Operating profit before special items and remeasurements increased by 54% from USD 1,628 million to USD 2,507 million, principally due to strong export prices, with a year on year weighted average price increase of 56% in export iron ore for Kumba offsetting lower export sales volumes and the impact of stronger exchange rates.

Markets

Total world crude steel production continued to grow and reached 760 million tonne for the first six months of 2011, up from 717 million tonne in 2010, a 6% increase. China’s crude steel production during the first six months of 2011 increased 9% year-on-year to 352 million tonne despite monetary tightening policies. Crude steel production in Japan has remained flat year on year, in spite of production disruptions caused by the earthquake and tsunami in March.

Global seaborne iron ore imports rose by 5% year on year to 515 million tonne driven mainly by an 11% increase in demand in China. With adverse weather and logistics constraints impacting seaborne iron ore supply, the market has remained tight, which incentivised Chinese steel mills to source domestically produced iron ore. While Chinese domestic iron ore production increased, the average implied grade continued to fall.

Iron ore index prices peaked during the first quarter and, although retreating from these levels, have remained high, underpinned by high cost Chinese domestic iron ore production. On average, realized quarterly contract and index prices were aligned for the first half of 2011.

Despite global steel production rebounding above pre-Financial Crisis levels, prices for manganese ores have been held in check at the current levels on the back of an even stronger response in supply growth and a build up of port inventories in China that approached the 4.0 Mt level before dropping back to 3.6 Mt at the end of June. Alloy conversion capacity continued to grow through the year, placing additional pressure on margins for all alloys, with some higher cost producers eventually idling capacity to cut losses.

Operating performance

Kumba Iron Ore

Total tonnes mined at Sishen mine increased by 6% from 72.1 million tonne in 2010 to 76.7 million tonne of which waste mined was 51.8 million tonne an increase of 12% over the first six months of 2010. This planned increase in mining activity was negatively affected by wet pit conditions resulting from excessive rainfall. As a result of the wet pit conditions, run of mine material supplied to the Dense Media Separation plant reduced, causing total production at Sishen Mine to decrease by 12% from 21.1 million tonne in 2010 to 18.6 million tonne. Production from the Dense Media Separation plant decreased by 2.4 million tonne to 12.3 million tonne which was also reduced by maintenance downtime 17 and wet feedstock causing blockages in the plant. The jig plant achieved a run rate in excess of design capacity during the second quarter which offset the shortfall of the first quarter. The contribution by the jig plant to Sishen mine’s production decreased to 6.3 million tonne in the period (30 June 2010: 6.4 million tonne).

Total sales volumes for Kumba were maintained at approximately 22.0 million tonne for the six months. Export sales volumes from Sishen Mine for the first six months decreased by 0.4 million tonne to 18.4 million tonne. Kumba’s export sales volumes to China increased by 1.9 million tonne to 12.7 million tonne which represented 69% of total export volumes for the six months, compared with 57% in the prior period. This was driven by a 1.1 million tonne reduction in export sales to Japan as a result of the earthquake and tsunami and the rescheduling of vessels from June 2011 to July 2011. 2.8 million tonne of stock was used to supplement the lower production from the mine.

Iron Ore Brazil

Iron Ore Brazil generated an operating loss of USD 36 million, largely reflecting the pre operational state of the Minas Rio project.

The Amapá operation contributed an operating profit of USD 45 million for the period, compared with an operating loss of USD 7 million in the first half of 2010, reflecting a strong production performance and continued cost containment during a period of elevated prices. Production totalled 2.33 million tonne in the period, a 26% increase, including 939,000 tonnes of higher priced pellet feed, a 37% increase.

Samancor

Operating profit of USD 106 million is USD 103 million lower than the prior period, driven mainly by lower prices and stronger local currencies.

Mine shutdowns in South Africa following the fatality in February 2011 resulted in lower production volumes in South Africa. In addition, production was lower at Gemco in Australia due to concentrator downtime as well as conveyor slippages, mainly due to unusually heavy rainfall. Ore production of 3.1 million tonne (100% basis) is 8% lower than the prior year and alloy production of 362,000 tonnes (100% basis) is marginally lower than the prior year.

In 2010, high pricing drove a stimulation of domestic Chinese production which resulted in a stockpile build up. In 2011, the ore sales price has softened by 11% and, consequently, production levels have fallen and stockpiles have started to reduce.

Projects

The development of the 9 million tonne per annum Kolomela Mine continues and overall project progress reached 94%. Construction is substantially complete and various systems of the plant have been handed over for cold commissioning. Transnet has made significant progress in the construction of the direct rail link from the mine to the Sishen-Saldanha iron export channel. Hot commissioning of the plant is expected to start during the third quarter of 2011. During the process, ore will be fed through the plant, resulting in work in process stock and some saleable product being produced during 2011.

For the six months ended June 30th 2011, 15.3 million tonne of material was mined at Kolomela at a cost of USD 73 million, bringing the total waste mined as part of the mine’s development since 2008 to 37.3 million tonne. 600,000 tonnes of ore has been mined and stockpiled for the commissioning of the plant. The life of mine has been extended by eight years to 28 years since the initial investment decision. At this stage of the project, it is anticipated that the mine will be ramped up to produce 4 million tonne to 5 million tonne during 2012 and to produce at design capacity of 9 million tonne per annum in 2013.

At the 26.5 million tonne per annum Minas-Rio iron ore project, civil works commenced, on schedule, at the beneficiation plant during March. Construction is under way for the tailings dam and earthworks continue in order to support the continuation of civil works (including the completion of earthworks associated with the primary crusher). The pipeline element of the project is continuing, with 25% of pipeline construction completed. At the port, offshore works have continued, with the final piles of the iron ore pier driven in June and the access bridge and tug boat pier completed, while onshore civil works have continued in line with the schedule during the period.

Anglo American continues to work closely with the state and federal authorities towards the receipt of all relevant licences and permits. The project remains on target to deliver first ore on ship in the second half of 2013. During the first half of 2011, licence and permit receipts continued, including securing the Mineral Easement and progressing land access, though there are still a number of other licenses and permits to be secured in relation to the pipeline and the beneficiation plant during the remaining period of project development.

Pre feasibility studies for the second phase of the Minas-Rio iron ore project commenced during 2011 and, while ongoing, these studies, together with the current resource statement (total resource volume (measured, indicated and inferred)) of 5.8 billion tonnes, support the expansion of the project.