Cynthia Carroll, Chief Executive, Anglo American plc:
Thank you, John.
Good morning, ladies and gentlemen. I’m delighted to see
all of you here today. Thank you for coming.
2009 was an extraordinary year for the mining industry. And one
of great change for Anglo American.
I’m going to talk briefly about the global economy and how
it has affected our industry…and I’m going to look at
our performance in light of those global economic conditions.
Then I’d like to explain the steps we’ve been taking
to develop and modernise your company.
So let’s start by looking at the economy in 2009.
It’s a pretty simple story to tell. But believe me, it did
not seem so simple when we were right in the middle of it.
In early 2009, the world economy collapsed following the
unprecedented financial crisis in the autumn of 2008.
As the year went on, varying degrees of confidence began to
return to world markets. Alongside the pick-up in industrial
activity, the prices of many of our commodities increased sharply.
Recovery was driven principally by the emerging economies led by
China and India, while the picture for the developed world remained
rather more subdued.
This backdrop still stands, though we’re now seeing signs of
recovery in the OECD countries to support the ongoing strength
elsewhere. This is certainly reflected in today’s
substantially stronger commodity prices.
So what was the impact on Anglo American?
Well, I’m pleased to report that the decisive measures we
put in place to position the Group through the downturn proved
effective. We saw strong performances across our businesses and
delivered a solid operating performance, with operating profit of
$5.0 billion and underlying earnings of $2.6 billion.
And we achieved that as we continued to invest in and develop
the business for growth.
Let me tell you how.
Strategic vision
The first thing to say is that we have a clear ambition, and
everything we do, every day, is designed to achieve it.
That ambition is for Anglo American to become the investment,
the partner and the employer of choice in the mining industry
– in short, for Anglo American to be the leading global
mining company.
We shall achieve that goal through our operational excellence of
world class assets in the most attractive commodities. And we shall
achieve it while maintaining a resolute commitment to the highest
standards of safe and sustainable mining.
We have already become a much more focused and
performance-oriented mining company.
In 2009, we made significant progress on several fronts.
We:
- restructured the Group;
- embedded significant cultural change; and
- achieved a step change in safety performance.
All this while continuing the significant cost and efficiency
initiatives that are taking Anglo American into a new, more dynamic
era of value delivery.
Restructuring achieved
Let’s talk about the way we’ve reorganised the
business.
Beginning in January 2009, we worked on a thorough, strategic
and organisational review of Anglo American.
We wanted two things.
- Number one, a robust strategy for long term value
delivery.
- Number two, the right business structure to support that
strategy.
The two reviews ran in tandem. When the Board met in
Johannesburg in early June, we agreed to focus on what we believe
to be the most attractive commodities: copper, diamonds, iron ore,
metallurgical coal, nickel, platinum and thermal coal.
Later in the month we received the approach from Xstrata to
merge the two companies. It was no big surprise. Naturally, our
strategic review had examined our competition in terms of portfolio
composition, quality and strategy. The Board was therefore in a
very solid position to tell Xstrata that the proposal was just not
worth pursuing. There was no strategic fit.
Then, in October, we formally announced the outcome of the
strategy work and the second area of focus for us – the
Group’s reorganisation. We stripped away the divisional
layers of management to create a more streamlined and efficient
structure, placing the management teams for each of our seven
commodity businesses in their core geographical areas, and making
them directly responsible for operational performance, project
delivery and for driving down costs.
At the same time, we rationalised the corporate centre to focus
on creating further value. Close collaboration allows us to realise
substantial benefits from Anglo American’s scale and
performance-oriented culture.
I’m referring to leaders who are relentless in their drive
for value, the sharing of best practice based on wide experience in
different territories, technical innovation, operational know-how
and the pursuit of synergies in key value-driving functions such as
supply chain and asset optimisation.
We’ve worked quickly. This new structure is now
implemented. It gives us a benefit not only in the way we run the
business, but also in cost. The associated, annualised cost saving
is approximately $120 million and we reduced our total workforce by
23,400 during the year.
The strategic review also identified businesses no longer core
to our future: we will divest our zinc assets, Scaw Metals,
and phosphates and niobium businesses, together with Tarmac. The
preparatory work to separate these businesses is under way.
I’m pleased to say that we have received a lot of interest
– the process to sell the zinc portfolio is well
advanced.
Cost performance
We said we wanted to create additional value from asset
optimisation and global supply chain programmes. We are doing just
that.
The target we set was $2 billion of savings by 2011. We are on
track for that, and have in fact restated our target upwards.
We will now deliver that $2 billion just from our core portfolio
– so it doesn’t take into account any contribution from
businesses to be divested. In 2009, we generated more than $1.6
billion of savings, ahead of expectations.
Naturally, we continue to exercise tight cost control.
We’ve delivered cost reductions across the Group, most
notably at our Diamonds and Metallurgical Coal businesses.
And Anglo Platinum is truly being transformed. The business
has a clear strategy to move the cost position of its operations to
the first and second quartile. In 2009, it achieved flat cash
operating unit costs and significant further productivity
improvements.
The other good news is that following a major restructuring of
the operations at Rustenburg and Amandelbult to enable greater
operational control and flexibility, the company has removed
140,000 ounces of high cost production – about 6% of our
annual production – by placing three shafts on care and
maintenance.
We’ve provided strong support to the recapitalisation of
both Anglo Platinum and De Beers in recent months, positioning them
to take full advantage of economic recovery and the delivery of
their long term growth prospects as respective industry
leaders.
Divestment programme under way
And we’ve made excellent progress during 2009 in disposing
of non-core assets. As we reported at the half year, we disposed of
our residual shareholding in AngloGold Ashanti in the first quarter
of 2009. We sold our shareholding in the aluminium products company
Hulamin in July and in Tongaat Hulett in August. Those three
disposals generated total proceeds of $2.4 billion.
In addition, during the first quarter of 2010, we’ve
agreed the sale of Tarmac’s aggregates businesses in France,
Germany, Poland and the Czech Republic and its Polish concrete
products business. Total proceeds will be approximately $400
million.
Delivering growth
Our overall strategy is very clear: we deploy capital in those
commodities that deliver long term, through-the-cycle returns for
our shareholders. These are commodities that have strong
fundamentals and attractive risk-return profiles. We have developed
a portfolio of world class, low cost, long life operating assets,
together with growth projects that focus on those most structurally
attractive commodities.
We had a choice to make when the economic downturn came. We
could have pulled back and stopped all major investments.
Instead, we continued to develop key strategic growth projects. It
was the right choice: we are now in a good position to capitalise
on the next phase of global economic growth.
I’d like to focus for a moment on our four major projects
– the Minas Rio iron ore project and the Barro Alto nickel
project, both in Brazil, the Los Bronces copper expansion project
in Chile and the Kolomela – previously Sishen South –
iron ore project in South Africa. I’ve visited all of them in
the last year or so and have been really impressed by the way our
teams are working together efficiently and effectively, towards our
common goal. I always come away excited by the energy, enthusiasm,
optimism and commitment that our people are showing around the
world – at all levels.
Each of those four projects is well placed on its respective
industry cost curve, each has a long resource life and each has
further expansion potential. They’re all on track to enter
production, some from next year onwards, in time to meet what we
expect to be continuing growth in commodity demand. I’ve
picked four – there are many others in development and going
through various stages of feasibility, not least an exciting
greenfield copper opportunity at Quellaveco, in Peru, where I had
constructive talks with the President just last month, and a large
metallurgical coal project at Grosvenor, in Australia.
We will invest $4.2 billion in new projects this year, out of a
total planned capital expenditure for 2010 of $6.0 billion.
To mention just two of these: the Barro Alto project in Brazil will
produce around 40,000 tonnes per year of nickel, starting in the
first quarter of 2011. It’s on budget, and it’s
on schedule. Life of mine production costs will be around
$3.70 / lb, and that compares to today’s nickel price of
close to $12 / lb. In Chile, the Los Bronces copper expansion
project is also on track and on budget and will start production in
the fourth quarter of 2011. It will produce 370,000 tonnes
per year of copper at the outset, and the cost per pound will be 80
cents over the life of mine – compared to a current copper
price of over $3.50 / lb.
So as you can see, we have a lot to be excited about, and we
have made significant structural change in this past year.
It has been accompanied by very positive cultural change. Our
people have really taken to heart the importance of performance,
that there are ways we can all work more profitably. They’ve
taken up this performance-oriented culture and they’re
running with it – everywhere we operate. You heard our cost
savings target – we’re getting there because the
mindset and focus have changed.
Safety performance
There’s been a similar cultural change in our attitude to
safety. Mining is a tough business. But there are ways to mitigate,
and even eliminate, the risks. We really can achieve a safer
working environment. It’s in our hands and we’re doing
it. It is an attitude that is now embedded in the culture of Anglo
American.
These aren’t just words. There’s hard evidence.
Anglo American’s safety record when I joined the Group was
unacceptable. Everyone, throughout, has been committed to
turning this around.
In 2009 we achieved a 55% reduction in fatalities compared to
the start of 2007. And we reduced our lost time injury
frequency rate by 52% over the same period. In the first quarter of
2010, fatalities were 67% lower than the same period last year.
Now I know that percentages tell you nothing of the human
tragedy involved. And I am truly saddened by the loss of life on
company business last year. But the great majority of our sites
operate without any fatalities – 92% of them during 2009
– and we have many examples of exceptional safety
performance.
Anglo Platinum, for example, operated for extended periods
without incurring a single fatality. At Kumba Iron Ore, Thabazimbi
has achieved two years LTI-free; our base metals businesses were
fatality-free for the first time since 2005 and Iron Ore Brazil
delivered a 98% improvement in its injury frequency rate –
and recently reached the milestone of 10 million man hours worked
without a lost time injury.
That’s good, but for the Group as a whole it’s still
not good enough. You heard it from the chairman. You will hear it
from me. We shall work to reduce accidents still further and we are
relentless in striving to achieve our goal of zero harm. This is a
priority in Anglo American.
There’s other evidence of a healthy company culture. Last
year we saw many of our people wholeheartedly involved not only
with those processes that bring direct business benefit, but also
with the way Anglo American engages with the world. The
expectations of mining companies are rising: I welcome that.
We’re moving fast to continue to meet and exceed those
expectations.
Sustainability
The chairman has talked about some of our initiatives. Let me
give you some other examples.
We are committed to environmental stewardship and minimising the
environmental impact of our operations. Our sustainable development
agenda progressed on several fronts during the year. One of the key
elements of our strategy is the management of water: we have to
find ways of using water more effectively in the communities and
catchment areas where we operate. Effective water management
systems are now in place across all of our operations.
Last March, we launched the Anglo Environment Way (AEW). It sets
out a consistent approach to responsible environmental management,
supporting our vision for minimising harm to the environment by
designing and operating all of our operations in an environmentally
responsible manner.
And we conducted 13 biodiversity peer reviews during 2009, four
in conjunction with the conservation group Fauna & Flora
International.
Finally, we are very conscious of the energy we use. Mining is
energy intensive: our efforts to improve energy efficiency continue
to be a major focus.
There are other areas where we are making a sustainable and
positive difference to the communities in which we operate.
In South Africa, for example, I’m enormously proud of the
new enterprise development venture we’re involved in which
builds on our already highly successful Zimele programme.
It’s our commitment to the United Nations Business Call to
Action – and we are the first major mining company to sign up
to this important initiative. We’re establishing 12 new
enterprise development hubs in areas of high unemployment. We
believe the venture will create 25,000 new jobs in 1,500 new
businesses over the next seven years. Today through the
expansion of Anglo Zimele we support around 10,000 jobs in South
Africa, and by applying the model in countries like Chile we have
created a further 8,000 jobs. We’re now rolling this
out further, into such countries as Brazil and Peru.
As for health, we’ve been dedicated to the issue of
fighting HIV and AIDS since the 1990s – over 80% of permanent
workers in South Africa now regularly test for HIV each year
– and in 2008 we extended our policy commitment to include
the dependants of our employees. In 2009, we were delighted to have
our pioneering work recognised by the Global Business Coalition on
HIV/AIDS, Tuberculosis and Malaria. They awarded our South African
coal business the Business Excellence Award for Best Workplace
Programme. It is an award of which our colleagues in South Africa
are justifiably proud.
I hope that gives you some idea of the work we have been doing
across our businesses. I’d like to close with a few thoughts
about the outlook.
Outlook
Broadly, I believe we can be reasonably optimistic.
In 2009, it took a huge policy stimulus and a turn in the
inventory cycle to drive the rebound in industrial activity. In
2010, the positive effects of these factors will fade. We feel
economic headwinds in the advanced economies, where continuing
balance sheet repair will constrain demand prospects.
But the outlook for the emerging economies is brighter. Even if
there are further economic setbacks, China and India in particular
are likely to grow strongly. We expect a robust demand for
commodities as the pattern of economic growth shifts towards these
fast-growing emerging economies. China will continue to upgrade and
develop its infrastructure. The longer term potential of India and
Brazil will provide further support.
These economies also have the greatest scope for strong consumer
spending growth, which leads demand for platinum group metals and
diamonds.
That’s why I can say with some confidence that the medium
and long term outlook for the mining industry remains strong.
And if the outlook for the mining industry as a whole remains
strong, your company in particular is well-placed to take
advantage. We have an exceptional portfolio of assets, an
enviable project list and a newly demonstrated ability to
deliver. We have an outstanding workforce, a supportive Board
of Directors – and we have a new Chairman with enormous
experience. We are so pleased – I am so pleased –
to be working with him.
We’ve achieved our restructuring.
We’re managing our ongoing change towards a
performance-driven culture.
In all the territories where we work, right around the world, we
have a clear strategy that directs us towards our common
ambition…to be the investment of choice, the partner of
choice, the employer of choice in the mining industry.
Thank you.
