromising on safety or the underlying asset integrity. And with the exit of De Beers expected in due course, we would see that come down lower on a pro forma basis to around $1.4 billion for the simplified portfolio. And looking ahead, we expect sustaining CapEx at around $2 billion per annum with lifex and growth options on top of that subject to meeting our hurdles, of course. Finally, it's worth briefly looking at the pro forma results for the go-forward group without De Beers and including the full benefits of our cost savings. As you can see, it continues to show strong margins, cash conversion and return on capital employed, demonstrating the positive outcomes from our transformation strategy. So rounding out then on the key points. Our go-forward businesses are performing well, delivering strong EBITDA margins. Our focus on cost is unrelenting, and we're perfectly on track to deliver our committed $1.8 billion of cost savings. We continue, of course, to focus on cash generation. Our attention to detail on working capital and CapEx has ensured another period of very strong cash conversion. Our net debt will benefit significantly from transaction proceeds and the sell-down of our remaining 19.9% stake in Valterra, after which our leverage will be below 1x. We continue to be excited by the financial outcomes from our simplified portfolio, higher margins, higher cash conversion and higher return on capital employed. Thank you, and I'll now hand back to Duncan.

Thanks, John. So there are a number of elements here which make our simplified portfolio stand out from the rest. The first of which, of course, is our commodity mix, which is now entirely future enabling products. We are fortunate in that we have some of the best copper assets in the world, which are set to represent more than 60% of EBITDA by 2027, all of which have significant expansion potential. Our iron ore business supplies premium iron ore to the steelmaking industry, and that positions us well as that sector decarbonizes and as new steelmaking centers emerge. The newly positioned Anglo American, as John has just pointed out, will be higher margin and more cash generative. We are continuing to prioritize value accretion over volume growth as at the end of the day, it is the value that you are creating from a unit of capital that should be the measure, not just simply the tonnes of production. And I think that the Los Bronces-Andina joint mine plan that we announced in February of this year is a great example of that. By working to solve for value and to generate meaningful synergies, we have created an outcome that is designed to provide substantial benefits for all of our investors. Our strong market base of assets, which is -- which are all competitively positioned on the cost curve and in many cases, set to improve their relative positioning over the next few years will be key to generating higher free cash flow. This should support consistent capital returns for our shareholders over time. Now you've seen this chart on the left before, and we continue to believe that it's a really important one and the underlying story in it is important. It helps us to understand why despite an optically high copper price, industry returns remain modest. The cost and the capital of building new projects has grown faster than prices. This lack of a price response is very unlikely to continue in the coming years, considering the challenges that the industry is facing just to keep up with the expected medium-term demand trends. This will also, we think, shine a brighter light on those few companies that have long-life, high-quality expandable assets with lower capital, lower risk growth options, which will be able to then generate higher returns. And it is not just the longer-term growth that will drive improving conditions for Anglo American. As Collahuasi recovers from its current low-grade phase later this year and at Los Bronces, as it improves on its own before we even do the tie-in with Andina, industry consultants WoodMac expect that by 2030, we will have seen the biggest improvement in the cost curve positioning of the business as compared to our main peers. Our high-quality endowments also underpin our growth optionality. As this chart shows, we remain well placed to deliver copper production in excess of 1 million tonnes per annum. Now all of these projects in this slide are advancing in both the studies and the permitting processes. Rest assured that we remain very focused on optimizing for value rather than simply production growth at any cost, as I said. The Los Bronces plant decision, the prioritization of Los Bronces and Andina joint venture, amongst others, are examples of that, and we'll keep chasing down those adjacencies. Quellaveco's pathway in the short run will be through a throughput of 140,000 tonnes per day, all the way up to 150,000 tonnes per day, and we have now got the permits for that. Sakatti in Finland has also seen an optimization that -- and at the lower end of prices, we'll see copper equivalent production of around 60,000 to 80,000 tonnes per annum. We continue to evolve and progress our studies on all of these projects. And this, alongside our substantial copper endowments and any further adjacency optionality, I think, reinforce a real pathway to 1 million tonnes and beyond. Turning to our premium iron ore business. Now while we understand that there is a real focus on -- in the market on copper these days, iron ore, specifically the premium quality iron ore segment is one that we fully expect to generate substantial returns for shareholders. The material produced at Minas-Rio and Kumba is high grade and high quality and compares favorably to our peers. Not only that, but the quality of our products is also improving over time. At Kumba, the UHDMS project will triple the proportion of premium quality production volume at Sishen from 18% all the way up to 55% and serves as a valuable addition to the mix of products already produced by Kumba. At Minas-Rio, the Serpentina resource provides us with the option to potentially double our production there, and that would be production of high-quality DR-grade iron ore. While there may be some temporary short-term pressure on pricing as new sources of iron ore supply come into the market, when considering the declining grade in the Pilbara, coupled with China's commitment to decarbonization, we continue to have conviction in the short -- in the long-term fundamentals of iron ore. The optionality in our iron ore portfolio only enhances our ability to drive value from it. At Woodsmith, we are continuing to progress the three conditions that we need to be met before we would proceed to FID for this project. We have had some great learnings to date from the SBR moving into the Sherwood Sandstone and the team have embedded these learnings and are setting us up very well, I think, to continue to sink 1 of the 2 main shafts. We are also making good progress with the syndication with discussions going well with a number of strategic partners. And lastly, our balance sheet must be appropriately deleveraged at the time that we would be prepared to take this to the Board for an FID approval. And on the market development front, we are continuing to see very positive market sentiment and strong inbound interest from the agricultural industry. Now while Woodsmith remains a compelling opportunity and has the potential to be a flagship asset in this portfolio, we only see these three conditions being fulfilled by 2027 at the earliest. In conclusion, our focus on operational excellence is delivering stable performance in our simplified portfolio with both our copper and our iron ore businesses tracking to full year guidance. Our cost savings targets remain on track, and we continue to drive efficiency through CapEx and working capital. We remain committed to our portfolio simplification and reached another milestone with the successful demerger of Valterra earlier this year. We are continuing to progress our respective exits from the remaining businesses as expediently as we can, and we'll continue to focus on optimizing value. Looking forward, we remain on a clear pathway to transform this company and are set to emerge as a highly differentiated business that is well positioned to deliver consistently through the cycle with significant growth optionality. And with that, I think John and I are very happy to take your questions. And Tyler is going to moderate just so that I don't call you by the wrong name. But Myles, I saw your hand.

And I think as well, I'm going to take the easy way out here and not pick a favorite and just go with the geographic question snake, I guess, is what it will be called so. Ian, if you'd like to ask a question. We do have some questions on the line as well, which I'll come back to when the mic gets back.

Ian Rossouw from Barclays. Just a question on De Beers around the $2 billion of inventory, John, you've mentioned previously. It looks like that you were saying the inventory release of $0.6 billion, a lot of that was from De Beers. Could you maybe give a bit of details where we stand now? And what is normalized levels per your comments?

Do you want to do that, John?

Yes, sure. No problem. Thanks, Ian. So when we look at the total inventory in De Beers then at the end of 2024, then that was about $2.3 billion, something like that. And as you see, the majority of that working capital inflow for the group was in respect of De Beers inventory. So when you roll that through, then the sort of inventory that remains in De Beers is probably about $1.8 billion, something like that. Not all of that, of course, is rough diamonds. There's various other things in there across the industrial businesses and retail stock and so on and so forth. But when we look at the rough diamond inventory, then that's pretty much getting down to about the levels that we would consider normal for De Beers.

And is that all carried on the balance sheet or is some of it off balance sheet?

All on balance sheet.

Okay. And how does that impact the book value of the business?

Well, it's within the carrying value of the business. So relative to the $4 billion that we had before, then there will be a movement in that to reflect the reduction in the inventory in terms of what sits on the balance sheet, not necessarily a material difference in the overall valuation of the business and a willing buyer, willing seller scenario. But yes, the -- what's on the balance sheet would be lower by the reduction in inventory.

It's Liam Fitzpatrick from Deutsche Bank. First question, just on met coal and the sale process there. Just trying to gauge your level of confidence on completing with Peabody. And I think their position has been that they need to see sustainable -- a return to sustainable longwall mining to complete. Is that a shared position? Do we need to see some sort of restart before completion can happen?

Yes, Liam. So look, fundamentally, under the contract, there's no real damage at all to the ore body at all. Obviously, the cash flows are delayed in terms of the restart. And what I am very confident on is the process that we followed to get it to restart and the progress that we're making within that process. So on that basis, we believe that the contract should complete under the normal conditions, and we've been working quite hard with Peabody to make that a reality.

And then just a quick follow-up on the costs. The $500 million remaining, how much of that will flow through into the unit cost that we eventually see for 2026 versus kind of general overhead?

In terms of the $0.5 billion, the majority of that, that's still to come through sits in corporate costs. So I would say that less of that will be coming through in unit cost, more sits corporately. Just by nature of where we're at in the restructuring that, of course, we've divested these businesses. We still have a corporate center that has to service all of that, do all the accounting, the legal, the treasury while working through that process. And then once those businesses are divested, the corporate costs come down commensurately.

It's Matt Greene from Goldman Sachs. Duncan, I have a question on Collahuasi, if I may. You touched briefly on the challenges around refractory material and the variability of the ore feed. I appreciate you've guided this year as a trough production year, but this is a world-class Tier 1 asset. So I'm quite surprised to see it end up in this position with such little operating flexibility. So if we could take a step back, what have been the contributing factors that have led to this? And are you comfortable that the JV can deliver operational excellence over the medium term and I guess, to go ahead with the fourth line expansion?

Yes. Sure, Matt. And it's a great question, of course. But -- and the short answer to that is, yes, I am confident that the JV management can deliver sustainable and good outcomes. But if we step back to specifically answer your question, Collahuasi fell behind in its stripping. I mean we knew that from a while ago. So it wasn't immune from any of the issues that we were dealing with in Anglo generally at the time. So it was hard yards to push to catch up. And generally, they've been making good progress on doing so. However, this year, they had planned to utilize that low-grade stockpile. Now for many of us, of course, we say low-grade stockpile, and we think it's really low grade that at Collahuasi, the stockpile there is running grades higher than some of the biggest copper mines that are sitting in the industry today. Unfortunately, when they got into that, stockpiles are notorious in terms of the homogenization and your ability to effectively assay them and so on and so on. The grade is clearly there, but the recoveries are not. So it's more oxidized than they expected it to be. And then they did have that double whammy effect of the fact that they ran out of water. So very cash-strapped part of Chile. The solution there was to build our own desalination plant. For years, we've been struggling with water abstraction there. So the desalination plant was very well progressed, but wasn't in time to cover off the deficit of water in the first half. So as I say, a bit of a double whammy effect. That shouldn't exist in the second half of the year. What will continue to exist in some way, shape or form is the fact that our reliance in this bridge period on the stockpile means that we're likely to get lower recoveries from it going forward. So what do we do now? We work really hard with the management and try and help them to find ways to accelerate that stripping so that we can just open up the back end of the mine again. To that extent, both Glencore and Anglo have found equipment that we've got at our existing operations that we're not utilizing that we're happy to send up to Collahuasi to help them get going with that. But that's the fundamental background to it.

Duncan, Jason Fairclough, Bank of America. Two quick ones. First, in terms of the costs associated with the coal mine not being running, can you frame that for us? I mean you mentioned earlier $250 million costs associated with the Valterra problems. I mean, is this hundreds of millions of dollars that it's costing you to not have this run?

Yes. Jason, so I think roughly the dimensions here are it's about $45 million a month to keep Moranbah on hold, and it's about $10 million a month to keep Grosvenor on hold. So that is the shape of it. Still looking to hopefully get a restart later this year, early next year on Moranbah and of course, making some quite good progress at Grosvenor, too. So in the next couple of weeks, hopefully, we'll get the permission to go back underground and so on, but that's sort of the dimension of it.

Okay. Just a small other one. Did you guys used to have a manganese business?

We still have a manganese business. Doing really well. So the recovery of the Groote Eylandt resource and the port infrastructure and so on doing good. So hopefully, looking forward to some really positive cash flows from that.

Where does this all -- where does it fit into this? Because I don't really see it being mentioned on any slides today.

Yes. No, it's because it's not a fundamentally main part of the business going forward. So we hold a minority stake in that in Samancor, as you know. At the right time, we'll decide what we need to do with it, but we've got a lot on our plate right now. And so we're pretty much focused on dealing with the major elements of the portfolio change.

Ben Davis, RBC. Quick question on Valterra. Obviously, it's quite a sizable stake for the 19.9%. Can you give any sort of preference, envisage how you're going to dispose of that? Is it going to be a series of consecutive blocks, a strategic sale, Valterra buying back stock? Any ideas just would be interesting.

John, do you want to take that?

Yes. I mean, listen, as we said, the whole reason for holding the 19.9% was to manage the flowback. That's worked pretty well with a 90-day lockup period, which obviously comes to an end around about the beginning of September. We're open-minded on various options, but our primary objective and priority on this has always been to ensure the successful trading of Valterra. So we'll look at our options. Clearly, we sold down previously through some accelerated book builds that's probably an option that would be the simplest going forward, but that's not to exclude any other options. And then we'll consider the conditions as we move through later this year and into next year for when exactly the right time to do that is.

Alex Pearce at BMO. Duncan, could you provide us an update on the situation with Transnet and Kumba at the minute? Next year is a lower production year for the asset. And I see in the results, you got some penalties from a take-or-pay situation from Transnet, I believe, this half. Are you able to comment on the kind of levels at which that could be triggered going forward?

You mean the penalties to us or the penalties to Transnet?

Yes, yes, to -- Transnet paid you.

Yes, Transnet paid us. So no, Alex, I think really positive progress being made within Transnet on the restoration of those assets. Still slow, if I'm perfectly honest with you, but certainly much better availabilities this year than we've seen in previous years. So they went through a very big maintenance program at the end of last year, which was by and large, successfully completed, and we're now seeing some of the benefits of that. Of course, the next major step for this particular corridor is very likely going to be some form of concessioning. The government is in a process right now of running an RFI process, request for information process. So they're gathering a lot of inputs from various infrastructure players, industry players, et cetera, et cetera, as to what a concession line would look like. And then depending on how that all rolls out in their analysis, either later this year or early next year, they'll issue a request for quotation, an RFQ for people to bid on a concession. So I think that, that's sort of the pathway of travel. In the meantime, the mine in amongst the other user group, so four or five main users on that line, working really, really closely with Transnet to manage all the reliability and the safety issues on that line and so far, so good. We'll have to see what happens when the RFQ comes out and what the interest is. But hopefully, we get a very solid operator who knows what they're doing in terms of running infrastructure projects to take that over and run it. As far as the penalties are concerned, I mean, it was a technical issue. So we will get the money back, if you like, in terms of the tariffs on the way forward. So...

Alan Spence from BNP. It's an election year in Chile and some candidates seem to have some very different views of what Codelco should look like. Any early thoughts on maybe some new options for you in the country?

No. Look, I mean, election is every 4 years in Chile and government does change every 4 years in Chile. I think the most important thing for us to do is just being a good company within Chile. And generally, that's been the secret of success. We haven't heard anything specifically that would materially impact what we're doing there or what Codelco is doing, particularly on the Andina-Los Bronces asset. So hopefully, still, as I say, looking forward to getting that deal fully inked before the end of this year.

And Sakatti, what drove the downside and the kind of scale of the opportunity you see there? And does that do anything to the time line?

Yes, it was -- no, I think time line is good. So real material progress with Finland and the derogation for the permits there. Particularly having had the project declared by Europe as a strategic project for Europe, I think that, that was a really material milestone forward. So probably a little bit more optimistic now on time line than we were at the last time we spoke. The delta in the number is predominantly driven actually by the nickel price because that's a copper equivalent number.

Richard Hatch from Berenberg. Just a question on Collahuasi. You talked about accelerating the mine development. I just note in the costs, you mentioned this in your commentary that the costs have stepped up there, about $480 million a half now from $420 million in H2. So how long should we think about this kind of period of increased costs at Collahuasi? And then second one is just can you just remind us on the capital intensity of the fourth line? My mind isn't good enough anymore.

John, can you do the capital intensity one? My mind is not good enough for that -- just as far as the Collahuasi costs are concerned, as I said, we're going to be working pretty much through to the end of next year. And if we're going to accelerate stripping, that's going to be more trucks. So I think probably through to the end of next year is what you should be figuring on there.

Does it step up from this level? Or does it stay at this level?

No, we're going to work really hard not to let it step up from this level.