Speech made by Sir Mark Moody-Stuart, Chairman, to the Anglo American plc Annual General Meeting - 25 April 2006
Ladies and Gentlemen, 2005 was another year of strong prices for
most of our commodities. This contributed to a 39% increase in
underlying earnings. Given the strong cash generation achieved for
the period, the Board is pleased to recommend an increase in the
normal dividend to 90 US cents - an increase of 29% - together with
a special dividend of 33 US cents per share. In addition we have
commenced a share buy-back programme of $2 billion to be
implemented during this year.
As the Chief Executive will outline in greater detail, during
2005 the Board carried out a strategic review that will result in
the most significant change in the shape of our business since our
listing in London. Over the last six years we have divested some $9
billion of non-core assets as part of a strategy of concentrating
on our core natural resources businesses and of upgrading the
quality of our assets. The decisions taken at the end of last year
will move this strategy on to the next stage and will result in the
creation of a more focussed mining and quarrying business.
Our management team under Tony Trahar's strong leadership, has
been making good progress with the implementation of this strategy.
We expect all the key milestones to have been achieved well before
next year's AGM. Tony is determined to drive through the completion
of this programme. He has indicated to the Board that with the
completion of this phase of the Group's development he believes it
would be appropriate for him to make way for a new leader to
oversee the next phase of our plans for growth. Since Tony will by
then be approaching his normal retirement age, the Board has
accepted the logic of this view. It provides us with the prospect
of securing a smooth and orderly transition and of creating a
leadership group with the prospect of many years in the job. We
have, therefore, commenced a process of identifying a successor.
Nevertheless, Tony's continuing commitment as Chief Executive to
the completion of our strategic restructuring means that this is
not the moment for valedictories, save to note the enormous
contribution which Tony has made and continues to make to Anglo
American's development and success.
During the year there were an unusually large number of changes
to the Board. At last year's AGM you elected three new Executive
Directors, David Hathorn, Rene Medori and Simon Thompson and one
new Non-Executive, Ralph Alexander.
At the end of 2005 two Executive Directors, Tony Lea and Barry
Davison, retired from the Board. Tony Lea was our Finance Director
from the time of the formation of Anglo American in 1999 having
previously served the Group for many years in both Anglo American
Corporation and Minorco. He played a pivotal role in establishing
the company's credibility with the investment community. Tony
successfully handed over his role as Finance Director to Rene
Medori last September, but continues to be available for advice.
Barry Davison joined the Board in 2001 as Executive Chairman of
Anglo Platinum. Barry is a man with a real passion for his product
and he has played a major role in the rapid expansion of global
platinum demand as well as in negotiations with the South African
Government around the evolving black economic empowerment agenda.
He continues as non-Executive Chairman of Anglo Platinum. We are
grateful to both Tony and Barry for their contributions to the
success of the Group.
From 1 January, Peter Woicke joined the Board and is proposed
for election today. He has had a distinguished career in finance
including as a Managing Director of the World Bank and as Chief
Executive Officer of the International Finance Corporation.
It is with regret that I report the decision of Dr Maria Silvia
Bastos Marques to step down from the Board after two and a half
years. I would like to thank her for her distinctive and valued
contribution to our deliberations. I am also delighted to recommend
the election of Dr Mamphela Ramphele who has previously served as a
Non-Executive Director of Anglo American Corporation of South
Africa and as Vice Chancellor of the University of Cape Town. Dr
Ramphele also brings a distinguished record of public service
outside of South Africa including as a Managing Director of the
These changes will bring the Board back into compliance with the
Combined Code requirement that at least half of the Board should be
made up of independent non-Executives - excluding myself.
For the coming year we will be making some changes to the
composition of our Board Committees. Mr Phaswana will step down
from the Remuneration Committee. Mr Margetts will be leaving the
Audit Committee and will be replaced by Mr Woicke. Dr Ramphele and
Mr Woicke will join the Nominations Committee. Mr Alexander and Dr
Ramphele will join the Safety and Sustainable Development
I should like to thank those Directors who have chaired Board
Committees: David Challen, Chairman of the Audit Committee; Chris
Fay, who chairs the Safety and Sustainable Development Committee;
Fred Phaswana who chairs the Nominations Committee; and Rob
Margetts who has led our work on remuneration. I am grateful for
the experience and judgement which each has brought to these
important areas of our work.
The Chief Executive will report upon the Company's operational
performance, but I would like to preface this with some comments on
the changing international context in which we are working and to
touch on some of the issues contained in our Report to Society 2005
– which was published last week and is available here today
if you would like a copy.
Some 70% of our operations are in developing countries. In many
of them government capacities are limited or lacking, institutions
are often weak and poverty is a major challenge. The sectors in
which we are active have a number of distinct characteristics.
- Firstly, our operations have significant environmental and
social impacts that need to be carefully managed;
- Secondly, since mining involves the extraction of a
non-renewable natural resource it presents distinct challenges in
relation to sustainable development. We therefore seek to ensure
that during the lifetime of a mine we balance the depletion of a
natural resource through growing the stock of social, human and
man-made capital. This is not too difficult where there is an
effective State that makes good use of tax revenues – but
that is not always the case;
- Thirdly, the revenues that we generate are often volatile and
may cause macro-economic difficulties and extractive revenues have
sometimes been subject to wholesale embezzlement by government;
- Fourthly, our assets are immobile and once we have committed to
the development of an operation we have a clear incentive to manage
relations with stakeholders in such a way as to minimise conflict
and to promote stability and prosperity.
These distinctive challenges involve us in having to manage a
wide range of increasingly salient social and political risks.
These issues are not peripheral, but are fundamental to our
continuing access to land and resources and to our ability to
attract investors and the best talent.
Moreover, I think we are seeing a retreat from some of the
protections of fiscal and regulatory stability that inward
investors enjoyed in many countries during the late 1990s and the
early years of the twenty-first Century. Fuelled in part by an
increase in nationalism around the exploitation of natural
resources and by the current boom in commodity prices, some
governments have been seeking a proportionately higher tax take. In
such situations, governments need to recall that investor
confidence is important at times of famine as well as feast and
they should avoid tax models which do not reflect market lows or
which, through reducing margins, lessen the resources which can be
However, there is an important risk management point here for
extractive companies. Whilst we cannot and should not take on
responsibilities that are properly those of governments, we also
cannot stand aloof from major governance and social issues in the
countries where we operate.
Thus, it is important for our industry to be actively engaged in
maximising our beneficial impacts in areas like poverty reduction
and to support good governance measures, such as the Extractive
Industries Transparency Initiative or the International Council on
Mining and Metals' Resource Endowment project. At a community level
it is crucial too for us to understand the needs, priorities and
concerns of the communities where we work through structured
engagement and to seek, through our work in areas like training and
supply chain development, to ensure that other skills and
enterprises are generated to take the strain when mining stops in a
locality. In all these areas, working alone and through initiatives
like the International Council on Mining and Metals, the Global
Compact, the Global Business Coalition on HIV/AIDS, and the new
NEPAD Investment Climate Facility, I believe Anglo American to be
at the forefront of addressing these strategic risks to our
I want to highlight one other area that relates to sustainable
development, namely climate change. As a company with energy use
equivalent to that of Finland, we have a corporate responsibility
to manage and reduce our carbon impacts and to anticipate the
likely regulatory developments and costs of carbon which society
will impose. This is highly relevant to us as a major energy user
– and hence our recent decision to increase our targeted
energy saving from 12% to 15% by 2014, relative to our 2004
baseline – and to use an attributed cost of carbon in all new
investment decisions. This makes sound commercial sense as well as
being environmentally responsible.
We are also looking at the immediate commercial opportunities
created by carbon trading; by instruments such as the Clean
Development Mechanism and from power generation through the use of
methane drained from coal beds before they are mined - contributing
to safer mining as well as to prevention of greenhouse gas
emissions. We are looking too to be closely involved in
technological innovations designed to mitigate the effects of
climate change through, for example, our membership of the US
Government led public-private partnership FutureGen project;
through investigating the potential impact of carbon capture and
storage via our Monash project in Australia; and through Anglo
Platinum's involvement in the development and application of fuel
Anglo American is a long-term business and it is essential that
we understand the strategic and policy imperative which will impact
upon our business going forward.
In closing I would like to place on record - on your behalf -
the thanks of the Board to the Chief Executive and his management
team and to all our staff for their efforts, ingenuity and
commitment in delivering another fine set of results.
I will now ask Tony Trahar to provide an account of the
financial and operational performance of the business and of
progress in implementing our strategy.