The management of Anglo American says it is making headway on its strategy that sets the path for the company to deliver sustainable returns to shareholders. In a statement accompanying the recently released results, Mark Cutifani, Chief Executive of the diversified group revealed that they are doing so through a change programme called ‘Driving Value’, which has focused on revitalising the business and laying the foundation for long-term success.

“We have set demanding but achievable targets and we are determined to meet them by working efficiently and effectively to drive significantly greater value from our asset base,” said Cutifani.

“We are seeing early progress, including in our Platinum and Metallurgical Coal businesses, across our Commercial initiatives and in reducing early stage project evaluation costs by $200 million in 2013 alone. Our pathway to increase margins and returns by 2016 is clear.”

Anglo American reported underlying earnings of $2.7 billion (2012: $2.9 billion), with underlying operating profit increasing by 6% to $6.6 billion. Underlying operating profit increased owing to De Beers contributing for a full year as a subsidiary, improved sales at both Copper and Platinum and the weakening of the South African rand, partially offset by lower prices across the majority of our commodities.

“While I expect headwinds to continue in 2014 as we reset the business, the benefits of much-improved operational processes and performance will flow through largely in 2015 and 2016. In the immediate-term, we have already delivered significant sustainable improvements, including early operational improvements, overhead reduction and reducing early-stage project expenditure,” added Cutifani.

He revealed that commodity demand remained soft against a backdrop of weaker growth in the world economy in 2013, particularly in the emerging and developing economies. “For our business, the effects of such a difficult macro-economic environment were exacerbated by operating challenges at key operations and adversarial labour relations in South Africa.”

Anglo American said it has started to make solid progress at Los Bronces and Collahuasi, the company’s two biggest copper interests in Chile, where improvements in waste stripping volumes and process tonnages supported a significant improvement in copper production.

At the currently constrained Sishen iron ore mine in South Africa, a redesign of the pit and changes to core operating processes should result in consistently higher production from 2015 onwards. The Sishen challenges have been partially offset by solid performance from Kolomela, which is now operating at well above nameplate capacity.

“At our underground metallurgical coal mines, production improved by 30%, with Moranbah North lifting longwall output by 39% on the back of an improvement in cutting hours, an increase in automated cutting rates and reduced unplanned downtime. In the South African thermal coal business, the priority is to implement a range of optimisation initiatives aimed at driving greater value across the mines and expansion projects,” the company said.

Anglo said De Beers had a good year and was able to increase output against a background of rising demand. Meanwhile, our single largest investment, the Minas-Rio iron ore project in Brazil, was 84% complete by the end of the year and remains on track to ship its first iron ore by the end of 2014.

However he said: “Our Platinum business faced the significant challenges of cost pressures, declining productivity, trade union militancy and continuing price pressure. We finalised a “root-and-branch” review of the business to address the changed fundamentals of the platinum industry and to understand the primary drivers of the dramatic reduction in profitability across the sector. Following an extensive but constructive process of engagement with government and the unions, our labour force is being aligned with operational requirements, and we are putting the review’s proposals into action across the business and concentrating on those assets with sustained profitability potential, while adjusting production more closely with current product demand.”

Cutifani said while he expects headwinds to continue in 2014 as we reset the business, the benefits of much-improved operational processes and performance will flow through largely in 2015 and 2016. In the immediate-term, we have already delivered significant sustainable improvements, including early operational improvements, overhead reduction and reducing early-stage project expenditure.

“The world economy should also strengthen in 2014 and 2015 as we continue to emerge from the challenges of the global financial crisis. China should continue to grow by around 7% and the diminishing effects of fiscal tightening should support a firmer recovery in the US and beyond.”