At Anglo American plc's Annual General Meeting for shareholders in London today, Sir Mark Moody-Stuart, Chairman, and Cynthia Carroll, Chief Executive, made the following remarks:
Sir Mark Moody-Stuart, Chairman, Anglo American plc:
Good morning ladies and gentlemen and welcome to the Anglo American Annual General Meeting. Notice of the meeting was dispatched to shareholders on 11 March and there is a quorum present. I therefore declare the meeting to be duly constituted. May I present an apology from David Challen who is unable to join us today through illness.
We meet to provide you with reports on the management and performance of your company during 2008 – a year of unprecedented economic dislocation and instability. Overall, during the year, the company produced a very strong financial performance with operating profit from core operations climbing 10% to $9.8 billion. Underlying earnings stood at $5.2 billion and earnings per share were down by only four cents to $4.36.
These figures mask, however, the extraordinary pattern of events which unfolded during the year so that, after a strong performance in the first seven months, most commodity prices fell precipitously. From their high points in the first half of the year, the price of platinum had fallen by 59% by the end of the year; copper by 65% and nickel by 69% - as the banking system came close to collapse, confidence and credit drained from the system and global financial markets went into free fall.
We have continued to see that, although some emerging market economies are doing less badly than others, the spread of globalisation over the last two decades, means that the world is far more inter-connected than ever before. Thus, the recession is being felt even in those countries that have pursued orthodox macro-economic policies and whose regulatory systems have not failed. Sadly, from the point of view of the industry, the hypothesis that there would be a decoupling as between the new and old world economies’ has proven to be largely wrong.
Against a background of great uncertainty about the length and depth of the recession, your Board took the difficult decision to recommend that no dividend should be paid. This was done with the greatest reluctance and with a full understanding of the difficulties which our decision may cause for many individual and institutional investors. We entered the recession with a strong balance sheet and with what had been thought of by many, at the height of the boom, as a relatively conservative level of borrowing. However, in the current context, $11 billion of borrowing represents a significant sum. We believe it to be sustainable, against a background of halving our capital expenditure this year and aggressive targets for savings from procurement and asset optimisation programmes. Recently, we have further underpinned our position through the sale of the last tranche of our stake in AngloGold Ashanti and a new bond issue. However, the Board took the view that, in current conditions, cash preservation was paramount in order to maintain the maximum degree of flexibility. We have a strong, long-term business and we have taken difficult decisions intended to position the business for the upturn when it arrives. The Chief Executive will give a fuller account of these issues in her report.
I should, at this juncture, however, note that a number of actions and programmes put in train by the executive, under Cynthia’s leadership, have proven to be far-sighted. Although the company became more acquisitive during 2007 and in the first half of 2008 than hitherto, the largest acquisition we made was that of Minas-Rio for US$7 billion which forms the latest step in a long-term strategy to build a significant iron ore business. Moreover, Cynthia brought to the company a new determination to get Anglo working as a team – as One Anglo – to realise synergies and to share services together with a new, Value Based Management analytical framework. Thus when the downturn arrived we had value creating programmes on procurement, shared services and asset optimisation already gaining momentum.
Let me place on record the thanks of myself and the Board to our employees for their hard work. During the year, the priorities for most of our businesses altered radically; moving from wrestling with the need to expand production to the current focus on asset optimisation and cash conservation. I recognise the very considerable strain that this has imposed upon our people. It was, therefore, with considerable regret that, in February, we announced the need to reduce our workforce – of employees and contractors – by some 19,000 people.
During 2008, we saw encouraging progress on safety with a reduction of almost one third in our fatalities from 40 in 2007 to 27 last year. This is, of course, still far too high a figure and we will continue to focus on the goal of zero harm. I believe, however, that great credit is due to Cynthia for the leadership, courage and commitment she has shown in challenging entrenched attitudes towards safety - not only in Anglo but in the mining industry in general. We had over many years been strengthening our safety systems and technical fixes like reducing fatalities from falls of ground, but Cynthia has reinforced the importance of visible felt leadership and this is now very evident at our mines. I also believe that excellent work has emerged from the tripartite process set in train in South Africa between ourselves, the government and the trade unions.
Over the last 15 months, I have visited Anglo American activities in the Philippines, Peru, Brazil, South Africa, China and Alaska. In each case I have been impressed by the work that I have seen and by the commitment of our local teams to ‘do the right thing’. In Peru, for example, at our Michiquillay project, our team obtained their social licence to explore from the two local communities, in a context in which State representatives had been unable to make such progress over many years. Through their commitment to engagement, trust-building activities and small-scale economic development projects, our team secured the strong endorsement of both communities. We will seek to ensure that we deserve their trust.
Last month I spent some time in Alaska meeting the team responsible for the potential development of the Pebble mine – one of our joint venture partnerships – and local stakeholders. The project has been controversial and I wanted to understand why. The project is in an area long zoned by the State government for mining development. It is, however, close to three streams located in the headwaters of the extensive Bristol Bay watershed, which is well known for its rich salmon fisher. I understand the fears and passions which have been stirred and recognise the cultural and commercial importance of the salmon. But I believe that many of these fears are based on the false assumption that this is a choice between mining and fishing. I am confident that the two can co-exist. We have made it clear that the project will work on the basis of world-class scientific and engineering skills and that we will use inclusive and innovative stakeholder engagement. Our bottom line is that, if the project cannot be built in a way that avoids damage to Alaska’s fisheries and wildlife or to the livelihoods of Alaskan communities, it should not be built. It is on that basis that we will continue to evaluate the project in compliance with the prescribed regulatory processes in Alaska. But, we will do so with a mindset that goes well beyond compliance.
This leads to a more general point about your company and the industry in which we work. The focus that we have created in recent years on sustainable development is not a discretionary activity. We have to be selective about what we do in every aspect of our business. However, just because there is a recession we will not find that climate change reverses itself, that there is more water available in water stressed areas, that the level of HIV/AIDS infection goes down or that poverty becomes less of an issue for some of the countries where we work. All these issues ultimately impact upon our business and upon our role in society. That is why the Board is quite clear that these issues are core to our business and must be managed as such.
Gaining and maintaining the support of the communities where we work is essential. One of the ways in which we do this is through our enterprise development activities. Especially in South Africa and Chile, these are now generating over 13,000 jobs in independent and sustainable small and medium size businesses. Our activities increased substantially during 2008 through the creation of eleven new small business hubs in mining communities in South Africa. In 2009 we will be adding three new hubs in communities which, over many years, have provided labour for the mining industry. We are also creating a new small business initiative in Brazil, to be delivered in partnership with our NGO development partner, CARE International.
Finally, I thank my Board colleagues for their work. We are making some changes today to our Committees. Sir C.K. Chow and Peter Woicke will join the Remuneration Committee and Chris Fay will step down from it. Peter Woicke will leave the Audit Committee. In relation to the Nominations Committee, Nicky Oppenheimer and Sir Rob Margetts will step down; Sir C.K. Chow will join it and I will take over as Chairman.
I had originally intended to step down as Chairman of the Board during 2008 but I was asked to stay on whilst the global economy stabilised. We do, however, intend to identify my successor over the next 12 months. As part of the process of refreshing the Board’s membership, although two long-serving members, Sir Rob Margetts and Dr Chris Fay, are standing for re-election today; they will be standing down in due course as and when we add new members to the Board. I would like to pay tribute to them both. Rob has served as our senior independent director and has contributed greatly to the evolution of our remuneration policies. Chris has chaired our safety and sustainable development Board Committee since its inception and has brought great experience and commitment to bear in holding executives to account on safety issues.
I will now ask the Chief Executive to address us.
