Message from the President

Serenity against turbulence

Cutbacks in investments, restructuring of assets, drop in sales, build-up of inventories. This could be the pessimistic scenario used for reviewing the year of 2009 if we looked at the performance of Anglo American Brasil solely through the prism of the economic crisis. But in fact the Company came out of last year stronger than when it went in, for it succeeded in successfully coping with the challenges.

Furthermore, our long-term vision contributed decisively to our greater serenity in dealing with the turbulence of the world economy. This is how Anglo American Brasil plans and operates its business. This is also a peculiarity of the mining industry and of our Company in particular, which lends us greater flexibility in adjusting to changes in the scenario and to short-term events.

Impacts of the crisis

We prepared for the worst of the crisis by foreseeing a major reduction in prices and demands for all our products. We also cut back on investments in infrastructure and postponed for 12 months the execution of some projects which were in progress, such as the construction of the new industrial plant in Barro Alto, Goiás. But, fortunately, the slump in the nickel market lasted shorter than expected. With regard to the niobium operations, Anglo American kept up its normal production pace in view of the better conditions of this market, where the price of the metal remained stable throughout the crisis. The main impact of the economic turbulence was on the fertilizer production, yet the trend is for recovery in 2010.

The nickel market is growing – even though the world market stockpiles reached 158 thousand tons in 2009, while the historical average reached 18 thousand tons between 2001 and 2009 – and the prospects are encouraging for 2010 and 2011. There is an estimate of 12% growth for 2010 in the stainless steel industry, the main consumer of ferronickel. As a result, the market for this alloy is expected to grow 7% in the 2010/2011 two-year period. And the prices are expected to remain in the range of US$ 8 per pound during this term.

All of the current operations of Anglo American Brasil (Codemin, Mineração Catalão, Copebrás-Cubatão and Copebrás-Catalão/Ouvidor, which formed the Base Metals division) were maintained in 2009. However, some adjustments were necessary, such as the postponement of the Barro Alto Project, as already mentioned, and the pre-feasibility studies for the Jacaré Project in São Félix do Xingu, State of Pará, and Morro Sem Boné Project, Mato Grosso, as already foreseen in our Annual Report of 2008.

Pulling together helped us mitigate effects of crisis

In view of the crisis scenario detected in the second semester of 2008, we already started mobilizing our own employees in January of 2009 to face the oncoming difficulties. After creating a Cost Reduction Committee formed by employees from the corporate office in São Paulo, we received 210 suggestions for cost cutbacks. Without a doubt, we can safely say that the greatest benefit reaped from this period of challenges was the engagement of our personnel.

There was also an important intensification of the actions of the Asset Optimization program, an internal initiative focused on continuous improvement in the exploitation of our resources and in cost and investment reduction. In this regard, the Company surpassed the goals set for 2009. We were able to increase productivity while using the same resources. In other words, we optimized processes and equipment use, obtaining better results from investments already made. This crisis period engendered this gain for the Company and for all the teams involved.

Anglo American values: focus on safety

An important event for our organization in 2009 was rolling out our values: Safety, Care and Respect, Integrity, Accountability, Collaboration and Innovation. Even though all of these concepts are key to the management of our businesses, we want to place special emphasis on Safety. It is significant that we did not make any cut whatsoever in investments in this area. All of the programs, training sessions and equipment purchases related to safety were maintained last year.

And although the issue of safety has always been one of our major concerns – for we have always considered any accident unacceptable – the inclusion of this theme as one of our values is related to Anglo American’s ambition to raise it to the same level of importance as our pursuit of excellence in business. This has allowed us to reach a record number of days without lost time accidents in some of our operations (Codemin closed out three years of no lost time accidents in January 2010), and the Barro Alto Project is a global benchmark in terms of safety.

Restructuring and sale of assets

In 2009, we announced our intention to sell Copebrás (phosphate products units in Catalão/Ouvidor and Cubatão) as well as Mineração Catalão (niobium unit in Ouvidor), representing a big step towards concentrating our operations in areas of strategic interest to the Company. This decision meant directing our business focus mainly on nickel production, where the Company has competitive advantages, in alignment with the strategies determined by the Anglo American Group. The new Company structure will be more concentrated on operational activities – i.e., production – with a cutback in the corporate offices. This is our way of focusing on strategic operations and doing what we know best.

It is also important to point out that, although Anglo American announced its intent to divest itself of these assets, the actual sale will depend on the national and international markets and the proposals received. Until the transactions are concluded, the Company’s commitment is to continue treating all its employees in a fair and equitable manner, in line with the value “Care and Respect”.

Currently, Anglo American’s global focus in on the production of nickel, copper, platinum, diamonds, iron ore and coal. The restructuring of our business in Brazil – which also includes the reduction of the vertical structure of the Group – will lend greater agility to the Company, reducing response time in decision-making.

Integration of Company offices – source of concern

One of the subjects of greatest impact in 2009 was the announced integration of the corporate offices of Anglo American in Brazil, currently located in three different cities: Rio de Janeiro and Belo Horizonte for the iron ore industry, and São Paulo for the nickel, niobium and phosphate operations. The proposal to bring together all corporate offices – with strong indications that the headquarters would be established in Belo Horizonte – was a factor of instability for our teams in São Paulo, for the planned change would affect their lives and those of their families. However, the fact that the integration was suspended was announced in December 2009. Today, even though we continue working out of different offices, we maintain our continued quest for synergy and collaboration, an aspiration well embodied in our motto – “One Anglo”.

Keeping the focus on sustainable development

The redefinition of Company costs perforce affected the investments in social and environmental projects. But this did not mean that we failed to fulfill our commitments or that we suspended programs already in existence. It just meant that, in some cases, we did not kick off new programs or make investments in the larger amounts we had expected.

Our partnerships with the NGO Care Brasil – which is part of the Care International network – remained one of the highlights at our Barro Alto facilities. The project has the goals of training companies, institutions and local educators to deliver courses in entrepreneurism and microfinances, among others.

In 2009 Barro Alto was the venue for the course on

Entrepreneurial Management for small, medium and large businesses, both formal and informal. The objective was to encourage the interest of the community in improving its knowledge so as to be able to identify new opportunities, seeking sustainable development.

In Niquelândia and Barro Alto we were very pleased to find that the local communities view Anglo American as a partner in their development. The most recent Community Forum “Exchange”, held in November 2009 in all localities where Anglo American operates, yielded very positive results and included the delivery of the Engagement Plans to the respective communities.

An important event in the environmental area for the Company in Brazil in 2009 was its participation in the Corporations for the Climate platform [Empresas pelo Clima (EPC)], an offshoot of the Brazilian Program GHG Protocol, of which Anglo American is one of the founding members. Becoming part of this group of companies renews and strengthens our commitment to reduce the greenhouse gas emissions of our units. The overall goal of Anglo American is to reduce its emissions in tons of CO2 by 10% between 2005 and 2014 (the baseline for comparison is 2004).

We also renewed our socioenvironmental commitments through participation in several international treaties which seek to promote respect for natural resources, biodiversity and best practices in the pursuit of sustainable development. Anglo American is also proud to be a signatory of the Global Pact and of the principles of sustainability set forth by the International Council on Mining and Metals (ICMM).

Challenges for 2010

We finished 2009 with many lessons learned and reassurance about the paths taken thus far. In addition to the need for distributing assets in the most recommendable manner for all future businesses, our main challenge for 2010 shall be to conclude the Barro Alto project, postponed due to the global crisis, now slated for start-up in 2011.

Barro Alto means a lot to Anglo American, because when it goes on line we will jump from a global nickel production of 26 thousand tons/year (in 2009) to 66 thousand tons/year. The unit will reach full production capacity in 2012.

After the restructuring of top management and the business portfolio, this year we also take on the challenge of increasing capacity and expanding the results of the nickel business unit, which currently consists of operations in Brazil (Niquelândia and Barro Alto) and Venezuela (Loma de Níquel).

In 2010, we will also seek the consolidation of our business units and synergy among all our offices and plants in order to improve upon the results of the “One Single Anglo” vision.