ANGLO AMERICAN ADDING VALUE TO NATURAL RESOURCES

Transcription

1 ANGLO AMERICAN ADDING VALUE TO NATURAL RESOURCES ANGLO AMERICAN PLC ANNUAL REVIEW 2002

2 HEADLINE EARNINGS PER SHARE US CENTS HEADLINE EARNINGS BY BUSINESS $ MILLION DIVIDENDS US CENTS PER SHARE * Platinum 205 Gold 324 Diamonds 266 Coal 69 Base Metals 231 Industrial Minerals 376 Forest Products 126 Ferrous Metals and Industries NET OPERATING ASSETS BY BUSINESS $ MILLION SHARE PRICE PERFORMANCE 2002 CAPITAL EXPENDITURE BY BUSINESS $ MILLION Anglo American FTSE Indexed ,580 Platinum 2,511 Gold 1,658 Coal 3,617 Base Metals 3,848 Industrial Minerals 3,897 Forest Products 1,696 Ferrous Metals and Industries Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 586 Platinum 246 Gold 142 Coal 346 Base Metals 363 Industrial Minerals 365 Forest Products 85 Ferrous Metals and Industries GEOGRAPHICAL ASSET MIX % HEADLINE EARNINGS BY REGION % 31 South Africa 7 Rest of Africa 35 Europe 21 Americas 6 Australasia 42 South Africa Mining 12 South Africa Other 11 Rest of Africa 22 Europe 9 Americas 4 Australasia 02 Adding value 06 Chairman s statement 08 Chief executive s statement 12 Acquisitions and project pipeline 14 Safety, health and environment 15 Social responsibility 16 Operations review 19 The business - an overview 20 The board 22 Financial statements 22 Consolidated profit and loss account 23 Summary consolidated balance sheet 23 Four year selected consolidated financial information 24 Summary directors report 24 Independent auditors statement 25 Summary remuneration report 32 Key financial data IBC Shareholder information The Group s 2002 Annual Report, which includes the financial statements, directors report, corporate governance report, remuneration report and report of the auditors (which is unqualified), is available to shareholders free of charge from the Company s Registrar. A separate Report to Society 2002 is available on request. Throughout this Review, $ means United States dollars. The 2002 Annual Review, the 2002 Annual Report and the Notice of AGM, together with the shareholder information booklet, are available on the corporate website: *Throughout this review, 2001 figures have been restated for the adoption of FRS and 1999 figures have not been restated for the adoption of FRS 19.

3 GOLD DIAMONDS PLATINUM COAL BASE METALS INDUSTRIAL MINERALS FERROUS METALS AND INDUSTRIES FOREST PRODUCTS PLATINUM GOLD DIAMONDS 1 COAL Anglo Platinum (69.6%* held) is the world leader in platinum group metals, with the highest market capitalisation of any platinum mining company. It is the largest primary producer of platinum globally and is also a significant supplier of palladium and rhodium. All of its operations are in South Africa, where the company wholly owns six mines, two smelters and a base metals refinery as well as a precious metals refinery, and is in joint venture in a seventh mine. Anglo Platinum remains committed to the expansion programme to produce 3.5 million ounces of refined platinum per year by the end of 2006 in response to projected market demand. *Holding at 14 February 2003 AngloGold (51.4% held) accounts for nearly 7% of world mine output of gold and is among the world s largest gold producers, with annual gold output currently at around 6 million ounces. The company has operations in South Africa, Tanzania, Mali and elsewhere in Africa, as well as in North and South America and Australia. AngloGold has recently completed two major capital projects, and has another three which are on track for completion on time and within plan. The company has a focused worldwide exploration programme and plays a vigorous role in the downstream marketing of gold. De Beers (45% held) has been synonymous with diamonds for more than a century. The company leads the world in diamond exploration, mining, recovery, sorting, valuation and marketing. De Beers produces more than 40% by value of total annual global diamond production from its mines in South Africa, and through its 50:50 partnerships with the governments of Botswana and Namibia. Through its marketing arm, the London based Diamond Trading Company (DTC), De Beers markets over half of global supply, and has conducted a renowned diamond advertising and promotion campaign for over half a century. The company, in partnership with Louis Vuitton Möet Hennessey (LVMH), is currently committed to exploring ways to exploit the value of its brand. 1 Operated by De Beers, the Company s independently managed associate. Anglo Coal ranks as one of the world s largest private sector coal producers and is a major exporter. It has the advantage of being able to source supplies from three geographic regions: South Africa, Australia and Colombia/Venezuela. In 2002, its total coal sales were 84.5 million tonnes (2001: 77.4 million tonnes). During the year, in Australia, Anglo Coal divested 30% of its interests in German Creek and 49% of the Theodore, Dawson and Taroom projects and acquired 51% of Moura mine and a 23% interest in the Jellinbah East mine. Early in 2002, the Anglo American/BHP Billiton/ Glencore consortium acquired the remaining 50% of the Cerrejón Zona Norte operation in Colombia. In January 2003, Anglo Coal Australia acquired a 70% interest in the Girrah coal deposit. GROUP PROFILE OUR PRODUCT AND GEOGRAPHIC DIVERSITY UNDERPIN OUR PERFORMANCE

4 BASE METALS INDUSTRIAL MINERALS FOREST PRODUCTS FERROUS METALS AND INDUSTRIES Anglo Base Metals principally comprises copper, nickel, zinc, niobium and mineral sands operations and projects in South America, southern Africa, Canada and Ireland. The business has significantly upgraded the quality of its portfolio over the past year with the disposal of five non-core assets and has several projects recently commissioned, under construction, or at feasibility study stage. The business strategy is to become a significant industry player within the next few years. A major step in this regard was the acquisition in November 2002 of Disputada, a world class integrated copper producer located in Chile. Anglo Industrial Minerals (AIM) occupies a pre-eminent position in construction materials in the UK, where wholly owned Tarmac is the market leader in aggregates, asphalt and concrete blocks. Tarmac is growing its core aggregates and downstream businesses, in particular concrete products, especially in continental Europe. The $173 million new cement plant at Buxton in the UK is scheduled for completion in the second half of the year. In Brazil, AIM has a controlling interest in Copebrás, which mines phosphate rock and produces phosphate fertilisers and related products. Copebrás has recently completed a project in Goiás, virtually doubling its phosphate fertiliser capacity. This integrated forestry, pulp, paper and packaging group, operating under the Mondi name, has businesses across Europe and in South Africa. Core products are eucalyptus pulp, packaging papers and board, converted packaging papers, office communication papers and uncoated mechanical papers mainly newsprint. Frantschach (70% owned) is a pulp, kraftpaper, industrial sacks and packaging producer with 66 plants in 30 countries. Wholly owned Neusiedler produces uncoated woodfree paper, mostly sold as A4 copy paper. In March 2002, Mondi lifted its stake in Russian paper producer Syktyvkar to 88%, which had increased to 97% by year end, and announced a $233 million expansion at 50% held Slovakian paper producer SCP Ruzomberok. Ferrous Metals produces carbon and stainless steel, vanadium, chrome, manganese and mines iron ore. The business holds an 80% share of Highveld Steel, the world s major vanadium producer, and of Scaw Metals, which acquired Moly- Cop, the world leader in grinding media, during the year. Ferrous Metals has a 40% stake in Samancor, a major integrated producer of chrome and manganese alloys, and owns 25% of Avmin and 20% of Kumba, both producers of iron ore, with a further 9.9% of Avmin and 10.0% of Kumba awaiting approval from the South African competition authorities. Boart Longyear, wholly owned, is a leading manufacturer and supplier of tools and services to the mining industry. It has operations worldwide. Tongaat-Hulett (53% owned) is a major producer of sugar, starch and glucose and aluminium products.

5 OPERATING IN 61COUNTRIES THROUGH 8 KEY BUSINESSES 01 ANGLO AMERICAN PLC WITH ITS SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES IS A GLOBAL LEADER IN THE MINING AND NATURAL RESOURCE SECTORS. IT HAS SIGNIFICANT AND FOCUSED INTERESTS IN GOLD, PLATINUM, DIAMONDS, COAL, BASE METALS, FERROUS METALS AND INDUSTRIES, INDUSTRIAL MINERALS AND FOREST PRODUCTS, AS WELL AS FINANCIAL AND TECHNICAL STRENGTH.

6 02 AngloGold has been very active in expanding the market for gold, particularly through its drive to reposition gold as a desirable accessory in a modern and lifestyleoriented consumer market. Through a series of innovative marketing initiatives, the company is adding value to the yellow metal from initial refining at the mine, to forming alliances with designers and manufacturers, right through to marketing gold via the Internet. Neusiedler has a strong brand image in Europe with its high-grade papers for the steadily expanding desktop publishing/office communication market. The company is able to obtain premium prices for much of its production, while retaining the flexibility to supply a one-stop service to customers who want a comprehensive range of grades from a single source. ANGLO S BUSINESSES ARE INVOLVED IN AN ARRAY OF VALUE ADDED PRODUCTS AND SERVICES

7 03 The development of fuel cell technology is a logical extension of Anglo Platinum s strategy of growing the market for platinum group metals. Fuel cells will be a major driver for long term platinum demand. The environmental benefits of fuel cells were recently highlighted by President Bush in his State of the Union address on 30 January 2003, when he called for more research into fuel cell technology. Tarmac is the leading brand in the UK for asphalt road surfaces. Premium crushed rock aggregate from Tarmac s UK quarries is used to produce an unrivalled range of branded specialist asphalts for use in highway, residential, commercial and industrial projects. Schools are making play areas fun, colourful and safer for children Mastertint, Tarmac s coloured asphalt, achieved that aim at this forward-thinking school in Gloucester. Anglo American s diversity extends far further than its commodity range or the number of countries in which it has operations: its businesses are involved in an array of value added products and services along a pipeline which extends from the initial mining and refining of raw products through to the ultimate consumer. PLATINUM At Anglo Platinum s smelters and refineries in South Africa, platinum group metals (PGM) concentrates are refined to high degrees of purity and fabricated into various forms to meet customer requirements. Over the next decade a major new wave of demand is likely to come from the development of fuel cells. With the recent acquisition of a 17.5% stake in specialist chemicals company Johnson Matthey Fuel Cells Limited, Anglo Platinum is now exposed to the commercialisation of the two companies jointly developed fuel cell technology. The three largest auto manufacturers in the USA have built working fuel cell vehicles and plan commercialisation by the middle of the current decade. Anglo Platinum s strategy for growing the PGM market has been very successful in platinum jewellery. The platinum jewellery market is a created market and much of its achievement springs from the Platinum Guild International, with Anglo Platinum remaining the major supporter. Platinum jewellery is setting fashion trends internationally as it extends its reach in countries as diverse as China, India and the USA. GOLD AngloGold has evolved over the past few years from being a production-driven mining company to a market-driven organisation. It is pursuing consolidation downstream of the smelthouse gate and is today the leading exponent in expanding the market for gold. Through its sponsorship of the World Gold Council, along with such downstream investments as Oro Africa (a jewellery manufacturer linked to a leading Italian fabricator) and GoldAvenue (an Internet venture with leading bullion bank JP Morgan and Geneva-based Produits Artistiques de Métaux Précieux), AngloGold has moved closer to the world of bullion trading, manufacturing and retailing. AngloGold has also recognised the need to extend gold s reach through research and development. Autek, AngloGold s joint venture with Mintek, is researching new industrial uses for gold in areas such as autocatalysts. One of the most promising projects being explored is the use of gold in filters for air conditioning units. DIAMONDS A major development for De Beers, an independently managed associate, was the recent creation by De Beers and Louis Vuitton Möet Hennessey (LVMH) of a wholly independent company, De Beers LV, to unlock the value of the De Beers name as a global luxury brand. The company s first retail operation opened in London in late A new outlet is planned to open in Japan in 2003 and a flagship store in the USA in 2004.

8 04 Jewellery is one of the two major demand sectors for platinum. Through its support of the Platinum Guild International, Anglo Platinum is actively involved in increasing platinum jewellery s share of the luxury-goods market and is making particularly strong inroads in the Pacific Rim region. In recent years, Mondi packaging businesses have been highly successful in moving down the value chain and have now reached critical mass in several regional European markets, with a product range stretching from the basic industrial sack to sophisticated packaging that combines high-quality printing and robustness. COAL As one of the world s leading producers and exporters of coal, Anglo Coal is involved in many stages of the coal cycle from mining to utilisation. Effective preparation of coal not only adds marketing value at the source; it also improves the homogeneity of coal supplied, reduces transport costs, improves utilisation efficiency, produces less ash for disposal at the power plants and often reduces emissions of oxides and sulphur. In terms of the Kyoto Protocol, Anglo Coal, along with other industry participants, is actively involved in formulating mechanisms to promote the development and use of clean coal technology, emissions trading and carbon sequestration (the removal and storage of atmospheric carbon). These initiatives are designed to secure the future of the coal industry, a key supplier of world energy, in a responsible and sustainable manner. BASE METALS Anglo Base Metals Namakwa Sands mineral sands operation in South Africa has its own refining and smelting facilities to convert mineral sands into more valuable downstream products, almost all of which are exported. The principal products are zircon, the main application of which is in the ceramics industry; rutile, used in welding electrodes as well as in titanium dioxide pigment and titanium metal production; pig iron for the foundry industry; and titanium slag, which is used as a feedstock for the production of titanium oxide pigment. INDUSTRIAL MINERALS Tarmac occupies a pre-eminent position in the construction materials industry in the UK, where it is the market leader in aggregates, asphalt and concrete blocks. In addition to selling raw aggregates to the market, Tarmac converts a substantial portion of its aggregates output into downstream, value added products such as ready-mixed concrete, asphalt and concrete blocks and paving. For example, Tarmac produces asphalt made from premium aggregates which is used for its anti-skid and noise-reduction qualities on road surfaces such as roundabouts and motorways. FOREST PRODUCTS As a leading European producer of office paper, Mondi supplies people with one of the most important means of communication. One key product is Neusiedler s Color Copy paper range, a speciality paper for laser printing perfection. The colour photocopies and colour laser prints produced are sharp, brilliant prints, true to the original even at the highest resolution. Mondi also produces innovative packaging solutions for the specific needs of the products and its customers. The development of high quality print and excellent customer support have led to Mondi going beyond merely producing packaging materials and adding real value for its customers.

9 05 Anglo Industrial Minerals products are an important part of the UK construction industry. As UK leader, Tarmac Topblock is the country s only manufacturer to offer the full range of dense and lightweight aggregate and aircrete blocks to meet the demands of today s building industry. De Beers involvement in the diamond pipeline now extends from mining through to the end consumer. De Beers and LVMH recently formed De Beers LV, an independent company, as part of an effort to develop the De Beers name as a luxury brand. De Beers LV s first store opened its doors in December 2002, in London s West End. Frantschach s stand-up pouches are made from four different materials aluminium, nylon, polyester and cast propylene which give a unique shape and superb surface for printing. This packaging solution is extremely durable, convenient and userfriendly. It guarantees an odour and gas barrier, prolongs product life and results in high visibility on the shelf. The pouches have a variety of structural options recloseable openings, spouts, laser perforations and a wide choice of size and shape. FERROUS METALS In the Ferrous Metals sector, Scaw Metals is in the businesses of rolled steel, foundries and fabrication, as well as grinding media, in which it is now the world leader. The company is a leading manufacturer of single piece, thin walled locomotive and passenger coach frames and freight car components. TECHNICAL DIVISION Anglo American s Technical Division is an example of the Group being at the forefront of technology and technological innovation. Over the years much of this expertise has been developed within the Group itself and, in contrast to its peers, Anglo has chosen to retain this focused, expert capability. Notable achievements have included the in-house-refined Spectrem prospecting system, which used airborne electro-magnetic techniques in its search for minerals in Canada. The Anglo American Research Laboratories continue to develop new metallurgical techniques to improve existing, and create new, extraction processes, which will support environmentally sustainable practices.

10 06 CHAIRMAN S STATEMENT Having joined the board in July 2002, I succeeded Julian Ogilvie Thompson as chairman at the beginning of December. The greater part of the 2002 reporting year was thus under the aegis of my predecessor. In the period of handover, I have found Anglo American to be an organisation of strong values and principles, where clear written statements find expression in people s behaviour. Changes over recent years have significantly improved analysis and controls, introducing more uniform systems across all businesses in, for example, the allocation of capital. A key area of focus has also been safety, health and environment, with much-needed ongoing improvement in industrial safety. We continue to look at the internal synergies which can be found through more common services across our businesses. People across the Group have contributed positively to these changes, demonstrating flexibility and creativity. MARK MOODY-STUART CHAIRMAN We have a diverse portfolio, with demonstrated strength which comes from that diversity and resulting exposure to businesses with different cycles. We are growing our businesses around the world, both organically as well as through significant acquisitions. We have continued to build on our strong position in South Africa, through expansion of production, as in platinum, and through venturing into significant new areas such as iron ore. RESULTS Headline earnings were $78 million higher than in 2001, as lower commodity prices, inflation and higher costs were exceeded by favourable exchange, volume, De Beers earnings and structural and other variances. Headline earnings per share were 10% above the prior year. The total dividend was increased by 4% to 51 US cents per share. OUTLOOK We face a year of considerable uncertainty, with the major cloud being potential conflict in Iraq. All our products are ultimately affected by industrial growth and consumer demand, but the timing and nature of demand fluctuation vary, again a reflection of the broad base of our business. While base metals and industrial minerals are immediately linked to the industrial cycle, in platinum and gold there is a need to develop more capacity to fill a demand gap, with consequent price implications. Demand and price movements in our different businesses will thus respond in different ways to changes in GDP growth. In addition, of particular importance is the South African rand s strength at the beginning of 2003 we will be very challenged to sustain our record 2002 performance in the year ahead if the current exchange rate level is maintained.

11 07 CHAIRMAN S STATEMENT MAJOR CHALLENGES FACING OUR BUSINESS Discussions at the UN World Summit on Sustainable Development showed that there is an increasing acknowledgement of the essential contribution of business, including mining and natural resource based industries, to development. This support is, however, clearly subject to ensuring that economic activity respects the environment and benefits society at large rather than just a few. There was also an acknowledgement that it was necessary for governments and civil society organisations of various kinds, as well as business, to work together if the challenges are to be addressed. The Global Mining Initiative (GMI) which culminated in a multi-stakeholder conference in Toronto in May, and in which Anglo American played a significant role, was one such collective effort to develop the standards to which responsible business must adhere. The recommendations of the GMI are now being carried forward through the International Council on Mining and Metals. Trust is essential in such partnerships and, for this reason, we are continuing to develop open and comprehensive reporting, not just on financial matters but also on environmental performance and social impacts. We intend to build on the work of the Global Reporting Initiative and our first Sustainable Development annual report, Report to Society, which will be released shortly, is a step in this direction. There is no doubt that the accounting scandals around the world have damaged trust in business in general. Engaging, listening and building partnerships must become a part of the way corporations naturally operate. This approach needs to be at all levels of our organisation, and we are fortunate for the positive response of our people all around the world. Anglo American in southern Africa has in several areas been a pioneer in starting to address such issues, working with others to tackle issues in education, in the development of small and medium size enterprises, and in relation to the challenge of HIV/AIDS. Anglo has taken a lead in making anti-retroviral therapy available to HIV positive employees progressing to AIDS. We are also committed to seeking to extend treatment to dependants and people in communities surrounding our operations, but this too will need partnership it can only succeed if all the affected parties accept their respective roles. DIRECTORATE AND STAFF It is fitting that I should pay tribute to Julian Ogilvie Thompson, my predecessor, who retired as chairman after serving more than a quarter of his 46-year career in Anglo American in that capacity. The lasting memorial to that period of Julian s leadership is the transformation of Anglo American into a global mining and natural resources company, with a growing global business, strong in its diversity and in its South African heritage. All of us in the Group will miss Julian s incisive comments and encyclopaedic knowledge we hope that he will be around and on call if required for many years to come. As you can see from pages 20 to 21, we have a board of diverse background, experience and skills. A notable exception is the absence of a woman on the board and we shall be moving to address this issue in the coming year. The board committees, which allow us to draw effectively on the experience of our non-executive directors, were headed for the reporting period by: Rob Margetts, the Remuneration and Audit committees; Chris Fay, the Safety, Health and Environment (SHE) Committee; and Julian Ogilvie Thompson and myself, the Nomination Committee. Following from, and in line with, the recommendations of the Higgs Report, I have proposed that the duties should be spread so that Rob Margetts heads the Remuneration Committee; David Challen, the Audit Committee; Chris Fay, the SHE Committee; and Fred Phaswana, the Nomination Committee. In addition, as announced on 28 February, it is proposed that Rob Margetts will become senior independent nonexecutive director with effect from the AGM. I should like to thank Sir David Scholey for fulfilling this role since December Sir David has also been appointed to the SHE Committee and Professor Van Miert to the Nomination Committee, both with effect from 25 April Finally, on behalf of the board, I should like to thank Tony Trahar, the chief executive, the executive directors and our staff for their efforts and contribution during a period of major external challenges as well as continuing change and development in the Company. Based on this history of working in partnership to address issues, we can face the great challenges of achieving employment equity, and of working in South Africa to achieve the targets of economic empowerment of previously disadvantaged groups, with some confidence. These are things which must be achieved if business is to be able to work in a stable society. From the chief executive s statement you can see how progress is being made towards the targets in the different businesses, and most importantly how trust is being built all around trust of others in our commitment to deliver the targets and, equally, trust that a stable mining regime is being built in South Africa to allow the necessary major investments to be made. Sir Mark Moody-Stuart KCMG Chairman

12 08 CHIEF EXECUTIVE S STATEMENT TONY TRAHAR CHIEF EXECUTIVE AYEAR OF PROGRESS FOR ANGLO AMERICAN

13 09 CHIEF EXECUTIVE S STATEMENT FINANCIAL RESULTS It gives me great pleasure to report that Anglo American achieved record headline earnings in 2002 of 125 US cents per share, up 10% on the 114 US cents per share achieved in Both figures are stated on a full provision basis for deferred tax following the adoption of FRS 19 with effect from 1 January This performance was achieved despite difficult economic conditions and slowing international growth and reflected significantly increased contributions from gold, diamonds, base metals, forest products, industrial minerals and ferrous metals, which more than offset lower earnings contributions from platinum and coal. In the light of the improved earnings, the board has decided to increase the final dividend by 2 US cents per share, resulting in a total dividend distribution for the year of 51 US cents per share, up 4% from 2001 and covered 2.5 times by headline earnings. Importantly, Group EBITDA (earnings before interest, tax, depreciation and amortisation) increased to $4.8 billion and the annualised EBITDA interest cover increased to 20 times, reflecting the strong cash flow generation across the Group and the conservative gearing of 23.1% net debt to total capital at year end. Currencies, in particular the wide fluctuations in the South African rand, had a marked impact on the results. The dollar averaged R10.48 during the year compared with R8.62 in 2001 but the year end balance sheet was affected by the rapid strengthening in the South African currency in the last months of the year, to a closing rate of R8.58 to the dollar. This strength in the currency increased shareholders equity on conversion by $2.5 billion, thereby lowering return on capital employed and shareholders equity in comparison with The successful placement of the $1.1 billion convertible bonds during the year enhanced the Group s balance sheet structure and we were pleased to receive long term credit ratings of A3 from Moody s and A- from Standard & Poor s. STRATEGY Over the past four years, Anglo American has become a focused natural resources business. In that period we have disposed of some $4.5 billion of non-core assets and invested $10 billion in strengthening our core businesses through acquisitions. The Group continues to achieve better geographical balance in its asset portfolio with the split of attributable net operating assets in 2002 as follows: 35% Europe; 31% South Africa; 21% the Americas; 7% Rest of Africa and 6% Australasia. To achieve sustained growth, we have set a number of initiatives in motion: > redefining the relative roles and responsibilities of the corporate centre and the business units, so as to give greater scope to operational management, and to facilitate the sharing of best practice and procurement and to improve knowledge management across the Group; >a continuing focus on efficiencies and cost savings; > identification of opportunities in high growth markets such as China and India; > seeking to develop the value chain in our businesses and to improve their focus on marketing and customer relationships. Examples of this approach are already evident in our forest products, industrial minerals, gold, platinum and ferrous metals businesses; > ensuring that we have an optimally balanced portfolio of world class assets; > placing greater emphasis on the development of our human resources. This involves culture change, improved employee communication, the encouragement of innovation and structural performance and talent management; and > seeking to anticipate and address society s expectations of multinational companies in the resource sector in areas like environmental regulation, corporate responsibility and sustainable development. SOUTH AFRICAN BLACK ECONOMIC EMPOWERMENT By far the most significant development during the year was the debate over the draft legislation in South Africa regarding black economic empowerment in the mining sector. A leaked draft of the Mining Charter in July 2002 undermined investor confidence in South Africa and caused great damage to the share price of Anglo American. Since then, we, and the industry, have been working actively with the South African Department of Mineral and Energy Affairs to create a framework that will result in a mining industry in South Africa that will benefit all. There has been significant progress on a number of fronts: > in October, the South African State President signed the Mineral and Petroleum Resources Development Act which transfers mineral rights into the state s hands with renewable 30 year rights of tenure by mining companies; > later that month the Mining Charter was published which sets out a range of black economic empowerment targets, including 15% equity or production ownership in five years and 26% in ten years, an outcome which I believe can be sensibly implemented within the specified timeframe and towards which significant progress has already been made by Anglo American; > the scorecard was published in February 2003, setting out a checklist for measuring empowerment levels. I believe these measures provide for a workable solution that will result in significant black economic empowerment for value; and > lastly, at the time of this review s publication, the Money Bill, which will introduce a royalty regime in South Africa, is still to be published.

14 10 CHIEF EXECUTIVE S STATEMENT I am hopeful that we can move ahead within a clear, well defined legal framework. The certainty that this would provide will give our shareholders and the market in general a platform to rebuild investor confidence in our Group going forward. The settlement reached over its expansion projects between Anglo Platinum and the Department of Mineral and Energy Affairs, as well as the recent empowerment initiatives in AngloGold and our coal business, confirm that the imperatives of industry security, stability and growth, and of black economic empowerment, can be reconciled. GROWING OUR BUSINESS The past year has again been an active one, with a total of $3.7 billion of acquisitions across a broad spectrum of commodities and geography. Base Metals By far the largest transaction was the acquisition of Disputada, a large, low cost copper producer in Chile, for a net consideration of $1.3 billion. The transaction was completed in November 2002, following lengthy due diligence and negotiations involving the vendor, ExxonMobil, and the Chilean government. The acquisition will consolidate our Base Metals copper unit into a leading global, low cost producer of copper. While copper prices have staged a modest recovery, we see further upside in the medium term for the metal with average cash costs around 50 US cents/lb, we will be well placed to take advantage of any improvement in prices. Coal Our global position in coal was further enhanced with the acquisition by the Anglo American/BHP Billiton/Glencore consortium of Intercor s 50% stake in Cerrejón Zona Norte (CZN) in Colombia. CZN is Colombia s largest producer and exporter of steam coal and this makes the consortium the largest producer of coal in the country. We also announced joint venture plans with Mitsui for our wholly owned subsidiary Anglo Coal Australia. Anglo Coal acquired a 51% interest in the Moura mine from Mitsui Coal, and divested to Mitsui Coal a 49% interest in the Theodore, Dawson and Taroom projects and a 30% interest in the German Creek mine. These transactions allow the development of Anglo Coal Australia s export metallurgical and thermal coal business in Queensland. Iron Ore Strategic shareholdings in Kumba and Avmin have been acquired for a total commitment of some $600 million. Anglo American acquired a 20.1% shareholding in Kumba and has a right to acquire a further 10.0%, subject to approval from the Competition Tribunal of South Africa, thereby increasing its shareholding to 30.1%. In addition, Anglo American acquired 25% of Avmin and has a right, subject to approval from the Competition Tribunal, to acquire a further 9.9%, increasing its shareholding to 34.9%. These transactions were recommended unconditionally by the Competition Commission in South Africa, but are still subject to Competition Tribunal approval. Forest Products Our expansion into corrugated packaging in Europe was strengthened with Mondi Europe acquiring La Rochette s UK Hypac business, the Durtal and Savoie box plants. Mondi Europe, which already held 19.4% in Syktyvkar, acquired a further 78% in this Russian paper mill, for $252 million. The transaction strengthens Mondi s position as a leading European manufacturer of A4 office paper. Ferrous Metals and Industries The $105 million acquisition of Moly-Cop by Scaw Metals has allowed Scaw Metals to expand into the global grinding media markets, in particular the growing mining markets of Chile and Peru. Industrial Minerals Industrial Minerals made good progress, with 11 acquisitions for a total gross consideration of $190 million. These included two significant transactions the purchase of the Mavike aggregates and concrete business on the Mediterranean coast, virtually doubling our business in Spain, and of Durox, which gives Tarmac a third of the UK aircrete block market and consolidates its position as market leader in concrete blocks. The other smaller acquisitions represent significant progress, particularly in achieving market leadership of the Polish concrete pavers business, but also building on our market positions in France and the UK. Platinum Our stake in Anglo Platinum increased during the year from 58.4% to 67.6%, for a total consideration of $847 million; and by 14 February 2003 our holding had increased further to 69.6%. We will continue our strategy of increasing our holding in Anglo Platinum from time to time, when we see value. Gold We acquired an additional 4.8% stake in Gold Fields Limited for $252 million, bringing our total holding to 20.9%. This provides Anglo American with a valuable strategic holding in Gold Fields. In July 2002, AngloGold acquired an additional 46.25% in Cerro Vanguardia SA, a gold and silver mining operation in Argentina, from Perez Companc International SA for a gross consideration of $105 million, thereby increasing its interest in Cerro Vanguardia to 92.5%. SAFETY AND HEALTH Since becoming chief executive I have regarded improving the Group s safety performance as our highest priority. In 2001, there was a welcome decline in our lost time injury frequency rate a trend which accelerated in Even more significantly, we achieved a 39% drop in our fatal injury frequency rate. I am confident that good progress is being made and that the framework has been put in place to achieve further ongoing improvements in our performance. These acquisitions further Anglo American s strategic objective of securing a meaningful interest in the iron ore sector. In December, Anglo American signed a Memorandum of Understanding with the South African government, setting out an agreed approach to the exploitation of the iron ore deposits in the Northern Cape.

15 11 CHIEF EXECUTIVE S STATEMENT Within southern Africa the greatest social and humanitarian challenge is posed by the HIV/AIDS epidemic. Anglo American has long been a leader in devising prevention, education and treatment programmes with extensive links to community initiatives. Nonetheless, after a thorough review in 2002, we concluded that although these programmes should help to contain the rate of infection, which we estimate to be some 23% in our South African operations, we needed to augment our existing programmes by providing access to anti-retroviral therapy (ART) for our employees. This provides them with an incentive to be tested and to assess their HIV status. We anticipate that this initiative will keep many of our employees healthy for longer enabling them to continue to support their families. We are seeking to forge partnerships with the donor community, the public sector and community groups to extend access to ART to dependants and to the communities surrounding our operations. The support being received from several pharmaceutical groups is welcomed and has already resulted in significant price reductions for ART drugs. WE ALSO ADD VALUE THROUGH ACQUISITIONS AND OURWELL-BALANCED PROJECT PORTFOLIO CORPORATE RESPONSIBILITY During 2002 we launched our new policy statement: Good Citizenship: Our Business Principles (now available at This establishes a clear framework for how Anglo American companies will conduct their business. It provides our employees with values and standards against which they must gauge their conduct and sets out for our external stakeholders the standards to which we are prepared to be held to account. It lies at the core of how Anglo American relates to the wider society of which we are a part. OUTLOOK The outlook for our key businesses remains mixed in the face of current global economic and political uncertainties. Precious metals are performing strongly despite mounting concerns over global economic growth. Current geopolitical tensions have supported demand for gold, while supply concerns have contributed to price rises in platinum and nickel. The continued strong performance by the Chinese economy should also benefit copper, platinum group metals and diamonds. All of this, however, needs to be balanced against the sluggish growth forecasts for the USA, Japan and much of the European Union, and the current uncertainties that prevail in terms of possible military action in the Middle East. Our results are highly sensitive to volatility in commodity prices and exchange rates. The rand exchange rate is of particular importance and maintenance of the current rate throughout 2003 would make it very challenging to sustain the record 2002 performance. Nevertheless, the balanced mix of our businesses and ongoing expansion programme, together with the continuing and intense focus on costs and efficiencies, will help to underpin the Group s performance. A J Trahar Chief Executive

16 12 WE ARE ADDING VALUE THROUGH ACQUISITIONS OF $3.7 BILLION 1 IN 2002 COAL: CZN COLOMBIA $105M FERROUS METALS: MOLY-COP PERU AND FROM INTERNAL GROWTH WITH A DIVERSE $5.8 BILLION PROJECT PORTFOLIO $1.3BN BASE METALS: DISPUTADA CHILE PROJECT PIPELINE PLATINUM RUSTENBURG MODIKWA ACP PROJECT POLOKWANE SMELTER UG2 PHASE 1 $311M $250M $190M $203M GOLD CRIPPLE CREEK & VICTOR MOAB KHOTSONG $194M $419M DIAMONDS CTP KIMBERLEY FINSCH $44M $107M COAL KRIEL SOUTH SACE EXPANSION $70M $50M BASE METALS COLLAHUASI SKORPION HBMS $286M $454M $276M COPPER ZINC ZINC/COPPER INDUSTRIAL MINERALS GOIÁS BUXTON CEMENT $147M $173M FOREST PRODUCTS FRANTSCHACH MEREBANK A4 RUZOMBEROK PM 18 MEREBANK PM2 $20M $12M $104M $26M 1 Amounts previously announced may differ from net cash consideration paid of $3.7 billion during 2002 due to final settlement upon completion. Some amounts represent gross consideration. 2 Major authorised projects. Date refers to commencement of production.

17 13 $89M INDUSTRIAL MINERALS: DUROX + OTHERS UK $101M INDUSTRIAL MINERALS: MAVIKE SPAIN + OTHERS $362M FOREST PRODUCTS: SYKTYVKAR RUSSIA LA ROCHETTE FRANCE $847M PLATINUM: ANGLO PLATINUM SOUTH AFRICA $365M FERROUS METALS: KUMBA AND AVMIN SOUTH AFRICA $252M GOLD: GOLD FIELDS SOUTH AFRICA COAL: MOURA JELLINBAH EAST AUSTRALIA RUSTENBURG RPM TAILINGS TREATMENT TWICKENHAM STYLDRIFT MINE UG PHASE 2 $186M $343M $344M $444M MPONENG TAUTONA $152M $48M!GARIEP CONVERSION $27M CERREJÓN EXPANSION CAPCOAL $50M $107M BLACK MOUNTAIN $110M ZINC/LEAD RUZOMBEROK PULP $129M

18 14 SAFETY, HEALTH AND ENVIRONMENT LEADING THE WAY IN THE PROVISION OF ANTI- RETROVIRAL TREATMENT FOR HIV/AIDS EMPLOYEES Our performance in these vital aspects of good corporate citizenship and sustainable development continues to show encouraging improvement. In August 2002, Anglo American announced that it would provide anti-retroviral treatment (ART) to employees with HIV/AIDS. For 2002, our lost time injury frequency rate (LTIFR) showed a further substantial reduction from 1.50 in 2001 to The fatal injury frequency rate also fell by 39%. > The winner of the CEO s Group Safety Award was the Bindura Nickel Corporation in Zimbabwe where a five-year shaftsinking project was completed without a lost time injury. > Anglo American made a substantial contribution both financially and by way of active participation in many of the debates to the successful World Summit on Sustainable Development, which was held in Johannesburg in August/September > The Global Mining Initiative (GMI) reached its conclusion with an international conference, Resourcing the Future, in Toronto in May This unique collaborative venture has led subsequently to the launch of the International Council on Mining and Metals (ICMM). SAFETY Substantial improvement Our safety improvement programmes are beginning to yield substantial results, but Lost time injury and fatal injury frequency rates (per 200,000 hours worked) Lost time injury frequency rate Fatal injury frequency rate we remain a long way from our ultimate goal of reducing fatalities and injuries to zero. During 2002, 25 employees and 22 contractors lost their lives at our managed operations. Falls of ground, moving machinery and transport-related accidents were the main causes and these areas remain the focus of targeted safety programmes. The management and employee effort is reflected in the 42% reduction in the LTIFR, and we are confident that the improvement will be maintained. The number of exemplary performers in the Group continues to rise, with Codemin, Skorpion, Namakwa Sands, Anglo Platinum s Smelter and Precious Metals Refinery, Tarmac Western, Mondi s Springs mill, Transalloys and Hudson Bay Mining and Smelting s metallurgy operations, along with many smaller operations, recording an LTIFR of less than 0.2. HEALTH Best practice guidelines developed During the year, a team of specialists carried out a worldwide review of occupational health management systems and of our own Group practices. This has culminated in the development of best practice guidelines for our Group, which will allow greater standardisation in the management of occupational health issues today and so prevent or minimise future incidents of occupational disease. HIV/AIDS Providing access to treatment The severity of the HIV/AIDS epidemic in sub-saharan Africa is a significant threat to economic growth and development. It is an issue of global concern that requires concerted intervention on the broadest possible scale. Providing access to treatment in developing countries has become a humanitarian as well as an economic and social imperative. Against this background, Anglo American announced in August 2002 that it would encourage Group companies to extend their existing HIV/AIDS wellness programmes by making ART available at company expense to HIV positive employees progressing to AIDS. We strongly believe that providing access to treatment is the single short term initiative that will change the way the AIDS epidemic unfolds and provides hope for the future. Implementation at company healthcare facilities is proceeding very well and initial signs suggest an encouraging uptake from HIV positive employees. The size and scope of our ART initiative is unique and Anglo American has been widely acclaimed for its business leadership role in broadening access to AIDS treatment. Extension of our HIV/AIDS prevention and treatment interventions beyond the workplace into the communities associated with our operations is vital to the sustainability of the initiative. Our strategy for community based initiatives relies heavily on establishing partnerships, particularly with the public sector, but also with trade unions, NGOs and international donor agencies. ENVIRONMENT Significant progress in reporting data On the environmental front, we have made significant progress in the way in which we relate our environmental data on emissions and energy consumption to specific products. This will improve the value and relevance of our specific target-setting and will also enable us to contribute more meaningfully to global issues of product stewardship and life-cycle analysis. GLOBAL MINING INITIATIVE The GMI Conference, Resourcing the Future, was a major multi-stakeholder event, with participation by the CEOs of 20 companies, senior figures from 25 national governments and a wide range of civil society, intergovernmental and international finance organisations. Three days of lively and constructive debate led to a commitment by industry leaders in the form of the Toronto Declaration. Anglo American will now work with other leading companies in the ICMM to bring these words to life. JOHANNESBURG SUMMIT In support of our goals, the globally agreed outcome of the World Summit on Sustainable Development, the Plan of Implementation, made explicit reference to the important contribution that mining, minerals and metals make to the economic and social development of many countries. Anglo American is well placed to play a major role. For a fuller discussion of these and other issues, please refer to the Anglo American Report to Society 2002 which will be available on our website: or on request by using the reply paid postcard enclosed with this Review.

19 15 SOCIAL RESPONSIBILITY THE GROUP COMMITTED $28.8 MILLION DURING THE YEAR TO COMMUNITY AND CHARITABLE CAUSES During 2002, Good Citizenship: Our Business Principles was rolled out across the Group s managed operations. It sets out the standards to which employees, contractors and significant suppliers are expected to comply on issues such as human rights, ethics and stakeholder engagement. In 2003, these commitments will be reinforced through training and strengthened management systems. SOCIAL ASSESSMENT Rapid assessment tool developed When coupled with good governance, the responsible exploitation of natural resources is an effective route to development and the alleviation of poverty. One of the most important challenges for Anglo American s operations is to maximise their contribution to the sustainable development of the communities in which they work. The development of a significant new Anglo American project is routinely preceded by an assessment of its environmental and social impacts. In 2002, a new tool was developed to enable mature operations, which may not have already carried out a social impact assessment, to gauge their social and economic interactions with their local communities. This rapid assessment tool is designed to help managers maximise positive and minimise negative impacts, including those arising from eventual mine closure. During 2002, three pilot projects were undertaken in Australia, Brazil and South Africa. Once these results have been analysed, we would hope to roll out the methodology more widely within the Group. COMMUNITIES Communities constitute one of the Group s most important stakeholder groups. Anglo American has underlined this commitment through the development of Community Engagement Guidelines. An increasing number of Anglo American operations are also working through community liaison panels or forums to ensure a structured engagement. By the end of March 2003, the majority of the Group s significant operations will have in place three year Community Engagement Plans. These set out a three year rolling strategy for engaging with the local community; identifying and managing stakeholder concerns; complaints procedures; resourcing community projects; and setting objectives for the future. At Mondi Forests in KwaZulu-Natal, South Africa, a team of social development facilitators is working to address community concerns and to examine ways in which under-utilised business resources can be used to generate income creation schemes for local people. Such opportunities include beekeeping, improved access to grazing, and use of surplus wood for firewood and crafts. A charcoal making enterprise, being developed with the UK Department for International Development, has already created 125 jobs. CORPORATE SOCIAL INVESTMENT Community projects In 2002, Anglo American and its subsidiaries committed $28.8 million (2001: $20.2 million) in voluntary support for community investment and charitable causes, amounting to 0.9% of pre-tax profit. Among the causes supported were: >a Sightsavers International project to protect almost one million people in Mali from river blindness; > community HIV projects across southern Africa to promote awareness, prevention and to support the care of those who have become ill and their dependants; > assistance through the Chairman s Fund for Bophelo School in Johannesburg in its work of improving the life chances of poor and acutely disadvantaged children; >support by Copebrás in Brazil for a women s healthcare centre in Catalão; and >a community foundation established by Loma de Níquel in Venezuela which supports rural development, health and education projects. ENGAGE Building bridges with local communities Anglo American is a sponsor of ENGAGE, a global campaign to encourage international business to build bridges with local communities. It aims to deliver one million extra days a year of employee volunteering in the community. The Group has many sites where the volunteering ethos is strong, including Namakwa Sands and the New Denmark colliery in South Africa, Codemin in Brazil and the London head office, which is working with an inner London primary school to improve literacy and numeracy standards. Anglo American believes that volunteering not only creates greater understanding of local communities but is also of benefit to employees personal and team development. BLACK ECONOMIC EMPOWERMENT $1.8 billion in transactions Anglo American recognises the imperative of giving historically disadvantaged South Africans a route to greater participation in the economy. To this end, the Group has: > been one of the most active generators of black empowerment transactions amounting to some $1.8 billion; > promoted procurement from black businesses and black business development. Over the years this has amounted to over $800 million, including approximately $238 million in 2002; >catalysed the formation of black small enterprises through the business operations and the small business development unit known as Zimele. Zimele has invested in 29 companies, supporting around 1,000 jobs; and > supported 557 university scholarships and bursaries in GLOBAL CORPORATE CITIZENSHIP Greater transparency and accountability In 2002, the Group was party to a number of international moves to promote good governance, including the World Economic Forum s Statement on Global Corporate Citizenship. It has also been involved in the development of the UK government s proposal for a mechanism to promote greater transparency of the tax and royalty payments made to governments by extractive companies, and more active and open debate about the uses to which they are put. If a workable and widely supported system can be devised, it will be a significant advance for accountability and integrity.

20 16 OPERATIONS REVIEW PLATINUM GOLD DIAMONDS CONTRIBUTION TO HEADLINE EARNINGS 20 % CONTRIBUTION TO HEADLINE EARNINGS 12 % CONTRIBUTION TO HEADLINE EARNINGS 18 % $ million Operating profit 802 1,345 Contribution to headline earnings EBITDA 926 1,442 $ million Operating profit Contribution to headline earnings EBITDA $ million Operating profit Contribution to headline earnings EBITDA Platinum s contribution to headline earnings was $351 million, $127 million lower than in 2001, mainly owing to lower prices realised for palladium and rhodium. South African rand based costs were impacted positively by a weaker exchange rate during 2002, but this was offset by losses on the translation of dollar assets resulting from the stronger rand at the end of 2002 compared with gains in The average realised dollar price for platinum of $544/oz was $18/oz higher than the 2001 figure, while palladium and rhodium prices achieved were significantly lower at $329/oz (2001: $582/oz) and $831/oz (2001: $1,610/oz) respectively. Recent market demand reviews continue to confirm that there is a significant growth opportunity and Anglo Platinum remains committed to the expansion programme to produce 3.5 million ounces of refined platinum per year by the end of Refined platinum production across the group increased by 141,900 ounces to 2.25 million ounces (excluding Northam). The company has made significant progress in including empowerment groupings in its expansion plans and is well on the way to meeting the requisite ownership percentages as envisaged by South Africa s Mineral and Petroleum Resources Development Act. The strong demand and thin liquidity in the platinum market are expected to remain in 2003, resulting in continuing firm prices. In 2002, AngloGold s contribution to headline earnings was $205 million, 27% higher than in 2001, despite gold production having declined by some 15% to 5.94 million ounces (2001: 6.98 million ounces) as a result of the sale of AngloGold s assets in the Free State of South Africa. Total cash costs decreased from $178/oz ($170/oz excluding Free State) to $161/oz as a result of the rand s weakening against the dollar and the establishment of a robust suite of high margin and low cost assets. In July 2002, AngloGold announced the acquisition of additional production of 120,000 ounces per annum, doubling its stake to 92.5% in the Cerro Vanguardia gold/silver mine in Argentina. AngloGold has recently completed two major capital projects, and has another three which are on track for completion on time, and within plan. Together, they will yield some 15 million additional ounces of gold production over their lives. Dollar weakness, international political tension, equity market declines and a reduction of producer hedging have all been positive for gold in Against this background, a solid platform for the gold market is expected in the year ahead. However, while there has been a decline in physical demand, scrap sales and recycling have increased sharply in response to higher gold prices. With further gold price volatility expected in 2003, a resurgence of physical demand should not be expected immediately. De Beers contribution to headline earnings amounted to $324 million. Sales of rough diamonds by the marketing arm of De Beers, The Diamond Trading Company (DTC), were 15.7% higher, reaching $5.15 billion. Diamond stocks were reduced by nearly $1 billion the main contributor to the exceptionally strong operating cash flow figure of $1.6 billion. As a consequence, De Beers was able to reduce its Senior Debt by $1,065 million to $2,485 million. Following a promising first half of the year, the second six months saw an eroding of consumer confidence, particularly in the USA, owing to fears of deflation, rising unemployment, sharply declining stock markets and the threat of war in the Middle East. Nevertheless, worldwide retail diamond jewellery sales held up reasonably well and are estimated to have been 3% ahead for the year. In 2002, De Beers and its principal partners, Debswana and Namdeb, produced 40.2 million carats (2001: 38.7 million carats). In South Africa, the Combined Treatment Plant in Kimberley will come fully on stream this year. De Beers has now received clearance from the European Commission on its Supplier of Choice strategy and is proceeding with its implementation. Continuing geopolitical concerns and greater economic uncertainty are likely to make 2003 a challenging year. The DTC s sales prospects will depend on the timing and scale of global economic growth, a recovery in consumer confidence and the level of stocks that the trade pipeline will be comfortable to hold.

21 17 OPERATIONS REVIEW COAL BASE METALS INDUSTRIAL MINERALS CONTRIBUTION TO HEADLINE EARNINGS 15 % CONTRIBUTION TO HEADLINE EARNINGS 4 % CONTRIBUTION TO HEADLINE EARNINGS 13 % $ million Operating profit Contribution to headline earnings EBITDA $ million $ million Operating profit 82 (510) Operating profit Contribution to headline earnings 69 Contribution to (18) headline earnings EBITDA EBITDA In 2002, Anglo Coal s headline earnings were $266 million, a 31% decrease on Export metallurgical coal prices were marginally higher, but export thermal coal prices were significantly lower, resulting in a net negative impact of $56 million. Headline earnings were adversely affected by $45million owing to the rapid strengthening of the rand at year end, in contrast to a gain of $39 million in 2001 on the back of a weakening rand. Operating profit of $427 million was 13% below South African operating profit reduced by $23 million to $244 million. Average thermal coal export prices were 16% weaker. Higher inflation was offset by an 11% increase in export volumes, a net weaker average rand for the year and $31 million from improved operating efficiencies and cost savings. In Australia, operating profit fell by 25% to $130 million mainly due to technical difficulties at the Dartbrook and Moranbah North mines. In 2002, Anglo Coal Australia acquired 51% of Moura mine, a 23% interest in the Jellinbah East mine and divested 30% of its interest in the German Creek mine and 49% of its interests in the Theodore, Dawson and Taroom projects. South American attributable operating profit was $50 million (2001: $49 million). This performance reflected weaker thermal coal prices, a cutback of Colombian production in response to market conditions and the impact of the general strike in Venezuela. This was offset by the Anglo American/ BHP Billiton/Glencore consortium s acquisition of the remaining 50% of the Cerrejón Zona Norte operation. A moderate export coking coal capacity increase in 2003 is expected to have limited impact on price levels. Export thermal coal prices will, as previously, be driven by a mix of demand and supply factors, inter-fuel competition, weather and sentiment. Headline earnings for Base Metals were $69 million, compared with an $18 million loss in Despite base metals demand remaining weak, with the partial exception of nickel, all three main commodity businesses improved their financial performance. Exceptional charges were reduced significantly owing to reduced impairments. In 2002, Anglo American acquired the Chilean world class integrated copper producer, Disputada, from ExxonMobil for a net consideration of $1.3 billion. Anglo American also completed an orderly exit from Zambia Copper Investments and Konkola Copper Mines (KCM), and disposed of its interests in the Salobo copper/gold project, Tati Nickel, BCL and the Kolwezi copper project. Attributable production of copper amounted to 497,700 tonnes, of which Disputada contributed 39,000 tonnes from the date of acquisition, compared with 468,700 tonnes in 2001 (excluding KCM). Increased production at Codemin and Loma de Níquel entering commercial production at the beginning of the year resulted in attributable production of nickel of 25,600 tonnes, despite the sale of Tati. Attributable zinc production rose from 165,600 tonnes, to 211,500 tonnes. Lisheen operated above design throughput capacity and achieved record production levels. Hudson Bay saw increased throughput and higher copper and zinc grades. At Namakwa Sands, throughput rates at all processing plants rose, but the strengthening of the rand in the second half of the year compared to the first half of the year meant operating profits were 6% down on The outlook for base metals is expected to remain weak until there is tangible evidence of a recovery in underlying demand and a sustained reduction in refined metal inventories. Headline earnings for Industrial Minerals rose to $231 million in The Tarmac group was the principal contributor to this increase, achieving an operating profit of $253 million, an improvement of 33% on the prior year s $189 million. This was principally due to improved margins in the UK, despite mixed market conditions, and a continued focus on cost reduction, although acquisitions and the impact of exchange rate movements were also positive factors during the year. In addition, an improved profit from Copebrás, the Brazilian phosphate producer, and the sale of the loss-making UK based Cleveland Potash contributed to the increase. In the UK, the major aggregates, asphalt, ready-mixed concrete and concrete products businesses all reported improved results. The benefits of the cost reduction initiatives introduced in the previous year were felt, alongside new initiatives which were implemented during the year. In continental Europe, operating profit increased by 48%. The operations in Spain had another excellent year and central Europe recorded an improved result largely due to acquisitions, efficiency improvements and good performances from the Polish paving and Czech Republic businesses. However, difficult market conditions continued in Germany. At the end of 2002, Copebrás new plant commenced production. The Buxton cement plant in the UK is scheduled to be completed towards the end of the year, within budget. The short term outlook for the Tarmac group is largely dependent on the private sector in the UK holding up relatively well, and government expenditure on infrastructure not being sacrificed as a result of events in the Middle East or government financing concerns. The increased focus on cost reduction and customer service should strengthen the group s position.

22 18 OPERATIONS REVIEW FOREST PRODUCTS FERROUS METALS AND INDUSTRIES EXPLORATION CONTRIBUTION TO HEADLINE EARNINGS 21 % 7 % $ million Operating profit Contribution to headline earnings EBITDA CONTRIBUTION TO HEADLINE EARNINGS $ million Operating profit Contribution to headline earnings EBITDA In 2002, total Group expenditure on exploration was $93 million. Of this, $47 million was spent by Base Metals on grassroots and brownfields exploration, $13 million by Anglo Platinum and $27 million by AngloGold. During the year, Base Metals exploration efforts focused on areas most likely to produce enhanced results. Consequently, the number of active countries was reduced from 18 to 13, and global staff complement was reduced by 20%. Further rationalisation will continue during Forest Products total headline earnings for 2002 were $376 million, a 38% increase on Operating profit increased in both Europe and South Africa, reflecting the benefit of acquisitions, higher volumes and margin improvement. Mondi Europe continued its strong performance, achieving a further 32% increase in operating profit to $434 million for the year. The improved profits arose from the successful integration of acquisitions, increased volumes and the sustained focus on profit improvement, cost reductions and innovation, despite difficult market conditions. There was further expansion in Europe, with the completion of two acquisitions an additional 78% interest in the Russian pulp and paper group Syktyvkar Forest Enterprises and, jointly with the Spanish group Saica, the business of the French corrugated packaging group La Rochette. Mondi South Africa increased operating profit by 16% to $215 million, a consequence of increased volumes and improved margins. In the domestic market, strong demand and the weaker rand/dollar exchange rate supported good volume growth and real increases in prices for graphic papers, packaging papers and board and converted products. In export markets, dollar prices were lower during the year for bleached eucalyptus pulp and woodchips. Further progress was also made with disposals of non-core timber businesses specifically the sale of two softwood sawmills and a reduction in the shareholding in Global Forest Products. Headline earnings for Ferrous Metals and Industries were $126 million (2001: $86 million), reflecting a solid underlying performance and the positive impact of the acquisitions made during the first half of World crude steel production increased by 6.4% and international steel prices have shown a significant upswing since February Scaw Metals operating profit was $51 million (2001: $31 million), which included an $11 million contribution from the Moly-Cop forged grinding media operations acquired at mid-year. Highveld Steel recorded a significant increase in operating profit from $6 million to $38 million on the back of domestic sales of 570,000 tonnes, which surpassed the previous best year of In 40% held Samancor, manganese profits were higher than last year owing to greater ore and alloy sales volumes and lower production costs. Samancor chrome showed an improved operating performance as its major restructuring programme resulted in lower production costs. Ferrochrome prices for the year firmed over those of last year. During the year good progress was made in the strategic objective of securing a meaningful interest in the iron ore sector. Interests were acquired in both Kumba and Avmin. The Boart Longyear group reported an operating profit of $31 million (2001: $30 million). Tongaat-Hulett s operating profit, although increased in rand terms, was lower at $96 million (2001: $112 million). Terra recorded an attributable operating loss of $3 million (2001: $23 million loss), following a resumption of normal demand levels in US markets. Exploration in Chile delineated copper resources which may extend the lives of existing operations. The porphyry-copper programme in Peru, Chile and Argentina identified a number of promising targets for drilling. African exploration programmes continued to target zinc and nickel in Namibia, zinc in South Africa and copper in Zambia. Target generation for zinc and nickel in Australia and India identified a number of promising targets for follow-up in In Mexico, encouraging early stage drill results were obtained from a polymetallic base metal prospect. Iron oxide and copper/ gold exploration continued in several countries, with positive initial drill results from Sweden and Brazil. In the Philippines, resource definition drilling progressed at the Boyongan copper/gold project. An initial resource estimate and a decision whether to proceed to pre-feasibility will be made in Anglo Platinum s exploration efforts in South Africa are directly linked to its commitment to increase production levels to 3.5 million ounces per year of platinum by the end of There was good progress on all fronts and targets for the year were reached. Internationally, Anglo Platinum s partners have taken several exciting projects forward, including the joint venture with Pacific North West Capital (in the River Valley area near Sudbury, Ontario, Canada) and the Russian Urals projects in a relationship with Eurasia Mining plc. AngloGold s exploration focus continued, mainly in countries in which it already has operations: namely Argentina, Australia, Brazil, Tanzania, Mali, Namibia, South Africa and the USA, including Alaska. In addition, exploration was pursued in highly prospective areas in Canada and Peru. Some 63% of expenditure was spent on increasing near and in-mine resources.

23 19 THE BUSINESS AN OVERVIEW EFFECTIVE 14 FEBRUARY 2003 Platinum Gold Diamonds 2 Coal Base Metals Industrial Minerals Forest Products Ferrous Metals and Industries Anglo Platinum 69.6% AngloGold % De Beers 45% Anglo Coal Anglo Base Metals Anglo Industrial Minerals Anglo Forest Products Anglo Ferrous Metals SOUTH AFRICA Rustenburg Section Rustenburg UG2 Phase 1 Union Section Amandelbult Section Bafokeng-Rasimone * Potgietersrust Platinums Lebowa Platinum Mines Modikwa Platinum Joint Venture 50% Waterval Smelter Rustenburg Base Metals Refinery Precious Metals Refinery Process expansion phase 1 Project converting process ** Twickenham Mine Project Pandora Joint Venture Project 50%* Polokwane Smelter Project ** Tailings Treatment Project Rustenburg UG2 Phase 2 Project **Commencement of the joint venture is subject to certain outstanding suspensive conditions. ** Will be brought into use in SOUTH AFRICA (All owned) Ergo Great Noligwa Kopanang Moab Khotsong Mponeng Savuka Tau Lekoa TauTona REST OF AFRICA Geita (Tanzania) 50% Morila (Mali) 40% Sadiola (Mali) 38% Navachab (Namibia) Yatela (Mali) 40% NORTH AMERICA Cripple Creek & Victor (USA) 67%* Jerritt Canyon (USA) 70% SOUTH AMERICA Morro Velho (Brazil) Serra Grande (Brazil) 50% Cerro Vanguardia (Argentina) 93% AUSTRALIA Sunrise Dam Union Reefs Tanami 40% Boddington 33% Gold Fields 21% *Although AngloGold holds a 66.7% interest in Cripple Creek & Victor Gold Mining Company Limited, it is currently entitled to receive of the cash flow from the operation until a loan, extended to the joint venture by AngloGold North America Inc., is paid. 1 Operated by AngloGold, the Company s independently managed subsidiary. SOUTH AFRICA De Beers Marine (Exploration & Services) Finsch Koffiefontein Kimberley Mines Namaqualand Mines Premier The Oaks Venetia BOTSWANA Debswana 50% (Jwaneng, Orapa and Letlhakane mines) NAMIBIA Namdeb 50% (Mining Area No.1. Orange River Mines, Elizabeth Bay and Marine concessions) De Beers Marine Namibia 85% TANZANIA Williamson Diamonds 75% CANADA Snap Lake DIAMOND TRADING AND MARKETING Various companies involved in the purchasing, selling and marketing of rough diamonds, including The Diamond Trading Company INDUSTRIAL DIAMONDS Companies manufacturing synthetic diamonds and abrasive products 50% 2 Operated by De Beers, the Company s independently managed associate. SOUTH AFRICAN TRADE COLLIERIES Bank Goedehoop Greenside Kleinkopje Landau SOUTH AFRICAN POWER GENERATION COLLIERIES Kriel New Denmark New Vaal SOUTH AFRICA OTHER Eyesizwe Coal 11% Richards Bay Coal Terminal 27% COLOMBIA Cerrejón 33% AUSTRALIA Callide Dartbrook 78% Drayton 88% German Creek 70% Jellinbah East 23% Moranbah North 88% Moura 51% VENEZUELA Carbones del Guasare 25% COPPER Collahuasi (Chile) 44% Disputada (Chile) Mantos Blancos (Chile) Palabora (South Africa) 29% Quellaveco (Peru) 80% NICKEL Codemin (Brazil) 90% Bindura (Zimbabwe) 53% Nkomati (South Africa) 25%* Anaconda Nickel (Australia) 24%** Loma de Níquel (Venezuela) 91% Barro Alto (Brazil) ZINC/LEAD Hudson Bay (Canada) Black Mountain (South Africa) Lisheen (Ireland) 59% Gamsberg (South Africa) Skorpion (Namibia) MINERAL SANDS Namakwa Sands (South Africa) NIOBIUM Catalão (Brazil) **Anglo American s effective interest is 51%, with an indirect holding of 26% being held through Avmin, of which 7.4% is subject to South African Competition authorities approval. ** In February 2003, Anglo American agreed to dispose of substantially all of its shareholding in Anaconda Nickel. AGGREGATES AND BUILDING MATERIALS Tarmac Group (UK) Tarmac France (France and Belgium) Tarmac Central Europe (Germany, Poland and Czech Republic) Steetley Iberia (Spain) Tarmac International Holdings (Far East and Middle East) PHOSPHATE PRODUCTS Copebrás (Brazil) 73% FIBRE SUPPLY Forests (South Africa) SiyaQhubeka Forests (South Africa) 65% Waste paper (South Africa) PULP Frantschach (Czech Republic) 70% Richards Bay (South Africa) GRAPHIC PAPER Neusiedler (Austria, Hungary, Slovakia, Russia, Israel) Aylesford Newsprint (UK) 50% Europapier (Austria) 70% Merebank (South Africa) PACKAGING Mondi Packaging (UK, France, Ireland, Poland) Frantschach Packaging (Europe) 70% Frantschach Swiecie (Poland) 61% Mondipak (South Africa) Corrugated paper (South Africa) Cartonboard (South Africa) SOLID WOOD Mining timber (South Africa) Sawmilling (South Africa) Woodchips (South Africa) Global Forest Products (South Africa) 19% Samancor (South Africa) 40% Australian Manganese 40% Zimbabwe Alloys Columbus Stainless Steel (South Africa) 14% Highveld Steel (South Africa) 80% Scaw Metals (worldwide) Avmin (South Africa) 34.9%* Kumba (South Africa) 30%** Anglo Industries Boart Longyear (worldwide) Tongaat-Hulett (South Africa) 53% Terra (North America) 49% Amfarms (South Africa) Hippo Valley Estates (Zimbabwe) 49% **includes 9.9% which is subject to South African Competition authorities approval. ** includes 10% which is subject to South African Competition authorities approval.

24 20 THE BOARD EXECUTIVE Tony Trahar B.Comm, CA (SA) 53, is chief executive and has been with the Group since He is chairman of the Executive Committee (Exco), and a member of the Safety, Health and Environment (SHE) Committee. He is non-executive chairman of the Forest Products and Industrial Minerals businesses. Tony Trahar s other directorships include AngloGold and Anglo Platinum. NON-EXECUTIVE Barry Davison BA 57, is a member of Exco and the SHE committee. He has been Anglo Platinum s chief executive since In 1986, he joined the board of Anglo American Corporation of South Africa Limited (AAC). In 2001, he was appointed chairman of Anglo Platinum. He is president of South Africa s Chamber of Mines and a non-executive director of Nedcor. Tony Lea BA Hons 54, is finance director and has been with the Group since He became a director of Minorco in Tony Lea is a member of Exco and chairs the Investment Committee. Bill Nairn B.Sc (Eng) 58, is group technical director and a member of the Investment and SHE committees. He was appointed chief executive and managing director of JCI in Bill Nairn joined AAC in 1997 when he was appointed an executive director and, in January 2000, he was appointed group technical director of AAC. He is a member of Exco. Sir Mark Moody-Stuart KCMG Ph.D 62, was appointed a nonexecutive director on 17 July 2002 and succeeded Julian Ogilvie Thompson as nonexecutive chairman on 1December He also sits on the SHE Committee and chairs the Nomination Committee. He is a director of The Shell Transport and Trading Company plc, HSBC Holdings plc and Accenture Ltd. Sir Mark is a member of the UN Secretary- General s Advisory Council for the Global Compact. Sir David Scholey CBE 67, is the senior independent non-executive director and a member of the Nomination Committee. He is the chairman of Close Brothers Group, a director of Vodafone Group and Chubb Corporation and an adviser to UBS Warburg. He was formerly a non-executive director of the Bank of England and a governor of the British Broadcasting Corporation. David Challen CBE MBA 59, is a member of the Remuneration and Audit committees. He is currently vice chairman of Schroder Salomon Smith Barney and was previously chairman of J. Henry Schroder &Co Limited where he spent most of his professional career. He is currently a member of the Takeover Panel and the Financial Reporting Council. Dr Chris Fay CBE B.Sc, Ph.D, FREng, FRSE 57, is a former chairman of Shell UK. Chris Fay chairs the SHE Committee and is a member of the Remuneration and Audit Committees. He is a nonexecutive director of BAA plc, the Weir Group plc and Stena International b.v. and nonexecutive chairman of Expro International Group PLC and Tuscan Energy Group Limited. He is chairman of the British government s Advisory Committee on Business and the Environment.

25 21 THE BOARD NON-EXECUTIVE Bobby Godsell MA 50, is a member of the SHE Committee and has been with the Group since He is chief executive of AngloGold, a position he has held since its formation in He is the past president of South Africa s Chamber of Mines and a former director of Standard Bank Investment Corporation. Göran Lindahl M.Sc, D.Sc 57, is a member of the SHE Committee. He is a nonexecutive director of Du Pont, IKEA and Sony and a co-chairman of Nanomix, Inc. He is a chairman of the Alliance for Global Sustainability and is a former special adviser to the UN Secretary-General. He was president and chief executive officer of ABB from 1997 until the end of Rob Margetts CBE BA, FREng 56, is chairman of the Audit and Remuneration Committees and is a member of the Nomination Committee. He is the non-executive chairman of Legal & General Group Plc and BOC Group plc and was formerly vice-chairman of ICI PLC. Rob Margetts is a governor at Imperial College of Science, Technology and Medicine, is chairman of the UK Natural Environment Research Council and a member of the UK Council for Science and Technology. Nicky Oppenheimer MA 57, is a member of the Nomination Committee. He joined the Group in 1968 and subsequently became an executive director and a deputy chairman of AAC. He became deputy chairman of De Beers Consolidated in 1985 and has been chairman of De Beers since Fred Phaswana B.Comm, MA 58, is a member of the Remuneration and Audit Committees. He is currently BP regional president: Africa and previously a director of BP Oil (Benelux), an associate president of BP Netherlands and chairman and chief executive of BP Southern Africa. His other appointments include the South African Institute of International Affairs and the South African National Energy Association. Professor Karl Van Miert Graduate in Diplomatic Sciences 61, is a member of the Audit Committee. He is currently President of Nyrenode University, Netherlands Business School, a member of the supervisory boards of German utility RWE, Philips NV, Munich Re and Wolters-Kluwer. He is also a member of the advisory boards of Goldman Sachs, Eli Lilly and Rabobank. He was a member of the European Parliament from 1979 to 1985 and a member of the European Commission from 1989 until Changes to the various committees of the board which take effect on 25 April 2003 are referred to in the chairman s statement and summary corporate governance report.