We're up. Okay, we're live. Good morning, everyone, and welcome to Anglo American's 1st fully virtual results presentation. I'm here slaving away at work. Stephen sitting in his back yard next to the pool.
So if we look at each other and we're juggling between the 2 of us, it's just making sure that we're coordinated. Hopefully, you're all used to the format by now. We're still developing and making sure we get it right, but the most important thing is that we connected with you, gave you a chance to ask questions as well and from our point of view, make sure that we're accessible to our shareholders. We are open for business. So
I'm on
the first slide, which is the header. From our point of view, it's obviously been a very tough 6 months. COVID-nineteen is a new term we've all had to learn and adapt to. In our case, it obviously had it has obviously had a material impact on our operations in the business. But certainly, from our perspective, I think we finished the half strong.
And we also believe that taking that improving performance into the second half will be the key to us delivering a much better full year result. In opening the presentation, I think it's also important to acknowledge all of our colleagues in Anglo American, acknowledge the communities with which we work, in which we operate and with which we work and the partnership we've had with so many members in the community and so many stakeholders across the board. Our We Care program has become a cornerstone for our response to COVID, in which we focus on making sure that our people are looked after, that we're also playing our part in our local communities even more so than we normally do, and I'll talk a little bit about that later. And from our point of view, that we're making a real contribution. At the same time, we've been working very hard to make sure that we protect the business, that we maintain business continuity and we're rebuilding the operations after some pretty significant lockdowns in March April.
I guess the best way to show that or characterize that in numbers is in April, after the March lockdowns, we were producing at less than 60% of production capacity. And by the end of June, we're at 90%. So the recovery continues. They still got some we've still got some hard work to do. And I do expect that the second half may be a little bumpy, but certainly, we're in a very different place.
And I think we've built a set of relationships with communities and governments where they know and understand how we can help keep the economy going and at the same time, keep people safe. And I think that's the key to the future. And certainly, from our perspective, I think we've built that foundation and that trust with our communities and with our governments that they'll support us in going forward. So let's jump straight into the presentation. I'm going to go to Slide 3, which is the agenda.
Very simply put, we'll keep the order of play as usual. I'll talk about where we are today with the world a more complex place, and I think it's important for you to know how we're dealing with the issues. Stephen will take you through the numbers and pull apart the detail. And then I will pick the ball back up and take you through how we see the forward look and then we'll go to Q and A. So I'm now on Slide 4.
As we should and always do, we open with safety, health and environment. At first glance, if you look at where we've come from over the last 7 years, we've been significantly improving our performance in the business in safety, about a 70% improvement in terms of our injury frequency rates. But even more important, our fatalities have dropped 93.5%. In the last 12 months, we've lost one colleague, that's one too many, but we're making progress from where we started. Secondly, in terms of health, we've improved our position 95% in eliminating serious health hazards through the business.
And on environment, we've reduced our incidents by 97%. But when you talk about those issues, it's not simply about numbers. We've had some serious incidents in the first half and we've just been bloody lucky we didn't lose a colleague in those incidents. And so we've improved the underlying performance. We still haven't delivered 0 incidents and that's something that we're focused on and we'll continue to improve.
As you're aware, on the Murrenbaf longwall face, we had a ground fall. We since recovered. We understand the issue where we've not had the right technical design inputting into changing geotechnical conditions. We've actually changed the organization design to make sure that we've got that response. We've also checked across the business in other in any other areas where we may be deficient in terms of the level of technical input, and I think we've straightened that issue out.
I guess the proof is in the pudding. We ended up getting the wall away about 3 weeks earlier than our forecast after the fall, and the operation has been going well since. And certainly, the digitization work that Tony and the team have been doing with Seamus has helped improve our performance and we have to keep improving. In terms of the converter incident in Platinum, Natasha and the team have already implemented a range of both physical and operating process controls, 8 in fact. And again, we'll continue on our pathway to automation and the installation of hard controls in those processes where we have elevated risk.
I guess, in both cases, the important thing to observe as well is that our secondary safety controls, that is the flags and making sure people were clear of those areas where there was a heightened risk, ensured that we didn't have any injuries through either of those incidents. And that's a very important issue for us and a good learning as well. In terms of Grosvenor, the ignition of gas on the longwall face, it would appear the gas was flushed through a waste fall. In looking at the other elements and learnings, we're still very much in an investigation process as is the department. But most importantly, our 5 colleagues that were injured are now making a good recovery.
Some are already home. But again, we're making sure that we're working with the families and helping them on the rehabilitation path. I guess, most importantly, and again, the key point to stress for us as a business is that we have to continue to improve and get to 0. On health, our We Care program was our central focus in 2020, obviously, with COVID. I will talk to that in a little bit.
And on the environment, we've had one incident, which was a repeat spill due to heavy rains in South Africa in one of the tailings areas in the base metals refinery. And again, introducing some additional engineering work to make sure that we don't have that exposure on a go forward basis. So for us, the other two milestones that were important for us in 20 20 on the environmental side was the confirmation that we believe we can get to carbon neutrality by 2,040 and that we would have at least 8 operations carbon neutral by 2,030. I think that's I think the thing that characterizes us differently is we are willing and will show you when we meet a pathway to carbon neutrality that's quite unique and different in the industry and our 2,040 date is certainly leading edge in terms of industry and making sure we get there in good time. That obviously and that move obviously coincides with our announcement on the demerger or our intention of a potential demerger of thermocol operations in South Africa in the 2 to 3 year time frame.
All very important milestones for us and our business and very much a statement about where the portfolio is going over the next few years. In going to the next slide, which is Slide 5 in your deck. Again, the numbers show how challenging and volatile times have been and we didn't help ourselves with those self inflicted interruptions. But we've still maintained our focus on improving the business and making sure that we're putting our best foot forwards wherever we can. While production was down 11%, I think it's more it's very important to understand that at the same time and with the big lockdowns, we lost 20% of our working hours during the course of the first half.
As I said, we were down or we lost almost 50% of our workforce
at the
end of towards the end of March and into April. And on a full half basis, we lost about 20% of the time available to us in terms of our production teams. So the 11% production drop is credible in that context. Our operating cost, 4% lower than we were last year, has obviously had some help from foreign exchange. But again, at the operating level, we were still down 3% or 4% against where we were last year on an apples for apples basis.
And so I think the progress we've made in continuing to improve our productivity has been solid. And again, when I adjust the hours worked, our productivities were actually up 7%. So the underlying performance was strong, but obviously, big impact from lockdowns and the other measures we've had to take as a consequence of COVID. Stephen will take you through the balance sheet details a little further, so I won't dwell any longer on the actual operating numbers other than to make one point. We've delivered a dividend consistent with our policy, the 40% payout ratio, and that's important.
And so from our perspective, we've maintained faith with our shareholders as we said we would. In terms of defining and describing our response to COVID, we talk about the response in 3 parts. Firstly, and through our We Care program, we focused on prevention, that is keeping people safe and hoping that we can keep them away from exposure in terms of the virus, and that includes our work in the community. Secondly, in having an exposure, how do we respond? How do we sort the business and make sure we configure the business to continue operations.
And then obviously, while we're doing all of that work, doing all of that work with the communities and doing all of that work with governments, we've also got one eye trained very firmly on how we recover the business over time. And as I said, getting to 90% production by the end of June was very important to us. And I'm still sure that it'll be a bit of a bumpy ride through the second half. But the most important thing is we've established a relationship with our communities. We've established trust.
We've established a relationship with governments. We're providing advice and support on how they can deal with issues. We've actually designed new ways of operating, social distancing. We have our own app, Engage, which every one of our employees has that helps them understand our expectations and also provides a platform to communicate how we can improve things. And so the tailoring of the business has been something quite unique.
And from our perspective, there'll be many positives that come out of the learnings that we've been through in terms of the business. And so the final point I'd make in terms of our response and how we've connected with our communities, this is not new to us. It's in our DNA. It's consistent with our purpose, which is around reimagine mining to improve people's lives. And again, the learnings that we've had are significant and will certainly improve both our approach in connection with our communities and on a longer term basis in terms of the way we see efficiencies and how we can work differently and more efficiently across the business.
I'm now on Slide 7. Just to reinforce how far we've come in the last few years, in 2012 and with materially higher commodity prices, our industrial margin was sitting in around 30%. In 2019, and with it was almost 10% lower prices, we actually delivered margins of 42%. If I adjust for commodity price mix, we would have been at around 47% if we were back in 2012. So the improvements have been significant, and they've been sustained in the business.
Our operating costs are 30% lower, that's in nominal terms and our productivities are double where they were back in 2012. For us, the first half was also impacted by the delay in sales, Obviously, not much going on in the diamond sector or the luxury goods sector. In PGMs, obviously, the converter incident had an impact on what we get out, but we'll see both of those improve in the second half. And so we expect our sales to start picking up and certainly, the cash flow position to change to the upside as we continue to improve our sales and pull stocks out of working capital. More specifically, and talking about diamond the diamond market and why we believe it's structurally attractive, As you know, the diamond market has been growing in the last 10 years, and 2,009 was the last recession or the last major recession.
And we've seen consistent sales growth over that period. It's also important to note that we've seen consistent supply growth through that period, and that's something that's changing across the industry. Today, we've seen continuing improvements or we've seen a very tough start to the year, but we've seen continuing efficiency improvements in the business. But with the market where it is, we've actually pulled back our production more than 20%, and we've seen the other major player in the market pull its production back as well. And we also expect supply to fall away as smaller operators have found it much more difficult to operate in these times.
And with companies closing operations through resource depletion, because you can't forget, we haven't seen a major new discovery in diamonds for the last 10 years, we think structurally the prognosis is very good. Our research tells us that the market is strong. And in our case, when you look at China, which was first impacted by COVID, we saw virtually no sales in the Q1. Yet in March June of this year, we've seen sales actually exceed last year's May June figures. And the sense we have from interacting with people on the ground is very positive.
Now we certainly don't expect Europe and the U. S. To recover as quickly. For us, a key selling part of the year is in the period from Thanksgiving through to the new or through to Christmas and the New Year in the U. S.
We would expect to see things pick up materially by then. But again, we're not ones to try and forecast in a month. Our stock position will be such that we can respond quickly to a change in the market. And certainly, we'd expect to start to see stocks running down in the Q4. But again, I'll let Stephen talk to that in terms of where we are.
But given that we've pulled production back and we see a continuing depletion in the midstream because there are sales actually occurring, we think the business will be in a good position by year end and certainly be ready for a much stronger 2021. Finally, again, with supplies falling away somewhere between 15% 20% over the next 2 or 3 years, we expect a rare product to become much rarer. And so for us, structurally, we think diamonds is in a good place. On a broader scale and across the business, and I'm now on Slide 9, our copper business has done Coluasi, whilst bronzes is actually starting to get some rain, so that's good news. Our costs have dropped from $1.35 to $1.07 a pound and yes, foreign exchange has played a part, but our operating costs have been really improving at the operating level on an apples for apples basis.
And so thrilled with what's happening. And remember, with Quellaveco and other incremental improvements, we expect to grow our business 50% with Quellaveco making a Q1 cost contribution to the operations. You're going to see us grow the business and reduce our operating costs, really thrilled with the work the guys have done. In PGMs, again, we've positioned strongly for the recovery. We've got the 2nd or the standby converter operating.
We will have the refurbished converter operating in Q4. And so again, that will continue the recovery. And again, with Mogalakwena almost at full rate, Ammunna Belt at about 70% and Natacha focusing very strongly on the stability and the performance of the processing operations, I think we're in good shape. We are still seeing infections around the communities in and around our platinum operations. But with recovery of people that had been infected actually outnumbering new infections, we're actually seeing a drift positive drift back into the operations of people.
So again, we think we're dealing and managing the issues well and we're seeing people return to work. Across bulks, again, another solid response, particularly pleasing was the Minas Rio ramp up. Through the half, I think we're about 21% of where we were last year. We actually touched nominal capacity in March, so great performance at Minas Rio. The nickel operations also in Brazil have done exceptionally well.
Seamus and the guys obviously had the Grosvenor incident in Australia, but now Moranbah and the other operations are doing well. Coomba, great recovery after the lockdown in March. Timba and the team have done a great job and you'll assume those results as they reported yesterday. I'd also like to make a special comment and commend our bulks team or in particular, the marketing team in bulks and across the board, they've done a great job in getting our product to market. And in particular, when we had the issue with the converter, we were able to satisfy all of our customer needs in the PGM space.
And I think that was a remarkable piece of work. And it's also why people probably haven't got our earnings forecast absolutely right because the marketing team have made a great contribution. So for the second half, we believe the operations are heading into more stable and capable territory. And certainly, we think the second half should be a much better half for us. And with that, I'll hand across to Stephen.
Stephen, you can see you're on.
Thanks, Mark, and good morning. As Mark said, the business has been robust through a volatile few months. The strength of the balance sheet as we entered the period has served us really well and I'll touch a little bit later on how we expect the balance sheet to respond from here. While I'm on the balance sheet, really pleased to see the lifting of the South African exchange control restrictions that was also announced back in February. We've managed costs tightly through the period, but sustainably, it's helped underpin our earnings and we've been able to exercise degree of flexibility in CapEx to help protect our cash flows where needed.
But importantly, we've done all of this in a really sustainable way, fully funding our sustained business capital and not compromising our growth projects. So looking at the numbers, there's always going to be a volatile period, but they reflect all of the hard work across the whole Anglo American team. And EBITDA of $3,400,000,000 despite an 11% impact on production and that's really benefited from the transformation process that we've been through for the last 7 years. It's really given us a solid operational base. EPS at $0.72 a share and off the back of that a $0.28 dividend based on our 40% payout policy.
Unit costs down 4% with some help from FX, but remember that is off a lower production volume, so some really good performance at an important time for us. CapEx of 1,800,000,000 dollars and I'll talk to cash flow and working capital a little bit later. So moving to Slide 12, looking at the breakdown of the $3,400,000,000 across the business unit, as you would expect, very limited earnings from diamonds given the extent of the lockdown right across the whole diamond value chain. And just to remind you, we did give flexibility to our customers, particularly through Q2. Really good performance from copper as Mark touched on, an environment where we had slightly softer prices, some challenges that was processed with water, but production back on track and traveling very strongly with C1 cash costs of $1.07 a pound.
PGMs obviously heavily affected by the converter plant outage, but strong earnings when you consider this really closer to 1 quarter sale rather than 2. And again, full compliments to the marketing team who managed to juggle those production challenges, sourcing material in a tight market and meeting our customers' demand with all of the uncertainty that they were also going through. Folks benefiting from the great work at Minas Rio, good recovery at Coomba post the lockdowns and definitely helped by the stronger iron ore price. In the bulk partly offset by lower prices at met coal and the operational issues that Mark has spoken to. So if we turn to Slide 13 and the drivers of EBITDA, firstly, price, some ups and downs across met coal, thermal coal, copper that I've spoken to, but broadly offset by the benefit that we see in the weaker producer currencies.
The impact of COVID approximately US1.1 billion dollars largely from consumer demand affecting diamonds and the South African lockdowns that we had through that March, April period at Coomba, PGMs and Thermal Coal. We took a considered and staged approach at each site. We felt it was appropriate also considering the community and country aspects, always with health and safety as our number one priority. The outage ACP at PGMs reduced EBITDA by 600,000,000 and together with 400,000,000 in relation to the disruptions at Met Coal. So if you put all of those things aside, the rest of the business actually performed quite well led by copper and Minas Rio in particular.
Hence, the 400,000,000 dollars improvement driven by those 2 sites. Turning to Slide 14 on the balance sheet. As I said, we entered the start of the period a very, very strong position, net debt to EBITDA of 0.5 times at the start of the period and there was 2 primary factors across the 6 months that saw net debt increase. So firstly, the allocation of capital towards growth, dollars 400,000,000 at Quellaveco and dollars 700,000,000 with the acquisition of the crop nutrients business as we acquired Sirius. Secondly, we had a $1,400,000,000 build up of working capital across the half.
Diamonds at $500,000,000 and PGM is also at $500,000,000 We had some shorter term weather impacts just towards the end of June at copper and Coomba. So we do expect working capital should run down through the second half. So diamonds probably more over a 6 to 12 month period depending on markets, PDMs fairly substantially over the next 6 to 9 months and the Copper and Coomba minor build should clear in Q3. Also helpfully from a balance sheet perspective, the lifting of South African exchange controls and that's now in the process of being implemented and developed, a really pleasing development. As I've said previously, the currency controls that used to exist didn't have a major practical sort of significant impact on us, but we do welcome the simplicity in capital structure and the move towards a more typical OECD regime.
I think it also sends a really strong positive message about the country's desire to promote investment and growth. So as a result, net debt of $7,600,000,000 that's around 1.1 times EBITDA well within our guided range. Now obviously, as we look forward, all subject to the normal caveats, particularly around prices, exchange rates and any impact from COVID, but we would generally expect that number to trend downwards from here towards year end. Turning to CapEx on slide 15, we're staying with our revised guidance down by $1,000,000,000 to $4,000,000,000 to $4,500,000,000 and that does include the $300,000,000 of year 1 spend at the Wood Smith project following the Sirius acquisition. The decrease in capital driven from a number of factors, weaker local exchange rates, some flexibility in the timing of their critical projects and obviously staying focused on our staying business capital spend.
That reduction does include $300,000,000 reduction at Kayaveco and Mark will touch on that a little bit later. But importantly, because of the strength of the balance sheet, we've been able to make every decision for every asset for the right health and safety reason and for the right long term economic outcome. At the same time, our brownfield projects, the diamond vessel in Namibia and Aquila in met coal remain on track and on budget and you would have seen our recent announcement of a life extension project at Kumba at the Kolomar mine site. So clearly on Slide 16, we remain focused on our disciplined capital allocation. And so to the scorecard for the half, over the last 6 months we maintained our base dividend $600,000,000 for the final dividend from 2019 and we allocated capital to some discretionary options.
So growth capital in total $800,000,000 for the Sirius acquisition and $6,000,000,000 on our other growth projects And we also saw the finalization of the additional shareholder returns, so $200,000,000 from the share buyback program. So stepping back on Slide 17, yes, a volatile few months, but we're well placed and it still remains about balance. We reinstated the dividend in 'seventeen and since then we've returned $5,000,000,000 to shareholders. We remain committed to our balance sheet target with no more than 1.5 times net debt to EBITDA through the cycle. All of that underpins our growth profile.
Our P101 and technology development and the marketing focus on margins allows us to invest sensibly across the business and that in turn will drive our growth in production, EBITDA and cash flow. Quellaveco project in Peru, the brownfields project should deliver a combined 20% to 20 5% production growth by 2023. In the copper equivalent terms, that's really market leading. We believe our long term EBITDA margins from the mining business can reach that 45% level based on long term consensus commodity prices. So, a real commitment to get the balance right in terms of balance sheet, returns to shareholders, importantly relationships with stakeholders and the discretionary allocation of surplus cash flows.
Mark, back to you.
Okay. Thank you, Stephen. Now looking forward, I think it's important to make the point that the last 6 months haven't changed our strategic view of things. We do think ESG issues will continue to come to the fore, but we've been there for a long time. And certainly, the work that we've done is starting to be recognized in terms of some of the new industries that are coming out.
Now top rating in the FTSE in terms of what we're doing on the ground has been recognized. So from our point of view, all of those things matter. Consistent with that approach, and I'm on Slide 19, our work on the portfolio starts obviously, around Quellaveca in Peru. Now prior to the onset of COVID-nineteen in mid March, we were tracking somewhere between 3 4 months ahead of the program. The guys have been doing a fantastic job.
When the national quarantine was imposed, the majority of the project's 10,000 strong workforce were demobilized in line with the government's request and asked to hit home. So we've helped people get back to home. Construction work as a consequence was significantly slowed. And whilst we maintain some critical works on works on critical items, we were substantially stopped across the board. With quarantine extended, we then decide to extend the lockdown for 3 months to give a chance for the country to get on top of COVID and at the same time, so that we could minimize our outgoing cash expenditures with the view that we would then remobilize when we could put in place the workforce and deliver on full productivity.
We thought that was the most effective way that we could contribute to the health and safety issues as well as make sure the project, when we hit the button, was able to run as hard as we could. So in taking that strategy, we're now on a restart, and it's a staged restart. We've estimated the cost of demobilization, remobilization and the cost of the structural changes we've made across the organization and how we've rescheduled to make sure we reduce the peak of workforce through the process. And in doing that, we've adjusted the financial estimate for the project to between DKK 5.3 billion and DKK 5,500,000,000. Now that leaves us with some contingency on the expectation that it still will be a bit of a bumpy ride over the next few months as we see secondary infections, those sorts of things.
But we think we've catered for those properly. And at the same time, we still think it's quite reasonable and our forecast of delivering in 2022 remains on track. In fact, we're on track to the base schedule, although we've had to give back obviously the big gains we made prior to March. But again, a lot of work going on to continue to improve that work. The last 3 months, we've also been focused on improving the way we bring the operation up through commissioning.
And so we haven't completed that work, but we've got some positives there. So we believe we can offset any cost issues and pull back some of that improved value through the way we operate through commissioning. So pretty pleased with the work the guys have done, and I think we're in really good shape. In terms of crop nutrients, the UK, despite a really tough period in lockdown, we were able to get back to work relatively quickly, implemented our social distancing rules and where we've been somewhere like 30% or 40% above on productivity in the underground operation by changing and reconfiguring, we're not quite at that level above our plan, but we're on track to deliver the planned works for the year, that is for $300,000,000 So Chris and the guys have done a fantastic job. And as we look at the business and we look at the market potential, we're happier today than we were on the day we bought the asset on the basis of what we've seen.
The guys have done a great job. Yes, there'll be some technical adjustments, but they're at the margin. We think generally, the team has got the configuration right. And from our point of view, the market and the interest we've had in the market for the product has really been positive, particularly when you think about the new world in terms of fertilizers and we'll have to see in agriculture in terms of smarter use of fertilizers. We think the products we'll be producing are certainly made to order for that new well.
So very happy with where we are on Woodsmith. In terms of the transition from thermal coal, I think it's important to remember that as we transition out of thermal coal, we're building crop nutrients. And the crop nutrients business probably has got double the potential contribution it can make to the business. So we think that's a pretty good swap. In thermal coal, we've already reduced our footprint by 55% back in 2015, 2016 when we sold assets that we didn't think could make a material contribution in the longer term.
So we're well on the way. Today, it represents 5% of the EBITDA across the business and probably reducing over time given the price forecast. We expect to be out of the business within 2 to 3 years. And from our point of view, that's a good place to be. But at the same time, we've got to acknowledge that they are and remain low cost competitive assets, albeit with a relatively shorter mine life than the balance of our assets across the portfolio.
But a good pack of assets, likely a demerger within the next couple of years, we think that's the right decision for Anglo American. In terms of our broader portfolio and its positioning in the world that we're looking at in terms of the future, we're certainly positioned to contribute to an environmental led new materials demand. We've seen the early evolution of electric vehicles and some of the challenges of energy storage. Now we're seeing widespread investment plans in hydrogen, first in China and demand in the automotive sector. We're seeing, obviously, buses in Britain using hydrogen.
And now in Europe, we're seeing a much broader application and pull for hydrogen products. We've been central to the promotion of hydrogen as the new fuel source. We're a founding member of the Hydrogen Council. And certainly, from our point of view and our involvement in PGMs gives us a vested interest in making sure that we help support growth in the industry. For us, you'll be aware that we're looking at introducing a solar array in South Africa to generate or use renewables to generate primary energy, but we'll oversell the oversize those units and generate hydrogen so we can start converting the major truck fleets to hydrogen consumption as well.
So from our perspective, it's a great place to be. And most importantly, over the same period and with a greater use of renewables, we also improve our cost structures by reducing energy consumption by 30% by 2,030, which is also part of and one of the most important drivers of our cost reduction strategy as well. So 1 plus 1 gets 3 in terms of what we think hydrogen and other new developments will contribute in terms of our world. On Slide 23, you'll see our conversation around having an active route to a Gruner world. And from our point of view, that's where we're going as a business.
This approach fits with our commitment towards the environment and in minimizing our direct impact and footprint in terms of the communities around us. We've committed to making the business carbon neutral by 2,040, earlier than most and that by 2,030, we'll have at least 8 operations that will be carbon neutral. Again, it will be a combination of solar, wind and other renewable sources connected to hydrogen and also battery power, so that we create closed loop systems and the pathway is very clear. The detailed design is still in the works, but we're also starting to move on the pilots that we're looking at developing to demonstrate those pathways. And the platinum business will be one of the first places that we develop and in fact, we'll have our 1st off highway truck on hydrogen during the course of this year.
Our new technology and innovation work is also central to this footprint. That 30% energy reduction includes implementation of bulk sorting, coarse particle flotation, bulk sort as we've got in 3 operations already through copper, PGMs and nickel. We've also got coarse particle flotation units being built in the copper business in Chile as we speak. And again, as we go further down line, looking at reducing our water consumption by 50%. And so really changing the nature of the operations, the footprint for the operations, and we hope creating a model for the industry that will drive us all towards a much greener future and a much more significant contribution to a green future for the planet.
On Slide 24, we talk to the numbers in a very simple way. We're building and evolving a high quality mix of assets that are suited to future demand, and we expect to see improving margins as a consequence of those switch. So a consumer world, an electrified world, a greener world. And from our point of view, our cleaner, greener world products will make up 65% of our portfolio over the next few years. And certainly, from our point of view, even with our contribution in bulks, we'll have high quality, highly efficient iron ore and met coal, which will make again another efficiency and cleaner contribution to the making of steel over the longer term.
On Page 25, we talk to delivery. Like all journeys to a much better place, the road is always not as smooth or it's not as always smooth as you'd like. But there is no doubting our progress and our continuing commitment to outpace our competitors in growth and continuing business improvement. As we have along the journey, we will keep learning and getting better. And we continue to measure success and sustainability through 3 primary lenses.
1st, effectiveness. Over the long term, we believe those companies that can generate better than 10% free cash flow will provide the ability to pay dividends and grow their business. And I'm not talking about the next 2 or 3 years, we're talking about the next 10 to 20 years. That's the business we're building. And as we broaden the contribution across our portfolio, you've got a portfolio set for long term performance.
Measuring the efficiency in how we generate those cash returns is just as critical for shareholders. And so our return on capital employed targets make sure that we keep our eye on capital discipline and that we don't throw money at simply generating cash and at the same time, destroying value. And being sustainable is absolutely key. So we have our 7 performance pillars: safety, environment, social performance, talent pool, making sure we got the right people, production and resource base and the life of assets we have in the portfolio, unit cost position, we continue to improve against our competitors. And ultimately, it's about having a conservative balance sheet that allows us to do the right things and continue to make sensible investments for the long term.
And so with that, as a differentiated company in terms of assets, capabilities and the ability to deliver long term returns, that's Anglo American, very happy to take questions.
We have a question coming from the line of Liam Fitzpatrick from Deutsche Bank. Please go ahead with your question.
Bank. Just two questions from me. First one on CapEx and secondly on your climate targets. On CapEx, you've cut your guidance for this year by $1,000,000,000 but no change to the 2021, 2022 guidance. Can you just break out that reduction in terms of translation, project delays, permanent savings?
And then secondly, on the climate target, you've now got a very ambitious target, which is well ahead of what your peers are aiming for. Can you just clarify whether that 2,040 target will involve material amount of carbon offsets and life cycle offsets? Thank
you. Stephen, do you want to take the capital question?
Yes, certainly. So in terms of the current year, Mark, the $1,000,000,000 reduction, probably about $400,000,000 of FX impact across the total spend, about €300,000,000 in terms of Quellaveco. So they're probably the 2 biggest items. Now clearly, Quellaveco will shuffle across 'twenty one and 'twenty two. We haven't updated that guidance yet across 'twenty one and 'twenty two.
We will do that probably at our December update call. So we'll work our way through that and really understand how we're progressing through the second half, which will feed into 2021 and 2022's guidance.
Yes, I think you've also got to remember, Liam, that with the lower production, you will naturally see lower sustaining capital through the course of the year. We've also done some efficiency work. So when you get those numbers, they balance out pretty well. On the carbon neutrality approach, I think firstly, a comment on pathways. You'll see in Brazil, where we've signed long term contracts with renewable energy suppliers, doing similar work in Chile.
We've got lots of sun in Chile. We've got lots of sun in South Africa and in Queensland. So we want to use solar energy as much as we can. The idea of then over sizing, converting to hydrogen, creating closed loops with battery technologies as well is pretty well being thought through. And you've got to remember, we're also looking at dropping our energy consumption through the efficiency work that we're doing at a technical level.
So I think there's no doubt that we've got a complete solution pretty well thought through, and I think that's what puts us ahead, Liam. In terms of the 2,040 target, again, we think we're on good a good track to get there. We haven't relied on offsets to actually get to those numbers because of all of the work we're doing on the front end. I mean, we've been putting the right people on the ground, working all of these solutions out to come up with the position we've taken. Certainly, that leaves us with the ability to look at offsets if needed.
But we really want to drive the business to make a better contribution. In my view, offsets are sort of cheating a little bit in that you're using someone else's credits to cover your own ability or inability to get to 0. So the focus for Anglo American is to get there under our own steam, if you pardon the pun. But at the same time, if we need to do a little bit on the offset side, we'll obviously keep that option open. And don't forget with crop nutrients, the idea of improving agricultural production means the world is going to have to use less land for agriculture to actually hit its carbon neutral targets.
And so from our point of view, is a significant contributor to what difference we can make and given we've got such a small carbon footprint. So we've thought it through pretty well to get to those numbers.
If I could just a very quick follow-up. Just I mean, it's clear on the carbon offsets. What we see from some of the aluminum companies is they use life cycle offsets. So given some of your commodities, PGMs, for example, are used in emissions abatement, are you going to use those sort of offsets in terms of your targets? Or is 2,040 that's 0 emissions at the operations?
So the target for the business is to not use those life cycle offsets because we think there will still be a fair bit of debate on whether that's a legitimate way of balancing out in terms of carbon neutrality. Look, if at the end of the day, we need offsets in terms of land and those sorts of things, we will consider them, but it's not our focus. It's around improving energy efficiency, which improves our cost structures. It's about looking at developing closed loose systems that allows us to operate in a clean way. The offsets is a third option, but it hasn't played a major role in how we see ourselves getting to the end result.
Our next question comes from the line of Jason Fairclough from Bank of America. Please go ahead with your question.
Yes. Good morning, Mark. Good morning, Stephen. Look guys, a little bit of a tricky question for you here. So there was a bit of a view coming from investors that Anglo is getting quite confident and quite confident operationally.
And I think some people even use the word swagger. And more recently, unfortunately, we've had some fairly serious operational incidents at both Amflats and in Met Coal. And today, I have the same investors asking me, has something gone wrong in Anglo? So I'm just wondering, can you give us some color on the operational shortcomings that contributed to these incidents? And specifically, I'm interested to know how you might be adjusting your operating model or at least the implementation of the operating model to address these incidents.
Yes. Jason, very fair question. I'm not sure that we had a swagger. We don't certainly believe we've got a swagger. In our view, we're about 50% of the way through the implementation of the detail in the operating model.
Where we start is what we call work management, which is about how we get work done, how we plan work and making sure we're delivering as per plan. And that's been the driver between safety improvement, the 90 odd percent, the environmental improvement, the 90%, the health improvements, 90%. And that work has gone well. We call that work management. In terms of operating strategy and the detailed technical design work, there's been a lot of good work there, but we're probably still only 50% of the way up to where we want to be.
And that includes the change in the control systems we've got, for example, in platinum. We've still got a lot of stuff that's done manually, so there's a lot more automation required. And for example, Natasha has introduced 8 new both physical controls and procedural controls in the converter to make sure we don't have the same incident. So we're still working through, we're still learning, we're still a works in progress in many ways. To be specific, at Moranbah on the longwall, the area that we started the wall had a little bit different geology, but we applied a standard design.
What we've done now is I said, look, any of those designs and this goes right across the board or any of the major cutback designs actually have to be signed off one level above because where you've got a change in circumstance, you really do make sure you've got all the issues cupping. So I think that's an important change. And the new design configuration worked extremely well. We got away 3 weeks earlier and the operation has been going well. Now we've been implementing digitalization technologies in the management of the longwall and that's improved our productivity.
We've more than doubled, but there's still more work to be done. The growth in our issue in coal, a bit of a different issue. And I know a lot of technical people won't understand the issue. We don't think it was an operating issue in terms of the way we would handle things on a day to day basis. What appears is that we've had a major fall in the waste area, which all operations have, where you do have some accumulation of gas, where everybody has it.
And it's actually flushed that gas onto the longwall face. The question is what may have ignited the gas. And that's where the investigation work now is going on and we'll find that solution. And I think ultimately, that will require changes across the industry in the way some of these technologies work. But again, I'm going to let the investigation finish its work, but I think there'll be some changes in the industry.
In terms of the ACP, again, there were some procedural issues and there were some control issues. I think Natasha is right on that. And for those that I've been talking to in the last few months, my I've explained the selection of Natasha in terms of her background in making sure we improve the operation stability and consistency out of platinum. And even though we've had massive change in the portfolio, our consistency hasn't been as good as it could be and that's where the focus is. So I'd like to say that the 90% improvement that we've seen across all the dimensions indicates that we've gone somewhere very different to where we are, but we've still got a way to go.
We're still not as good as we would like to be and we're still not at 0 incidents. So we'll learn, we'll apply the lessons and we'll keep getting better as we should.
Okay. Thanks, Mark. Very clear.
And a good question. A good question.
Our next question comes from the line of Alain Gabriel from Morgan Stanley. Please go ahead, Helane.
Yes. Good morning, gentlemen. Two questions from my side, if I may start with the first one for Stephen on Slide 14. You've touched on the working capital. I guess if we were to roll forward that slide into the second half of twenty twenty, how would you expect the working capital bucket to change across the 3 different groups of PGMs and then the other items and more importantly, diamonds as well?
And would you is it conceivable for diamonds to repeat the working capital build that we have seen in H1 during the second half? That's my first question.
Kai, do you want to give us your second question as well?
Yes. On the second question, clearly, you've given an update on your unit cost guidance and it's been significantly improved versus what you have previously said. What portion of that is FX and oil? And what portion is retainable or sustainable cost savings that we should be expect to roll forward into next year?
Okay. Mark, I'll deal with the first one and I'll make some opening comments on the second and then maybe throw to you. So, in terms of working capital, if you look at the sort of 3 primary areas, diamonds, as Mark said, will clearly be market dependent and it's hard to pick a month, but we're confident the market will come back and demand will flow through quite strongly when it does come back. So, without picking the month, whether it happens in November, December or January, February, I'm not too bothered by. It's really about the market coming back and I know the team are looking at how they can sell diamonds in a different way given the circumstances.
So they're working hard on that one. On PGMs, given that we're now back up and running at the ACP and the materials flowing out, I'd expect that to come back quite strongly over the next 6 to 9 months. And so you should see it may not be all of it, but a substantial portion of that $500,000,000 reverse between now and probably the end of Q1 in 2021. And copper and Coomba really was just about swells or capacity at the port in Coomba's case. So that should flow itself out back through Q3.
So all things being equal, I'd love to think potentially you're at least $500,000,000 maybe a bit extra flushing out of that through the second half. But it is with all the qualifications that you'd expect in terms of prices, markets, further interruptions by COVID, but that's probably about the best guidance I can give you is more around timing than absolute amounts. In terms of just maybe your first comment on our cost guidance, I mean, clearly some of the businesses have been impacted by the disruptions and some of that's flowing through into cost structure and met coal is probably a good example where that's flowing through quite directly into unit costs and probably the currency hasn't helped in that case as the Aussie dollar strengthened against the U. S. In the other markets, copper is probably the standout.
Yes, we've seen quite a I don't know what the percentage would be, 20% movement in currencies through copper producing regions. That's clearly helped. And just looking across the others again, there is no real comment there given the limited sales. Through Brazil, yes, again, we've had some currency movement that's helped. As probably more in the sort of 10% to 15% range.
So where we've produced well, you've seen sustainable cost out and yes, that's been helped by foreign currency. There's no denying that. But you also have seen price movements and so on Slide 13, I think it is, you can see that those two things have largely offset one another between currency CPI and price movements. And so there's a bit of give and take across each of those. So rather than just focusing on cost as I often do, I'd also ask you to focus on the price movement as well.
Mark, any comments from you on that?
Yes. Look, again, another good question. I think the way I'd characterize where we are, firstly, on average, the assets that we have in the portfolio and these are the same assets, So I'm not talking about the portfolio change, I'm talking about the assets that we're operating, are on average doing 30% more in terms of production. And in terms of their actual performance, that group of assets is doing at least 20%, I think it's about 23% or 24% better on unit cost. So we're at another level of performance.
And it's interesting, our actual underlying performance is actually even better than that, but we're having a little less consistency because we're at a higher level of performance. Now people know, there's a few of us in the business that are pretty forensic in the way we pull stuff apart and understand what's going wrong and what we need to do to get right. So we've obviously looked at the issues in coal and the ACP issue, but it's actually a much broader view. And we're looking at how we can improve the stability to take another 5% to 10% step on the operating cost side. And the 2 go hand in hand.
So one of the big improvements we're continuing to make, we're giving about 60% back to inconsistency and I'm talking about the last 12 months. So we're just working really hard with the teams to get the stability. And so on the basis of the first half, and Stephen stripped away COVID and other movements, we had about a $400,000,000 improvement outside of platinum and met coal. There's about a 4% 3% to 4% underlying cost improvement in the business if we can get that stability across the business that we'll take into the New Year. So that's what Tony is focusing on with the operating teams, just to get the stability.
We're working at another level in terms of risks and automation. That works ongoing with the digital work. So I'm hoping that we're taking 3% to 5% improvement, but you're seeing some of it in the underlying performances into next year. But that's one we'll talk about at the end of the year once we've seen how far we've come along in terms of improving our stabilities. But the one thing I have to say, being an Anglo American is about constant improvement.
And where we do have issues, we try and do everything we can to make sure we learn and we apply the lessons across the board. And we've stubbed our toe and we're in the process of making sure that we understand and apply those learnings. And again, we'll keep you posted on that progress over the next 6 months.
Our next question comes from the line of Miles Alsorp from UBS. Please go ahead with your question.
Great. Yes. So a couple of things. 1 on coal. Why is it taking 2 to 3 years to exit thermal coal?
Are you including Cerajon as well in terms of assets you want to exit? And how do you think you can exit that? And then maybe secondly, well, on met coal, are your views changing around met coal is given the moves to decarbonize deal in Europe? Is the future looking grimmer for met coal? And then maybe with De Beers as well, what sort of cost savings do you expect from this business transformation?
And where do you think prices will rebase once the market comes back? Thank you.
Myles, there's about 5 questions in that lot, so I'll try and unpack them as quickly as I can and deal with each of them. Firstly, on the thermal coal transfer, certainly, from South Africa, the response from the government has been very positive and constructive. So if we ultimately go down the demerger proposal, and that's the most likely route, we'll certainly, I think, do that in better than 2 years. Sarahon, people know where we stand on Sarahon. We will exit at some point.
But we are also being very respectful of our 2 partners in terms of our processes. We maintain a dialogue. And at some point in the next 2 or 3 years, I think we'll be gone from there as well. Again, I don't want to be or can't be too hard on the timing of that because again, we've got 2 other I was going to say customers, 2 other competitors and 2 other colleagues that we have in that asset, we're making sure that we deal with that the right way. But again, we should be out of both in that time frame.
Certainly, the South African change will be much quicker. In terms of met coal, look, the carbon issue is obviously a question, but I think most investors are a little more sophisticated than people give them credit for. They understand that steel is absolutely critical and that you need met coal in the mix and it will take time to make the changes. But there's no doubt that in terms of capital allocation, we keep an eye on when those changes and how those trends will change. We do for iron ore as well because we will see more recycling.
By 2,035, we think steel will make steel recycling will make up 50% of the mix. We think iron ore starts to change shape by 2025. So with both iron ore and met coal, we'll keep an eye on capital allocation. We'll tend to operate and run to pull a bit more cash. And our new investments will go into those commodities or products that we think are longer term, the big game changers.
And that's why we think we're very different to our competitors. We've got a much longer view. We've got a portfolio that's set up for the future. And certainly, we're making sure people are very clear that we're building this business for long term performance. In terms of De Beers being consistent on the different product side, in the last 10 years, De Beers has delivered around 10% sustainable free cash flow, so that's before its growth CapEx.
We're currently operating about 27,000,000, 28,000,000 carats. We can actually take that up to about 37,000,000, 38,000,000 carats if the market is strong. We expect supply to drop away 15% to 20% in the next 2 or 3 years. You know about Argyle and there are other changes in the market that are occurring. So structurally, we think the business is in good shape.
We are, when you look at it, running the best diamond business in the world and it has been for 90 years. So there's no reason for us to think differently about that. We think prices will likely be stronger on the basis of supply falling away. There hasn't been a major discovery for 10 years. But in terms of what Bruce is doing, the rest of the business has made significant improvement in our cost structures.
De Beers has made improvements, but it hasn't come as far down that cost curve. But also, it has to think about the midstream, downstream and its marketing investments. So Bruce is thinking right across the value chain, looking at improving its cost and looking at how we continue to evolve the business for the long term. And I know 1 or 2 old timers from De Beers said, it's not like it used to be. Well, it can't be.
We're not about shaping this business for the last 20 years. We're about shaping this business for the next 20 years. And so Bruce's work that we'll talk about in the next little while because obviously, we have to take all our employees through it is about improving our costs. It's about making sure structurally the business is set for the long term. And it's about making sure that we're the key supplier getting the right price for a rare product that's becoming rarer.
And certainly, we think it's positioned for the long term.
Okay. Is there a cost target at this point then?
We're not talking about the costs until we finish our processes. But again, we wouldn't be doing it if it wasn't worthwhile.
Our next question comes from the line of Ian Russell from Barclays. Please go ahead with your question.
Thank you. Hi, good morning. Just two questions from me. First of all, on your ESG targets, I wanted to get a bit more insight into what do you think the cost and CapEx over the time or in the near term will be to achieve your GHG reduction target energy efficiency, etcetera, by 2,030, I guess initially and then ultimately carbon neutral by 2,040. Have you done much work on that sort of margin abatement curve?
And what implies sort of carbon price you need to achieve that in terms of cost parity? And then the second question, just on what you mentioned in the earlier answer, Mark, about your views on met coal and iron ore sort of changing market dynamics. Does that make your view about, I guess you said capital allocation decisions will change, but I'm curious what your views would be then on a miranda, Grosvenor debottlenecking? And also curious just your thoughts on this Kapskievel project approval given that sort of view you've just given on capital allocation?
Yes. Okay. Again, a lot in that, Iain. Let me pick up the issue of carbon costs. What you'll find in the Cap Stevel approval, timber and the guys have actually used carbon costs and we've costed that in the proposal against the South African carbon costs.
Look, I've seen carbon cost estimates ranging from $20 a tonne to $100 a tonne. I still think that's a moving fleet. We look at all the scenarios and try and work out what we think it's worth. But if I just looked at the diesel current diesel costs, capital costs and operating costs, In looking at the solar array that we're looking at for Mogalakwena, oversizing, providing our primary power source to the plant and then using excess capacity to generate hydrogen in a closed loop system and then running our trucks. And it's the truck that we're looking at is a fuel cell battery hybrid.
It will be the 1st off highway truck in the world designed by the Anglo American people. We've had some people supporting us, but our teams actually designed it. We believe the fuel cost on a total cost basis will be actually lower than what it costs us to run that system with energy off the SA grid and diesel fuel imported at global prices. We're not going to talk capital numbers yet. We will start actually explaining those numbers when we start presenting our sustainability strategies and when we talk to the detail on Mogalakwena.
So we'll start unpacking the detail towards year end and as we go forward. Stephen, I see your hand up, you'd like to say something?
Yes, thanks, Mark. You mentioned in your opening comments about some of the renewable power and energy contracts we've got in Brazil and Chile as an example. They are in fact and will be substantially cheaper than what we had in place previously. And I think you'll see more and more of that coming through as you get scale and volume in that sort of segment. A couple of other quick comments on that.
A lot of the things that will help us get there are actually really good for our business anyway. So, some of the technology improvements, the coarse particle flotation, etcetera, that could that maybe crush is good for the business and good from an ESG perspective. So they're actually a really integrated spend that help drive you down that course. And obviously, some of these contracts and developments, it would be a question of, well, who spends the capital and how do you pay for that over time. Not all of those things will necessarily be us spending the capital, but us getting the benefit of the outcome of that.
Maybe then just a couple of comments and I'll throw back to Mark on met coal. Again, capital allocation, we often do think in a 5, 17 year world as we allocate capital. And so met coal, I think, will still be a major part, particularly high grade met coal, a major part of the steel production for 15 plus years. So we're still well inside that in terms of capital allocation. The Moranbah growth and the debottlenecking, no, that won't be impacted by that.
The rapid payback and returns on that, it's really an expansion and efficiencies through the wash plant that will give us the additional volume and returns. And Cap Stevel South, as Mark mentioned, took full account of carbon pricing, community expectations, water, all of those sorts of things in our consideration and also has a fairly rapid payback through a 5 to 7 year period. So again, well inside and again, a high grade product like we currently produce from Coomba. Mark, back to you.
Yes. Thanks, Steve. That was a good summary. Ian, to sort of capture that in a final comment, we believe that the capital implications are not significant on the basis that there'll be combination of what we invest in and Stephen's point around 3rd party supply and there are people that are providing different types of structures and deals where they can have shared installations that will reduce our upfront capital cost and are very competitive from an operating cost perspective. And we're in a number of those conversations, and we've seen some of those already come through.
And on the operating costs are actually then lower than what we've got as infrastructure in place. So it works both ways. And as Stephen said, Moranbah Grosvenor debottlenecking, obviously, we'll get through the investigations and understand the key issues on Grosvenor. It will change, I suspect, a few things the way we operate. But the debottlenecking is a pretty straightforward project.
It's got a rapid payback as has Cap Stevel and other types of projects. So we'll continue to invest in the business, but you won't see big step outs in terms of substantial new projects. They're more likely to be in other parts of the business, if I could make it. It's a lean towards other parts of the business as opposed to a massive step out at this point in time because the prognosis is still good in met coal and iron ore, but prices will track down. We think the opportunity to make better returns will shift into those areas over time.
Barbara, can I just jump in, please? Guys, we've got 5 more questions in about 10 minutes. So questions, could you keep to one question per analyst? Of course, we have the roundtable afterwards. Thank you.
Our next question comes from the line of Tyler Brodaw from RBC. Please go ahead with your question.
Great. Thanks very much. Mark, as Stephen mentioned, you've got far more growth underway than peers. Amplify has also showed a really strong outlook for the PGM market, especially with the burgeoning hydrogen economy. It feels like it's really picking up steam there.
I guess, presumably any molecule expansion would be very high IRR, but how are you looking at that within the context of your already robust growth profile? I guess how do you look at incremental growth spending from here?
Look, it's a pretty stiff competition for capital across the group, I've got to say. We've got good opportunities, yes, in Metco, but De Beers and obviously, the ship. But it's a competition for capital. We made judgments about what we think the markets will look like. So nothing less than you would expect.
In terms of the PGM business, Mogalakwena has a few different types of options. We've got the ability to expand the open cut. And with the new exploration work, we've also got the ability to tee off with shallow declines into high grade underground ore bodies that give us the ability to utilize our processing infrastructure more effectively. And those costs from those operations are very competitive and in some cases, lower than the open cut operating costs. So as we've done our exploration, we've developed a whole new range of possibilities and options.
And so where we should spend in the mine versus on the processing side is we're just trying to look at getting that balance right. We're also creating a lot of lower grade material out of Mogalakwena as well, which is very low cost material when you put it through the process. So we're getting those balances right to get the capital allocation right. So at the end of the year, we'll be talking about the preferred option for Mogalakwena, and it will likely be a bit more from the open cut, future developments in underground and there will be some processing configuration changes. And we'll try and utilize our facilities with more of our own feed because that will drive us further down the cost curve.
So that's one example, Todd. I could go through more, but I think that's you get the flavor of where we're going.
That's perfect. Thanks very much.
Okay. We now have another question and it comes from the line of Dominic O'Kane. Please go ahead with your question. And Dominic O'Kane Corr from JPMorgan.
Good morning, guys. Yes, just a quick question. Just a follow-up on De Beers, so the business changes that are afoot. I just wonder if you could maybe you have mentioned it, but just maybe dig into those changes in a bit more detail. Where can we expect to see the most significant change?
Is it in the upstream, the midstream? And within that, given the kind of the experience of the site holder system during the global lockdown, should we expect any changes to that site holder system over time?
Thanks, Johnny. Look, the let me just talk in the broad. Firstly, from an operating perspective, and I use Wanang as an example, our shovel productivities have improved 40% to 50% and the team is on the trail and chasing some of our best performing operations. So they'll continue to improve. And so we're taking those into account.
The changes that are up our Venetia productivities, our productivities across all parts of the operation and looking at continuing to reduce our costs in those parts of the business. That's one. Our overheads, our administrations always got to look at tightening up and trimming those costs. We also want to invest more in diamonds and in our brands. Our brands forever market being growing much quicker than the rest of the industry.
And it's very clear that you can get what we think is fairer value for your products if you've got the right brand and people understand what you're trying to do with the product. And so our investment strategy around marketing is very important given the last 2 or 3 years and the positive growth we've seen in forever, Mark, that's also a very important part of our strategy. So understanding right the way through to the consumers, as well as the position with our customers. Now our site holders are our direct customers. They are part of the change.
We are consulting them in the process. And so they'll be part of the restructuring. Now to be fair to them, we would we think it's important to have those dialogues, but we are flagging there's an important exercise that we've got to go through in making sure that they understand who will get what, how we will position those conversations. And I'm not going to preempt what those conversations will look like. But again, the whole value chain has to keep evolving for the world that we have and how we're competing with other discretionary spend products.
And so for us, it's a natural evolution. As I said earlier, it's not about the last 20 years, it's about what we see today and for the next 20 years. That's how we're creating De Beers or continuing to transform De Beers.
Okay. Thanks.
We have a question coming from the line of Sylvain Brunet from Exane. Please go ahead with your question.
Good morning, guys. So let me ask you one question on Met Coal, where you change the volume guidance for next year. I just wanted to get a better sense whether this was a way to derisk Rovenor until you get more visibility? Or is there any precise reason behind it already? Thanks.
I think
the key point to make, Sylvain, we don't expect production from Grosvenor this year. And we're not anticipating production in the first half next year either. So it's likely more likely that we'll commence again in the second half of next year. We haven't gone beyond that. Stephen, do you to say anything on the actual guidance numbers?
Mark, I wasn't sure I heard the question quite clearly, but nothing too much to add from what you were saying in respect to Grosvenor. I didn't understand the rest of the question. Okay. Why?
No, no. It's purely a Grosvenor issue that we're dealing with in terms of any of the change numbers. And we don't expect Grovener to be in the mix until probably second half next year.
Okay, thanks.
Our next question comes from the line of Oliver Greycroft from Berenberg. Please go ahead with your question.
Hi, thank you. You hit record throughput at Kolawazi. Is this sustainable? And what's the medium term production and grade profile like there? Thanks.
We've certainly seen good throughputs. Grades are a little bit high, but we had forecast the grades to be higher. In terms of the forecast, we are chasing a 10% improvement in production. We're edging towards that over the next year. And then around 20%, which is the move to 2 10 tonnes an hour, which is timed, I think, around 22, 23, in that sort of range.
Grades will come off a little bit back to the longer term average, but we're going to see grades for a little while yet, I think 12 months 6 to 12 months. So yes, the immediate term is very, very strong, and we expect to see continuing volumes through the plant. And then we'll do the 2nd step up to the 210, aiming to hit our 23 target in terms of volumes. It's a little bit lighter than that, but we'd like to get there a bit quicker.
Thank you.
Our next question comes from the line of Sergey Donskoi from Societe Generale. Please go ahead with your question.
Yes, hi. To complement a question on the other copper asset. How dire is currently the situation with water at Los Bronces? And when do you think you will be in a position to come up with a complete solution to this issue?
The guys have actually been doing very well. They've been able to trade water and find new sources of water. So the forecast that we put on a full year basis was on the fact that we thought we'd have a pretty dramatic drought and that we would only include those sources that we believe we could get to. The good news is we've had lots of snow and rainfall even to the extent that we're not able to mine on a few days because there's so much snow. So we're certainly in a good place.
I think we're just under an average year rainfall at the moment. So that basically pushes back the water problem. And with Aaron and the guys and the work they're doing, I think as we go into 2021, we're going to be in pretty good shape. We won't say anything more than that until we get to the end of the year because the season and we hope the rainfall season is not finished. But I'd have to say today, I'm a lot happier than I was at the end of year results.
So really pleased with the progress. And so we expect Los Bronces to make a strong contribution for the balance of
the year.
Thank you. Barbara, I believe that is the end of the questions, correct?
That's right. We have no further question at this point, so I hand the conference back to you.
Thank you. Look, thank you, especially those last 5 for speeding up. Apologies for that, but we do have the roundtable coming up next. So look, thank you very much indeed on behalf of all of us for your time this morning. If there's any further questions, you know where we are, please to get in contact us.
We'll be very happy to try and help. So thank you very much. A very good morning.