FINANCIAL AND OPERATING PERFORMANCE

Since the start of the mining commodities crisis some three years ago, Anglo American has reduced its number of operating assets by 26. Crucially though, we were determined not to sell assets below their inherent value, not even during the dark days of late 2015 and early 2016, after the slump in mining stocks had accelerated, abetted by the aggressive shorting actions of certain hedge funds, which at one stage accounted for about 20% of our share register.

Accordingly, in the first six months of the year, the only major asset we agreed to sell was our niobium and phosphates business in Brazil, for which we received $1.5billion, well above market expectations.

Later in the second half, however, market sentiment improved on the back of substantially strengthening prices for iron ore and both metallurgical and thermal coal. We also disposed of a number of minor assets as we continued to tidy up our portfolio so that total proceeds for disposals amounted to $1.8 billion(1) for the year.

We delivered a profit for the financial year attributable to equity shareholders of $1.6 billion and underlying EBITDA of $6.1 billion. At the same time, continued capital discipline resulted in capital expenditure(2) declining from $4.0 billion to $2.5 billion, while no new major projects were approved. The performance was bolstered by an across-the-business improvement in productivity of 18% as we progressively rolled out our Operating Model and sold a number of less productive assets, with copper equivalent unit costs declining by 9% in dollar terms.

Net debt was reduced by $4.4 billion, from $12.9 billion to $8.5 billion, considerably below our year-end target of $10 billion, with net debt to EBITDA of 1.4 times. We continue to plan for somewhat lower debt levels, given the continued volatility in the mining industry

Although we maintained a high level of liquidity, with cash and undrawn facilities of around $16 billion, the imperative to restore the balance sheet meant, regrettably, that dividends remained suspended. With the company now in a much healthier state than a year ago, however, and prospects for prices a little more positive, the Board is targeting reinstatement of the dividend for the end of 2017 (payable in 2018). When the dividend resumes, we will move to a payout ratio-based policy, the details of which we will define at that time

ASSET FOCUS AND OPTIONALITY

In February 2016, when, as it turned out, prices for mining products were around their lowest point in the current commodities downturn, we announced that we would be concentrating our capital on our portfolio of diamond, platinum group metals (PGMs) and copper interests, and that we intended to explore the sale of many of our coal and iron ore assets.

As the benefits of our own cost and productivity improvements started to come through, and as we successfully divested a number of coal and platinum assets, in addition to the niobium and phosphates business, with prices also firming for a majority of our products during the second half all of those factors served to accelerate the repair of our financial position. The pressures on us to divest further major assets have therefore diminished considerably.

Although we still believe that the top-tier asset positions we hold in De Beers, PGMs and Copper form the bedrock of a financially stronger and more competitive Anglo American, we continue to benefit from the much improved operational performance of a number of other high quality iron ore, coal and nickel assets. As a result, we now have a much greater degree of optionality with regard to asset retentions, and to our geographic balance.

SAFETY AND HEALTH

Throughout Anglo American, safety is our paramount consideration. In 2016, we experienced a better total recordable injuries performance, with a 24% reduction in recordable injury rates compared with 2015. It is distressing, however, to record a steep rise in fatal injuries, with 11 lives lost at the Group's operations, including seven in deep mines, of which four were in mines we have subsequently sold. This was clearly against the trend of recent years, and all the more surprising given the heightened focus on safety throughout the Group, including an increasing emphasis on critical controls and more thoroughgoing safety initiatives such as our Global Safety Day campaign. Any loss of life in the workplace is a tragic event and is quite unacceptable and a deeply saddening aspect is that several of the fatal incidents were eminently preventable, arising, as they did, from front-line operational practice not being aligned with our stringent safety policies. We must reverse this performance, and the Board, and particularly its Sustainability Committee under the chairmanship of Jack Thompson, an experienced miner, has been engaging closely with chief executive Mark Cutifani and his management team to address this challenge.