Anglo interim results

It is Anglo American day today, we have seen all the subsidiary companies report so far and now it is the time of the parent company to report the bits that we have not seen already. Half year results this morning, company with operations around the world, started here, primary listing in London and report in Dollars. Yeah, main reason for that is that the UK is friendly for companies and they want to be there, plus the investors there understand mining. And then of course they have to report in Dollars for the main reason that their products are all sold in Dollars.

The meat of it, group revenue grew by 22 percent to 18.294 billion Dollars from this time last year, group EBIDTA 31 percent better to 7.112 billion Dollars, profits for the period came in at 3.988 billion Dollars, translating to underlying earnings per share of 258 US cents. And a dividend of 28 US cents per share, which represents an increase of 12 percent on last year. At an average rate of 6.90 for the period, that translates to 1780 ZA cents worth of earnings and just shy of 186 ZA cents of dividends declared, official, and not based on the average rate. Hmm.... something is better than nothing I guess, and a commitment to returning to higher dividends in the future.

Expansion on the go, the Brazilian Iron Ore project is key. Check it out from the CEO statement: "In Brazil, our 26.5 million tonnes per year Minas-Rio iron ore project continues to make good progress, with civil works for the beneficiation plant and construction works for the tailings dam all getting under way since March. The project is on track to deliver first ore on ship in the second half of 2013 at a first quartile cost position and we have begun the pre-feasibility work for the project's very significant expansion potential to 80-90 million tonnes per year." There is a lot riding on this project. A lot.

What is probably more exiting and closer of course is the Kolomela project, which is a lot closer to completion. This project of course is a Kumba project. From the Interim Results 2011 comes the following: "Kolomela 9 Mtpa iron ore project - 94% complete and on schedule to produce 4-5 Mt in 2012; hot commissioning to take place during H2 2011" Hot commissioning? Paul tells me this is an engineering term, I found a definition online:

If a plant/factory is completed but not functioning, it is called "cold commissioning". When it is completed and working, its opening is called "hot commissioning".

Gotcha. Other projects include Barro Alto, a nickel project in Brazil is producing already, full production is expected in the second half of next year and is expected to ramp up to an average of 36 kilo tons per annum. Los Bronces, a copper project in Chile is nearly completely finished. There are on the other hand divestment programs too, out with Scaw metals and remember from earlier in the year that Tarmac will be folded into a 50:50 JV in the UK with Lafarge.

The outlook is pretty key I guess and perhaps you can see why and how the market is uncertain and all commodity companies look very cheap. "Anglo American believes that demand for commodities remains healthy, driven by the resources intensive growth in the emerging economies, particularly in China and India." Yeah, and this is probably the theme of our time, I would suggest that this is probably going to unfold over the next decade and a half. India have the ability to pick up the slack where the Chinese left off.

The company continues in their outlook: "However, the unfolding of sovereign debt crises in Europe and the United States, and policy tightening in the major emerging economies is expected to generate short-term volatility." They are again referring to the current mess that is the debt issues in developed world, plus recent adjustments in China and rates increasing in India at a faster click than anticipated. For me however, this is an issue facing many companies, this line: "Costs will continue to be impacted by strong producer currencies and increasing prices for key inputs." Remember the chart about gold producers and costs from two days ago? Yip, thought so.

What are the market participants saying? Tough old day to say for sure, with the deadlock in Washington DC and the debt clock ticking, this is a bit of an issue really. But I guess folks on balance are sellers, the stock is down over two and a quarter percent in London. Cheap? Yip.