Mark Cutifani, Chief Executive, Anglo American plc:
Sir John Parker, members of the Board, distinguished guests, shareholders, members of the Executive Committee, colleagues, ladies and gentlemen.
As the incoming Chief Executive in his first month, it is a privilege to be given the opportunity to speak to our shareholders at an Annual General Meeting. In making my introductory remarks I would also like to acknowledge Cynthia Carroll’s contribution to the organisation and to wish her well for the future. We share a passion for safety and I have made the point from day one that my focus on people and the provision of a safe and healthy workplace is a pre-requisite for doing business in, and with, Anglo American.
It is a great honour to be appointed to the role of Chief Executive Officer of Anglo American. Our company has a storied history, beginning with its proud South African origins and extending to the international stage as it has established itself as a major l diversified mining group. However, while many things have been achieved, we cannot continue to do business as usual. Our share price is languishing compared to our peers and we are not being rewarded for the potential we have embedded in the asset portfolio.
In that context, let me say that I recognise that South Africa remains critical to our shareholder-value proposition. Likewise, we remain important to South Africa’s longer term development prospects. I am confident that we can operate more effectively in all of our key jurisdictions, recognising that our local communities and our host nations are our most important stakeholders. We must be driven by our desire to deliver value to our shareholders while being guided by our understanding of the need to deliver long term sustainable social outcomes.
On a broader front, in my previous roles with AngloGold Ashanti, Inco and Vale, WMC and Rio Tinto, I have had responsibilities in almost every one of Anglo American’s development and operational jurisdictions. Furthermore, that experience across more than 20 commodities has extended from technical and commercial roles through to some unique experiences in social developments in both developed and developing countries across the globe.
In my 36 years in this industry, I believe I can point to a track record of financial discipline and business delivery, alongside a commitment to progressive social change that is consistent with the Anglo American values around caring for people and for the communities in which we operate.
In making my first specific remarks around my personal business philosophy I will start with leadership and people.
As Henry Ford once said: “You can take my factories, burn up my buildings, but give me my people and I’ll build the business right back again.”
People are the business. Anything that we accomplish with our resources, the assets we have built and the capital we invest is through the design and actions of our people. Leadership must be focused on people, providing the vision and the drive to deliver on our potential.
A team that has the vision to lead the industry in the delivery of sustainable value must do more than merely talk about the word ‘value’. We must create the conditions and live the values to allow people to trust each other, to work as a team and to hold each other accountable for delivery on our commitments to one another. This is how we create an exceptional business. And this is how we will create relationships with our host communities in which people can believe.
Leadership is about delivering on our potential.
There has been considerable media commentary on strategy in our industry recently, with new chief executives promising not to make acquisitions, not to develop new projects and to return cash to shareholders in ever increasing amounts. I will not make promises where I am not sure we can consistently deliver value or where we do not have an execution strategy. In my view the difficult issues we have seen in the industry over the last five years relate to a lack of capital discipline, a lack of focus on returns and incapacity to translate good intent into business results. In Anglo American, we take full responsibility for addressing that issue. We cannot over-simplify the issues by attributing poor performance to one or two philosophical mantras. We will build our strategy guided by the need to spend within our means and to deliver attractive capital returns within a risk profile that we are comfortable allows us to deliver on our promises. Delivery on commitments must be supported by the establishment of an execution discipline and structures that leave as little as possible to chance or factors outside of our control.
As an industry, we have lost sight of what the obvious issues are. So, we will look at a new project development, a potential acquisition or any other transaction on the basis that:
- It is the best place to commit that capital compared to all other options;
- We have enough information to be confident we have got the numbers right and that we have fully appraised the risks and the opportunities; and
- We have the team that can execute in line with the plan.
While it should go without saying, we will again reinforce the notion that all investments must more than compete with the natural alternative; that is, to return cash to shareholders. That simply demands that our individual and portfolio focus must be on delivering returns well in excess of our weighted average cost of capital.
So, in collaboration with the executive team and the Board, over the next three months we are conducting a detailed strategic review. It will cover such fundamental aspects as:
- A compelling confirmation of our commitment to people and the provision of a safe, healthy and productive workplace.
- As a major diversified company, we need a more focused articulation of the value proposition that will guide our strategic positioning.
- An operating and project delivery model that takes inspiration from beyond the mining industry, to support the implementation of the plans and disciplines necessary to improve our ability to execute our strategy. In doing so we will also establish the underlying processes necessary to improve our competitive operating position, to improve margins and to increase capital returns.
- The basis of a capital-management regime, including “constructive competition” in terms of capital allocation in order to drive a strong value-creating culture. This is the issue that is crucial: that we ensure that money goes to the right place. We will also be considering a different capital model that takes more cognisance of individual capital risk, more like the approach that the petroleum industry takes towards the syndication of capital. That is, we will be more open to joint ventures where we partner with others to tap broader operating or other experiences along with lowering our incremental capital risk on specific projects.
- A renewed focus on technical innovation, where the application of “intellectual capital” drives the creation of longer term competitive advantage.
- A consistent approach, wherever we work, towards strengthening our Sustainability Framework. This local-focus approach will help us recalibrate our social development programs so that our investments more effectively impact our most important development partners. This approach will be developed consistent with, and within, broader government development structures – as it is not our intention to work outside these structures, but to better complement these frameworks with our local focus and more effective community and engagement processes.
- Making sure we have the right people in the right roles doing the right work and that everyone understands what they are individually accountable to deliver. This is a cornerstone in delivering continuous improvement and shareholder value.
- An understanding that our shareholders provide us with capital and support in the expectation we will take appropriate account of their views to deliver both exceptional and sustainable long term value.
As a point of principle, I believe that if there are no investment opportunities that deliver above our risk/return hurdles, we should return cash to our shareholders.
To deliver on our potential we will have to put in place new processes that reach outside the mining industry for their inspiration and application. To be brutally frank, our industry lags the petroleum, manufacturing and aviation sectors and other more progressive and innovative heavy industry players in terms of operating practices – there is no reason why our industry should not use the best from all of these “restless innovators”.
In the last 10 years I have worked with a select group of industry colleagues to develop and apply the mining industry’s most comprehensive fully integrated operating model – it takes a good part of its design from a wide range of leading practices from outside the relatively narrow confines of the mining industry. The consistent evidence is that this model delivers, over a five year period, a material underlying improvement in the productivity of our operating processes – without any significant incremental capital investment. That is the challenge for us as a management team. The key measures for such improvement must be productivity, reduction of waste reflecting unit cost improvements and the delivery of improving capital returns.
We must become leaders in the industry in innovation.
When we integrate this type of approach with an experienced technical knowledge of how to extract value from our resources I have no doubt that we can lead the industry in value creation.
We will apply the same disciplined approach to all of our major investments and transactions.
In terms of our people, we must work together as a team to ensure we deliver on our collective commitments. Our commitment to work together and to hold each other accountable to deliver on our potential must be relentless.
Finally, as the leader of your Executive team, I commit to strong, honest, responsible and accountable leadership.
Strong leadership is clear, direct and focused on what has to be delivered.
Honest and responsible leadership takes the time to work with partners to understand the inherent complexities of our world to craft technical, commercial and, above all, socially sustainable outcomes in our broader global context.
Accountable leadership defines the understanding in the leadership team that we are ultimately accountable to those that put their trust in us to deliver on the potential in the assets we have at our disposal.
I have absolutely no doubt that Anglo American has the people and the physical and financial resources to deliver on its undoubted potential. I look forward to leading the Group and the team in striving to exceed your expectations.
We thank you for your support.
