| Tue 17 Apr 2007, 13:09 | | AGL - Anglo American plc - Address to shareholders |
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AGL
ANAAL
AGL - Anglo American plc - Address to shareholders by the Chairman and
Chief Executive
Anglo American plc
Incorporated in the United Kingdom
(Registration number: 3564138)
Short name: Anglo
Share code: AGL
ISIN number: GB0004901517
Anglo American AGM 2007
Address to shareholders by the chairman and chief executive
At Anglo American plc`s Annual General Meeting for shareholders in London today
(17 April 2007), 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, 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.
17 April 2007
Sponsor: J.P.Morgan Equities Limited
Date: 17/04/2007 13:09:45 Produced by the JSE SENS Department.
