Media

Sir Mark Moody-Stuart, Chairman, Anglo American plc:

Ladies and Gentlemen, 2006 was a year of exceptional performance for Anglo American with robust economic growth in most parts of the world, strong commodity prices and increased production for most of our products. Operating profit was up 54% to $9.8 billion and underlying earnings increased by 46% to $5.5 billion.

During the year we had one of the largest capital return programmes in the mining sector through share buy-backs and a special dividend of 67 cents. The interim dividend was 33 cents and we will be inviting you to approve today a final dividend of 75 cents. If approved, this will bring our dividend for the year to 108 cents – 20% more than in 2005. It is worth recalling that the 2005 dividend was, in turn, 39% higher than in 2004.

As the Chief Executive will outline in greater detail, we have been making good progress in implementing the conclusions of the strategic review announced by the Board in October 2005. This has played a significant role in the strong performance of our share price over the last 18 months. Since the creation of Anglo American plc in 1999, we have moved to focus upon our core extractive businesses and the extent of that transformation will be underlined when Mondi is listed separately around the middle of this year.

Over the last 12 months, we have delivered record production across many of our businesses, maintained good cost controls in very difficult circumstances, made good progress in developing key projects and in replenishing our project pipeline and we have taken some strides in improving co-operation between our business units. The only significant source of disappointment was the failure to achieve the step change for which we are looking in our safety performance. This will be a key theme for management in 2007. The Chief Executive will have more to say about these issues and how she sees the way ahead in a moment.

Governance
At last year's AGM Tony Trahar announced his intention to step down as Chief Executive. He rightly judged that, by now, he would have laid the foundations for the implementation of our strategic restructuring programme. The realisation of those goals is, indeed, now in sight. Thus, he ceased to be Chief Executive at the end of February and will be leaving the Board today.

Tony has served the Anglo American Group for thirty-three years and has been a pivotal personality in its development. He built Mondi into a world-class paper and packaging business, especially through some very shrewd acquisitions in Central and Eastern Europe. During his almost seven years as Chief Executive, Anglo American's market capitalisation grew from £14.4 billion to almost £36 billion.

He will be remembered in particular for the transaction which unwound the cross-holding between Anglo American and De Beers whilst increasing our holding in the diamond business from 32% to 45%. During his tenure, we disposed of some $10 billion of non-core businesses whilst significantly improving the quality of our asset base through $15 billion of acquisitions - increasing our holding in Anglo Platinum, through acquisitions such as those of the Disputada copper assets in Chile and coal operations in Australia and Latin America; and by establishing a meaningful presence in iron ore through the creation of the Kumba Iron Ore company. On behalf of the meeting, I offer our thanks to you, Tony.

I should also note the departure of another Executive Director, Simon Thompson, who has been with the company for 12 years. Most notably he masterminded the turnaround in our Base Metals business. Over the last three years he has served as Chairman of Anglo Base Metals, Anglo Industrial Minerals and as Chair of the Exploration Council. We are grateful for Simon's contribution to the success of the Group.

It is my great pleasure, however, to welcome Cynthia Carroll, our new Chief Executive to her first AGM. Cynthia is a geologist and spent the last 18 years at Alcan where, latterly, she was in charge of their Primary Metal business – which accounts for some 80% of Alcan's earnings. She is an American citizen with wide international experience and was an architect of Alcan's transformation into a global company – expanding the company's operations in China, the Middle East and Africa. She was also intimately involved in integrating the Pechiney assets into Alcan.

Cynthia was selected through the most intensive and professionally conducted selection process in which I have been involved over many years in corporate life. The Board's choice was driven by four key criteria apart from the international experience and leadership abilities that one would expect of any candidate; a track record of delivering operational excellence, including in the area of safety; the ability to motivate and lead cultural transformation; and an aptitude for engaging effectively with key stakeholders including with governments, and a record of growing businesses. On behalf of the Board, I commend Cynthia to you.

Policy Backdrop
We work in an industry with long-term investment horizons and which is ultimately dependent upon a licence to operate. In many countries issues surrounding the control of natural resources – especially when prices are high - stir significant passions. In resource dependent economies the revenues which we generate can be used to fuel wider development – as has been the case, for example in Botswana – or they can be misused and lead to the enrichment of elites. Moreover, given the pivotal role of the BRIC – Brazil, Russia, India and China - economies in our markets, the resource industries are at the cutting edge of an unprecedented fast shift in the balance of economic power. These considerations mean that we must ensure that we: read political risk accurately; anticipate society's expectations of our industry; and be prepared to work with partners to improve the development outcomes of our work.

Many of these challenges are covered in the Anglo American 'Report to Society 2006' which was published yesterday and is available here today. Because we strongly believe that these issues are fundamental to the future of our business I will briefly highlight three of them – black economic empowerment in South Africa, climate change and our contribution to wider development.

Black Economic Empowerment
About a third of our assets are in South Africa – the country in which Anglo American was born. We have long been committed to playing a full part in the building of the new South Africa. We support the Government in achieving the political imperative of black economic empowerment – which is clearly vital to long-term stability. Whilst some significant issues remain relating to the conversion of some of our mineral rights under the new dispensation, over the last year we have made good progress with a variety of black economic empowerment transactions including for Anglo Coal, De Beers, Tongaat-Hulett and Scaw Metals. We have also been instrumental in creating, out of the former Kumba Resources, the largest black controlled mining company in South Africa – Exxaro. We are also anticipating progress with BEE transactions within the platinum business.

We have also been pro-active in seeking out empowered suppliers so that last year some 26% of our South African procurement was from black-owned or managed enterprises. We have been making encouraging progress in achieving a more equitable racial representation in our management ranks – although there remains more to do. We have also sought to ensure that our contribution to black economic empowerment is, as far as possible broadly-based, including through employee share ownership schemes. We are committed to South Africa and remain one of the biggest investors there. Our aim is to accelerate the transformation of our business in its widest sense – not approaching these issues with a narrow compliance mindset.

Climate Change
The Stern Report and the recent IPCC Report, together with growing evidence of significant climate change, have elevated the issue to near the top of the public policy agenda. We are a leading coal producer, the world's biggest platinum producer – platinum being integral to fuel cell technology – and a major energy user. Thus we have a big stake in seeing effective policy responses. In running our businesses, we are seeking to reduce our carbon intensity, improve our energy efficiency and participate in relevant technological developments.

If the development needs of many of the emerging market economies are to be realised then coal will be an inescapable and important energy source. The challenge is for this to be made compatible with the need to reduce carbon emissions. To play our part in squaring this circle we are participating in the US-led FutureGen project designed to develop a near-zero emissions coal-based electricity generation station.

Carbon capture and storage must be a crucial element in the future use of coal. With this in mind, we have formed a Clean Coal Alliance with Shell with our Monash Energy project being one of the first collaborative projects under consideration. We are also working with Shell on clean coal approaches at our Xiwan project in China. To enable such big, long-term investments to go ahead, however, it is important for governments to provide greater certainty about the future public policy framework, so that we have a better idea of the balance between market mechanisms and regulation in strategies to reduce carbon.

Pending greater certainty on the policy front, I am pleased to note the progress being made by our Australian coal bed methane generation projects. The first two are already saving the equivalent in greenhouse gas emissions of over 350,000 cars each year. We are looking at other options in Australia and have been carrying out a feasibility study in the Waterberg coalfield in South Africa.

We recently received approval for our second Clean Development Mechanism methodology from the CDM Executive Committee. Within our operations we have literally hundreds of energy efficiency projects underway and are seeking to ensure that we spread the learnings from them. We are also looking actively at the role of biofuels, including through a pilot project in Australia. In the UK, I would particularly commend Tarmac's SAVE energy efficiency programme.

Business and Development
I briefly turn now to our role in development. As a company with over two thirds of our operations in developing countries, this is a vital agenda for us. In recent years there has been a change in the terms of debate with most development specialists now seeing the role of the private sector as integral to effective programmes for the alleviation of poverty.

Ensuring that we contribute to the sustainable development of the countries and communities where we work is also a crucial response to the tide of resource nationalism in Russia and a number of countries in South America and Africa. Thus, I am proud to note that in 2006 we generated and collected tax revenues for our host governments of around $4.5 billion and generated some $16.4 billion in added value in the economies where we operate.

At a local level, we have long sought to ensure that the communities associated with our operations should experience a significant net socio-economic benefit whether through greater economic opportunities, improved infrastructure, better heath and education provision or an enhancement of their capacities. Our local responses are now better informed through our Socio-Economic Assessment Toolbox – or SEAT process – enabling us better to understand the concerns, priorities and dynamics of the communities where we work. We have now carried out 50 such assessments and will soon begin a second wave using an improved methodology.

We have continued to innovate around local business development both through our well-established Anglo Zimele unit in South Africa and more recently through new initiatives in Chile to extend micro-credit to some 4,700 businesses over three years and a more ambitious plan for supporting the growth of entrepreneurs who have the potential to move beyond subsistence levels.

Nationally and internationally – and especially through the Extractive Industries Transparency Initiative - we are working with others to combat corruption and to promote transparency in the belief that this will contribute to resource revenues being used more wisely. Through our membership of the International Council on Mining and Metals we, and our colleagues at AngloGold Ashanti, have been prominent in their resource endowment project – which is identifying the factors that contribute to good development outcomes from the exploitation of mineral resources.

In 2005, we were active contributors to the work of the Commission for Africa and to the G8's Gleneagles package. We were then the first private sector investor to contribute to the Investment Climate Facility for Africa which has now collected over $150 million in pledges and is just starting work from its new base in Tanzania. I hope that over the coming years it will facilitate a blossoming of business activity in Africa to complement the increased aid flows pledged by governments.

Conclusion
In conclusion, I would like to thank the management team and our employees at all levels for their work in 2006. They have done a great job for us.

I now invite the Chief Executive to address us.

Cynthia Carroll, Chief Executive, Anglo American plc:

Thank you Sir Mark, I should like to add my thanks to Tony Trahar for laying strong foundations for the next phase of our growth and development. I am particularly grateful to him for his willingness to share his experience and advice during the handover period.

I will not detain you with a lengthy review of 2006 since you have already seen the Annual Report and the Annual Review. I will, therefore:

• briefly highlight the financial headlines for the year;
• report on the progress made in delivering on our strategy;
• outline Anglo American's capacity for organic growth; and
• set-out some preliminary priorities for the early months of my tenure as your Chief Executive.

Financial Headlines
In 2006 we achieved an operating profit for the year of $9.8 billion – our highest ever recorded – on the back of increased production, strong commodity prices and some successes in containing costs at a time of exceptional cost pressures. Notably strong performances were recorded by Base Metals and Platinum and we achieved record production of platinum, copper, zinc and iron ore.

Underlying earnings were $5.5 billion with record EBITDA of $12.2 billion. The strong cash generation from our operations in 2006, as well as the proceeds from non-core disposals, enabled us to announce a $7.5 billion return of capital in the form of share buybacks and special dividends – one of the highest levels of capital returns in the industry. This was in addition to $1.4 billion in ordinary dividends paid in 2006 and a further $1.1 billion final dividend recommended in respect to 2006.

On the 21st February of this year we announced a further buyback of $3 billion, which commenced this month.

Delivering our Strategy
The strategy announced by the Board in October 2005 is to become a focused mining group and, in the process, simplify our structure and enhance returns for our shareholders. Although the achievement of some of our objectives has involved complex regulatory issues we have made good progress and I would expect us to pass some more significant milestones over the next few months.

Plans for a full demerger of Mondi are on track. Final approval has now been received from the regulatory authorities in South Africa for a Dual Listed Company Structure with primary listings in both Johannesburg and London. This structure reflects the fact that the majority of Mondi's business is in Europe whilst recognising Mondi's South African heritage and its significant ongoing operations there.

The Dual Listed Company will comprise Mondi Ltd, a South African incorporated company holding Mondi's South African assets, and Mondi plc, a UK incorporated company holding Mondi's non South African assets, together, Mondi Ltd and Mondi plc, will be known as the Mondi Group. The Mondi Group will be managed as a single enterprise and the Board of Directors and management team of Mondi plc and Mondi Ltd will be identical. Sir John Parker and Cyril Ramaphosa will become Joint Non-Executive Chairmen of the Mondi Group.

David Hathorn and Paul Hollingworth will continue as Chief Executive Officer and Chief Financial Officer, respectively, of the Mondi Group. The headquarters of the Mondi Group will be based in South Africa.

It is currently expected that demerger documentation will be sent to Anglo American shareholders in early June 2007. Subject to receiving shareholder approval, the demerger is expected to be effected during July 2007.

Last year we reduced our holding in AngloGold Ashanti from 51% to 42% and realised around $1 billion in the process. The decision to exit our gold holding is driven by the higher relative valuations attributable to pure-play gold companies, compared with how those assets are valued as part of a diversified mining group. We will continue to explore all options that will enable us to exit AngloGold Ashanti in an orderly manner over the next two years.

The unbundling of Tongaat-Hulett's aluminium business to shareholders and simultaneous introduction of broad based black economic empowerment into both Tongaat-Hulett and Hulett Aluminium will occur during the second quarter of 2007 – reducing our holdings in each of them to 38% and 39% respectively.

In July 2006, we disposed of the majority of our stake in Highveld Steel, with Russia's Evraz Group and Credit Suisse each acquiring 24.9% of Highveld's share capital for an aggregate consideration of $412 million. The European Union competition authorities gave their approval in February. Once the remaining regulatory approvals are received, Evraz has an option to purchase our remaining 29.2% shareholding in Highveld. This should realise a further $266 million.

A Platform for Growth
I should emphasise that the Board see these disposals, and the greater focus and coherence they create, as a foundation upon which aggressively to grow our remaining, core, businesses. We have one of the best project pipelines in the industry with some $7 billion in approved projects and a further $10 to $15 billion of potential projects under review, to underpin that growth.

During 2006 approval was given to the $1.2 billion Barro Alto project in Brazil, which will enable us to more than double our nickel production by 2011. Approval was also given to a number of new projects and expansions which will enable us to grow our platinum output at a compound growth rate of 5% a year.

Kumba Iron Ore's already approved projects will see their production rise by 40% by 2009 – and we have other iron ore expansion possibilities under consideration.

In Anglo Coal, our new Dawson mine in Australia is expected to attain design capacity later this year with the Lake Lindsay project coming on stream in 2008. In South Africa, work is well under way at Mafube and in Colombia, Cerrejon is planned to expand production from 28 million tonnes to 32 million tonnes by the end of next year.

Similarly, De Beers will be bringing Snap Lake in Canada into production later this year. Victor is scheduled to follow in 2008. Approval has been granted for two new diamond mining operations in South Africa.

We are, in addition, looking at opportunities in new countries. We have already established a strong presence in China where we hope to develop some significant investment opportunities, over the medium term, especially in coal and platinum. De Beers have re-entered Angola and the Democratic Republic of Congo. In addition to our Moscow and Beijing representative offices, Anglo American will shortly be opening new offices in India and the DRC.

Initial Impressions
Since joining the Board in January and taking over as Chief Executive in March, I have visited a representative selection of operations in South Africa, Chile, Colombia, Venezuela and Australia. I have been listening and learning. I have been impressed by much of what I have seen – from an excellent continuous improvement programme in Anglo Chile to ground-breaking community and HIV/AIDS programmes at our Goedehoop colliery in South Africa.

The Group has an exceptional asset base; a unique and enviable market position in platinum and diamonds; excellent growth prospects; employees of the highest quality and commitment; and a strong technical base. These are great strengths and we need to ensure that we are maximising the value that they can deliver. The Board appointed me, as an outsider, to act as a catalyst for change and I intend to live up to that challenge. We will work to improve operational efficiencies while bringing the organisation together globally. To complement our organic growth potential we will examine possible acquisitions - when the time and the prices are right.

I know you will not expect me to set out definitive plans at this stage. I thought, nonetheless, that I should indicate five early areas of focus: safety; streamlining decision-making; leveraging our scale; continuous improvement and knowledge sharing programmes; and improving our engagement with stakeholders.

Safety is the foremost responsibility of any employer and we will be relentless in working to improve our safety performance. Progress has been made but, even so, last year 44 people lost their lives in our operations. This is simply not acceptable. We will, therefore, build upon the work set in hand by Tony Trahar and the excellent framework of standards which were produced in 2005. I have made clear that effective management of safety will be a key requirement for those managers who wish to make progress within the company. We will be implementing the learnings from 20 safety peer reviews undertaken at site level last year and I am determined that we will be more effective in capturing lessons from safety incidents and near-misses and disseminating them. We will be convening a special meeting of our top 100 managers worldwide for a Safety Summit in June to ensure that there is consistency of approach.

I am introducing changes too to our corporate structures so as to up the tempo, reduce bureaucracy and enable faster decision making. I want to see managers more empowered - with clear objectives and stretching targets against which to deliver. I have already removed one layer of management and increased my own interface with the business unit management teams.

I intend to see faster progress in establishing shared services and in maximising our ability to leverage our scale in areas like procurement.

We have enormous potential, but there needs to be a greater sense of common purpose across our businesses. We will instil a more regular approach of sharing knowledge and ideas as central to the way the new Anglo American does business. That approach is taking root, with over 300 electronic collaborative groups already established and a new toolset to support innovation is being piloted for roll-out across the Group. I know too – because I have seen them – that we have practices that are clearly world class. We will work to achieve greater consistency across the company in applying these practices everywhere. And we will recognise and reward innovation and collaboration within and between our businesses.

Finally, the new style at Anglo American will be more engaged with the world around us. We are leaders in an industry which depends upon the goodwill of others to thrive. We must work more closely with our host governments and seek to understand and complement their policy priorities. We will get closer to our customers and suppliers to understand how to work better together. And we will seek to improve our contribution to development and our understanding of the concerns and priorities of the communities where we work.

Outlook
In closing, I believe that the strong global growth we are seeing will provide a supportive climate for our businesses in 2007. Stocks of most of the major metals remain relatively low and there remain significant constraints within parts of the supply chain. Thus the outlook is for metals to remain significantly above long term equilibrium levels.

This is my first AGM as Chief Executive – I look forward to leading our excellent team in tackling the challenges ahead.

Back to top