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Annual General Meeting - Address to shareholders
Anglo American plc (the “Company”)
Registered office: 20 Carlton House Terrace, London SW1Y 5AN
Registered number: 3564138 (incorporated in England and Wales)
Legal Entity Identifier: 549300S9XF92D1X8ME43
ISIN: GBOOB1XZS820
JSE Share Code: AGL
NSX Share Code: ANM
NEWS RELEASE
Annual General Meeting - Address to shareholders
Anglo American plc held its Annual General Meeting for shareholders in London today. The
following remarks were made by the Chairman and the Chief Executive.
Stuart Chambers, Chairman of Anglo American plc, made the following remarks:
Now, as it is my first AGM and before I ask Mark Cutifani, our chief executive, to give you an
overview of recent performance and an update on what you can expect in the next few years,
allow me to share some of my perspectives on this extraordinary company.
Anglo American is an iconic brand in mining and, as you can imagine, being appointed your
Chairman is not just a pleasure, it is a privilege. Your company today is a radically changed
business to what it was just five years ago. The quality of the asset portfolio, its operating
performance, and the transformed financial position of the Group are testament to the leadership
of the executive team led by Mark, in what were trying times.
I would also add that having now visited some 15 of the operations, I have been deeply impressed
by the quality of the Anglo American people I have met around the world and their enthusiasm
for the future.
As a global diversified miner, we operate and sell products all over the world, providing many of
the materials which are used to make products which benefit us all in our daily lives. But with that
ubiquity and reach comes responsibility. We must recognise that what we do touches the lives
of many people – not just our employees, customers and suppliers, but also the communities and
national economies where we operate.
So, when we set about delivering profitable growth in order to increase the value of your company
through the cycle – it is not just what we do that matters or is good enough anymore, if it ever
was. It is how we go about it. Not only must we strive, every year, to operate more safely, more
cost effectively, more productively than the year before; but we must also do so sustainably for
the environment and for the communities around our operations. Many of you in this room care
about – and have a right to expect – that we go about our business responsibly and sustainably
– that we do the right things. But what does sustainability really mean?
True sustainability covers many things, of course. Let me give you a few examples, from where
I sit:
• It means ensuring that it isn’t only shareholders and employees who benefit from the
successful development of a mine – but also the communities and countries where the
mines are located. We support the United Nations Sustainable Development Goals
through our Sustainability Strategy and one commitment we have made is for every direct
mining job we create at a mine, to develop five more indirect jobs locally to the benefit of
communities.
• Secondly, it also means innovating to develop new mining technologies to reduce the
physical impact of mining on the environment – in terms of water usage, energy
consumption, emissions and so on. And to deploy these technologies at existing as well
as new mining operations.
• Thirdly, to strive towards our goal of zero harm to our employees. This has been our big
disappointment in 2017. Although the Group’s recordable injury rate has improved by
more than 40% over the five years since 2012, the fact that people are dying at work is
simply unacceptable. Mark will describe later what we are doing to address this, which
includes a newly-established taskforce dedicated to the elimination of fatal incidents. I
do wish to reassure you all, however, that safety is always uppermost in the minds of the
Board as we work closely with Mark and his management team in addressing this
challenge for our business. These are human tragedies and we must do better.
• Fourthly, we celebrated Anglo American’s 100th birthday last Autumn – an impressive
innings for any company. Our average life of mine today is 30 years. Your Board must
ensure that, for example, in 5, 7, 9 years’ time, that life of mine averages at least the
same 30 years, achieved through sustained investment in exploration and endowment
development – and to do everything we can to secure the sustainability of the business
for the next 100 years. We must balance short term performance initiatives with medium
term plans and long term investments, which collectively secure the long term future of
Anglo American for all our stakeholders.
Sustainability means all of these things and more. If we don’t behave in this way as an industry,
we will lose our licence to operate and the business will become unsustainable.
So, in summary, it is important that we think about what our purpose is as a business. Simply
put, it is to re-imagine mining to improve people’s lives. The lives of everybody involved in, or
affected in some way by, what we do. This Board’s commitment is to strive to live up to that
Purpose as we go forward and create an ever more valuable company for you, and a company
you are proud to own shares in.
Let me now invite Mark Cutifani to provide you with an overview of the Group’s performance
during 2017.
Mark Cutifani, Chief Executive of Anglo American plc, made the following remarks.
Thank you, Chairman. And good afternoon, ladies and gentlemen – it’s a great privilege to take
you through our 2017 performance – a year in which we continued to deliver on our commitments
and saw the benefits come through from the deep-rooted changes we have made to the business
over the last five years.
We are now in a position to build on these firm foundations. We have a fundamentally different
business: more resilient, competitive, delivering solid returns and the good news is that we see
so much more opportunity ahead. We have established a new base to deliver consistent and
improving performance.
Our focus on quality assets and the portfolio decisions that we made – along with internal
restructuring and work process changes – have underpinned our broad-based business delivery.
Combined with an improved price environment, we delivered a strong financial result for 2017.
Let me begin with some of the headline numbers.
We set out to further strengthen the balance sheet in 2017 and we did so through a combination
of wide-ranging self-help work, in terms of productivity, costs and capital discipline, along with
receiving better than expected prices for many of our products.
For the year, I am pleased to say that we produced 5% more physical product compared to 2016
and we exceeded our cost and volume improvement target, delivering $1.1 billion business
improvement.
The hard work in the nuts and bolts of the business supported a 93% increase in attributable free
cash flow to $4.9 billion. Underlying EBITDA increased by 45% to $8.8 billion and we improved
our underlying EBITDA margin to 40%. And we ended the year showing a $4 billion reduction in
net debt, at $4.5 billion, well ahead of our target – even after dividend payments. Given where
we are in the commodity price cycle, we do intend to strengthen the balance sheet further during
this current year.
In delivering improved free cash flow, we also restored dividend payments six months early at
the half year – which I’m sure you will have noticed – while also regaining our investment grade
rating. Combined with the proposed final dividend payment of 54 cents per share, payable in a
few days’ time, total dividends paid to shareholders in respect of 2017 will amount to $1.02 per
share. This is our highest dividend in 10 years. So far, so good.
However, as the Chairman said just now, we are all disappointed with one critical aspect of our
business – that of safety. Our safety record in 2017 is extremely disappointing. We lost nine of
our people in fatal accidents, all in South Africa. Let me assure you that we have made significant
and urgent operational interventions to manage activity risks to end fatal incidents across all
operations. Preventing workplace deaths is not a journey, it needs to happen right now. That is
why we have launched a taskforce to eliminate fatal incidents from our company as a matter of
urgency. Through the taskforce, we will ensure that control strategies for the top five fatal risks
are in place by the end of the year – at every operation. And we will maintain momentum on our
existing safety strategy in parallel with this work.
Every leader in our business understands it is simply unacceptable to continue to work where
there is a likely consequence of injury. Safety is our most critical area of focus, and while we must
recognise significant progress over recent years, reducing our safety incident rates by more than
40%, we still have a long way to go to zero harm.
In terms of health and the environment, our excellent progress reflects the work we have been
doing on a number of fronts – and it is good to see such large reductions in incidence rates in
both areas. We are also pleased that just last week, the landmark agreement was reached by a
group of companies in South Africa, including Anglo American South Africa, with the claimants
in the silicosis and tuberculosis class action litigation.
At the heart of the turnaround of Anglo American is the implementation of our Operating Model.
This way of working has transformed day-to-day performance and is now delivering material and
sustainable benefits.
Compared to our 2012 baseline, we delivered 9% more product in 2017, at a 26% lower unit cost
and from half the number of assets. That represents an 80% productivity increase over that five-
year period – and 28% in 2017 alone. In dollar terms, that represents $4.2 billion of annual
underlying EBITDA improvement from costs and volumes.
Such improvements are generally achieved without additional capital, so we continue to improve
our ability to generate free cash flow and increase returns from existing capital employed. While
we have delivered a material operational turnaround in recent years, we still believe there is
significant further improvement ahead. In 2018, we expect a further $800 million of benefit and,
by 2022, we are targeting an additional $3-4 billion annual underlying EBITDA run-rate
improvement from production volumes, productivity improvements and cost reductions.
The quality, long life and growth potential of our mineral assets are the foundation of our global
business. We have transformed the nature and quality of Anglo American’s portfolio, contributing
to the materially improved financial and operational performance. We have moved from a total of
68 assets in early 2013 to 36. The disciplined and natural process of divesting assets that do not
meet our return criteria or long-term value potential will continue.
As we have divested less attractive assets, we have replaced them with assets of a higher quality
and cash generation profile, thereby lifting the overall quality of the portfolio. New portfolio
contributors include Grosvenor in Metallurgical Coal, Gahcho Kué at De Beers and the Minas-
Rio iron ore mine, while we also progress undeveloped options, ensuring a well-phased organic
growth pipeline. We have been careful to continue to invest in and advance a range of growth
options, ranging from relatively low capital, high return, quick payback brownfield expansions to
larger greenfield opportunities.
Our most advanced such option is the Quellaveco copper deposit in southern Peru. This is a
world-class project with a significant resource endowment, a first quartile cost position, and a 30-
year mine life with significant expansion and life extension potential. Importantly, we have
significantly de-risked the project by securing the major permits and we benefit from considerable
local community and government support. We are finalising our verification work now, we are in
the process of selling a minority share and we expect to bring the proposition to the Board for
consideration during this year.
As we look to the future, both the Board and the executive team are firmly aligned on the required
pace and scale of change in our industry to make it truly sustainable. In many ways, mining
processes are much the same today as they have been for many decades – and that is not a
sustainable path, given society’s rightful expectations of us – whether in relation to energy and
water usage, for example, or how we can best contribute to those communities and countries
where we operate.
Many of you may have heard me talk before about innovation in its broadest form and how we
believe this is the key to unlocking a truly sustainable future for our industry. We call our approach
FutureSmart Mining™.
Innovation in technology is a major area of focus for us and we are working in partnership with
others well beyond the shores of our own industry to think differently about the future of mining,
to find solutions that will materially improve efficiencies and our competitive positions.
The technologies we are developing will fundamentally change the way we extract and process
our products and will provide the next step-changes in operating performance – creating
significant safety improvements and major energy, water and capital cost savings. From
technologies that are available today, to those such as swarm robotics and the use of ‘shock
breaking’ instead of energy intensive grinding mills, the future of mining will be very different.
For example, picture a mine that can save more than half of its current energy consumption by
turning rocks into powder using shock technology – which you can see on the screen. We are
piloting this technology now, having tested it successfully at our Mogalakwena platinum mine in
South Africa, as part of our journey towards carbon-neutral mining.
Or if we consider the role of water in our business and the scarcity of this precious resource. Our
ambition is, where possible, to eliminate the use of fresh water from our mining processes. We
are focusing on two areas: water balance management and waterless (or dry) separation.
Dry separation involves finding new ways for dry crushing and grinding of ore to the required
particle size. Essentially, it allows for de-watering waste far earlier in the process and is also far
more energy efficient. New chemistry is opening up different techniques and equipment that will
facilitate rapid dewatering and bring true dry disposal one step closer.
It is innovations such as these that will make previously inaccessible or uneconomic orebodies
mineable, both technically and in an acceptable way to our host communities and countries. We
intend to remain at the forefront of this technology revolution.
Looking at sustainability more broadly, Anglo American has a long track record as a leader in
sustainable, responsible mining, and a reputation for doing the right thing. Building upon this
position we have recently introduced what we believe to be a progressive and industry-leading
Sustainability Strategy, aligned with the United Nations’ Sustainable Development Goals. We
believe this strategy will positively transform how stakeholders experience our business.
The strategy itself is focused on three global sustainability pillars – to be the Trusted Corporate
Leader to support Thriving Communities and to create Healthy Environments – each
encompassing three global stretch goals. These goals are deliberately ambitious, they will
challenge our business to innovate and change, and we are mobilising our people and resources
to deliver them by 2030.
Our goals include:
• Creating five jobs off-site for every job on-site in our host communities;
• Working with governments to ensure every school in our host communities performs
amongst the top 20% of state schools in the country;
• Reducing greenhouse gas emissions by 30%;
• Improving energy efficiency by 30%; and
• Reducing freshwater abstraction by 50% in water-scarce regions.
By delivering on these commitments, in part through a collaborative approach to regional
development, we will transform the way Anglo American does business and present a different
picture of the future of mining.
In fact, if Anglo American is to play its part in creating a sustainable future for the world and
improving the lives of all of us who live here, then we must be prepared to challenge our business
and ourselves, by bringing an innovative mindset to the way we mine and the way we engage –
to re-imagine mining. That is our clear Purpose, as Stuart mentioned a little earlier.
As I have described, the Anglo American that you see today could barely be more different from
just a few years ago. As a result of the tough business decisions we made through the downturn,
our adherence to our plan to drive operational performance and maintain capital discipline, and
to preserve and advance future opportunities, we are well set to continue to deliver value to you,
our shareholders.
We believe that our approach is different – from the quality focus of our assets; to the capabilities
of our innovative people to get the best out of those assets; to the operating and capital discipline
that understands our job is to deliver cash flow and returns… sustainably. And sustainably means
that we are acutely aware of the role we play in society and the responsibilities that go with it.
Ladies and gentlemen, we are working closely with the Board, led by Stuart Chambers, on the
path from base camp to the summit. Let me speak for the whole management team and all our
employees when I say that we are excited about the opportunities that we see for the business
to fulfil this great company’s full potential.
Thank you.
The Company has a primary listing on the Main Market of the London Stock Exchange and
secondary listings on the Johannesburg Stock Exchange, the Botswana Stock Exchange, the
Namibia Stock Exchange and the SIX Swiss Exchange.
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
08 May 2018
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