Anglo American plc AGM 2008
Address to shareholders by the Chairman and Chief Executive
At Anglo American plc's Annual General Meeting for shareholders in London today
(15 April 2008), Sir Mark Moody-Stuart, chairman, and Cynthia Carroll, chief
executive, made the following remarks:
Sir Mark Moody-Stuart, Chairman, Anglo American plc:
Ladies and Gentlemen, welcome to the Anglo American Annual General Meeting. We meet to review a further highly successful year in which operating profit from core operations rose by 12% to $8.9 billion – allowing us to continue with our progressive dividend policy through the Board's recommendation of a 15% increase in our dividend to 86 cents which, if accepted, will take our dividends for the year to 124 cents per share. I commend the Board's proposal to you.
I am also pleased to note the significant progress made by the company under the leadership of Cynthia Carroll and her executive team. There is a new vigour and vitality in the company. A raft of important initiatives has been launched to: improve operational performance; to realise synergies between our businesses and to improve the consistency of application of policies and standards across our operations. In addition, the level and quality of engagement with key stakeholders has been significantly increased.
This refreshed approach has been most evident in the handling of safety issues, which has been a consistent area of concern for the Board. Cynthia Carroll has exerted impressive leadership in this area, challenging ingrained assumptions about the inherent dangers involved in mining and creating real belief in the concept of 'zero harm'. Managers are aware that they will not progress in the organisation if they have a poor safety record. Furthermore, through the temporary closure of Rustenburg platinum mine for comprehensive retraining of the workforce in the aftermath of a series of fatal incidents, Cynthia gave a palpable demonstration of commitment to our long-standing dictum that safety must come before production. In so doing she has begun to change the nature of the debate about safety across the South African mining industry with the involvement of Government and the unions. There is still a long way to go but there are some encouraging signs that we are achieving a step change in performance. The challenge will be to ensure that the current intense focus on safety continues and that the current improvement becomes sustainable through a change in culture.
The Board also believes that an intelligent balance is being struck between an awareness, on one hand, that in the current climate assets are relatively expensive and, on the other, of the importance of increased corporate activity for the long-term growth potential of the Group. We have been bolder than in previous years and made several acquisitions to complement the organic growth of the portfolio. These have strengthened our portfolio of copper and coal assets and we have taken major strides in delivering against our objective of establishing the Group as a significant player in the iron ore business through the MMX acquisition in Brazil. The disposal of non-core assets over the last two years was intended to provide a platform for the growth of our core businesses. That growth will come from a combination of an impressive project pipeline, targeted acquisitions and the hard, and unglamorous, grind of improving the efficiency of our existing assets.
In another year of strong financial results I wish to thank each and every one of our employees for their contribution. Over the last year the Board and Board Committees have met in South Africa twice and in Chile. In addition, I have personally visited Anglo activities in Australia, China and the Philippines. In each of these countries I have been impressed by the professionalism of the Anglo people whom I have met. We have some of the best people in the industry and there is a widespread commitment to excellence and to 'doing the right thing'. There is also a good awareness of our Business Principles and key policies. We are currently updating and reviewing our 'Good Citizenship' business principles based on internal and external stakeholder input. Copies of the current document are available at the meeting. The process is almost complete but if any investor would like to contribute to this work, your feedback would be welcome.
Commodity prices remained high over the last year reflecting both the strength of the global economy for most of this period and, in particular, the unprecedented rate of urbanisation in both China and India. But another factor at work has been the industry's relatively muted ability to expand the supply of key commodities at the anticipated rate. The factors that have constrained supply growth include: lengthier permitting processes; the increased importance of gaining community consent; bottlenecks in the supply chain, skills shortages and constraints in the supply of water and energy. These underline the extent to which the mining sector cannot afford to be insular in how it relates to the outside world and how sustainable development considerations are increasingly central to our ability to do business. Moreover, society increasingly expects us to contribute to finding solutions to global challenges such as
poverty, delivering against the Millennium Development Goals and climate change. Some of you may be aware of a pamphlet recently produced by 'Action Aid' in South Africa. This alleged that in communities in the Limpopo Province of South Africa our subsidiary, Anglo Platinum, has been forcing people off their traditional land, has failed adequately to compensate families who are resettled, has not provided them with sufficient alternative agricultural land and has polluted water at schools close to the Potgietersrust platinum mine. I will not go into these issues in detail now – although some of them will, no doubt, be raised in questions – but there is another side to this story.
The resettlement of three communities has been planned or under discussion with the affected communities for almost a decade. In the case of the village of Ga Pila out of over 700 households, only 27 have failed to move; and in the cases of the two Mothotlo villages, which is still underway, over 820 households out of 956 have already moved. Moreover, they have moved to better houses, to villages with improved schools; they now have a clinic and have received more and better agricultural land.
South African law – as in this country – provides for communities to be moved in order to facilitate projects of national importance. But we have instead worked on the basis of obtaining the freely given consent of the community and traditional authorities through negotiation. The fact that all 956 households have signed agreements,together with the support given by the traditional and political leaders in the region, are an indication that the resettlement is based on a fair compensation model. This is not to deny that in an area that has great social challenges that there are enduring problems of poverty and lack of development – but it is our objective that in the coming years the resettled communities will receive a significant net benefit from the mine and the opportunities which it generates.
We take the allegations from Action Aid about water pollution at local schools extremely seriously. On a precautionary basis Anglo Platinum is, with the agreement of the municipality, providing alternative drinking water for the community. We believe that there is, indeed, a problem of elevated nitrates in water from shallow wells in many villages in the wider area – and I welcome that Action Aid brought this to attention. Contrary to what is stated by Action Aid, the data available to Anglo Platinum indicates that this arises from pit latrines or geological factors and not from the mine. Further work is under way to identify the source of the problem and to devise solutions.
In many rural communities in Limpopo Province and elsewhere, often remote from any mining, there is a problem with water quality in shallow wells which can arise from sewage, cattle kraals or indeed underlying geology. It is a major challenge for frequently under-resourced municipalities to fulfil their responsibilities of providing clean water to communities. There are clear limits to what Anglo American or Anglo Platinum can do, but I know that we are happy to work with development NGOs and development agencies to see whether workable solutions can be found to this wider problem. Together with the public authorities we have sought to work with Action Aid – but I understand that last week the municipality felt obliged to adjourn a meeting to compare scientific data when Action Aid tried to turn it into a media circus. Copies of a detailed rebuttal of the points made by Action Aid are available here today and they are also available on the Anglo Platinum and Anglo American websites.
I have worked in the resources sector throughout my career and believe passionately in its ability, when responsibly done, to contribute to wider development. The sector has some distinctive features compared with other industries, of which I would highlight five.
Firstly, we typically exploit resources which are not owned by ourselves but by host governments on behalf of their people – which underlines the conditional nature of our licence to operate. There is, in each country, a legitimate argument to be made about the extent to which a proportion of royalties and tax revenues are recycled to the areas where mining takes place. Secondly, in adding value to natural resources, the sustainability challenge is to
ensure that, during the lifetime of a mine, we contribute to building the social and human capital of the communities where we work so that their capacities and access to opportunity are increased.
Thirdly, our assets are immobile, involve significant up-front capital expenditure and are long-term investments - meaning that we have to live with the judgements we make about our ability to operate ethically in particular locations. This means that we have a very active interest in good governance and a clear preference for working in jurisdictions where the rule of law operates and where there is effective and predictable enforcement of environmental and other legislation which governs our business.
Fourthly, our social and environmental footprint is often significant, bringing with it commensurate responsibilities to local communities – including the need to improve our ability to understand our indirect and cumulative impacts.
And, fifthly, mineral resources are often found in areas where there has previously been limited development and where the sector may offer the only route for progress. This often means working with national and local governments with limited capacities or in weak governance zones and where we may find ourselves thrust into roles more properly filled by the State. It underlines the importance of our seeking to contribute to improving governance through initiatives like the Extractive Industries Transparency Initiative and the Investment Climate Facility for Africa and of the central role of partnerships with governments, international institutions, NGOs, community based organisations and other businesses in producing better development outcomes. These factors provide a backdrop of almost unique complexity for a business. They suggest that we will not always get our interactions right across some 40 countries. But it would be disingenuous of our critics to ignore the efforts that we invest in maximising the likelihood of our getting things right. Hence our leading edge Socio-Economic Assessment Toolbox – or SEAT – process that is now implemented at every one of our established operations; our well established programmes for enterprise development; our leadership in HIV/AIDS; and our new toolbox for long term mine closure planning. I welcome too our growing network of partnerships with NGOs including CARE International on development issues and Fauna and Flora International on biodiversity.
Furthermore, it is important that we look at our contribution to society in the round. Our return to shareholders is a fundamental part of our role as a company but I draw your attention too to the developmental opportunities that we deliver to society including through innovation and building the skills of those who work for or with us. Moreover, it is instructive to note that in 2007 whilst we generated $5.9 billion for investors, we also paid $11 billion to our suppliers, including almost $5 billion to suppliers in Africa; we paid $3.6 billion in wages and employee benefits; and paid or generated some $3.8 billion in taxes and royalties for our host governments to reinvest in services like health and education. The business which we generate for suppliers, in turn, generates further tax revenues.
Finally, ladies and gentlemen, I should thank members of the Board for their work over the last year. In this period, we have seen the departure of David Hathorn as an Executive Director following the demerger of Mondi; of Ralph Alexander and of Bobby Godsell. Let me thank all of them for their contributions. David Hathorn has the important job of leading an independent company in which many of you may, like me, also be shareholders. Ralph Alexander has become chief executive of an energy company with interests in alternative energy sources. I wish them both every success. Bobby Godsell has retired from AngloGold Ashanti and I would like to thank him in particular for his work over many years in both Executive and Non-Executive roles as well as for the significant role he played in the peaceful transition to democracy in South Africa.
I am also pleased to welcome Sir C.K. Chow to the Board. He brings a formidable track record in international business to the Board as well as specific insights into the Asia Pacific region – from where we have not previously had strong representation.
