Cash & Liquidity Management

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Security and Straight Through Processing Managing Cash at Anglo American Anglo American Plc typically actively manages its short term cash using AAA-rated money market funds (MMFs), mainly USD, a policy which we have had in place for a few years. As a conservative investor, maintaining high levels of security and liquidity is central to our treasury strategy and key to our rationale in using MMFs. We do not actively chase yield, prioritising security and liquidity of our funds, and our cash is used to pay down debt, wherever possible.

Security and Straight Through Processing:

Managing Cash at Anglo American

by Geoff Brett, Cash Manager and William Ward-Brew, Treasury Operations, Anglo American Plc

Anglo American is one of the world’s largest diversified mining groups. The company has a unique portfolio of high quality mining assets and natural resources including precious and base metals and bulk commodities, including iron ore and coal. Headquartered in London, UK, Anglo American employs 190,000 staff in 45 countries across Africa, Europe, South and North America, Australia and Asia.

Anglo American is listed on the stock exchanges in London and Johannesburg and had operating profit in 2007 of $10.1 billion. In precious metals, subsidiary Anglo Platinum is the world’s largest platinum producer; generating 37% of the world’s newly mined platinum output. The company owns 45% of De Beers, the world’s leading diamond exploration, mining and marketing company

Cash Management Policy

Anglo American Plc typically actively manages its short term cash using AAA-rated money market funds (MMFs), mainly USD, a policy which we have had in place for a few years. As a conservative investor, maintaining high levels of security and liquidity is central to our treasury strategy and key to our rationale in using MMFs. We do not actively chase yield, prioritising security and liquidity of our funds, and our cash is used to pay down debt, wherever possible.

We select funds using a variety of criteria, not least our confidence in the security of the assets, the fund’s exposures and our relationship with the fund manager. Except in cash held in certain jurisdictions e.g. Brazil, we invest most of our cash in MMFs, including amounts from group companies within a cash pooling arrangement. Where we receive funds into our account after cut off times, we deposit cash overnight with our transactional bank and then transfer the amounts into a liquidity fund the following day.

As a conservative investor maintaining high levels of security and liquidity is central to our treasury strategy and key to our rationale in using MMFs.

Dealing in MMFs in practice

We use SunGard’s AvantGard Quantum as our treasury management system (TMS). In addition, we decided to extend our use of the TMS and build on our existing relationship with SunGard by using SunGard’s STN money market fund portal to deal MMFs on-line. This tool also has the benefit that it is fully integrated with our TMS to allow straight-through-processing. At this stage, not all of our fund providers have placed their funds onto the platform, but we continue to encourage our remaining fund providers to do so. There are a variety of benefits to using a money market fund portal as opposed to dealing directly with each fund provider. Firstly, the portal provides a “one stop shop” to access information on different funds, view investments and deal directly in funds, both investing new cash and bringing cash back in-house. Although yield is not our primary consideration, it is inevitably one of the factors, which will inform our decision between funds, bearing in mind the size of investment involved, so long as risk and liquidity considerations are equivalent. The portal allows us to compare yields and access information about the fund, including the fund prospectus and other information about the fund’s assets, and an up-to-date view of the total fund size. This data is extremely significant for us; for example, we have limits on the total percentage of a fund in which we can be invested. In recent weeks, some of the funds have reduced in size, therefore increasing our total percentage holding which may result in us changing our investment levels. Understanding the assets in the fund is also vitally important in making our investment decisions.

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