Cynthia Carroll, Chief Executive, Anglo American
plc:
Thank you, John.
Good morning, everyone. It’s good to see you here today.
Thank you all for coming to our annual meeting, particularly those
who have travelled so far to be with us.
Let me begin with just a brief word on the global
economy. During 2010, we saw commodity prices continue to
increase, with near-record highs recorded for several commodities
by year end. China and India led a strong economic recovery in
emerging economies, following timely policy stimulus; but in the
second half of the year, the advanced economies also gained
traction. The US has strengthened significantly, with positive
trends in domestic consumption and investment spending. Germany and
Japan have also rebounded, helped by surging exports to China.
2010 was a very good year for Anglo American and our financial
performance certainly reflected delivery on all fronts. Our goal of
becoming the leading global mining company is within our reach as
we continue to deliver our world class projects, greater
efficiencies, and pursue new growth opportunities.
But let me first start by talking about Safety. Right across the
business, we continue to focus on our safety performance –
day in, day out. This determination is bringing results. We are
starting to make a real difference to our people within Anglo
American and across the mining industry, particularly in South
Africa, by setting new benchmark standards for safety
practices.
Over the past four years, we have achieved a 66 per cent
reduction in the number of people who have died while on company
business, as well as a 51 per cent reduction in lost-time injury
rates. This represents a significant improvement; however, sadly
and regrettably, 15 people lost their lives in 2010.
This is a stark reminder that we still have a lot further to go
to achieve our goal of zero harm; so we have stepped up our efforts
to achieve this by auditing what we do well and what we don’t
do so well, as well as spreading best practice across the
group.
By way of example, 3,000 employees at our Australian operations
stopped work on the 28th of February this year to discuss and share
ideas on how to improve safety performance. A month on from
that meeting, encouraging signs have emerged with statistics
showing improved safety for March.
Turning to our financial performance; EBITDA climbed to $12
billion; we almost doubled our operating profit, to $9.8 billion
and our underlying earnings per share, which reached 4 dollars and
13 cents. And, of course, we reinstated the dividend, with a
proposed total of 65 cents for the year – our new base annual
dividend level; and you will recall that we have achieved this
while maintaining investment in our major growth projects without
recourse to you, our shareholders, during the economic
downturn.
We are continuing to deliver on our clear strategic
objectives… We have a unique and well diversified portfolio,
in our chosen, structurally attractive, commodities. Our seven
focused commodity businesses are driving superior operating
performances.
Let me just speak for a minute on asset optimisation and supply
chain, because we are really seeing the benefits of leveraging our
scale. In reaching $2.5 billion in 2010, we comfortably exceeded
our target of delivering $2 billion in benefits by the end of 2011
– and this is from our core businesses alone.
We are also seeing the benefits from the re-organisation of our
business as we realise strong productivity improvements and drive
our operations to the lower quartiles of their cost curves. For
example, we’ve transformed our Platinum business, moving it
down the cost curve with a 23 per cent increase in productivity
since 2008, containing cash operating costs below inflation, while
exceeding our platinum production target for the year of 2.5
million ounces.
Elsewhere in the Group, our Kumba Iron Ore, Metallurgical Coal,
and Nickel businesses also delivered productivity gains. Notably,
our associate De Beers is clearly reaping the rewards following its
own comprehensive restructuring, as well as the much-improved
trading environment for diamonds.
Importantly, we have significantly strengthened our balance
sheet through the planned disposal of businesses considered
non-core to our future; we have announced $3.3 billion of proceeds
from divestments, contributing to the reduction of our net-debt
position to $7.4 billion at year end.
I would like to highlight the success of our divestment
programme. This is already well advanced, with our zinc portfolio,
Moly-Cop and AltaSteel, five undeveloped coal assets in Australia
and a number of Tarmac's European businesses all being sold. Then,
in February this year, we announced our agreement to combine the UK
businesses of Tarmac and Lafarge. The 50:50 joint venture will
create a leading UK construction-materials company, with a
portfolio of high-quality assets and strong brands in the
marketplace.
Now, turning to our growth… Anglo American has an
exceptionally strong near and medium term growth position –
we expect to increase our organic production by 50 per cent by
2015. Our four major growth projects – in which we continued
to invest through the downturn – are making excellent
progress, enabling us to start up a new mining operation every six
to nine months over the next few years. We are proud of
having one of the largest organic growth pipelines in the mining
industry, with $17 billion of projects already approved.
And in the next three years, we expect to approve a further $16
billion of projects… starting later this year with the
Quellaveco copper project in Peru – once we obtain the
necessary water permits.
Moreover, as the chairman has mentioned, we are bringing much
more rigour and discipline to the process of project delivery
– an area which traditionally has been a challenging one for
the mining industry.
Looking at our four major current projects – in the order
they will come on stream:
First, Barro Alto in Brazil has already come on stream, as we
produced the first nickel at the end of last month in line with our
commitment to shareholders. Barro Alto uses proven – and
therefore low risk – laterite-processing technology and is
well positioned in the lower half of the cost curve, with an
extremely attractive margin.
We expect Barro Alto’s cash-cost position to be a little
over $4 per pound, while today nickel is trading at around $12 per
pound. Barro Alto will double our total nickel output of
around 40,000 tonnes a year when it reaches full capacity next year
and we are assessing two other nickel prospects in Brazil which
have the potential to add a further 66,000 tonnes of production,
with upside even beyond that.
Also this year – in the fourth quarter – we expect
to commission our Los Bronces expansion project in Chile. This will
produce an additional 270,000 tonnes of copper per year over the
first five years and 200,000 tonnes per year over the life of mine,
at highly attractive cash operating costs, and will make Los
Bronces one of the world’s top five copper producers.
Los Bronces’ reserves and resources support a mine life of
over 30 years and there are also further expansion opportunities
there.
In the middle of next year, the 9 million tonne per year
Kolomela iron ore project in South Africa will begin production
– again, with a very competitive cost position. This will
take Kumba comfortably past the 50 million tonne production level
per year.
And lastly, we have made substantial progress with our 26.5
million tonne per year Minas-Rio iron ore project in Brazil. We
have secured a number of key approvals, including the mining permit
and the second part of the installation licence for the mine,
beneficiation plant and tailings dam. With these approvals in hand,
we have begun the civil works for the beneficiation plant and
tailings dam construction.
It should now take between 27 and 30 months to construct and
commission the mine and plant, complete the project, and deliver
the first ore on ship. During 2010 we continued to study the
expansion potential of Minas-Rio and our latest resource estimate
provides a total resource of at least 5.3 billion tonnes; this is
almost four times the resource when we first acquired an interest
the project.
We have also secured an extremely competitive cost position for the
project by reaching agreement with our partners at the Açu
port on a fixed, 25-year, iron ore port tariff. This gives us a
clear, first-quartile cost position for Minas-Rio. The optionality
we have for port expansion and our priority rights for iron ore
shipments, make this port facility a key strategic asset for us in
Brazil.
Looking beyond these near-term projects, we have significant
further growth options from our $50 billion unapproved and world
class project pipeline that has the potential to support a doubling
of Group production over the next decade.
Mining, of course, is a long term business. That necessitates
taking a long term view… with a company like Anglo American
often considering investing in mining operations and projects not
just for the next 10 or 20 years, but for many generations to come.
Our ability to positively impact those communities around our
operations, therefore, is an area of major focus, in order to
ensure a long-term legacy built on respect, responsibility and
integrity.
These characteristics were particularly evident in our response
to two unforeseen natural events that our chairman has mentioned.
Our Copper business was able to build six fully equipped
replacement schools within six weeks of the earthquake in Chile
last year, enabling 4,500 children to complete their school year. A
similar response was seen by our Metallurgical Coal business in
Queensland, Australia, following the devastating flooding over the
New Year period, providing accommodation, meals and amenities to
hundreds of evacuees. We are proud of our people and the difference
they continue to make.
At this juncture, I want to extend a warm welcome to any fellow
Americans who have travelled from Alaska to be with us at this
year’s AGM. I’m glad that we had a chance to meet some
of you and discuss your views yesterday and that I had an
opportunity to listen to the spectrum of opinion when I was up in
Anchorage, Iliamna and New Halen again just last month. We held a
town hall meeting with around 70 people in Iliamna and we met with
others in Anchorage, including government officials, local business
people, the Bristol Bay Native Corporation and others.
Then, just two weeks ago, I was in Australia and visited
Moranbah and the site of our proposed Grosvenor met coal project.
We met with local government and other local stakeholders to
discuss our shared vision for growth in the region and announced
plans for a $20 million investment in services and infrastructure
for the local community.
And last Fall I visited southern Peru where we are progressing
our Quellaveco copper project; again, we met with the regional
President and a number of local business people who are benefiting
from our entrepreneurial development programme.
Anglo American fundamentally believes in partnerships and
committing to the right foundation work with communities and other
stakeholders, recognising that we are working together for the long
term.
Sir John also talked about our concern for the difficulties of
Mr Blom and his fellow claimants. I would like to add my own voice
to that of the chairman and express my personal sympathy and
concern.
This is one of those situations where, even though Anglo
American firmly believes it is not liable, it has decided, as a
responsible corporate citizen, to respond to the request for
assistance.
I am pleased to report that Anglo American will make proposals
to the claimants' attorneys to provide appropriate medical
treatment for the claimants insofar as they do suffer from
silicosis or silico-tuberculosis. The cost of this treatment
will be borne entirely by Anglo American.
This proposal will be made on humanitarian grounds, without any
admission of liability. If accepted, it will mean the claimants
will very soon benefit from proper medical treatment, which will
continue for as long as it takes their claims to be finally
resolved by the Courts.
So, finally, looking ahead for the mining industry, the economic
outlook is positive. Sustained industrialisation and urbanisation
in China and India continue to underpin growth in commodity demand.
Their economic potential is massive, given the likely convergence
of their living standards on those in the major advanced economies.
Increased consumer confidence, particularly in China and India, is
creating support for strong demand and pricing, and is especially
evident in our diamond business. We are seeing steel industry
demand growth both in parts of Europe and, strongly, in China.
There are clearly challenges in the coming months, with
austerity packages in many European countries and with the recent
oil price jump. And the effects of the devastating earthquake
and tsunami in Japan have not yet flowed through to the global
economy.
But we are confident about the medium to long term supply and
demand drivers. These are grounded in the emerging economies’
ongoing heavy investment in infrastructure and their strongly
growing middle class, which will continue to underpin demand
growth. Mining is the lifeblood of global economic growth in the
21st century and Anglo American has the long-life resources of many
of the metals and minerals to help sustain that growth.
As an executive team, we continue to drive together. Never
before has Anglo American had such a collaborative and supportive
team of executives, working across the business units and across
the geographies to drive performance and value delivery. We
have a clear, focused strategy. We have an outstanding
project pipeline, with a new mine coming on stream every six to
nine months over the next few years. There are exciting
prospects in all of our business units. We had a very good
year last year. And while the first quarter of this year has
seen some bumps in the road due to unprecedented weather conditions
across the southern hemisphere, the outlook is favourable for
our chosen commodities, and we are well placed to capitalise on
that.
We have the people, we have the balance sheet and we have the
resources to become the leading global mining company, and to
continue to deliver exceptional value to you, our shareholders.
Thank you.
