Thank you Chairman. I would like to start with a few words about
strategy, then to review the financial and operational highlights
of 2005 and to update you on how we are addressing the issue of
safety at our operations.
Before moving to the substance of my remarks may I thank you for
your kind words regarding my planned retirement next year. As you
know, I suggested this timescale with the clear intention of first
completing our strategic restructuring programme. This will be done
with due dispatch after which it seems to me that it will be a good
moment, at the age of 58, to hand over to a new leadership team so
that they can oversee the next phase in the development and growth
of the Group.
Over the seven years since Anglo American plc was listed in
London, we have pursued a consistent, but steadily evolving,
- To simplify our shareholding structure, especially through the
unravelling of the cross-holding with De Beers, and to increase our
- To develop a strong project portfolio as the foundation for
- To increase the synergies available to the Group in areas like
information management, technology, procurement, sustainable
development and human resources;
- To further advance our strong sense of corporate social
responsibility in the countries in which we operate; and
- To improve the focus of our business through the disposal of
non-core assets for value;
In 2005 and the early months of 2006 we have continued to
implement this strategy and we have disposed of Boart Longyear, our
mining equipment business, Samancor Chrome and a number of smaller
business interests in our Ferrous and Industries division for $1.1
billion. More fundamentally, at the end of October, we announced
the outcome of our strategic review that had at its heart the
intention to focus increasingly on our core mining business. This
- The listing of Mondi, our paper and packaging business on the
London Stock Exchange;
- The disposal of our South African steel and vanadium business,
- The restructuring of Tongaat Hulett, in which we own a 52%
stake, so as to list separately its aluminium operations;
- A strategic review of Tarmac's businesses with a view to
improving its overall returns;
- Reducing our stake in AngloGold Ashanti; and finally
- Buying back $2 billion of our own shares.
On each front progress is being made.
Some shareholders may question why, given our planned focus on
mining assets, we have chosen to reduce our exposure to AngloGold
Ashanti at a time of rising gold prices. It is important to note
the relatively small share of our earnings – some 3% in 2005
- that now comes from gold. But more particularly, gold companies
have a distinctive group of investors and trade on different
multiples compared with diversified mining companies. Thus, the
value of our stake in AngloGold Ashanti has not been fully
reflected in our overall market capitalisation. Already, through
reducing our stake to some 41.8% we have realised some $1 billion
in cash. The announcement of our strategy on AngloGold Ashanti and
the steady progress with its implementation has been well received
by the markets.
We will continue to support value creating opportunities in
Mondi leading up to a separate listing. We can take credit for
having built Mondi, through a combination of organic growth and
shrewd acquisitions, into a major player in both business papers
and packaging. Nevertheless, the time is now appropriate to prepare
Mondi for a listing in its own right.
In regard to Tarmac – the core of our industrial minerals
division – there are significant overlaps and synergies
between its extractive businesses and many of the disciplines
involved in mining. It also adds stability and geographical
diversity to our earnings. Thus we continue to regard it as a core
business whilst seeking to improve its margins and returns on
capital. This process has already begun, with a number of smaller
businesses having been identified for disposal, and recent
acquisitions in Romania, Poland and the Czech Republic adding to
its growing European base.
During 2005, Anglo American continued its track record of strong
earnings growth, of increasing dividends to shareholders, of
identifying and developing projects to underpin our future growth;
and of rigorous cost control.
We reported record underlying earnings of $3.7 billion, an
increase of 39% compared with 2004. We also achieved record
production levels in coal, diamonds, iron ore, vanadium, nickel,
zinc and platinum group metals and Base Metals, Ferrous Metals and
Coal each generated their highest ever contribution to earnings.
EBITDA was up by $1.9 billion at $9 billion - enabling us to reduce
debt by almost 40% to $5 billion and to return some $2.5 billion to
shareholders through a special dividend and buy-back programme.
These good results were driven by strong commodity prices and
the continuing expansion of the Group's production base. Compared
with 2004, the average prices in 2005 for a number of our key
commodities were up 300% for vanadium, 71% for iron ore, 28% for
copper; 32% for zinc; 6% for platinum and nickel and 9% for gold.
This strength has continued into 2006 with copper up 51% at the end
of the first quarter compared with a year before, zinc up 70%,
platinum up 20% and gold up 29%. Moreover, the relative robustness
of the performance of, and confidence in, the global economy has
led most commentators to expect prices to remain firm during 2006.
This is underpinned in the case of a number of commodities by
relatively restricted supply growth and the steep increase in many
mining and processing input costs, not least of which are rising
energy cots. The increasing involvement of investment funds does,
however, add a greater element of unpredictability to the markets
and we have seen considerable price volatility in recent weeks.
But the scale of our earnings growth did not result from
passivity in the face of rising prices. A number of measures that
we have put in place over the last two years significantly enhanced
our performance. An example of this was our ability to deliver $730
million in cost and efficiency savings in 2005, up 32% on 2004.
Whilst preserving the entrepreneurial flexibility of our business
units we have increasingly sought to leverage the resources of the
Group more effectively across disciplines including procurement,
talent management, and technical and research support. We are
currently embarking upon a similar process in relation to
Information Technology through a major infrastructure consolidation
process. We are also planning a significant drive to support
knowledge sharing and collaboration across business units and
disciplines through our new global information portal.
In relation to growth opportunities, the most cost effective
route is through the development of our own greenfield projects or
brownfield expansions and we have one of the largest project
pipelines in the industry. In 2005 we authorised several new
platinum projects and Anglo Platinum expects to increase production
from 2.45 million ounces last year to between 2.7 and 2.8 million
ounces in 2006.
In coal we have agreed the expansion of the Dawson project and
the go-ahead for the new Lake Lindsay colliery - both in Australia.
These metallurgical coal projects represent an investment of $1.4
billion. I visited the Australian coal operations last month with
the Chairman and the Safety Committee and we were most impressed
with the potential for further expansion. In South Africa, and
subject to regulatory clearances, we expect to see the $264 million
Mafube project get under way and in Colombia an expansion at
Cerrejon Coal from 28 million to 32 million tonnes per annum has
In 2005, the Board also approved a $559 million expansion of
iron ore operations at Kumba's Sishen mine. This will increase
production from the mine by 10 million tonnes by 2009. Our
associate company, De Beers, is proceeding with the Snap Lake and
Victor projects in Canada, and the Voorspoed project in South
Africa. Our Base Metals operations are progressing feasibility
studies for the new Barro Alto nickel project in Brazil; and for a
major expansion at the Los Bronces copper mine in Chile.
In total, the Group has a current approved project portfolio of
$6.7 billion with a further $10 billion to $15 billion of projects
under consideration. These will underpin our growth prospects
across the board.
Black Economic Empowerment
Chairman, you referred to the importance of companies working
with our host societies to address their major socio-economic
challenges. This is particularly relevant for Anglo American in
South Africa where a great deal still needs to be done to address
the legacies of the apartheid era. Anglo American has been at the
forefront of business attempts to spread opportunities to new black
entrepreneurs. At the grassroots level this is reflected in our
drive to procure more from BEE companies – this expenditure
has grown from R800 million in 1999 to R9 billion in 2005. Last
year we had the honour of hosting President Mbeki at an exhibition
that he asked us to stage about the work of our Anglo Zimele, our
business development incubator. At any one time this is invested in
some 25 to 30 companies supporting over 2,000 jobs.
I am pleased to note that AngloGold Ashanti has been granted its
new order mineral rights. In relation to equity ownership, the
Anglo American Group has helped to catalyse the emergence of
several major South African black-owned mining companies. Over the
last year, we have facilitated, through our subsidiary, Kumba, the
creation of the largest black-owned, managed and controlled mining
company in South Africa and we have supported De Beers' genuinely
broadly-based empowerment deal with Ponahalo.
We are also proud of the progress that is being made in
establishing wider employee share ownership schemes across our
Group in South Africa. We are making good progress too in
increasing the proportion of historically disadvantaged South
Africans in our management ranks.
We are looking at opportunities arising from new geographies.
The balance of power in the world economy has been shifting
dramatically over the last five years – a process which seems
certain to accelerate – as the BRIC economies, Brazil,
Russia, India and China, come increasingly to the fore. These
economies and their material intensive growth patterns are to a
large extent driving commodity markets – as did the demands
of Japanese growth in the 1960s and 1970s.
We have a long-established presence in Brazil with identified
expansion opportunities. In Russia our most significant asset is
Mondi's Syktyvkar mill but we have also established a
representative office in Moscow and are looking at further
opportunities. India is already a significant market for a number
of our products and we are looking to establish a representative
office during 2006 to bring us closer to operational opportunities.
In China, which is already a major market for our products, Tarmac,
Kumba and Mondi each have small operations and AngloGold Ashanti
and Anglo Platinum have active exploration programmes. Anglo Coal
has a number of significant opportunities under review.
During 2005, we acquired a small stake in major Chinese coal
producer, Shenhua. We intend to look not only at conventional
opportunities to acquire and develop mines but also at new
partnerships both within the BRIC economies and internationally
with the significant companies that are emerging from these
Safety and Corporate Social Responsibility
One of our greatest challenges has been to improve our safety
record. We have made a lot of progress since 1999 with a major
reduction in both our number of fatalities and our lost time injury
frequency rate. It has been a consistent priority at all levels
from the board room to the stope. We have many examples of
excellence with Base Metals, for example, not having had a fatality
in over 16 months anywhere in the world. Over the last two years we
have, nonetheless, seen a slowing in the momentum of improvement.
We continue to suffer injuries and fatalities amongst our 128,000
employees and 44,000 contractors at our managed operations.
Over the last few months we have introduced a new framework of
non-negotiable standards – the Anglo Safety Way. All senior
managers, including myself, have attended a new safety training
module, developed by Du Pont, as the start of a cascade process. We
have also introduced a new safety peer audit process that has been
successfully introduced around the Group and in terms of culture we
are determined that lessons are captured and learned more
effectively from safety incidents and that our managers accept that
'zero harm' is a realistic goal in our operations. I hope to be
able to report on a much improved safety performance at next year's
Chairman, in your remarks you referred to a number of the
important initiatives which we are pursuing in relation to
sustainable development. I can confirm that the executive team see
these challenges as central to the long-term future of our business
including our access to capital, to talent and to land and
resources. Our recently released "Report to Society", which is
available to shareholders at this meeting, clearly sets out the
many exciting programmes we have underway at our operations - and
the progress that is being made on this front.
Ladies and Gentlemen, 2005 was a year of significant
achievement. We achieved record earnings, production was up, costs
were contained, projects were delivered on time, and further
organic growth prospects were added. We have also set ourselves
clear strategic targets for refocusing the Group to realise value
and to provide the foundation for future growth.
In terms of risks, Chairman you have referred to issues of
resource nationalism and higher taxes in some jurisdictions. There
are also major cost pressures bearing upon a number of our key
inputs which we have, to date, been largely successful in
containing. Although there are also clearly concerns in the world
economy arising from trade imbalances, the scale of the US deficit
and the inflationary pressures which may result from higher energy
prices, the overall outlook remains encouraging, with leading
indicators signalling continuing strong global growth and robust
underlying demand. If prices and demand continue at, or near,
current levels the Group can expect another strong year.