The annual general meeting (AGM) for shareholders held by diversified miner Anglo American was an opportunity for the company to inform its shareholders of the plans and strategies it will devise in an effort to return Anglo American to full profitability as well as offer value to shareholders.Speaking at the AGM, Anglo Americans chairperson Sir John Parker began by admitting that 2012 was a difficult year for both the mining industry and company, explaining that an economic slowdown in China, a troubled euro zone and the United States slow economic recovery, all had a significant impact on trading conditions. He added that falling commodity prices and above-inflation cost increases in many countries further eroded profitability, which resulted in Anglo American reporting a 44% decline in operating profits compared to the previous year, while earnings were 54% lower in 2012. Further, Parker highlighted that Anglo Americans financial and operating performance continued to suffer as the company experienced setbacks in key areas of its business, referring to lengthy illegal industrial action at its Anglo American Platinum and Kumba Iron Ore operations in South Africa, as well as operational setbacks in the companys Chilean copper business, coupled with various problems at the flagship Minas-Rio iron ore project in Brazil. Anglo Americans objective is to maintain a strong investment-grade rating which demands rigorous capital discipline. We recognise only too well that our major capital project, Minas-Rio, has been a much bigger challenge than any of us could have anticipated and that over the next two years we will bear a heavier capital expenditure burden as we seek to complete its development, after which we expect capital expenditure to be moderated, he said. Parker noted that given the increased challenges involved in developing large and complex greenfield sites, the board would apply a highly disciplined approach to the allocation of capital with smaller, lower-risk brownfield expansion projects more likely to find favour in the short term and will also explore the merits of seeking suitable partners in large greenfield projects. We are making real progress, however, towards first iron ore shipment from Minas-Rio by the end of 2014. We have secured the vast majority of the permits needed; the focus now is on working towards converting our installation licences into operating licences. Earthworks at the beneficiation plant are almost complete; around three-quarters of the civil works have been done; and almost half of the 525-kilometre pipeline has been laid. Minas-Rio is a world-class iron ore project of rare magnitude and quality, in an established mining jurisdiction, representing one of the worlds largest undeveloped resources of iron ore, said Parker. Turnaround Strategy The difficult issues faced by the mining industry over the last five years relate to a lack of capital discipline, a lack of focus on returns and incapacity to translate good intent into business results, this is according to Anglo Americans CEO Mark Cutifani. He said that of more concern, is Anglo Americans share price depreciating, highlighting that it is languishing compared to the companys peers and which translated to Anglo American not being rewarded for the potential it has embedded in the asset portfolio. As an industry, we have lost sight of what the obvious issues are. So, we will look at a new project development, a potential acquisition or any other transaction on the basis that it is the best place to commit that capital compared to all other options; that we have enough information to be confident we have got the numbers right and that we have fully appraised the risks and the opportunities; and that we have the team that can execute in line with the plan, revealed Cutifani. Going forward, Cutifani said that the company would adopt an operating and project delivery model that takes inspiration from beyond the mining industry, to support the implementation of the plans and disciplines necessary to improve Anglo Americans ability to execute its strategy, which include:
A renewed focus on technical innovation, where the application of intellectual capital drives the creation of longer term competitive advantage.A consistent approach, wherever Anglo American works, towards strengthening its sustainability framework. This local-focus approach will help the company recalibrate its social development programs so that its investments more effectively impact Anglo Americans most important development partners. This approach will be developed consistent with, and within, broader government development structures as it is not the companys intention to work outside these structures, but to better complement these frameworks with its local focus and more effective community and engagement processes. Making sure Anglo American has the right people in the right roles doing the right work and that everyone understands what they are individually accountable to deliver. This is a cornerstone in delivering continuous improvement and shareholder value. An understanding that the companys shareholders provide us with capital and support in the expectation Anglo American will take appropriate account of shareholders views to deliver both exceptional and sustainable long term value. Meanwhile, Cutifani made clear the companys position regarding South Africa. I recognise that South Africa remains critical to our shareholder-value proposition. Likewise, we remain important to South Africas longer term development prospects. I am confident that we can operate more effectively in all of our key jurisdictions, recognising that our local communities and our host nations are our most important stakeholders. We must be driven by our desire to deliver value to our shareholders while being guided by our understanding of the need to deliver long term sustainable social outcomes. Outlook Parker added that there are now clear signs of an upturn in US housing, which should reinforce a broader economic recovery helped by ultra-loose monetary policy, while in China, the authorities have also eased policy to stimulate faster growth. However, he cautions that Chinas newly installed leadership is mindful of the need to rebalance the economy, which will restrain growth over the next few years. In Europe and Japan, activity has been weak, but there are signs of improvement and changes in recent policy should boost growth in 2013. In the medium term, we see continuing robust demand for industrial commodities as emerging economies continue to industrialise and advanced economies invest in upgrading their infrastructure, Parker told shareholders. Meanwhile, Cutifani acknowledged the important role that employees play. People are the business. Anything that we accomplish with our resources, the assets we have built and the capital we invest is through the design and actions of our people. Leadership must be focused on people, providing the vision and the drive to deliver on our potential. I have absolutely no doubt that Anglo American has the people and the physical and financial resources to deliver on its undoubted potential. I look forward to leading the group and the team in striving to exceed your expectations, he concluded.