ANGLO_AMERICAN(AAL.L)：4Q12_PRODUCTION：SA_STRIKES_MASK_A_BETTER_COPPER_RESULT-2013-01-28.ppt

3600,3200,2800,anglo american,deutsche bank markets research,rating buy europe united kingdom,company anglo american,date 28 january 2013 results,metals & mining metals & mining,reuters aal.l,bloomberg aal ln,exchange ticker lse aal,price at 25 jan 2013 (gbp) price target (gbp) 52-week range (gbp),1,886.00 2,200.00 2,910.00 - 1,664.00,4q12 production: sa strikes mask a better copper result some copper improvement but platinum and iron ore performance weighs anglo reported better-than-expected 4q12 production from met coal, copper, diamonds and platinum divisions. weaker volumes were recorded by nickel. iron ore was down 28% qoq but was 5% above dbe. overall the downside to production due to strikes in south africa masks a better production result from copper and met coal. upside to our valuation leads our buy rating.,grant sporre research analyst (+44) 20 754-58170 rob clifford research analyst (+44) 20 754-58339 ,tim clark research analyst (+27) 11 775-7268 ,a mixed bag of results versus both dbe expectations and qoq performance better-than-expected production results were reported for copper (+7% vs dbe), diamonds (+19%), platinum (+26%) and met coal (+14%) offset by weaker results from the nickel division (-26%). thermal coal and iron ore were in line with expectations, qoq production improvements were reported in diamonds (26% qoq), copper (+10%) and met coal (+5%); but with iron ore (-,key changes target price price/price relative,2,230.00 to 2,200.00,-1.3%,28%), platinum (-33%) and nickel (-18%) reporting volume declines. anglos result will likely lead to continued group cost pressure and relative to peers this was not a strong result, although expectations were low.,limited newsflow expected until 1h13 results given the appointment of mark cutifani as ceo, we expect a quiet period from anglo until his first public comments at the interim results (100 day view). at,2400 2000 1600 1/10,7/10,1/11,7/11,1/12,7/12,the fy12 results we expect some noise on write-ups and impairments with a,de beers write-up (us$7bn, co guidance) offset by write-downs of platinum,ftse 100 index (rebased),us$1bn, announced), amapa (us$200m, dbe) and potentially minas rio. the minas rio bv is us$8.5bn (dbe), versus our valuation of us$1bn, thus a write- down is likely in our view but may not be to the extent of our estimates given the possible introduction of a jv partner as one way of de-risking the project.,performance (%) absolute ftse 100 index,1m 0.3 5.5,3m 1.5 8.3,12m -29.0 9.8,earnings and nav changes: earnings up c.4%, nav down 2% earnings changes reflect the better than expected copper, met coal and diamonds result offset by the weaker platinum earnings and npv assumed post the operational review announced recently. target price trimmed to 2200p, (29500 sac); recommendation buy, risks our price target reflects a valuation taking into consideration both dcf over life-of-mine (9.5% wacc - beta 1.25, erp 4.5%, rf 5%, cod 6% on a through- the-cycle target gearing of 30%) for core asset valuations and market values or peer group multiples for non-core assets. we apply a 0.9x nav multiple to reflect managements performance relative to the broader metals and mining sector. risks include stronger-than-expected operating currencies (rand, a$) and lower commodity prices, in particular pgms, copper and iron ore. specific risks include further cost increases or delays at minas rio, the implementation risks of the platinum operational review and delays to project approvals forecasts and ratios,year end dec 31 db eps (usd) % change p/e (db eps) (x),2010a 4.01 0.0% 10.3,2011a 5.06 0.0% 8.9,2012e 1.75 3.3% 17.1,2013e 1.94 4.5% 15.4,2014e 2.23 -5.1% 13.4,source: deutsche bank estimates, company data _ deutsche bank ag/london deutsche bank does and seeks to do business with companies covered in its research reports. thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. investors should consider this report as only a single factor in making their investment decision. disclosures and analyst certifications are located in appendix 1. mica(p) 072/04/2012.,28 january 2013 metals & mining anglo american,model updated:27 january 2013,fiscal year end 31-dec,2009,2010,2011,2012e,2013e,2014e,running the numbers,financial summary,europe united kingdom metals & mining anglo american,db eps (usd) reported eps (usd) dps (usd) bvps (usd) weighted average shares (m) average market cap (usdm),2.08 1.97 0.00 21.7 1,202 33,937,4.01 5.23 0.65 28.4 1,206 49,759,5.06 5.10 0.74 32.3 1,210 54,238,1.75 1.44 0.78 32.9 1,244 37,070,1.94 1.94 0.78 33.0 1,284 38,262,2.23 2.23 0.80 34.5 1,284 38,262,reuters: aal.l,bloomberg: aal ln,enterprise value (usdm),40,223,51,756,64,162,48,163,52,685,56,944,valuation metrics,buy,p/e (db) (x) p/e (reported) (x),13.6 14.4,10.3 7.9,8.9 8.8,17.1 20.7,15.4 15.4,13.4 13.4,price (25 jan 13) target price 52 week range market cap (m),gbp 1,886.00 gbp 2,200.00 gbp 1,664.00 - 2,910.00 gbpm 23,462 usdm 37,070,p/bv (x) fcf yield (%) dividend yield (%) ev/sales (x) ev/ebitda (x) ev/ebit (x),2.01 nm 0.0 1.9 9.1 14.7,1.84 5.0 1.6 1.9 4.9 6.0,1.14 6.0 1.7 2.1 5.6 6.8,0.93 nm 2.6 1.7 7.0 10.5,0.90 nm 2.6 1.5 6.4 8.9,0.86 nm 2.7 1.5 6.3 8.5,company profile,income statement (usdm),anglo american plc is a globally diversified mining company. it has interests in diamonds, platinum, coal, copper, nickel, zinc, iron ore, and industrial minerals. the group has operations and developments in africa, europe, australia, and south and north america. the company first listed in london in 1999, and has been disposing on non-core assets to create a more focused mining group. anglos diamond and platinum assets differentiate it from the other diversified miners. price performance 3600 3200 2800 2400 2000 1600 jan 10 jul 10 jan 11 jul 11 jan 12 jul 12,sales revenue gross profit ebitda depreciation amortisation ebit net interest income(expense) associates/affiliates exceptionals/extraordinaries other pre-tax income/(expense) profit before tax income tax expense minorities other post-tax income/(expense) net profit db adjustments (including dilution) db net profit cash flow (usdm) cash flow from operations,20,858 4,432 4,432 1,692 0 2,740 -407 84 1,612 0 4,029 1,117 487 0 2,425 144 2,569 4,087,27,960 10,532 10,532 1,866 0 8,666 -139 822 1,579 154 11,082 2,809 1,575 0 6,698 -1,568 5,130 7,727,30,580 11,406 11,406 1,967 0 9,439 183 977 183 264 11,046 2,860 1,753 0 6,433 -49 6,384 9,362,29,119 6,836 6,836 2,266 0 4,570 -523 485 -39 0 4,493 1,385 1,257 0 1,851 396 2,247 4,890,35,632 8,253 8,253 2,337 0 5,916 -773 560 0 0 5,703 1,654 1,551 0 2,499 0 2,499 6,419,37,241 8,991 8,991 2,296 0 6,694 -1,015 678 0 0 6,357 1,881 1,603 0 2,872 0 2,872 7,164,anglo american margin trends 40 30 20,ftse 100 index (rebased),net capex free cash flow equity raised/(bought back) dividends paid net inc/(dec) in borrowings other investing/financing cash flows net cash flow change in working capital,-4,561 -474 50 -472 -371 1,282 15 0,-5,216 2,511 -64 -919 -788 1,882 2,622 0,-6,126 3,236 -347 -2,222 4,667 299 5,633 0,-5,620 -731 22 -2,085 2,081 -6,587 -7,300 0,-6,731 -312 22 -1,937 0 -373 -2,600 0,-7,756 -592 22 -1,933 0 -1,015 -3,519 0,10,09,10 11 ebitda margin,12e,13e ebit margin,14e,balance sheet (usdm) cash and other liquid assets tangible fixed assets goodwill/intangible assets,3,269 35,198 3,118,6,401 39,810 2,695,11,732 40,549 2,682,4,635 40,887 2,627,2,035 44,881 2,627,516 50,340 2,627,growth & profitability,associates/investments other assets,6,899 7,824,8,915 8,835,8,804 8,675,16,402 10,122,16,842 11,280,17,448 11,520,40 30 20 10,25 20 15,total assets interest bearing debt other liabilities total liabilities,56,308 14,506 13,733 28,239,66,656 13,581 15,104 28,685,72,442 12,873 16,380 29,253,74,672 14,228 16,282 30,510,77,665 14,228 17,141 31,369,82,451 16,228 17,363 33,591,0 -10 -20 -30,09,10,11,12e,13e,14e,10 5 0,shareholders equity minorities total shareholders equity net debt,26,121 1,948 28,069 11,237,34,239 3,732 37,971 7,180,39,092 4,097 43,189 1,141,40,889 3,273 44,162 9,593,42,421 3,876 46,296 12,193,44,300 4,560 48,860 15,712,sales growth (lhs),roe (rhs),key company metrics,solvency,sales growth (%) db eps growth (%),-20.7 -51.9,34.0 92.3,9.4 26.4,-4.8 -65.5,22.4 11.0,4.5 14.9,50 40 30,70 60 50 40,ebitda margin (%) ebit margin (%) payout ratio (%) roe (%),21.2 13.1 0.0 10.5,37.7 31.0 11.7 22.2,37.3 30.9 13.9 17.5,23.5 15.7 52.5 4.6,23.2 16.6 40.1 6.0,24.1 18.0 35.8 6.6,20 10 0,09,10,11,12e,13e,14e,30 20 10 0,capex/sales (%) capex/depreciation (x) net debt/equity (%) net interest cover (x),22.1 2.7 40.0 6.7,18.9 2.8 18.9 62.3,20.3 3.2 2.6 nm,19.3 2.5 21.7 8.7,18.9 2.9 26.3 7.7,20.8 3.4 32.2 6.6,source: company data, deutsche bank estimates,net debt/equity (lhs) grant sporre +44 20 754-58170 page 2,net interest cover (rhs) ,deutsche bank ag/london,28 january 2013 metals plus 17koz were placed on care and maintenance at marikana mine. below expectations nickel (-17.8% qoq, -26.7% vs dbe): production ceased at loma de niquel as a result of the expiration of the remaining licenses in november 2012. the barro alto ramp up has been slow as the line 1 furnace experienced a partial sidewall collapse in october 2012 and has been rebuilt, returning to capacity in december 2012. in line with expectations iron ore (-27.9% qoq, +5.2% vs dbe): kumba reported 4q production of 9mt, slightly ahead of our expectations, driven largely by a good result at kolomela (2.8mt, above nameplate). export sales remain the driver of earnings and were,deutsche bank ag/london,page 3,28 january 2013 metals & mining anglo american down 10% qoq at 9mt. kumba noted losing 5mt of production to the recent strike action. overall, this is a weaker qoq result given the strikes but kumba has used waste stripping teams to keep production levels up and has defended the strike action well. finished inventories were down qoq at 3.7mt. we think that at the results, kumba will release guidance for lower sales given the lower inventories and will have to increase cost guidance given slower waste stripping this quarter. the minas rio project remains under capex review. first ore remains scheduled for before the end of 2014. manganese ore (-1.4% qoq, +0.0% vs dbe): production remained in line with 3q12 as plant availability at similar levels continued at gemco. manganese alloys (+17.7% qoq, +0.0% vs dbe) reflects the improved production off a low base at temco after resumption of operations. note that temco is in a disposal process. thermal coal (-2.8% qoq, +1.7% vs dbe): export thermal from south africa was up 2.3% due to the continued ramp up at zibulo that was partially offset by the closure of high-cost pits at kleinkopje. the eskom thermal coal production decreased 4.7% in 4q12. figure 1: divisional production, 4q12a/4q12e, 4q12a/3q12,4q12a/ 4q12e,4q12a/ 3q12,division,measure,3q12,4q12a,4q12 dbe,%,%,platinum segment,platinum palladium rhodium copper nickel gold equivalent refined platinum diamonds (100% basis) copper segment nickel segment,troy ounces troy ounces troy ounces tonnes tonnes troy ounces troy ounces 000 cts tonnes tonnes,649,000 392,100 90,500 2,700 3,700 38,500 626,300 6,375 157,300 9,000,703,800 413,300 91,200 2,500 3,900 18,600 416,000 8,051 172,900 7,400,493,451 297,948 69,690 2,053 2,813 30,153 330,066 6,777 161,566 10,100,42.6 38.7 30.9 21.8 38.6 -38.3 26.0 18.8 7.0 -26.7,8.4 5.4 0.8 -7.4 5.4 -51.7 -33.6 26.3 9.9 -17.8,iron ore & manganese,iron ore manganese ore manganese alloys,tonnes tonnes tonnes,12,496,900 858,400 52,000,9,012,500 846,800 61,200,8,564,100 846,800 61,200,5.2 0.0 0.0,-27.9 -1.4 17.7,met coal,metallurgical thermal total,tonnes tonnes tonnes,4,495,700 3,398,900 7,894,600,4,580,000 3,714,700 8,294,700,4,383,000 2,881,700 7,264,700,4.5 28.9 14.2,1.9 9.3 5.1,thermal coal,metallurgical rsa export thermal colombia export thermal rsa domestic - other eskom total,tonnes tonnes tonnes tonnes tonnes tonnes,0 4,555,300 2,829,400 1,530,500 9,056,900 17,972,100,0 4,659,100 2,661,700 1,594,500 8,560,600 17,475,900,0 4,345,629 2,662,000 1,477,500 8,696,815 17,181,944,nm 7.2 0.0 7.9 -1.6 1.7,nm 2.3 -5.9 4.2 -5.5 -2.8,source: deutsche bank, company data,page 4,deutsche bank ag/london,1q08,2q08,3q08,4q08,1q09,2q09,3q09,4q09,1q10,2q10,3q10,4q10,1q11,2q11,3q11,4q11,1q12,2q12,2q12,3q12,3q12,1q08,2q08,3q08,4q08,1q09,2q09,3q09,4q09,1q10,2q10,3q10,4q10,1q11,2q11,3q11,4q11,1q12,2q12,3q12,4q12,1q08,2q08,3q08,4q08,1q09,2q09,3q09,4q09,1q10,2q10,3q10,4q10,1q11,2q11,3q11,4q11,1q12,2q12,3q12,1q08,2q08,3q08,4q08,1q09,2q09,3q09,4q09,1q10,2q10,3q10,4q10,1q11,2q11,3q11,4q11,1q12,2q12,3q12,4q12,1q08,2q08,3q08,4q08,1q09,2q09,3q09,4q09,1q10,2q10,3q10,4q10,1q11,2q11,3q11,4q11,1q12,2q12,3q12,4q12,1q08,2q08,3q08,4q08,1q09,2q09,3q09,4q09,1q10,2q10,3q10,4q10,1q11,2q11,3q11,4q11,1q12,4q12,4q12,4q12,28 january 2013 metals & mining anglo american anglos production history,figure 2: base metals production, rebased to 100, implied quarterly history 280 240 200 160 120,figure 3: amplats production, rebased to 100, implied quarterly history 220 180 140 100 60,20 80,platinum rhodium,palladium copper,copper,nickel,zinc,nickel,gold,source: deutsche bank, company data figure 4: metallurgical coal production, rebased to 100, implied quarterly history 140 120 100 80 60 40,source: deutsche bank, company data figure 5: thermal coal production, rebased to 100, implied quarterly history 125 120 115 110 105 100 95 90,metallurgical,thermal,total,thermal,eskom,total,source: deutsche bank, company data figure 6: iron ore and manganese production, rebased to 100, implied quarterly history 180 160 140 120 100 80 60 40 20 -,source: deutsche bank, company data figure 7: diamond production, rebased to 100, implied quarterly history 120 100 80 60 40 20 0,iron ore,manganese ore,manganese alloy s,diamonds (100% basis),source: deutsche bank, company data deutsche bank ag/london,source: deutsche bank, company data,page 5,qs08,qd08,qm09,qj09,qs09,qd09,qm10,qj10,qs10,qd10,qm11,qj11,qs11,qd11,qm12,qj12,qs12,qd12,qs08,qd08,qm09,qj09,qs09,qd09,qm10,qj10,qs10,qd10,qm11,qj11,qs11,qd11,qm12,qj12,qs12,qd12,qs08,qd08,qm09,qj09,qs09,qd09,qm10,qj10,qs10,qd10,qm11,qj11,qs11,qd11,qm12,qj12,qs12,qd12,qs08,qd08,qm09,qj09,qs09,qd09,qm10,qj10,qs10,qd10,qm11,qj11,qs11,qd11,qm12,qj12,qs12,qd12,qs08,qd08,qm09,qj09,qs09,qd09,qm10,qj10,qs10,qd10,qm11,qj11,qs11,qd11,qm12,qj12,qs12,qd12,qs08,qd08,qm09,qj09,qs09,qd09,qm10,qj10,qs10,qd10,qm11,qj11,qs11,qd11,qm12,qj12,qs12,qd12,28 january 2013 metals & mining anglo american comparing the production performance of the diversified miners,figure 8: annualised diversified miners coking coal production, qs08-qd12,figure 9: annualised diversified miners thermal coal production, qs08-qd12,50 40 30,mt,175 155 135 115,mt,95,20 10 0,75 55 35 15,bhp billiton,anglo american,rio tinto,bhp billiton,anglo american,rio tinto,source: deutsche bank, company data figure 10: annualised diversified miners iron ore production, qs08-qd12,source: deutsche bank, company data figure 11: annualised diversified miners copper production, qs08-qd12,350 300 250 200 150,mt,1400 1200 1000 800,kt,100,50 0,600 400,bhp billiton anglo american,rio tinto vale,bhp billiton,rio tinto,anglo american,source: deutsche bank, company data figure 12: annualised diversified miners nickel production, qs08-qd12 250 200 150 100 50 0,source: deutsche bank, company data figure 13: annualised diversified miners diamonds production, qs08-qd12 kct 30000 25000 20000 15000 10000 5000 0,bhp billiton,anglo american,anglo american,rio tinto,bhp billiton,source: deutsche bank, company data page 6,source: deutsche bank, company data,deutsche bank ag/london,28 january 2013 metals & mining anglo american investment thesis outlook anglo is in a recovery phase post the operational challenges of 2012 and it is the timing of the recovery in demand for its products (diamonds and platinum), operational improvements (platinum, copper, nickel) and project delivery (met coal and minas rio) that will be the key differentiating performance drivers relative to peers, specifically: 1. we see the appointment of mark cutifani as positive, but only expect an update his plans for the group at the 2013 interim results, we expect a renewed focus on operational improvements (improving the link of operations to divisional and group head office), project delivery and capital allocation. 2. we see the platinum review announced as positive for longer term fundamentals for pgms but anticipate that the implementation of the shaft closures and company restructuring to be disruptive and costly in 2013. 3. we see the potential de-risking of minas rio as a potential positive and anticipate firm guidance or the introduction of a partner. 4. we expect news on the turnaround of the copper division, with early improvements signs in recent reports, to highlight deferred not lost copper production. given the upside potential based on our valuation we rate anglo as a buy. valuation our price target reflects a valuation taking into consideration both dcf over life-of-mine (9.5% wacc - beta 1.25, erp 4.5%, rf 5%, cod 6% on a through-the-cycle target gearing of 30%) for core asset valuations and market values or peer group multiples for non-core assets. we apply a 0.9x nav multiple to reflect managements performance relative to the broader metals and mining sector. risks risks include stronger-than-expected operating currencies (rand, a$) and lower commodity prices, in particular pgms, copper and iron ore. more specific risks include further cost increases or delays at minas rio, the implementation risks of the platinum operational review and delays to project approvals.,deutsche bank ag/london,page 7,6.,7.,6