Other Mining and Industrial
of Mining and
– Tarmac and
(2010: $664 m)
Share of group
(2010: $894 m)
US$ million (unless otherwise stated)
|Net operating assets||3,201||3,393|
|Share of Group operating profit||2%||7%|
|Share of Group net operating assets||7%||8%|
- Note: Catalão and Copebrás, reported in the Other Mining and Industrial segment, are now considered core to the Group. Tarmac and Scaw Metals, which were identified for divestment as part of the restructuring programme announced in October 2009, remain non-core to the Group. The non-core businesses are not considered to be individually significant to the Group and are therefore also presented in the Other Mining and Industrial reporting segment. Until February 2011, this reporting segment also included the zinc operations.
Copebrás is the second largest integrated phosphate fertilizer producer in Brazil. Copebrás' operations are vertically integrated, covering mining of its own phosphate ore, beneficiation of the ore to produce P2O5 concentrate and processing into intermediate and final products.
Copebrás' mine in Ouvidor (in the state of Goiás) currently produces up to 5.9 Mt of ore per annum (dry basis) and is a prime phosphate deposit in Brazil with one of the highest grades of ore available in the country (approximately 13% P2O5). The company has approximately 15% of current Brazilian phosphate mineral resources and has a remaining mine life of 41 years at current production rates (excluding the Goiás II brownfield expansion).
The phosphate ore (run of mine) is treated at the co-located beneficiation facility, producing approximately 1.35 Mt of final phosphate concentrate per annum at an average (dry) grade of around 37% P2O5. Copebrás operates two chemical processing complexes located in Catalão in the state of Goiás, and Cubatão in the state of São Paulo. Copebrás produces a wide variety of products for the Brazilian agriculture sector, including low analysis (<20% P2O5 content) and high analysis (>40% P2O5 content) phosphate fertilizers, dicalcium phosphate (DCP) for the animal feed industry, as well as phosphoric and sulphuric acids.
Phosphate sales increased by 24% in 2011, as a result of strong domestic demand early in the year due to the 'mini crop' (a smaller secondary crop, mainly corn, grown in the first half of the year), demand for fertilizers by sugar cane farmers and farmers purchasing fertilizer ahead of the summer crop as a result of competitive fertilizer prices relative to grain prices.
The balance between supply and demand for phosphates tightened further through the year owing to reduced supplies from China and Saudi Arabia; this contributed to the average phosphates price for the year increasing to $700/t (2010: $510/t). From October, however, grain prices started declining from their peak on the back of continuing global economic uncertainty, taking fertilizer prices with them, which led to lower demand for both.
For the year as a whole, fertilizer sales totalled 955,700 tonnes, 4.2% below 2010. DCP sales were 124,500 tonnes, in line with 2010, while phosphoric acid sales were 4.8% higher at 100,200 tonnes.
Copebrás generated an operating profit of $136 million, representing a 68% increase on the previous year. This performance reflected higher international and local market prices, coupled with operational gains from asset optimisation initiatives in particular.
The strong performance was partially offset by increased input costs, particularly sulphur and ammonia, combined with the strengthening of the Brazilian currency.
A debottlenecking project, designed to increase capacity of Granulated Mono-Ammonium Phosphate by 60,000 tonnes and of DCP by 25,000 tonnes by 2015, is under review. The project is estimated to increase annual EBITDA by more than $35 million, through increased capacity and cost savings.
Given the phosphate market's sound fundamentals, the original Goiás 2 expansion project undertaken in 2008 and designed to increase phosphate production by more than 100%, may be re-assessed from a different product-mix perspective.
Prices for agricultural commodities in Brazil remain at healthy levels, resulting in good margins for farmers. Although international fertilizer prices softened towards the end of the year owing to the global economic uncertainty, they remain relatively high.
Nonetheless, the uncertain global economic outlook affected demand in the Brazilian market late in the year, as farmers decided to postpone purchasing fertilizer. Prospects are, however, positive and the current higher inventories of imported fertilizers may preclude further imports early in 2012, improving the overall dynamics for domestic fertilizers later in the year.
Catalão Mining (Mineração Catalão), which is located in the cities of Catalão and Ouvidor, in Goiás state, Brazil, is one of the world's three largest niobium producers.
As an alloying agent, niobium brings unique properties to steels, such as increased formability, corrosion resistance, weldability and strength under tough working environments, including extreme high or low temperatures. Such steels are known as high strength low alloy steels.
Around 90% of total global niobium consumption is used as an alloying element, in the form of ferro-niobium (FeNb) in high strength steels, such steels being used in the manufacture of automobiles, ships, high pressure pipelines, as well as in the petroleum and construction industries. The product is exported to the main steel plants in Europe, the US and Asia.
Niobium demand and prices have remained generally stable, notwithstanding volatility across world markets and uncertainty around the global economy, particularly the sovereign debt situation in Europe and the lacklustre pace of economic recovery in the US.
In 2011, world crude steel production rose by 6.8% to reach a record 1,527 Mt. Total demand for niobium rose in tandem to more than 70,000 tonnes of Nb content in FeNb form for 2011, which eclipsed the previous record figure of 65,800 tonnes achieved in 2008.
Catalão's operating profit declined by 19% to $54 million. The company's financial performance was negatively affected by lower production and sales volumes, higher costs related to Catalão's reintegration into the Anglo American Group, local inflationary pressures, and the impact of the Brazilian currency's appreciation against the dollar.
Production for the year of 3,900 tonnes represented a 3% decline (2010: 4,000 tonnes) following a significant change of production profile as the mine advanced further into the transition ore between weathered material and unoxidised ore, resulting in lower Nb recoveries. Set against this, improvements in the concentration and metallurgy processes at the Boa Vista plant led to higher recoveries. This, combined with higher average grades, and the inclusion of the Copebrás tailing from Mine 2, with its higher contained Nb grade, allowed Catalão to offset the impact of the transition ore.
The Boa Vista Fresh Rock project was approved in October 2011. The existing plant will be adapted to process new rock instead of oxidised ore, leading to an increase in production capacity to approximately 6,500 tonnes of Nb per year from the current 3,800 tonnes.
Despite the record levels of sales and prices in 2011, growth rates for niobium are likely to remain capped worldwide in the near term. The European sovereign debt crisis is likely to have a significant negative bearing on sales to Europe.
In the short term, additional niobium sales are likely to be diverted on a spot basis to China and, to a lesser extent, the US. Prices are expected to come under pressure from a stronger Brazilian real and the uncertain economic outlook in Europe and the US.
Tarmac reported an operating loss of $35 million, compared to a profit of $48 million in 2010. On a directly comparable basis, however, taking into consideration the impact of European businesses that were sold in 2010, Tarmac's operating profit showed a reduction of $55 million. Tarmac's directly comparable EBITDA performance was 32% lower.
Asphalt volumes benefited from carry-over of demand resulting from the severe weather at the end of 2010, as well as some continuing government infrastructure investment, particularly in respect of local authority road maintenance. In comparison to 2010, concrete volumes decreased, reflecting a reduction in demand from major projects such as the Olympic Village and Gatwick Airport, and reduced housing and other building expenditure. Cement production levels improved over 2010 as a result of the ongoing efficiency programme. Management efforts continue to be focused on mitigating the significant impact of rising input costs, in particular hydrocarbons, through initiatives such as increasing the use of recycled asphalt materials to recapture bitumen.
The outlook for the year ahead remains uncertain and dependent to a large extent upon the UK government's response to weak domestic growth and wider economic uncertainty across the euro zone. Against this background, volume declines are anticipated across major product categories in 2012, reflecting announced reductions in public sector spending, exacerbated by declining private sector spending.
The UK joint venture discussions with Lafarge are proceeding through the required regulatory processes.
Performance was severely impacted by the closure of the Precast business, one-off non-recurring separation costs and the continuing decline in housing, retail and commercial markets, which affected all products. Volumes suffered as a consequence of both the general market decline and a competitive pricing environment, where customers and competitors remain more focused on price and less on other value drivers.
Cost-reduction initiatives remain a high priority. Several key projects are also under way to enhance quality and improve customer service.
The underlying market outlook continues to remain challenging in the short term.
Scaw Metals generated an operating profit of $40 million, a 76% decrease compared with 2010, largely as a result of the sale of Moly-Cop and AltaSteel that was concluded in December 2010. On a directly comparable basis, however, taking into consideration the impact of the sale of Moly-Cop and AltaSteel in 2010, Scaw Metals' operating profit showed a reduction of $23 million. Scaw Metals' directly comparable EBITDA performance was 24% lower.
A strong performance was recorded by Grinding Media in spite of margin pressure owing to the strong rand. At Wire Rod Products, performance improved on the back of strong demand for offshore and mining products and improved business efficiencies. At Rolled Products, performance was affected by weak demand from the construction sector and selling prices not fully recovering rising input costs, resulting in reduced margins.
At Cast Products, a number of foundries suffered from a lack of demand for larger castings in the year, as well as a strong rand, significantly impacting the business' results. The situation improved towards the end of the year as the demand for railway, power generation and general engineering components saw the securing of important orders for the forthcoming year.
A strong focus by management on costsaving initiatives in all operations and sales to downstream businesses has mitigated the effects of weak margins. In addition, the closure of lossmaking operations and a focus on pursuing new markets with higher margins has enabled Scaw Metals to lessen the impact of weak economic conditions.
Total production of steel products at Scaw South Africa was 677,400 tonnes, a decrease of 5% over the prior year.