As dual-listed Anglo American looks back on what has been described as another “very successful year”, the mining giant can reflect on what was a significantly contrasting position less than a decade ago.

Since 2012, Anglo American had shifted from a 30% mining margin to a 42% mining margin by the end of 2018 – with a lower price basket – attributed to an upgraded portfolio, technical changes and the company’s operating model.

Further, the mining group believes it can further “step up” to margins of between 45% and 50% and a further 20% increase in volumes through its FutureSmart Mining approach and disciplined investment in high-quality growth.

“Whichever way you look at Anglo American, this is a fundamentally different business,” Anglo American CEO Mark Cutifani said in an address to shareholders at the group’s annual general meeting.

Over the past seven years, Anglo American has halved the number of its assets and significantly upgraded the performance of each remaining asset.

reinforced the quality of the portfolio and the impact of the operating model.

“We are now delivering 30% more product from each retained asset, translating into 10% more physical product in aggregate across the portfolio at a 26% lower unit cost in nominal terms, driving a doubling of productivity per employee,” Cutifani said.

The group’s overall position on the margin curve – effectively a cost curve adjusted for product quality – had improved from the forty-ninth percentile to the thirty-seventh percentile, he explained.

“In 2018, we continued to deliver on all fronts. We did what we said we were going to do. This is a strong set of results. But, more importantly, these results show what we can do and provide a foundation for us to continue to improve our business for the long term.”

He cited a 6% increase in volumes, with a significant contribution from the copper business; an increase in underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) of 4% to $9.2-billion; a free cash flow of $3.2-billion; a healthy return on capital employed (ROCE) of 19%; and earnings per share of $2.55.

“Since early 2017, we have returned $2.6- billion in dividends to shareholders, while also paying down more than $10-billion of net debt to put us in the resilient position we are in today,” Cutifani added.

Meanwhile, the company’s development of the Quellaveco project, in Peru, is on track.

The project is expected to generate strong cash flows, a real post-tax internal rate of return exceeding 15% and ROCE above 20%, with a four-year payback and an Ebitda margin of more than 50%, owing to its highly competitive first-quartile cash position.

“Beyond Peru, our growth opportunities span our copper interests in Chile, metallurgical coal in Australia and diamonds in Botswana, Namibia and South Africa, to name but a few examples,” Cutifani notes, highlighting the company’s commitment, for example, of more than $5-billion in investments into Anglo American’s South African business units over the next five years.

“In 2018 alone, our total tax and economic contribution to South Africa amounted to $8.5-billion, or more than R120-billion.”