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Performance against KPIs

Investment of choice

New capital investments

The Group's review at the end of 2008 for future planned capital expenditure resulted in a decision to reduce it for 2009 to $4.5 billion, including $1.3 billion stay-in-business capital expenditure. These substantial changes to planned capital expenditure will be achieved principally by rescheduling many of the Group's development projects. The Group's capital expenditure programmes for 2010 will continue to be monitored against prevailing and forecast market conditions.

During 2008, the Group continued with the development of several major projects in its pipeline of approved projects. The total capital cost of these projects, across the Group's Platinum, Diamond, Coal, Base Metals and Ferrous Metals businesses, amounts to $17 billion on an attributable basis. This was an increase of $5 billion relative to 2007. The increase was principally due to the approval in 2008 of three projects in South Africa, the Amandelbult No. 4 Shaft and the Styldrift Merensky phase 1 platinum replacement projects and the Sishen South iron ore project, increases in the forecast expenditure on the Los Bronces and Barro Alto projects and the consolidation of 100% of capital expenditure for phase 1 of the Minas-Rio iron ore project in Brazil.

For the longer term, the Group has an array of projects under active consideration at the pre-feasibility or feasibility stages. This pipeline of projects stretches well into the future, ensuring the Group maintains a high degree of flexibility with regards to its formidable organic growth potential.

During 2008, work continued on Anglo Platinum's major capital projects. The $692 million Mogalakwena North expansion project is expected to reach completion in Q2 2010. The $224 million Amandelbult East Upper UG2 expansion project is on track to raise the mine's platinum output by 100,000 ounces a year by 2012. Accessing Merenksy Reef, the $316 million Paardekraal 2 Shaft replacement project aims to replace 120,000 ounces of platinum annually by 2015. Smaller projects include the Base metals refinery expansion project and the Waterval Merensky Plant retrofit, both of which remain on time and on budget. Anglo Platinum has reduced its total capital expenditure for 2009 to $600 million on projects, through deferral of expenditure across several major projects, including Amandelbult No. 4 Shaft, Twickenham, Styldrift and the second slag cleaning furnace at Waterval.

During the year, Base Metals continued to develop its pipeline of projects across South America, southern Africa and the US. The major approved projects in copper and nickel provide scope for significant organic growth in the future. Completion of the approved projects in the Base Metals pipeline also improves the business unit's cost positioning across its suite of metals.

The decision to reduce capital expenditure on Base Metals' projects to $1.4 billion in 2009 has affected the commissioning dates of the business unit's two major approved projects. Commissioning of the Los Bronces copper expansion project in Chile, which aims to take production to an average initial level exceeding 400,000 tonnes per annum (tpa), has been delayed by eight months and first copper production is now expected in the fourth quarter of 2011. For the Barro Alto nickel project in Brazil there is a 12 month commissioning delay, with first production expected in the first quarter of 2011.

Base Metals has an extensive pipeline of projects under consideration or development for the longer term. In Chile, the potential phased expansion of the Collahuasi copper mine continues to be investigated. In Alaska, the pre-feasibility study for the Pebble copper project, in which the Group has a 50% stake, is ongoing. It is anticipated that exploration drilling will start at the 300,000 tpa Michiquillay copper project in Peru in 2009.

Kumba Iron Ore continues to ramp-up its production at the Sishen Expansion Project in South Africa. The project is expected to reach full production capacity of 13 million tonnes per annum (Mtpa) of iron ore in 2009. The Sishen South project, which involves the development of an opencast mine 80 kilometres south of Sishen mine, was approved in July 2008. Earthworks have commenced and bulk construction is scheduled to begin with the establishment of the major civil contracts during the first quarter of 2009. The mine is scheduled to start production in the first half of 2012, ramping up to full capacity of 9 Mtpa in 2013.

The pace of construction at Minas-Rio is driven by the timing of the Environmental Licence and other permits and, therefore, there is expected to be a 12 to 15 month commissioning delay to the first phase of the Minas-Rio iron ore project, with first production now expected in the second quarter of 2012. Planned annual capacity will be 26.5 Mtpa of iron ore pellet feed at an anticipated cost of $3.6 billion which is currently being updated following the announced delay.

In manganese, the $183 million GEMCO expansion project in Australia's Northern Territory is expected to be completed during the first half of 2009. The project is on target to increase GEMCO's manganese ore production capacity from 3.0 million dry metric tonnes per annum (Mdmt pa) to 4.0 Mdmt pa by the first half of 2009.

In Coal, the $473 million Zondagsfontein project is under construction and includes a 50:50 joint venture plant with BHP Billiton Energy Coal South Africa. The project is on track to deliver 6.6 Mtpa of export and domestic thermal coal from 2010, with first production expected in the second quarter of 2009. The Mafube project achieved full production rates of 5.4 Mtpa in 2008. Work continues on the housing project and the conveyor system and completion is expected in early 2009. MacWest is also nearly complete, with first production achieved in July 2008 and full production of 2.7 Mtpa expected in March 2009.

In Australia, the $726 million Lake Lindsay coking coal project is progressing well. The coal handling and preparation plant has been commissioned, having achieved milestones on or ahead of plan, while the dragline started operations in January 2009. The $839 million Dawson expansion project was completed in 2008. The Foxleigh mine was acquired in February 2008, delivering additional volumes and synergies with Anglo American's adjacent operations.

In Canada, Peace River Coal is making good progress on a $95 million capitalisation programme to acquire and operate its own mining equipment fleet. In Colombia, the expansion at Cerrejón to 32 Mtpa is complete and full production is expected to be achieved early in 2009. Feasibility studies are under review to expand the operation to around 40 Mtpa. Total project capital expenditure for 2009 for Anglo Coal has been reduced to $400 million.

For the first time in its history, De Beers opened three new mines in one year. In Canada, Victor mine in northern Ontario was completed and commissioned eight months ahead of schedule, while Snap Lake mine in the Northwest Territories commenced commercial production in early 2008, with both mines reaching full production in the second half of the year. De Beers' Voorspoed mine in South Africa was officially opened in November and is expected to produce 8.3 million carats at an average value of $120 per carat for the next 12 to 16 years.

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