Anglo American plc (AAL) Earnings Call Transcript & Summary

Okay. Well, good morning, everyone, and welcome to our half year results. And as some of you know by now, over the years, my tradition is to kick off the full year results. I don't normally come at half year, but there are a couple of reasons why I wanted to introduce today, and I'll come back to those. But as ever, let's start with safety. And I must say how delighted I am all of the Board are for the excellent progress that we're making in the safety movements, which are have been coming through in the last couple of years quite strongly. I know this will continue to be at the top of mind of Duncan and his team as he moves on. And as she takes over indeed the helm at Anglo Teck in due course. I'm also very pleased, as I hope you are that with the solid performance of the current business and the benefits of our major portfolio restructuring, which is starting to come through in the numbers. So returning now why do I want to introduce this session, albeit briefly? Two reasons really. Firstly, if things go to plan, which I'm pretty confident they will, the close of Anglo American's merger with tech to form Anglo Tech will happen. And this could mean, therefore, if the timing is as we expect that it will indeed be my last chance to introduce. So that's one reason. The second reason is I did want to say just a couple of things about Anglo Teck. And an enormously exciting endeavor which is going to bring really strong benefits to all of our respective shareholders and eventually collective ones and all of our wider stakeholder groups. I have spent 9 years as Chair at Anglo, and I will be handing over that button to my [indiscernible] at Teck Sheila Murray and on the closure of a merger, of course, not before -- but I'd like to say just a couple of things about Duncan, our CEO, who will become CEO of Anglo Tech. Now in him, we have a CEO, which I can tell you is utterly determined to deliver all that he has laid out for us and will set out to deliver over the next several years and indeed, delivering on all of the cost and the industrial synergies, which we have already announced to you. Post closure, I'll be watching from the sidelines as he does that and how we'll, of course, He'll be ably supported by John as the CFO; and Jonathan Price, who will join the -- as previously announced, Duncan's executive team. That's all for me. Thank you very much for your continued interest in all that Anglo American is doing. Let me now hand over to Duncan and then John to take us through the results today. Duncan?

Thank you, Stuart. I am indeed very determined -- all right. Good morning, everybody, for those that I haven't seen outside. It does, of course, continue to be a very busy time here at Anglo American. And I think the overall headline is that we have made yet more progress on our operational, our financial and our strategic plans over the last 6 months. We delivered another period of solid operational stability, and that translated into operating results being on plan across the business despite a number of external challenges, particularly related to weather. Market conditions were pretty tough in diamonds, but De Beers has delivered a very robust operational performance, and our steelmaking coal business continues to make great progress with higher production rates now bedding in at Moranbah. We also made progress on 2 of the lowest capital intensity copper opportunities of scale in the industry, and we received final approvals for the Los Bronces Sandino joint mine plan and have now advanced early-stage preparatory work for the integration of Kyoei and bad Blanca. In terms of our strategic plans, we took a big step forward on the outstanding portfolio work with the announcement of the sale of our steelmaking coal business to Dilma for up to $3.9 billion. We continue to pursue the sale of De Beers and I'll come back to that a little bit later on in the presentation. The planning for our merger with tech has been moving ahead well in parallel. And once we receive our final approvals, the 2 companies will come together to become a strong global mining champion with a compelling set of lower-cost, long-life copper assets alongside high-quality iron ore and zinc. This will be a company with a track record and the resources to grow the supply of the metals and the minerals that the world is counting on for decades ahead, led, of course, by copper. Now safety remains the foundation of absolutely everything that we do at Anglo American. While our injury frequency rates have stayed at record lows, I believe that there is still room to bring them down further by focusing our activities on planning, raising our standards and above all, getting the critical actions right. This comes down to leaders being visibly pleasant and engaged on the ground and we're working to embed our safety culture even more deeply with more active control checks out in the field. Now on safety, we can absolutely never be complacent. No matter how good the results there is always room for further improvement. Turning to sustainability. We launched our updated sustainability strategy and targets for the simplified portfolio in February of this year, and we're now embedding that strategy and the businesses progresses by making good progress to delivery against their plans. We are beginning to start to see now the benefits of a model that balances group level ambition and direction with locally relevant targets tailored to the priorities of each of our underlying businesses. This approach allows us to deliver consistent outcomes at scale while creating value and driving tangible impact and value on the ground in our country of operation. We are now 3 years on from moving the accountability of our assets' performance closer to the site and the evolution of that operating model is an important driver in consistently achieving our production targets. We also kept costs under control despite inflationary pressures stemming from the knock-on impacts of events in the Middle East. And John is going to unpack those costs for us just a little bit later on today. The copper business produced 344,000 tonnes in the first half and we're bang on track for our full year guidance of 700,000 to 760,000 tonnes with higher volumes half-on-half to come from both Collahuasi and [indiscernible] . Last process was a real highlight for us. The restart of that second plant has added profitable tonnes and the mine is gaining more flexibility with each quarter. In May, the permit for the desalination plant at Collahuasi was set aside by an environmental tribunal. 5 years after it had been granted. Production, however, from Collahuasi has not been affected because we are current -- because we do currently have access to alternative water sources. We are hopeful that a review of the Environmental Assessment Services or the FCA's decision will allow us to restart the ramp-up of that plant later on this year. We do continue to work very hard with the Chilean authorities to make that happen. Still at Collahuasi, the team is managing the variability as we transition through the lower grade and oxidized stockpiles and indeed, the recoveries have improved in the second quarter of the year. The mine is on course to access the fresh ore from the fourth quarter, which will be an inflection point after 2 years of limited flexibility. Now next year, the mine plan is characterized by much higher grade benches but also some more complex faulting that we will need to navigate. But the mine has worked through this many times before, and we remain confident in our 27 and our 28 copper guidance. Beyond that, this ore body has so much potential, and I'm going to come back to that a little bit later on in the presentation. Quellaveco remains the leading contributor of cash flow to the group, and it is great news to be able to report that we have now paid back the initial investment that we made in building that mine. They had another very strong quarter. Recoveries have picked up well, and we've also benefited from very healthy byproduct revenues there. Our iron ore business posted another period of steady performance despite some big challenges with higher costs from both diesel and freight. Performance at Kumba was notable insofar as it had to manage through some of the highest rainfalls. So both the mine Sishen and Kolomela have seen in decades, and they suffered that over April and May. Over in Brazil, Ministerio continues to have some of the highest productivity rates that we have in the group. Now one of the management team's main priority since the start of this year has been working with Teck on planning the integration for our merger. We are cracking on at [indiscernible] with all of that integration work, and there is a lot of work to do, as you can imagine. We're particularly focused on getting the business positioned to stand up on its own on day 1 post closing and getting ready for the 2 new listings in New York and Toronto and all of those associated regulatory processes. We set up an integration management office very early on, essentially a team of senior leaders from both companies that can work closely with me to drive the planning and the state of the readiness forward. They have done an excellent job so far, and we still have plenty to do, of course, but I'm very confident now that we will hit the ground running on day 1. As the combined portfolio comes together, we will be ready to realize the material value and the synergies that we have identified, and I'm clear that all of the assets can play a meaningful role in doing that. As far as the future growth path is concerned, we will get into that once we have full visibility of all of the information of both companies post completion. Clearly, that's not possible to do given -- currently, given the antitrust and gun jumping rules. So in terms of what that means for market disclosure going forward, we'll start out with the details of the essential architecture that we need to manage the business from day 1 and then get through the more detailed planning that is enabled by full integration. So the initial disclosure will likely cover organizational structure, the group's key financial policies and accounting as well as the disclosure frameworks. We will then update the market in the ordinary course thereafter and continue to evolve as we have more information. On the timing of completion, the final regulatory approval we need is, of course, as everybody knows, from China state administration for market regulation or summer. And we've been continuously engaging with them and cooperating with them over the last 6 months. We are of the view that the formation of Anglo Teck can only be positive for increasing global copper supply, and it is, therefore, also a positive for our customers. We believe that we will be on track to complete later this year or early next as we announced at the outset of the merger. I am conscious that many of you are going to have loads of questions related to the detail of these interactions and what that might mean but as I'm sure you can appreciate, this is a confidential process and a really important one, and we don't want to mistap anything in the way to getting these final approvals. So I'm afraid I'm really not going to be commenting any more on that at this stage. As I mentioned, we have moved forward on the portfolio transformation. The sale of our steelmaking coal business to Delmar for up to $3.9 billion was an excellent outcome from a highly competitive process that gives us both cash upfront and the ability to participate in price upside over the coming years. We are working towards satisfying all of the closing conditions and targeting close by Q1 of next year. On nickel, we are continuing to work through the EU antitrust process on the proposed sale to MMG for up to $500 million. This has taken a lot longer than we had anticipated, but we now have some positive momentum following that protracted delay. And we believe that there are no market supply issues that arise from this transaction and supply has increased and diversified in fact, further since we agreed this deal. And so we are optimistic now that we will receive this final regulatory approval and complete in the coming months. Now that takes me on to the last leg of our portfolio transformation, which is the sale of De Beers. Now the team there has been working incredibly hard in a terribly complex environment over the last few years. to achieve a responsible separation of that business. And I am pleased to say that things are advancing. That said, we are now in the final phases of our process. And that also is the most challenging phase of our process given the number of parties that we need to take along to the final point and get signing of the final agreements. Our focus remains on bringing this process to a conclusion within an acceptable terms during the second half of this year. And with that, I'll now hand over to John, who will take us through the financial results.

Thank you, Duncan, and good morning, everyone. I'm once again pleased with the financial performance for the first half of the year. We remain on track to deliver our annual production guidance. We've managed costs well in what's been an inflationary environment, and we further strengthened the balance sheet. As we continue to progress through our portfolio transformation, the financial reporting, of course, remains complex. As we've done in our recent results on this first slide, I've set out as simply as possible, the basis on which our numbers are presented. As a reminder, our continuing operations include both the simplified Anglo American portfolio and De Beers. Our discontinued operations include steelmaking coal and nickel. Our simplified portfolio focused on copper and premium iron ore delivered EBITDA of $4.1 billion. an EBITDA margin of 46%, and underlying earnings of $1 billion, all showing significant improvement on prior year, driven by favorable commodity prices and good cost control. De Beers has incurred a marginal EBITDA loss of $0.1 billion, reflecting the continued challenging market conditions mitigated by our restructuring actions. Discontinued operations reported a loss during the period, mainly due to lower volumes at SMC as a result of pure weather and the ramp-up of Moranbah North, which is now again operating at normal levels. Combining continuing and discontinued operations, the group delivered total earnings per share of $0.58 and a dividend of $0.23 per share, in line with our 40% payout policy. Net debt has continued to decrease, ending the period at $8.2 billion, down from $8.6 million at the end of December last year. Although that does reflect some favorable timing, which I'll come back to later. I'll take you through each of these items now in a little bit more detail, starting with the simplified portfolio. Our basket price was up 22%, reflecting significant increases in copper partly offset by small reductions in iron ore. Iron ore price realizations were impacted by the diversion of Middle East Barn product to other markets due to the Iran conflict and rising freight costs on an FOB basis. Production increased 1%, as Duncan mentioned, with slightly higher copper offset by lower iron ore. The higher prices supported a 22% increase in revenue and a 31% increase in EBITDA to $4.1 billion, with around 70% of this EBITDA being driven by copper. The tax rate in the simplified portfolio was 40%, slightly lower than last year due to the relative mix of profits and reduced impact from loss-making businesses following our restructuring program. This all resulted in a 60% increase in underlying earnings to $1 billion, and return on capital employed improved by 4 percentage points to 19%. It's pleasing to see these higher margins and higher return on capital materialize as that was exactly the basis of our portfolio restructuring. Turning now to costs, where we've got quite a lot to unpack with actual costs increasing due to macro factors in volume, while copper unit costs reduced significantly due to by-product credits. Starting with total operating costs for the simplified portfolio. You can see here, total costs increased by $0.6 billion to 4.8%, with the most significant factors being FX, CPI and fuel. There were then a number of smaller impacts, including freight as well as movements in Peru related to the rehabilitation provision and employee profit share provision. Finally, the restart of the Los Bronces plant and the return to higher activity at Manganese had an associated impact on costs. But of course, both of those were EBITDA positive. Moving on to unit costs. We saw a gross 13% increase. However, that is before the impact of byproduct credits and TCRCs. The combined effect of which was a credit of $0.6 billion compared to $0.3 million last year with all of that benefit in copper. The $0.6 billion credit is roughly evenly split between Chile and Peru, and is driven by molybdenum and silver. Given the scale of the relative cost basis with Peru gross unit cost being about half that of Chile, this meant that the credits had a much more material impact on Peru than Chile. Copper unit costs with the credit benefit, therefore, reduced by 12% from $155 to $136, with copper Peru at $0.45 and Chile at [indiscernible] Iron ore unit costs increased by 17% to $41 per tonne, reflecting the underlying cost position that I just described with most of the FX impact being related to iron ore. This left total net unit cost up 4% versus last year, bringing everything together now in the EBITDA reconciliation for the simplified portfolio. As you can see, the vast majority of the increase from $3.1 billion to $4.1 billion is due to macro factors. Our favorable basket price, driven by copper and by-product credits resulted in a $1.2 billion price benefit partly offset by FX on the South African rand and Brazilian real as well as CPI to take EBITDA before controllables to $4 billion. Moving on to the controllables. Sales volumes were slightly lower, mainly reflecting timing of shipments in copper. The Los Bronces and manganese cost impacts from the plant restart and increased manganese activity, respectively, totaled $0.2 billion and are spread across each of volume, cost and the other category. These and other incremental costs I described previously are then offset by the final corporate cost savings, lower TCRCs manganese volume to leave this controllable side of the chart, a small net positive in the first half of the year, taking EBITDA to $4.1 billion. Moving now to our exiting businesses and starting with an update on the actions we're taking at De Beers. The diamond market continues to face both cyclical and structural challenges, but we have taken and continue to take proactive action to preserve value and reduce the net impact to the group. This is evident in the results which show an EBITDA loss of $0.1 billion compared to $0.2 million last year even as prices have moved lower. This reflects the impact of cost savings, but more materially a lower cost inventory base as recent purchases have been at lower prices. Although the losses have been stemmed, we're not resting, and restructuring action continues while ensuring that we retain upside optionality as markets recover. The most significant action is at Venetia, where production will be paused for around 2 years, and capital expenditure on the underground project will be rephased. This protects near-term cash flow and will allow us to reduce CapEx in 2026 by $300 million while preserving the long-term value and future production potential of the asset. Venetia was also contributing loss-making carats in the first half. So pausing this production will also assist forward profitability. Alongside this, De Beers is reshaping its corporate structure, simplifying the organization and reducing the central cost base. This builds on the progress already moved already made to remove overhead costs and improve efficiency across the business. Overall, these actions demonstrate a clear emphasis on cash preservation, cost reduction and value protection while also setting the business up for a successful divestment. Briefly now on discontinued operations. EBITDA was a loss of $0.2 billion, reflecting -- principally driven by steelmaking coal, while nickel was broadly breakeven. I'm pleased with the operational progress at steelmaking coal with Morinda, I said, having a successful ramp-up and they're effectively back at normal operating levels. The equity shareholders loss of $1.2 billion reflects the underlying earnings plus a $0.9 billion impairment of SMC to reflect the terms of the DelMar transaction. Applying a consensus-based annual pricing to our DCF calculation doesn't attribute any value to the price link consideration. When in reality, of course, we would expect there to be option value from price volatility and with payments being calculated on a quarterly basis for 5 years. Meanwhile, we've initiated arbitration proceedings against Peabody in respect to the previous transaction, which is ongoing. Capital expenditure reduced to $0.1 billion, primarily reflecting the removal of PGMs from the portfolio. And the net debt impact was $0.2 billion outflow, including cash received from the steelmaking coal deposit from Delmar. Looking at capital expenditure, we've maintained a disciplined approach with CapEx in continuing operations decreasing by 6% and to $1.5 billion. This reduction was driven primarily by lower sustaining capital expenditure as the [indiscernible] Real filtration plant completed and the Colosi desalination plant approached completion. We do expect higher capital expenditure in the second half, but we've made some cost efficiency gains, which I'll touch on in the guidance section shortly. Growth CapEx increased modestly year-on-year reflecting investment in a small number of projects, including the first phase of the Collahuasi debottlenecking initiative and Kumba's UHDMS project along with Woodsmith. Moving now to cash generation, which, as always, remained a priority during the period. EBITDA of $4 billion translated into $3.5 billion of cash flow from operations. Working capital remained flat with the adverse impact of rising prices, largely offset by a number of timing benefits across multiple categories, including receivables, payables and marketing activities. I wouldn't expect all of these timing benefits to ensure and therefore, anticipate an increase in working capital through the second half. The GBP 0.3 billion outflow from other operating cash flows is primarily due to timing of market derivative settlements, which offset in EBITDA and working capital. Cash tax and interest payments, distributions to minorities and sustaining CapEx totaling $2.3 billion resulted in a $1.2 billion of sustaining attributable free cash flow up around 90% compared to last year. Similar to working capital, where we will see some increase in the second half, both cash tax payments and distributions to minorities were lower than the income statement charges and this will reverse to an extent in the coming periods. Nonetheless, it is pleasing to see the business continue to generate increased cash flows. Looking at net debt, we've seen a further reduction to $8.2 billion. The $1.2 billion of sustaining attributable free cash flow during the half was more than sufficient to fund growth CapEx of $0.4 million, the dividends paid to Anglo-American shareholders and the outflows from discontinued operations. And I'm pleased that our net debt-to-EBITDA ratio is now at 1x, while the group continues to maintain a strong liquidity position. Looking ahead now for the balance of the year, the business remains in a strong position with all operations and controllable costs trending as planned. The only change to unit cost guidance relates to a reduction in copper unit costs, which is a reflection of the byproduct credits, which I described earlier. As I noted in February, our original guidance was conservative on byproduct pricing and foreign exchange, given we were in the very early stages of the Middle East conflict and the associated macro uncertainty. In Peru, with updated full year guidance of $0.65 compared with the first half of 45, we continue to be somewhat conservative on pricing of moly and silver relative to current spots reflecting the sensitivity of unit costs to the size of the credits in Peru, as I described earlier. In Chile, we are the size of the cost base means their unit costs are less sensitive to those credits. We've guided full year at $210 compared to 206 in the first half. In iron ore, we've kept cost guidance the same for the second half. However, we would note that these businesses are more susceptible to oil price movements and do not benefit from the byproduct credits in the same way as copper. As you will see in our usual sensitivity analysis, which is in the appendix, for every 10% move in oil prices, we would expect a $43 million impact to 6-month group EBITDA. Moving on to CapEx. Our projects team is continuing to deliver optimized outcomes and the work on both the filtration plant at Minas-Rio and the plant debottlenecking at [indiscernible] have come in under budget, which allows us to reduce our CapEx guidance for the simplified portfolio by $0.1 billion. And as I mentioned before, now with the temporary suspension, Venetia we've reduced our expected spending at the beers in the second half by $0.3 billion. Therefore, collectively, for the continuing portfolio, this amounts to CapEx savings of $0.4 billion, bringing our total 2026 CapEx guidance now to $3.2 billion for the year. Finally, as I've mentioned previously, for 2026, we will incur $0.2 billion of special costs for the restructuring and merger and we will have $0.5 billion of noncash increase in our net debt arising from lease for the infrastructure related to the Los Bronces desalination plant, which will complete in the second half of the year. So to finish, let me briefly recap on those key financial messages. We delivered strong profit growth with EBITDA from our continuing operations up by 35% to $4 billion, aligned with our portfolio restructuring and a higher exposure to copper. We managed the controllable costs well and stronger byproduct pricing enabled us to reduce copper unit cost guidance by 12% to $1.36 per pound. Our focus on capital management and project execution has allowed us to reduce planned 2026 capital expenditure by $0.4 billion, which should further underpin higher return on capital employed, which is now at 19% for the simplified portfolio. The balance sheet also continues to strengthen with net debt reducing to $8.2 billion and leverage reducing to 1x EBITDA, while, of course, retaining significant liquidity. Overall, the simplified portfolio continues to provide resilient earnings with attractive exposure to copper led growth and delivering higher margins and returns. Thank you very much. And I'll now hand back to Duncan.

Thank you, John. So one of the biggest differentiators in our portfolio is the potential for us to deliver meaningful copper growth with higher returns and lower complexity relative to peers with the benefit of building from some of the best copper assets in the world. Now as the slide shows, bringing new copper production online is becoming ever more expensive. The rate of inflation of -- for capital intensity is running at almost double the increase in CPI. Capital is therefore now a bigger part of the project's economics than ever before. and returns need to be higher just to justify those elevated costs. As capital inflation continues, the economics of many growth projects are at risk without higher prices. And this is why we believe the copper price has to be structurally higher. It's also taking a lot longer to actually build and deliver these projects. Back in the 1990s, it took about 7 years from the time that you discovered an ore body to bring it into production. Now over the last decade or so, that has stretched out to almost 18 years. And if that carries on, the cycles will take longer to move from trough to peak and we'll see much bigger swings in price. This is especially true when so much of the demand for copper is coming from strategic buyers who really aren't all that price sensitive. So in that kind of world, projects that you can deliver in the short to medium term without spending a fortune to build them become hugely valuable. Now you'll have seen this slide before, but it makes this point well. Our key copper growth options really stand out where it matters the most, on complexity and on capital intensity. Over the last 15 years, the industry's CapEx estimates have mostly come in far worse than what was promised at the study stage. So in that world, low complexity and low capital intensity is exactly where you want to be. Starting from lower capital intensity projects our returns in from lower capital intensity, protects our returns and it leaves us really well placed to benefit from price upside that the supply dynamics should drive. And that's on top of a demand outlook that is structurally strong. Now with all of that in mind, the integration of Collahuasi Quebrada Blanca is a really exciting prospect. Arguably, it is 1 of the industry's best options for capital-efficient copper growth at scale and that is actionable in the near term. Now as a reminder, there is a potential to add an incremental 175,000 tonnes of annual copper production at around $2 billion of CapEx. So that's about $11,000 of CapEx per tonne of copper growth. Importantly, the integration would still allow for further growth and both -- from both assets, and this also provides increased flexibility for future options, including leaching and other plant expansions. We're busy putting the building blocks in place to make this integration a success. We are focused right now on the technical groundwork and on engaging with shareholders across both assets. And just like any other adjacency that we bought over the last few years, it is important that we take our time and we do this properly. Much of what drives the extended schedules for copper projects is the time needed for permitting, planning and stakeholder alignment. So we want to get that right from the outset. We continue to believe that this is by far the best way forward for both Collahuasi and Quebrada Blanca. It sits right in that sweet spot, low capital intensity, relatively low execution risk, high confidence and near-term copper growth at real scale. And I'm genuinely confident about the potential here. We can build something pretty special. One of the largest and most competitive mining complexes in the world, with decades of accretive growth ahead of it. Now last month, we announced the final regulatory approval for the agreement to form a joint mine plan between Los Bronces and [indiscernible] and Andina mine right next door. Now if you forgive the pun, it's really groundbreaking work there, a very thoughtful and innovative structure that meets the objectives of both sides without compromise to value creation and it allows the respective shareholders to participate in the upside on a pro rata basis. Now as we've said before, this joint mine plan will add another 120,000 tonnes of annual average copper production which will be shared equally between the parties. This -- when we announced this deal, we identified around $5 billion of pretax value uplift to share with [indiscernible] . And that was at a copper price of around $5 a pound. So this is probably the clearest example of us benefiting from exactly the copper dynamics that I've just been speaking about. Now that we're through completion, the teams are moving into the joint mine plan integration design work. We've got a governance framework in place, and we're now working towards the environmental permits where we're aiming to have them done by 2030. And just like Collahuasi and Quebrada Blanca, there could be more growth to come down the line. For example, here at Los Bronces. We've kept the right to develop the underground if the markets can support it. We're really excited about our future as Anglo Teck and the upside that we can unlock from this in terms of the and the growth. Now as I've said just now, it is going to take some time before we can talk to the deal aspects of project sequencing. However, that should in no way detract from the core of the value proposition because it will continue to be primarily driven by Anglo American and Teck's current portfolio of assets. The key value driver for us going forward, therefore, remains operational excellence. Now that we've built a more stable operating platform, we've got a solid place to plan from, and we're continuously working on systematically optimizing productivity, costs and stability. We're also looking further out to see how we can best manage the natural variation that occurs over the lives of mines as well as the inevitable pressures on grades over time. So Quellaveco, we've just completed a debottlenecking program at the plant. Recoveries are up, and the mine is operating very well. Now this stability gives us the ability to focus on maximizing the future value. And in this context, we're continuing to shape the production profile over the next decade. As you know, over the next few years, we're going to be moving from the supergene into the hypergene ore body and the hypogene ore body is characterized by lower grades. Now the work that we're doing there is looking to smooth out the production profile during that transition period. And as a consequence, we may take an earlier step down in annual production volumes towards the end of the decade in order to sustain that rate over a longer period of time to maximize value rather than taking a much bigger step down a little bit further out. Although, to be clear, these changes should not impact our current production guidance, and we are continuing to pursue new ore sources that could come into the mine plan over time as we look to optimize Quellaveco's value. It is a highly profitable business, highly cash generative and is well set to be a cornerstone of the Anglo Teck portfolio through the next decade and more. and we will continue to push for further options to enhance its value. At Kumba, what we're doing there with the UHDMS technology is already setting us up to get more out of session. It's going to triple the share of the high-grade product and that is exactly the quality of product that plays into the key demand trends over the medium term. And we're getting more optimistic about what we can deliver from Sishen over time. However, there is scope for other upsides from Combes performance in the near term and Mpumi is spearheading a full potential program there to improve productivity, costs and return on capital. Minas Rio is another mine that is operating well. And as we look forward, we remain excited about the full potential of Serpentina which is an excellent ore body. Now our focus at Minas-Rio is, therefore, now working through the most capital efficient and value-accretive pathway to the Spine resource with a particular focus on confidence in execution in the context of what we now see as a very much increased challenging and permitting landscape. We have the time to do this work. And to be clear, it does not impact our guidance and the operating stability that's now in place creates a solid platform for us to unlock the full potential of that Serpentina adjacency. So we are continuing to work hard on how we optimize the long-term potential across the portfolio. And through the merger, we will continue to challenge ourselves as to how we can strengthen sustainable performance even more over time and allow us to make the most -- most of what I see is shaping up to be a fantastic company. So to close, operational excellence is right at the heart of how we're driving better performance across the business. And there's definitely more to come as we set ourselves up to understand and then to deliver that potential from the merged business. After 2 years of hard yards, the portfolio work at Anglo American is nearly done, and we're in great shape to start life as Anglo Teck with a focused set of assets. In addition to that, we've got near-term growth we've got medium-term growth and a whole suite of assets and project options to keep us delivering well into the long term. And on a personal note, I am properly energized by Anglo American -- or how Anglo American is performing right now and buy everything that lies ahead. I am really looking forward to seeing this merger through and to leading Anglo Teck over the coming years to deliver its huge potential. I am determined, Stuart. And with that, John and I are happy to take your questions now.

Thanks very much. I think what we'll do is we'll start with MAC as I promised last night, and then we'll do the traditional analyst conga line of questions.

Thanks, Tyler. Duncan. It's Macrina Goldman Sachs. Just want to touch on your copper probably the near term. Congratulations on the opco San Andina agreement there. But when we think about this preparation period between now and when this JV kicks in what needs to be done to get this asset ready? You've touched on the tailings, the DSLs ramping up. But anything else that we need to be considered off here, anything.

No. I mean the critical path now at Los Bronces [indiscernible] runs absolutely through the permitting process. We've got a very good view of what the shape of the mine should be from the agreement work that we did. We've got keep doing what we're doing in terms of the removal of Paris Caldera. So that's pretty important because as soon as Perez Caldera is moved, we can bring back the second plant because you know the Los Bronces plant comes down again to move Paris Caldera. But we need that plant when we start the joint operations with Andina. So that's part of the critical path, but all on track and making good progress there. Just as far as the permitting process goes, look, it's a complex permitting environment. Generally, in South America, it's complex in Chile. It's quite complex, particularly in and around where Los Bronces is because it's so closely located to the city of Santiago. So normally, the sort of permitting process can take 3 or 4 years. But we have a very front-footed forward-looking government there who's very excited about the prospects of of good and responsible copper growth in the company -- in the country. And so look, I'm expecting that, look, we've got a number of legal processes that we need to go through. But this is a good outcome. Environmentally, it's a good outcome in terms of utilization of resources like water and land. So the environmental impacts are much better than 2 stand-alone growth options in the same place. So I'm expecting that we'll have reasonable ride through that permitting process, but it'll probably still be around about 3 years to get it done.

That's great. And then just longer-term [indiscernible] outstanding first half year. So congratulations on the performance there. When you scope the concentrator, you were limited by water, you've been able to manage that. You're pushing to 42,000 tonnes a day by the end of this year. I think the scope to move to 150 beyond that. Where do you see this -- well the concentrator tapping up? And then how do you think about the next leg year for Quellaveco?

Yes. Look, I mean, I think this is a great example of continuous improvement and innovation all at the same time. the ore body is the ore body and it has the grades that it has. And of course, we were limited by water in terms of what we could produce at the time. I think when we permitted the project originally, we could only process 127,500 tonnes a day. As you say, we sort of managed to iterate ourselves to around about 140 and now probably have liberated the possibility of processing almost 150,000 tonnes a day. So what -- how did we do that? Well, first of all, it's a complete optimization of the internal water balance with in the plant and making sure that we're recycling as much of that water, not allowing it to evaporate, et cetera, et cetera. So there's whole bunch of processes that go in around that. Of course, we implemented our first full-scale coarse particle flotation unit there, and that made a very big difference in terms of the application and use of water. And then there's been a little bit of debottlenecking. And every plant that you have, you really want your primary constraint to be your SAG mall. And so to the extent that you can debottleneck anything around that sort of gives you the benefit. So the primary constraint here will continue to be water. We're not using any more water than we were going to use for 175,000 tonnes a day. And I think given the combination of where the primary constraint is in the SAG mill now probably correlates with the primary constraints water, so around about 150,000 tonnes is where it's going to be. So there really just helps us smooth out the production variability, particularly during that transition period to the hypogene.

Maxime Kogge from ODDO. So first question is on Colas because it's a bit difficult to understand the situation there with regards to the Diesel plant. I mean a lot of money has been invested more than EUR 3 billion over the last few years has required 3 years of investing. And yet we had this 11th hour stoppage. So what are views assembling box there in your discussion with the administration? And when can we -- can you give us some to the time line for restart there?

Yes. So look, as I say, this is a permit that was granted by the SCA more than 5 years ago and granted off the back of a fully fledged consultation process with all the stakeholders that we're involved in it. What has subsequently happened is that a stakeholder group has taken the permit on review. It then escalated through a number of steps to get to the environmental tribunal who suggested that the SCA who granted the permit will need to review it. So it's just the components associated with the desalination plant. So this is the whole of the EIA for Koos. So it's just a component of the desalination plant that was taken under review. And this is a process that now the government has to reset, including the consultation process. But we are hopeful that within the next 6 months or so, we should be able to get back on track and be able to restart that plant. As I said earlier, it had no impact in terms of production so far because we have a number of alternative water sources. But in terms of the long term, we will need the desalination plant to come back on which we're expecting it will be.

All right. And just the second question on copper. You had just about the big spike we've had in sulfuric acid prices. was wondering what was the net balance for you because on the one hand, you have the smelter in charges. On the other hand, you have some consumption in using ops. So is it net positive balance? And do you see opportunities in terms of smelting going forward? And conversely, some hindrances in terms of leaching production?

Yes. Look, I mean, as far as smelting is concerned, I mean, we have the [indiscernible] smelter is one of the best operated smelters in that region. So it continues to perform very well. it's an integrated smelter for us, right? So we don't take custom material through it. It's really our own material that we put through it. We don't -- I mean, of course, there are interesting views today on the role of smelting in the system. But as we see it at this particular point in time, we're really not looking to expand our smelting capacity within the group. It is quite capital intensive. We're very happy with the capacity that exists in the market today. If that environment changes, then we would relook at it. But right now, so long as [indiscernible] continues to perform in the way that it does, it's a very viable component of our portfolio. In terms of leaching per se, another technology that's getting a lot of favor. It's one of these things that the mining industry has been poking at for a very long time in terms of a technology breakthrough. And many mining companies have got various different views of which technologies are good and which technologies are not. I am very clearly of the view there isn't a silver bullet in terms of leaching technology that applies to all mining. Leaching works in varying degrees on different types of ore bodies and there are many different types of leaching that you would pick appropriate to a specific ore body. Generally, leaching technology has been at the point where it works very, very well on oxidized ores but not as well in terms of recovery basis on sulfidic ore. The technology does seem to be changing and moving. So much higher recoveries on some of these technologies are coming through on the sulfidic ore. That would be a very big positive. If you had an ore body that was amenable to that sort of leaching because the capital intensity of leaching plant is just so much lower than the capital intensity of concentrators. It does come with other environmental permitting issues and so on. But I think to the extent that you have operations like Collahuasi, who has a leaching operation already, and we'll -- it's a shutter operation, but we can bring it back on. It gives you a lot more opportunity to make use of a technology that does work for you in that space. So yes, so I think leaching technology is an interesting space to watch, but it's not a silver bullet for the whole of the industry. So it's not something that I see at this point in time that a mass implementation that completely drops the cost curve of copper mining.

It's Izak Rossouw from Barclays. Just sort of follow up on that copper side. And obviously, with the restart of the Los Bronces plant earlier this year, you've been able to add additional volumes. You mentioned the Collahuasi leaching plant. Is there opportunity to do more of that, I guess, into next year, maybe run that loss price plans a bit longer before you move the Paris called Arada or bring back plans to bring back that leaching at Collahuasi? And then a second question, just on the steelmaking coal business. Obviously, the unit costs were pretty high. Obviously, a large fixed cost component within that as Maraba ramps up. How should we think about profitability in the second half? I know you don't give guidance on the cost of volumes, but just how we should think about that?

Okay. So as [indiscernible] plant. Remember, when we shut Los Bronces down, the plant down, it wasn't making any money at all. And there were 2 key drivers of that. One, it was just the fundamental underlying base of Los Bronces per se, but that plant specifically. And secondly, the quality of the ore that we were able to feed to it. The mine was very, very constrained in those days. You'll remember we were monophasic stuck in really struggling at the bottom of that phase to get the volumes at a quality that can support both of the plants Collahuasi and Los Bronces. And so the decision was an economic one, right? So value over volume was a very important driver for me. It still is today and hence, the decision to shut that plant down. What has changed subsequently is that the mine has progressed extremely well on their cost management focus, right? They have focused on where the real numbers need to be, and they've implemented a number of programs that have sustainably delivered better cost performance across the whole of Los Bronces. But secondly and probably far more importantly is that the progress that they've made on the development of the [indiscernible] , which is the phase that will ultimately replace Infinia 5 is ahead of schedule and the consequence of it being ahead of schedule means that, one, we have access to more ore to that ore is softer and process is better through the plants than the harder ore that comes out of Inner -- and thirdly is slightly higher grade, just given where it is in the mine, it's higher up in the mine than where Infinera 5 is. So the combination of those things then made the restart of course, in the back of some very robust copper prices, a materially viable value solution. So we started up. Now the constraint is absolutely the removal of that Perez Caldera tailing staff. So this is a commitment that we have. As you know, that this all sort of emanated from actually a very long-standing commitment, almost back to the Exxon days. to remove that tailings dam. But even more important in terms of what we understand about tailings dams under the GI STM process. So we are going to move that tailings tap. It needs the water because we're so water constrained in that region that we're currently using in that plant. So that is what we're going to do next. And the rate at which we can move that, of course, the big prize here is to have everything back up and running when we've combined Andina Los Bronces, so we can optimize the copper production from the combined asset at that point in time. So the real critical part now runs through the removal of Perez Caldera. That, as I said earlier, is like on track. It's running very well. I'm not sure whether we can accelerate it yet. It's a little bit early days, but to the extent that we can and optimize the way that we extract it, there is a small probability that we can either delay, but I'm talking about months, not years, the shuttering of the Los Bronces plant or sizing it up a little bit earlier if we get the permits back.

And then the Collahuasi leaching and Matco?

What was the Collahuasi question?

Just how we should think about the time lines for bringing -- potentially bringing that...

Yes. So look, I mean, the team is working very hard on that right now. I mean, I think there is a view that we might be able to bring some of that in -- during the course of next year, but don't know quite exactly where they've got to at this particular point in time. We have a plant there. So it's obviously -- it's going to have to be refurbished a little bit. It's a specific process. I think what we're also looking at is what the full reaching potential of Collahuasi s. So reaching Collahuasi you might think about in 2 phases. One is the restart of the current plant because current copper price environment probably substantiates and supports the restart of that plant. The guys are busy doing the feasibility study now as to when that might come on. The second phase is actually an application of one of these new technologies that is amenable to the Collahuasi ore body. And we have 2 options here, which is an absolute pleasure, right? One is we've got this massive mineralized waste pile, which is a stockpile that the mine has actually been running off for the last 18 months, which is probably more amenable to [indiscernible] than it is to concentration. And if some of these sulfitic technologies work in leaching, we have the Arena pit, and we have a portion of the resort that would probably be an amenable to that. So it's probably a little bit further out. But that's the technological dream and the optionality that we have embedded in Collahuasi. Then you asked on steelmaking coal and the unit costs. So look, the guys had a pretty rough start to the year with weather, right? We had 3 mega weather events across the group. One is in Australia at the beginning of the year where the open pits were completely inundated with water. Honestly, and I've never seen anything like this in my life. We had conveyors that are already 10 meters above the ground that were submerged, so all the resilience things that have been put in place were beaten by Mother Nature this year on. I mean, so probably 1 in 400-year flood that they had there. So it took them some time. And so some of is embedded in the cost base. And then we had to be very cautious in how we were ramping up Moranbah and so a bit slower to get it right. But I'm thrilled to say that over the last sort of 2 months or so, the guys are absolutely consistently hitting their straps kind of getting around about 150,000 tonnes a week of production out of Moranbah. On that basis, we should see some adjustment to the unit cost because the production is increasing and so long as we don't have another weather event in this year, the open pits are well on their way to recovery there, too.

This is Alain Gabriel at Morgan Stanley. Duncan, a couple of questions. One is on the integration with Teck. Your teams are clearly doing lots of integration planning. What have you learned so far that has surprised you either positively or negatively given the limitations of what you can and cannot say. And the second question is on the BS probably for John. What are the stand-alone provisions and pensions and long-term liabilities for taxes as well that you can share with us at this stage?

So on the integration, I'm thrilled to say no big surprises. So the challenging work is the volume of work at this point in time. because, of course, we're prevented from seeing commercial data on either side. The companies are actually competitors until the day that we closed, and that's a really cool stuff that I really want to get my teeth into big time. but I can't do that until we've completed. But on the other hand, what we do need is -- I mean, we've got a very clear view of where the synergies are that we have announced, and we need to set the organization up now to be able to hit the ground running hard in terms of the rapid delivery of those synergies. And secondly, you just got to have an operating model for the company. that everybody knows and everybody understands from day 1, and that's a lot of work. So understanding what the asset bases are. We rely very heavily on how tech think about certain things, and they have to rely very heavily on how we think about certain things. And then we've got to we've got to put the right operating model in place. So that's all been very good progress. And then, of course, the company has to actually operate. It's got to have a management system on that day. We've got 2 new listings in New York and Toronto, what you're required to do in terms of the statutory information, the financial reporting, the Sarbanes-Oxley stuff and so on. That's an enormous amount of work to, one, understand and then plumb systemically through the businesses, both in Teck and agile. So that's the volume of work. So not the most exciting work. Well, unless you Chavan, she loves this stuff, but very important work to get right if we're going to have a chance of driving those synergies out in the time that we said. John, do you want to do?

Just clarify the question. I picked up tax, but I didn't get your specific.

What are the long-term provisions and pension liabilities that are sitting in De Beers entity.

De Beers, so the pensions and the beers are in great shape. So like they are across all of Anglo American. So very well funded. We're in the process of moving the majority of those long-term defined benefit plans to buy in or buy out, which effectively means we transfer those liabilities to insurance providers. On taxes, nothing of concern on De Beers on long-term tax liabilities, all pretty in the ordinary course. So no unusual long-term liabilities. Of course, the bigger long-term liabilities and the beers as they are with any mining company is the closure provisions and rehabilitation provisions, et cetera, but all in the [indiscernible]

And are you able to quantify these long-term provisions?

No, not the.

Myles from UBS. A few quick questions maybe for John to start with. Could you give us a sense of how much you are looking to get from Peabody? Is it $500 million? Is it $1 billion? Is it $1.5 billion? Obviously, you've got kind of a better sense now of what you're going to realize and the losses that have been incurred and so on. But it would be helpful just to get a sense of what that potential could be. Maybe I know it's early days and it will be the new board decision, but how you're thinking around the dividend policy for Anglo Teck is it's more likely to be aligned with the current Anglo policy or a more North American sort of structure. And maybe for Duncan, just on manganese, Obviously, you've the most of the heavy lifting on the restructuring? And is that now kind of on the list of things to tidy up.

Okay. yes. On your first question on Peabody, obviously, the arbitration, as I said, has been initiated. That's a confidential matter, and therefore, I won't comment any further in terms of quantums or amounts. But as we've said consistently, we are very, very confident in our legal position on that case. And your second question on the dividend for Anglo Teck, you quite rightly say that will be a decision for the Anglo Teck Board, which, of course, is not yet formed and so that would be one of the things when Duncan talked about the phasing of communication that we'd hope to be able to clarify that very early post completion of the merger.

And then on manganese, Mal, you probably wouldn't expect me to say much difference from -- we look at all the assets in the portfolio all of the time. And to the extent we can see more value for them in a different way or in a different format, we would deal with that and manganese would just be 1 of those. So nothing specific plan on it, but absolutely in line with how we think about asset management and planning for the whole of the business at a portfolio level, it will be looked at in the same way.

Tony Robson, Global Mining Research. Possibly a question to John Dugan. The $4.5 billion special dividend being paid out just prior. So we're talking days, weeks prior to the formal unification issuing of shares to take and so on. And was there any thought about doing that as a buyback rather than special Surely, that's in terms of the weighting of the assets, the ratio you require as a merger of equals, would have the same impact on reduction in shareholders' equity. I would assume. So why especially rather than a [indiscernible]

Yes. I mean John can comment on this, but I can assure you, when we were looking at the merger ratios of the company and what we needed to do to put it together, we considered all of the options. The best option for us the return of some capital to the Anglo American shareholders. And so that was the decision we took. So it's not going to change now. It is a return of $4.5 billion, prior to completion. John, do you want to add anything to that?