17th Apr 2007 11:49
Anglo American PLC17 April 2007 News Release 17 April 2007 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, chiefexecutive, made the following remarks: Sir Mark Moody-Stuart, Chairman, Anglo American plc: Ladies and Gentlemen, 2006 was a year of exceptional performance for AngloAmerican with robust economic growth in most parts of the world, strongcommodity prices and increased production for most of our products. Operatingprofit 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 themining sector through share buy-backs and a special dividend of 67 cents. Theinterim dividend was 33 cents and we will be inviting you to approve today afinal dividend of 75 cents. If approved, this will bring our dividend for theyear to 108 cents - 20% more than in 2005. It is worth recalling that the 2005dividend was, in turn, 39% higher than in 2004. As the Chief Executive will outline in greater detail, we have been making goodprogress in implementing the conclusions of the strategic review announced bythe Board in October 2005. This has played a significant role in the strongperformance of our share price over the last 18 months. Since the creation ofAnglo American plc in 1999, we have moved to focus upon our core extractivebusinesses and the extent of that transformation will be underlined when Mondiis listed separately around the middle of this year. Over the last 12 months, we have delivered record production across many of ourbusinesses, maintained good cost controls in very difficult circumstances, madegood progress in developing key projects and in replenishing our projectpipeline and we have taken some strides in improving co-operation between ourbusiness units. The only significant source of disappointment was the failure toachieve 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 havemore 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 ChiefExecutive. He rightly judged that, by now, he would have laid the foundationsfor the implementation of our strategic restructuring programme. Therealisation of those goals is, indeed, now in sight. Thus, he ceased to be ChiefExecutive 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 apivotal personality in its development. He built Mondi into a world-class paperand packaging business, especially through some very shrewd acquisitions inCentral and Eastern Europe. During his almost seven years as Chief Executive,Anglo American's market capitalisation grew from £14.4 billion to almost £36billion. He will be remembered in particular for the transaction which unwound thecross-holding between Anglo American and De Beers whilst increasing our holdingin 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 ofour asset base through $15 billion of acquisitions - increasing our holding inAnglo Platinum, through acquisitions such as those of the Disputada copperassets in Chile and coal operations in Australia and Latin America; and byestablishing a meaningful presence in iron ore through the creation of the KumbaIron 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 theturnaround in our Base Metals business. Over the last three years he has servedas Chairman of Anglo Base Metals, Anglo Industrial Minerals and as Chair of theExploration Council. We are grateful for Simon's contribution to the success ofthe Group. It is my great pleasure, however, to welcome Cynthia Carroll, our new ChiefExecutive to her first AGM. Cynthia is a geologist and spent the last 18 yearsat 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 withwide international experience and was an architect of Alcan's transformationinto a global company - expanding the company's operations in China, the MiddleEast and Africa. She was also intimately involved in integrating the Pechineyassets into Alcan. Cynthia was selected through the most intensive and professionally conductedselection process in which I have been involved over many years in corporatelife. The Board's choice was driven by four key criteria apart from theinternational experience and leadership abilities that one would expect of anycandidate; a track record of delivering operational excellence, including in thearea of safety; the ability to motivate and lead cultural transformation; and anaptitude for engaging effectively with key stakeholders including withgovernments, and a record of growing businesses. On behalf of the Board, Icommend Cynthia to you. Policy Backdrop We work in an industry with long-term investment horizons and which isultimately dependent upon a licence to operate. In many countries issuessurrounding the control of natural resources - especially when prices are high -stir significant passions. In resource dependent economies the revenues which wegenerate can be used to fuel wider development - as has been the case, forexample in Botswana - or they can be misused and lead to the enrichment ofelites. Moreover, given the pivotal role of the BRIC - Brazil, Russia, India andChina - economies in our markets, the resource industries are at the cuttingedge of an unprecedented fast shift in the balance of economic power. Theseconsiderations mean that we must ensure that we: read political risk accurately;anticipate society's expectations of our industry; and be prepared to work withpartners to improve the development outcomes of our work. Many of these challenges are covered in the Anglo American 'Report to Society2006' which was published yesterday and is available here today. Because westrongly believe that these issues are fundamental to the future of our businessI will briefly highlight three of them - black economic empowerment in SouthAfrica, 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 AngloAmerican was born. We have long been committed to playing a full part in thebuilding of the new South Africa. We support the Government in achieving thepolitical imperative of black economic empowerment - which is clearly vital tolong-term stability. Whilst some significant issues remain relating to theconversion of some of our mineral rights under the new dispensation, over thelast year we have made good progress with a variety of black economicempowerment transactions including for Anglo Coal, De Beers, Tongaat-Hulett andScaw Metals. We have also been instrumental in creating, out of the formerKumba Resources, the largest black controlled mining company in South Africa -Exxaro. We are also anticipating progress with BEE transactions within theplatinum business. We have also been pro-active in seeking out empowered suppliers so that lastyear some 26% of our South African procurement was from black-owned or managedenterprises. We have been making encouraging progress in achieving a moreequitable racial representation in our management ranks - although there remainsmore to do. We have also sought to ensure that our contribution to blackeconomic empowerment is, as far as possible broadly-based, including throughemployee share ownership schemes. We are committed to South Africa and remainone of the biggest investors there. Our aim is to accelerate the transformationof our business in its widest sense - not approaching these issues with a narrowcompliance mindset. Climate Change The Stern Report and the recent IPCC Report, together with growing evidence ofsignificant climate change, have elevated the issue to near the top of thepublic policy agenda. We are a leading coal producer, the world's biggestplatinum producer - platinum being integral to fuel cell technology - and amajor energy user. Thus we have a big stake in seeing effective policyresponses. In running our businesses, we are seeking to reduce our carbonintensity, improve our energy efficiency and participate in relevanttechnological developments. If the development needs of many of the emerging market economies are to berealised then coal will be an inescapable and important energy source. Thechallenge is for this to be made compatible with the need to reduce carbonemissions. To play our part in squaring this circle we are participating in theUS-led FutureGen project designed to develop a near-zero emissions coal-basedelectricity 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 ourMonash Energy project being one of the first collaborative projects underconsideration. We are also working with Shell on clean coal approaches at ourXiwan project in China. To enable such big, long-term investments to go ahead,however, it is important for governments to provide greater certainty about thefuture public policy framework, so that we have a better idea of the balancebetween market mechanisms and regulation in strategies to reduce carbon. Pending greater certainty on the policy front, I am pleased to note the progressbeing made by our Australian coal bed methane generation projects. The first twoare already saving the equivalent in greenhouse gas emissions of over 350,000cars each year. We are looking at other options in Australia and have beencarrying out a feasibility study in the Waterberg coalfield in South Africa. We recently received approval for our second Clean Development Mechanismmethodology from the CDM Executive Committee. Within our operations we haveliterally hundreds of energy efficiency projects underway and are seeking toensure that we spread the learnings from them. We are also looking actively atthe role of biofuels, including through a pilot project in Australia. In theUK, 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 thirdsof our operations in developing countries, this is a vital agenda for us. Inrecent years there has been a change in the terms of debate with mostdevelopment specialists now seeing the role of the private sector as integral toeffective programmes for the alleviation of poverty. Ensuring that we contribute to the sustainable development of the countries andcommunities where we work is also a crucial response to the tide of resourcenationalism 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 revenuesfor our host governments of around $4.5 billion and generated some $16.4 billionin added value in the economies where we operate. At a local level, we have long sought to ensure that the communities associatedwith our operations should experience a significant net socio-economic benefitwhether through greater economic opportunities, improved infrastructure, betterheath and education provision or an enhancement of their capacities. Our localresponses are now better informed through our Socio-Economic Assessment Toolbox- or SEAT process - enabling us better to understand the concerns, prioritiesand dynamics of the communities where we work. We have now carried out 50 suchassessments and will soon begin a second wave using an improved methodology. We have continued to innovate around local business development both through ourwell-established Anglo Zimele unit in South Africa and more recently through newinitiatives in Chile to extend micro-credit to some 4,700 businesses over threeyears and a more ambitious plan for supporting the growth of entrepreneurs whohave the potential to move beyond subsistence levels. Nationally and internationally - and especially through the ExtractiveIndustries Transparency Initiative - we are working with others to combatcorruption and to promote transparency in the belief that this will contributeto resource revenues being used more wisely. Through our membership of theInternational Council on Mining and Metals we, and our colleagues at AngloGoldAshanti, have been prominent in their resource endowment project - which isidentifying the factors that contribute to good development outcomes from theexploitation of mineral resources. In 2005, we were active contributors to the work of the Commission for Africaand to the G8's Gleneagles package. We were then the first private sectorinvestor to contribute to the Investment Climate Facility for Africa which hasnow collected over $150 million in pledges and is just starting work from itsnew base in Tanzania. I hope that over the coming years it will facilitate ablossoming of business activity in Africa to complement the increased aid flowspledged by governments. Conclusion In conclusion, I would like to thank the management team and our employees atall 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 layingstrong foundations for the next phase of our growth and development. I amparticularly grateful to him for his willingness to share his experience andadvice during the handover period. I will not detain you with a lengthy review of 2006 since you have already seenthe 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 - ourhighest ever recorded - on the back of increased production, strong commodityprices and some successes in containing costs at a time of exceptional costpressures. Notably strong performances were recorded by Base Metals and Platinumand we achieved record production of platinum, copper, zinc and iron ore. Underlying earnings were $5.5 billion with record EBITDA of $12.2 billion. Thestrong cash generation from our operations in 2006, as well as the proceeds fromnon-core disposals, enabled us to announce a $7.5 billion return of capital inthe form of share buybacks and special dividends - one of the highest levels ofcapital returns in the industry. This was in addition to $1.4 billion inordinary dividends paid in 2006 and a further $1.1 billion final dividendrecommended 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 focusedmining group and, in the process, simplify our structure and enhance returns forour shareholders. Although the achievement of some of our objectives hasinvolved complex regulatory issues we have made good progress and I would expectus 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 beenreceived from the regulatory authorities in South Africa for a Dual ListedCompany Structure with primary listings in both Johannesburg and London. Thisstructure reflects the fact that the majority of Mondi's business is in Europewhilst recognising Mondi's South African heritage and its significant ongoingoperations there. The Dual Listed Company will comprise Mondi Ltd, a South African incorporatedcompany holding Mondi's South African assets, and Mondi plc, a UK incorporatedcompany holding Mondi's non-South African assets, together, Mondi Ltd and Mondiplc, will be known as the Mondi Group. The Mondi Group will be managed as asingle enterprise and the Board of Directors and management team of Mondi plcand Mondi Ltd will be identical. Sir John Parker and Cyril Ramaphosa will becomeJoint Non-Executive Chairmen of the Mondi Group. David Hathorn and Paul Hollingworth will continue as Chief Executive Officer andChief Financial Officer, respectively, of the Mondi Group. The headquarters ofthe Mondi Group will be based in South Africa. It is currently expected that demerger documentation will be sent to AngloAmerican shareholders in early June 2007. Subject to receiving shareholderapproval, the demerger is expected to be effected during July 2007. Last year we reduced our holding in AngloGold Ashanti from 51% to 42% andrealised around $1 billion in the process. The decision to exit our gold holdingis driven by the higher relative valuations attributable to pure-play goldcompanies, compared with how those assets are valued as part of a diversifiedmining group. We will continue to explore all options that will enable us toexit AngloGold Ashanti in an orderly manner over the next two years. The unbundling of Tongaat-Hulett's aluminium business to shareholders andsimultaneous introduction of broad based black economic empowerment into bothTongaat-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, withRussia's Evraz Group and Credit Suisse each acquiring 24.9% of Highveld's sharecapital for an aggregate consideration of $412 million. The European Unioncompetition authorities gave their approval in February. Once the remainingregulatory approvals are received, Evraz has an option to purchase our remaining29.2% 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 andcoherence they create, as a foundation upon which aggressively to grow ourremaining, core, businesses. We have one of the best project pipelines in theindustry with some $7 billion in approved projects and a further $10 to $15billion 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. Approvalwas also given to a number of new projects and expansions which will enable usto 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 underconsideration. In Anglo Coal, our new Dawson mine in Australia is expected to attain designcapacity 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 isplanned to expand production from 28 million tonnes to 32 million tonnes by theend of next year. Similarly, De Beers will be bringing Snap Lake in Canada into production laterthis year. Victor is scheduled to follow in 2008. Approval has been granted fortwo new diamond mining operations in South Africa. We are, in addition, looking at opportunities in new countries. We have alreadyestablished a strong presence in China where we hope to develop some significantinvestment opportunities, over the medium term, especially in coal and platinum.De Beers have re-entered Angola and the Democratic Republic of Congo. Inaddition to our Moscow and Beijing representative offices, Anglo American willshortly 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 havebeen impressed by much of what I have seen - from an excellent continuousimprovement programme in Anglo Chile to ground-breaking community and HIV/AIDSprogrammes at our Goedehoop colliery in South Africa. The Group has an exceptional asset base; a unique and enviable market positionin platinum and diamonds; excellent growth prospects; employees of the highestquality and commitment; and a strong technical base. These are great strengthsand 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 Iintend to live up to that challenge. We will work to improve operationalefficiencies while bringing the organisation together globally. To complementour organic growth potential we will examine possible acquisitions - when thetime and the prices are right. I know you will not expect me to set out definitive plans at this stage. Ithought, nonetheless, that I should indicate five early areas of focus: safety;streamlining decision-making; leveraging our scale; continuous improvement andknowledge sharing programmes; and improving our engagement with stakeholders. Safety is the foremost responsibility of any employer and we will be relentlessin working to improve our safety performance. Progress has been made but, evenso, last year 44 people lost their lives in our operations. This is simply notacceptable. We will, therefore, build upon the work set in hand by Tony Traharand the excellent framework of standards which were produced in 2005. I havemade clear that effective management of safety will be a key requirement forthose managers who wish to make progress within the company. We will beimplementing the learnings from 20 safety peer reviews undertaken at site levellast year and I am determined that we will be more effective in capturinglessons from safety incidents and near-misses and disseminating them. We will beconvening a special meeting of our top 100 managers worldwide for a SafetySummit 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 managersmore empowered - with clear objectives and stretching targets against which todeliver. I have already removed one layer of management and increased my owninterface with the business unit management teams. I intend to see faster progress in establishing shared services and inmaximising our ability to leverage our scale in areas like procurement. We have enormous potential, but there needs to be a greater sense of commonpurpose across our businesses. We will instil a more regular approach of sharingknowledge and ideas as central to the way the new Anglo American does business.That approach is taking root, with over 300 electronic collaborative groupsalready established and a new toolset to support innovation is being piloted forroll-out across the Group. I know too - because I have seen them - that we havepractices that are clearly world class. We will work to achieve greaterconsistency across the company in applying these practices everywhere. And wewill recognise and reward innovation and collaboration within and between ourbusinesses. Finally, the new style at Anglo American will be more engaged with the worldaround us. We are leaders in an industry which depends upon the goodwill ofothers to thrive. We must work more closely with our host governments and seekto understand and complement their policy priorities. We will get closer to ourcustomers and suppliers to understand how to work better together. And we willseek to improve our contribution to development and our understanding of theconcerns and priorities of the communities where we work. Outlook In closing, I believe that the strong global growth we are seeing will provide asupportive climate for our businesses in 2007. Stocks of most of the majormetals remain relatively low and there remain significant constraints withinparts of the supply chain. Thus the outlook is for metals to remainsignificantly above long term equilibrium levels. This is my first AGM as Chief Executive - I look forward to leading ourexcellent team in tackling the challenges ahead. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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