Report on the Anglo American AGM 8 May 2018
By Richard Solly, Co-ordinator, London Mining Network
With assistance from Ana Bolena Chamie, Andy Whitmore, Benjamin Hitchcock, Paul Robson, Seb Ordonez and Sunit Bagree.
1. This was the first AGM presided over by the new Chairman, Stuart Chambers. He seemed in a very cheerful mood (perhaps he is a very cheerful person; perhaps his cheerfulness is regularly boosted by his enormous pay packet). He smiled frequently, allowed everyone to have their say, and appeared to agree to as many requests and as many points as he possibly could. When he disagreed, he did so in a rather agreeable sort of way. He follows in the tradition of courteous Chairmen (yes, they have all been men) of Anglo American since its move to London.
2. To his right sat Company Secretary Richard Price. He was equally striking in his capacity to maintain an expression of relentless misery throughout the proceedings. Perhaps he had eaten something disagreeable for lunch. Perhaps he had not had time for lunch. Perhaps he had had a very tasty lunch but simply does not enjoy sitting for three hours in meetings in which the company will be subjected to irritating and intrusive questioning. (I can sympathise with that: I don’t enjoy company AGMs, either. If mining companies would only refrain from wrecking the planet, undermining the future, compromising the climate, destroying livelihoods, dividing communities, forcibly evicting farmers and showing catastrophic disrespect for indigenous cultures, we would not have to bother turning up at all, and could spend our time doing more pleasant things instead.) Or perhaps he was smiling all the time I was looking down at my notes and only looked sour-faced whenever I happened to look up. This is quite possible.
3. Stuart Chambers began by introducing all the directors. He said that Jack Thompson, Chair of the Sustainability Committee, was ill and therefore absent. Those to his left smiled and waved at us. I was reminded of the sudden orgy of smiling and waving at the recent Lonmin AGM when a shareholder accused directors of not looking as though they were pleased to see us. Directors to the Chairman’s right, perhaps taking their cue from the Company Secretary, looked very dour. I do not know whether there is any significance in this left-right split. Are those on the left naturally more cheerful than those on the right? I think it ain’t necessarily so.
Speeches from the Chairman and the CEO
4. The meeting began with speeches from Chairman Stuart Chambers and Chief Executive Officer (CEO) Mark Cutifani. The company has helpfully published these speeches in full on its website which means that the near – but not quite – verbatim notes that I took in the AGM with such effort have been rendered obsolete. It would be helpful if the Chairman could announce in advance the parts of the meeting that I don’t need to note, as it would save energy.
5. Just a few highlights of the opening speeches:
Stuart Chambers said (among many, many other things):
“We have to recognise that what we do touches the lives of many, many people.”
“It isn’t just what we do that counts, it’s how we go about it.”
“Many of you care about and have a right to expect us to go about our business responsibly and sustainably.”
“We support the UN Sustainable Development Goals.”
“We strive towards our goal of zero harm to employees .. it is unacceptable that people are dying at work … We simply must do better.”
Mark Cutifani said (among many, many other things):
“Safety is our most critical priority to date.”
“We do want to become the partner of choice for communities – indeed if we are to improve lives of all in the world, we must challenge ourselves. We are re-imagining mining and the way it should be. That is our clear purpose.”
Questions from shareholders
Carbon emissions and climate change
6. Questions began with several on carbon emissions and climate change.
7. Bruce Duguid, Hermes Investment Management, said that he was at the AGM with others from the Climate Action 100 initiative, a new global investor collaborative initiative covering 30 trillion dollars of assets under management. It aims to work with companies to curb carbon emissions and improve reporting. He said that Anglo American needed to increase both its activity and its transparency in four areas: its long-term decarbonisation ambition; its shorter to medium term interim milestones including its 2030 target; its work on a low carbon scenario analysis; and its transparency on policy advocacy on climate change.
8. Derek Forss, Head of Pensions at Transport for London, also supporting Climate Action 100, welcomed the company’s objective of creating a carbon neutral mine. He said he would like more detail on this goal. Would such a mine be operational by 2030? What role would carbon offsets play in meeting the goal of carbon neutrality? Are Anglo American’s goals enough to meet the goals of the Paris Climate Agreement?
9. Stuart Chambers said that the company would share detail as it comes. The current aspiration is to have a carbon neutral mine by 2030, but Anglo American has not yet determined what stage will have been reached by that date. The hope is that such a mine will have been started by then or at least be ready to be started. The goal is to have a carbon neutral mine without carbon offsets. Regarding carbon reduction goals, the aim is an absolute 30% reduction by 2030. This aim is created and informed by individual national and country agreements by the countries involved in Paris agreement. Anglo American’s goals are consistent with the goal of restricting overall temperature rises to two degrees or less.
10. Chris Simon, of the Local Authority Pension Fund Forum, welcomed Anglo American’s ‘ambitious goal’ of reducing greenhouse gas emissions by 30% by 2030. He asked how the company arrived at this figure and whether it was science-based.
11. Stuart Chambers confirmed that the goal was science-based regarding Scope 1 [direct greenhouse gas] and Scope 2 [electricity-linked indirect] emissions. The company was yet to do an analysis regarding a science-based goal for Scope 3 [other indirect] emissions. The company expected to do that in due course and would share it.
12. Mark Cutifani agreed that the goal was informed by science. The company was pursuing more efficient mining, drilling and blasting, and a lot more could be done to improve the efficiency of breakage. Putting ore through a box grader before milling could improve efficiency. “If we grind coarser,” he said, “we can get close to the same recovery but use less energy. It will also use less water. Using these technologies, 30% is achievable by 2030.”
13. Adam Matthews, representing the Church Commissioners and the Church of England Pensions Board, welcomed Anglo American’s efforts to ‘re-imagine’ mining. He welcomed the company’s sustainability strategy. Climate Action 100 would welcome information from Anglo American on its public policy advocacy, including through mining associations, and transparent reporting on them. Would the company do a review of its membership of industry associations and publish it, showing its involvement in direct and indirect policy advocacy?
14. Stuart Chambers replied that working with others was the best way to achieve results in many things, especially climate change. “We are happy to make it clear if we are member of a body with a policy different from us,” he said, “but if a body has the same view as us on ten issues and a difference on one, we do not want to walk away. We are carrying out a review of membership of industry bodies, which will be put to the board, and it will be made clear where these different policy positions are and what financial contributions we make.” The company would do this soon and would publish it by the next AGM.
15. Adam Matthews then spoke about the Transition Pathway Initiative (TPI), which he said was supported by asset owners and funds involving six trillion dollars worth of assets. Would Anglo American work with it and academics to use TPI to assess its mining activities against the two degree temperature rise benchmark? That would enhance the quality of dialogue with concerned investors.
16. Stuart Chambers said, “Yes, we are happy to do that. We are happy to engage with you on this.”
17. Andy Jones, of Hermes Asset Management, welcomed Anglo American’s climate change report but asked for more detail on the timeline for disclosure of the results of work done on scenario analysis, especially regarding its coal assets. He asked that the company carry out the recommendations of the Task Force on Climate Disclosure.
18. Stuart Chambers said that the company intended to carry out a more rigorous analysis and to ‘align on disclosure’. It was working with the ICMM [International Council on Mining and Minerals] on this.
19. A representative of ShareAction said that Anglo American clearly recognised the challenges of climate change. She noted that the links on its website to its position paper and its plans had not been working recently. She said that its work to decrease its greenhouse gas emissions and increase energy efficiency had been clearly expressed, but that more important was its potential influence on climate change through its role in the creation and implementation of policy. Climate lobbying is a very serious concern given its effect on policy making. Transparency on disclosing climate related trade association memberships necessary. How would the company increase its alignment on climate related issues?
20. Stuart Chambers said that the failure of two links on its website was alarming. Company Secretary Richard Price looked into the matter immediately from where he sat and assured the meeting that the links were again working. The Chairman then repeated that the most effective way to achieve progress is to work within industry associations. “You are saying we should get on the front foot in a lobbying way,” he said. “We are happy to commit that as part of the review we will look at lobbying activity and see whether we should be active members of associations where we need to lobby for our own view. The plan is to complete the review by the next AGM and then we can turn it into action.” ShareAction could continue the conversation with Jack Thompson of the Sustainability Committee.
Deep Sea Mining
21. Andy Whitmore, representing the Deep Sea Mining Campaign, said: “Last year I raised the issue of this company’s investment in Nautilus Minerals, which is trying to develop a deep sea mining operation – called the Solwara 1 project – in the Bismarck Sea off the coast of Papua New Guinea.
22. “I am pleased to say that Anglo American has recently confirmed that it is divesting from the project. I would like to acknowledge the company’s engagement with us on this issue, as we explained the financial, environmental and social risks associated with the project.
23. “Naturally we are glad that the company has taken this course of action, and believe it is the only option that is consistent with the company’s international commitments to sustainability, human rights, and environmental stewardship.
24. “From our point of view it confirms the growing concerns about the Solwara 1 project, and increasing opposition to deep sea mining in general. Sir David Attenborough is the latest to add his voice against this hazardous and unnecessary emerging industry, describing the proposed Solwara 1 project process as ‘deeply tragic’.
25. “We hope that the company will avoid any future association with deep sea mining, but would instead explore other more sustainable options such as ‘urban mining’ of the world’s vast stores of metal-containing waste.
26. “Given this, and the comments you made initially on innovation and sustainability, will the company commit to engage to develop a policy on environmentally sensitive areas that should be considered no-go zones for mining, including the seabed? We would also propose engaging on researching ways to reduce mining greenfield areas in general by sourcing minerals and metals in other ways, including urban mining.”
27. Stuart Chambers said that Anglo American was out of Nautilus now and that he could not comment on them. On the question itself he passed to Mark Cutifani, who said they would be interested in the idea of no-go zones, and said that indeed the ICMM had committed to such an idea around world heritage sites. So he would be happy to see ideas for discussion.
28. Andy Whitmore thanked them and said that he had himself planned to mention the ICMM commitment. He noted that this set a precedent. He also noted they had not responded on the ideas around urban mining, and suggested that it would be worth considering for true long-term innovation.
Community relations around the Cerrejón Coal mine in Colombia
29. I spoke as a shareholder (and a massive shareholder at that: I now have ten shares). I was also representing Colombia Solidarity Campaign. I said: “My question concerns community relations around the Cerrejón Coal mine in Colombia, of which Anglo American owns 33%. There still appears to be a deep lack of trust between company management and members of communities being relocated because of mine expansion. The huge power imbalance between the company and the communities, and the involuntary nature of the changes imposed on the, cause divisions which, we are told, local management then exploits.
30. “We continue to receive reports about the deep sadness that people feel at they having to leave their ancestral territory, and about the inadequacy of the amounts of land provided to people hoping to continue to live by cattle-raising. People have been compelled to abandon a wholly rural way of life and accept a semi-urban one. Most new productive projects have failed, leaving people without decent livelihoods. Housing in the relocated settlements has been constructed to inadequate standards, on unstable soil.
31. “From the community of Roche, we hear of harassment by mine security personnel of community members who go to hunt in the vicinity of their former homes. There is a continuing dispute over a broken agreement to enter into a contract with the Arregoces family for provision of services. Many community members do not trust the company’s water quality testing because the company did not consult them before choosing which institution would do the testing, and because its conclusions differ from those conducted by the NGO Indepaz and the University of Cartagena, which found elevated levels of metals in the water. There is a serious dispute over the number of families from Roche who need resettlement and compensation. This arose during public meetings between the company and the community. Today we hear that a meeting was held with the Ministry of the Interior last Friday, in the absence of many community members and without their knowledge, to decide this matter.
32. “Why were all members of the community not informed about this meeting and invited to it, given the gravity of the matter? What does Anglo American propose to do to address the continuing lack of trust? What will you do to ensure that problems of livelihoods, access to land, building quality and water quality are addressed justly and swiftly?
33. “The community of Tabaco was violently evicted from its ancestral territory in August 2001 in order that the Cerrejón Coal mine could expand. The community is an Afro-descendent community and was displaced in violation of its rights. Despite a court order in 2002 and an agreement with community leaders in 2008, it has still not been relocated. The agreement of 2008 did not take into account the constitutional rights of the community as people of African descent. Many people have lost their livelihoods. Its members continue to inhabit an area which is affected by air pollution from the mine. There is a dispute between the company and the community over the size of the piece of land to be made available for relocation. What will Anglo American do to ensure that this community receives justice at last? To make some progress, there has been a call by members of the community for Cerrejón Coal to finance advice to the community from the University of Antioquia. Will Anglo American ensure that this is agreed?”
34. Stuart Chambers replied, “Gosh, that’s a lot, Mr Solly.” He said that Anglo American clearly recognised that with regard to the management of Cerrejón there is a lot to do, but also that there have been clear improvements. He said, “We are a one-third shareholder. We have influence, but it is run by management on behalf of shareholders. On the specifics of your question, the most difficult thing for us is with regard to livelihood projects and how you go forward around displacements. Our commitment is to do this in collaboration with communities, and we want to do it this way. On the lack of trust, the only way to manage that is to have continued consultation with communities. We cannot magic trust up, but need to work on building it over time.
35. “In terms of housing being substandard on relocation, that is true. Thanks to drainage issues there have been problems with cracks. We have run the pilot house and it seems to be fixed. We will roll out the process of correction based on the principle ‘pdq’ [pretty damn quick].
36. “Regarding harassment, it is unacceptable in Anglo American. This is in our policy. We clearly engage with management at Cerrejón to let them know it is unacceptable to us.”
37. Regarding water quality testing, Stuart Chambers said he would like to break AGM convention and leave a question with me. There is disagreement between the Cerrejón company and the community on who should do the testing. Cerrejón management say they are not getting access to the methodology of the independent experts who did the testing for the community, so they are struggling to understand how the independent experts are coming up with their results. He asked that we ask our friends in the communities if the methodology of the independent study could be made available to the company.
38. Regarding the meeting with the Ministry of the Interior, because it had happened so recently, Anglo American did not have details of it, though they had asked for them and expected to hear back very soon. “We think it may not be too odd for them to have a meeting with the ministry,” he said, “but we understand that in a position where trust may be problematic that people may be concerned. But we will get the facts.” I explained that the information we had received was that the meeting was about the number of families to be relocated and compensated. A disagreement had arisen during community assemblies involving the people of Roche and the company on the number of families involved. The company said that 27 families were eligible for relocation and compensation and the suggestion was that the community said that the figure was over 500. It was clearly a matter of great importance and should not be decided without the involvement of the community.
39. Stuart Chambers replied, “Leave that with us, then, Mr Solly. As I said, we need to get the facts, and we will get back to you.” Generally, he said, he wanted to reiterate that Anglo American’s position is clear. The intent is to get the full facts and ensure that issues are dealt with responsibly. The company “will not rest” until they achieve that.
Legal issues and river diversion around the Cerrejón Coal mine in Colombia
40. Sebastian Ordonez, of War on Want, said: “In December 2017, The Colombian Constitutional Court ordered the suspension of the diversion of the Bruno Stream and the protection of the human rights of the La Gran Parada, Paradero and La Horqueta communities – especially their right to water, health and food security.
41. “These communities claimed that intervention in the Bruno stream by Cerrejón has the potential to deplete one of the most fragile ecosystems in Colombia, as the stream sits between two tropical dry forests.
42. “Furthermore, they suggested that the project is likely to trigger alteration of water sources in the region, which in the climate change scenario, would threaten the water supply of Wayuu communities and other communities who live in Albania and Maicao municipalities.
43. “When analysing the petitions, the Court considered the social and environmental importance of the Bruno stream in the region as it is located in a high-water-stress zone. It is not just the main water supplier of the Albania municipality and beyond, enabling livelihood and food security, but it’s fundamental to keep the balance of ecosystems. Similarly, it is a hub for social and cultural relations among the communities who depend on it.
44. “Considering the above mentioned, the Court ruled that the diversion of the Bruno stream encompasses many difficulties and uncertainties due to environmental and social impacts that haven’t been addressed yet and must be resolved. It listed ten, including points on the specific issues mentioned above, as well as:
- Scale of extractive activities that already have been taken place in the Guajira region which have resulted in ecosystem damage and would be exacerbated by the Bruno stream diversion.
- Historical intervention by the Cerrejón mine on water sources in the region, likewise expected projects and its potential effects in this regard.
45. “Thus, the Court has ordered amongst other provisions:
- The continuity of the inter-institutional round table integrated by different Colombian institutions and Cerrejón mine – which would complete a technical study towards addressing the difficulties and uncertainties of the environmental viability of the project, some of which were highlighted above.
- And that the inter-institutional round table ought to open spaces of participation for communities’ representatives who will be affected by the project.
46. “However, the inter-institutional table continued without both communities and the experts producing the impact studies for the Constitutional Court, so it seems as though Cerrejón is not interested in guaranteeing the participation of independent experts on this table.
47. “Given the significant weight of this sentence and the potential impact on Cerrejón’s planned expansion, not least on communities and their territories, I have two questions:
- How will Cerrejón resolve the ten uncertainties indicated by the Constitutional Court regarding the exploitation of the natural channel of the Bruno stream?
- How will Cerrejón guarantee the carrying out of truly independent studies of the impacts of diverting the Arroyo Bruno, involving independent scientists including the experts that provided the constitutional court with their studies – and the participation of local communities?”
48. Stuart Chambers said that this was an interesting example of something that requires ‘strong dialogue’ between the company and the communities. There has been a ‘tutela’, a legal action where the government allows interest groups to ask a company to meet certain challenges, and until it does, the government can step in and change things. The Bruno Creek crosses Cerrejón land and in 1998 a permit was granted as part of the original environmental plan to relocate 3.5 kilometres of the stream 700 metres to the north. At the moment, the stretch of the river on Cerrejón land is not used by communities. At the limits of Cerrejón land, where the river enters and leaves Cerrejón land, it needs to be usable by communities. The diversion permit was confirmed in 2016. The tutela has been accepted. Cerrejón management are committed to responding on the ten ‘uncertainties’ listed by the court, and Anglo American are committed to ensuring that this happens. The ten points have to be addressed. “The other side of this,” he said, “is we have to pursue this, and I would ask in return that Cerrejón management and affected people get together to accelerate this. This is not an expansion project, it was agreed in 1998 and if it is not possible to do it then management has to reduce output, and this will reduce jobs, and this is not in the interests of communities, workers or shareholders.”
49. Mark Cutifani added that with regard to independent expertise, Anglo American recognise the process that the court has put in place. The community consultation process is a significant step given the history, and “we will do all we can to connect all the issues. The court has identified independent participants, but are you suggesting that others should be identified?”
50. Sebastian replied that identifying experts should be part of the community consultation process.
51. Mark Cutifani said that Anglo American would need to check back with Cerrejón management and discover a way forward to resolve the issues, as this was the intention of the court. “We will see if we can encourage Cerrejón management to resolve this through community consultation. We need to land together in Cerrejón.” (I was not entirely sure what he meant by the last remark. Was he suggesting a shared visit by aeroplane?)
52. Stuart Chambers said, “Independent verification is important, especially when there is this challenging discourse.”
Anglo American’s failure to report on the Cerrejón Coal mine in Colombia
53. Ana Bolena Chamie, from London Mining Network, asked, “Why have Anglo American failed to include information related to issues surrounding Cerrejón in their Annual and Sustainability Reports, despite the fact that this has been a concern of this AGM for several years?
54. “Anglo American states that such reports – particularly the Sustainability Report – cover companies, subsidiaries and also joint ventures over which Anglo American has management control; it does not include independently managed operations, such as Cerrejón and Samancor, unless significant incidents arise.
55. “In this regard, it’s worth asking why Anglo American consider Cerrejón issues not significant enough to be included in the annual reports, when such issues embody negative effects on the environment and the livelihood of ethnic groups ancestrally inhabiting the region?
56. “The Colombian Constitutional Court has decreed that Cerrejón extractive activity as a whole has been negatively affecting the Guajira Region (see, for example, Sentence T 704/16) to the extent that it has triggered environmental destruction of one of the more fragile ecosystems in the country, (see, for example, announcement 58-2017) compromising water sources and polluting the air.
57. “Besides, the extractive activity has prompted social, cultural, environmental and territorial conflicts threatening the cultural survival of the Wayuu people. Is it not enough, and very much significant, that the highest court of Colombia had underscored that the issues raised here ought to be addressed in order to prevent more environmental destruction and cultural identity disruption in one of the poorest regions of Colombia?
58. “It should be a moral and ethical responsibility of Anglo American to include such issues in its annual reports at least, as for example BHP does. Especially when the company claims to observe the highest international standards such as the Voluntary Principles on Security and Human Rights, and the UN Guiding Principles on Business and Human Rights.”
59. Mark Cutifani answered that the key point is that in the Sustainability Report, Anglo American focuses on operations that it has primary responsibility for. “We will raise issues if they are high level in the report but we don’t go to the same level of detail. If the request is to include more detail on Cerrejon and other joint ventures that we don’t manage, we can consider that as long as it does not take away the primary reponsibility for this from Cerrejon management. We will take that on and give a response next year.”
60. Stuart Chambers added, “Please give us a steer on the nature of the content that is missing.”
Health of former mine workers in Southern Africa
61. Tony Dykes, of ACTSA (Action for Southern Africa), noted the recent out of court settlement of approximately 400 million US dollars (5 billion rand) in relation to a class action, which was first brought in 2012, for mineworkers with silicosis and TB in Southern Africa. He asked, “Is the class action settlement a comprehensive industry-wide settlement? To ensure all who should benefit do, publicising the settlement and ensuring that testing for silicosis is accessible, particularly to those ex-mineworkers living in rural areas of Southern Africa, is crucial. It is important for there to be at least yearly but preferably six monthly updates.”
62. Stuart Chambers said, “The settlement concerns those affected by mines operated in the past or present by members of working group involved, rather than a completely industry wide settlement. Regarding six monthly reports, first the settlement has to be agreed by the High Court. Let’s assume that happens, then it gets handed over to a trust, and the trustee board will be the ones who determine what happens and would have to agree to six monthly reports. We can suggest that and so can you. In the end it will be up to the trust to decide on those things. How do we make sure that as many people as possible get to know about this and can come forward, go through screening and see if they have a claim and have it met if so? That is up to the trust to execute but we can encourage that the trustees need to push for it.”
63. Tony Dykes said, “We look forward to you doing this and to further dialogue with you. Anglo American is influential in this matter. The appropriate Anglo American board member should be available for continued communication.”
64. Sunit Bagree, also of ACTSA, said: “Regarding the six monthly reporting and publicising the settlement and making it accessible, I take the point that trustees will have ultimate control over this process but it is very important for Anglo American to press on these points. The settlement reached in March 2016 on behalf of just over 4,300 former mineworkers led to the foundation of a trust and there have been a lot of criticisms of that trust for the slow processing of claims and slow payments. It has improved recently, but if there had been more pressure earlier, the current situation would be better. If people do not know about the settlement, or if they know about the settlement but cannot access the benefits, then it won’t be very helpful. How can we ensure that the class action settlement and statutory compensation scheme do not get confused and act as a drag on each other but rather work together in a complementary and mutually supportive way? Did you consult with trade unions, especially NUM (who are the union that most of the affected miners belonged to), before agreeing the settlement, and will you be working with NUM and other mining unions in Southern Africa as a whole to all mineworkers and dependants of mineworkers eligible for compensation?”
65. Stuart Chambers said that the company had consulted the South African government on the settlement. Mark Cutifani added that everyone had learned lessons from the 2016 agreement. Since last year’s AGM, 2,400 people had been screened. The process is moving. “We can apply those lessons to how the trust fund will work,” he said. “We have tried to keep everyone abreast of where we were in conversations, including unions, but as we reached the end, the legal team took primacy in representing claimants, and there were different views among different unions. As soon as we knew we were getting close, we flagged it, but it had to be a negotiation between both parties. Feedback was constructive. We are in a reasonably good place with generally constructive feedback.”
66. Sunit said: “It is absolutely crucial to engage with mining unions across Southern Africa as some of the affected miners are not South African, rather they are from surrounding countries and other countries in the region. I would also like to reaffirm the point made by Tony Dykes in his comments that we would like to continue this dialogue with Board member who leads on this issue.”
Death threats around the Minas-Rio iron ore mine in Brazil
67. Benjamin Hitchcock, of London Mining Network, said: “My question concerns the human rights impacts of the Minas-Rio project in Brazil. There is grave concern over repeated threats being made against critics of the Minas-Rio mine. These include death threats against specific individuals, and they are quite specific in making clear that the threats are being made because of the recipients’ criticisms of Anglo American.
68. “In late March, the Co-ordinator of the Program for the Protection of Human Rights Defenders for Minas Gerais State wrote to the Secretary of State for Human Rights and Social Participation and Citizenship, a Minas Gerais state government body, asking for protection for a number of named individuals. Requests included financial assistance to enable people to move out of the area temporarily, and provision of security cameras around people’s houses, among other things.
69. “What will Anglo American do to foster an atmosphere of tolerance and calm in the area and to discourage those who support its operations from making death threats against those who oppose them?”
70. Stuart Chambers replied: “On the general point, Anglo American has had and continues to have a long-standing commitment to human rights. We want to work with all stakeholders to ensure their views are heard. Some of the behaviour alleged is contrary to Anglo American’s code of conduct, and we cannot condone it. There is already a review going on to find out where this is coming from to see what we can do to stop this kind of behaviour, whether or not it is directly in our control. We need to foster a better relationship between human rights defenders and people who do not like what they are doing, and threaten them.” He said that the company wanted to foster more tolerance and a better environment.
71. Mark Cutifani added that ‘defending the defenders’ is a very important principle which Anglo American supports. “We are trying to be very clear with every employee and group that works with us and the whole community that it does not help Minas-Rio to be in the right place in the conversation,” he said. “We want to be in the community in 50 to 100 years and we are making clear that this is not helping. We are doing an investigation with the authorities to try to find out where this is coming from. We also do not identify defenders, to make sure they are not targeted. A few days ago we launched a partnership with International Alert regarding how we can foster open dialogues in areas of conflict. International Alert will provide suggestions as to how we can present ourselves differently and be a force to bring people together rather than causing conflict.”
Disastrous spills and pollution around the Minas-Rio iron ore mine in Brazil
72. Paul Robson, from London Mining Network, said: “My questions concern the Minas-Rio project in Brazil. In March there were two large spills from the iron ore pipeline of the Minas-Rio Project, and the operation of the pipeline has been suspended. This means that operation of the mine is suspended, as the mine is dependent on the full operation of the pipeline. Work is continuing on the expansion of the mine.
73. “The recent announcement by Anglo-American indicates that a full pipeline inspection (an internal scan of every part of the pipeline) will be carried out and will take 90 days. This will then be followed by a detailed analysis of the results of the scan, an assessment of the required remedial action, repair of the pipeline, testing of the pipeline and examination of the results by the regulatory authorities to allow lifting of the suspension of the operating licence of the pipeline.
74. “The announcement also says that it is expected to ramp up operations again from Quarter Four of 2018. How firm an estimate is that? When is full operation expected?
75. “The announcement says that the pipeline inspection is to identify specific causes of any weaknesses in certain sections of the pipeline. How close is the investigation to identifying specific causes of the breakages? Are there hypotheses as to the causes of the breakages? Is it hypothesised that the weaknesses are confined to certain sections of the pipeline or sections of a particular origin? Why is it necessary to examine the whole pipeline?
76. “The time limit for repairing the environmental damage is 30 May. The pollution of the stream-bed prevents use of water from the river and wells along the stream, damaging people’s livelihoods. Are they being compensated for this? For the community of Santo Antônio do Grama, another source of water has been used by installing new piping and pumps. Can you be sure that this will be sufficient in the coming dry season and until for the period the original water source cannot be used?
77. “It is reported that the company intends to lay off workers (who are at present on compulsory holidays) for five months. What provision is being made for their livelihoods?
It is reported that the company expects income before interest, tax, depreciation and amortitization (EBITDA) to be 300 to 400 million dollars less than expected this year. Can you confirm this? How firm an estimate is this?
78. “The president of Anglo American in Brazil says that by next year the Step Three expansion licence will be given, and that the pipeline burst will not prejudice it. Expansion will increase production from 16.8 to 26.5 million tonnes. If the pipeline burst after three years with current throughput, how will it cope for many more years with a higher throughput?”
79. Stuart Chambers replied that there had been large-scale accidents, and rivers had been polluted. He said that these events were unacceptable but that in the first one only 300 tonnes of slurry had been released, and the second spill was shut down in eight minutes. As far as water is concerned, the day after the incident, on March 12 Anglo American had begun supplying alternative water. They were monitoring river water at 17 points, and all were within current legal limits. “But we must keep our eye on the ball,” he said, “and ensure that if any clean-up is required, we will do it.” Regarding employment and the stopping of the mine, many workers were involved in construction work for Step Three. The company’s best estimate for a restart of mine operation was Quarter Four of this year, but the estimate could not be guaranteed until all investigations into the pipeline, including specifications for increased output, were finished. The company was very keen to restart as soon as possible but wished to exercise caution to ensure that the restart was not too early, so as not to risk a third spill.
80. Mark Cutifani added that the company’s pipeline review involved doing an ultrasound along the whole pipeline and putting a Pipeline Investigative Gauge, or PIG, through the pipeline, to check the integrity of the pipeline along its whole length, which is why it would take 90 days. “We understand where there may be issues and we do have a hypothesis but we will not share it in case it is wrong,” he said. The company would need another four weeks to analyse all the data and another one to two months of rectification work, but could not pre-empt the inspection. “To have one leak is unacceptable, to have two is distressing, and we are not going to have a third,” he said. “We may have a hypothesis but we have to test it from every angle to see if it is correct. We are taking advice from around the globe and working with statutory authorities so we are trying to make sure we have everyone involved as much as we can.” The company thought that the problem may be connected with the welds in the pipeline. The final clean-up should be finished by the end of May. The figure of 300 to 400 million dollars was on the basis of the 90 day analysis and then a couple of months of replacing parts of the pipeline. The costs of replacing the pipe were included in those numbers. The expansion in output of the mine would be beneficial because at the full rate there would be less stopping and starting of the slurry flow, and this would reduce high pressures on start-up. “Keeping it pumping is the most important thing.”
81. Paul Robson explained that his question was based on information available in Brazil, from information from Anglo American’s subsidiary and from experts in Brazil. He asked for confirmation that Mark Cutifani thought that there would be less of a problem when the pipeline is at full rate, because there would be lower pressures.
82. Mark Cutifani confirmed that this would certainly help.
83. Stuart Chambers said that the pipeline ran for 500 kilometres from the Minas-Rio mine to the coast. The company had already tested it and would learn more through inspection.
The elephant in the room
84. At last, a shareholder mentioned – and named – the elephant in the room; in this case, an Indian elephant. He thanked the company for the turnaround in its fortunes in recent years but then said that one of the company’s biggest shareholders, Anil Agarwal [Chairman of Vedanta Resources plc], owns 21% of the company’s shares and “says he does not care if the shares go up or down, so his interests are not aligned with ours.” He noted that Agarwal had recently appointed Srinivasan Venkatakrishnan of AngloGold as Chief Executive Officer of Vedanta Resources plc, and that “he knows Anglo American inside out.”. [Srinivasan Venkatakrishnan was CEO of AngloGold from 2013 until recently, and from 2005 to 2013 he was AngloGold’s Chief Financial Officer, for the earlier part of which time AngloGold was still controlled by Anglo American.] Anil Agarwal had recently boasted in the press that he had got Anglo American to stay in the Kumba Iron Ore project. The articles say that Anglo American was contacted for comment and Agarwal’s statement was not denied. Now it is claimed, he said, that “Agarwal is trying to get Anglo American to invest in India, where capital goes to die.” He urged the Chairman to ask POSCO, Rio Tinto and others whose investments in India had gone awry. Rio Tinto had had to donate its Bunder diamond mine to the state government. “Is Agarwal a shadow director?” he asked,”and if so, why do shareholders not have a chance to vote on whether he should be?”
85. Stuart Chambers said that Anil Agarwal wanted the same as other shareholders. Anil Agarwal says the same things to the Anglo American board as he says elsewhere, except on South Africa. He is aligned with other shareholders in that he wants Anglo American to become a larger company and prosper, which is in the interests of all shareholders. “He is very keen on that trajectory, but when you face a decision about scale, sometimes you go backwards to go forwards,” said the Chairman. “We have largely completed that and are now going forward and at the moment his wishes are not that unaligned to other shareholders. He is not a shadow director and cannot influence the board to do things which the board does not believe are in the interests of all shareholders. If there were a conflict we would need to take account of that but this has not arisen. We will do what we can to grow the shareholder value of the company. Anil Agarwal has said publicly that he does not want to run the company and is happy with the way in which it is being run. Regarding South Africa, what Anil Agarwal says is to be discussed with him. Our strategic decisions on South Africa were made before Anil Agarwal got a tranche of shares. We have fantastic assets and good business in South Africa and cannot see a future without involvement in South Africa, so the fact that we are still there is that there are good reasons to be there.”
86. [In case readers are unaware of the controversy which surrounds Anil Agarwal and Vedanta, I recommend that they consult the Foil Vedanta website or search for ‘Agarwal‘ or ‘Vedanta‘ on the LMN website or read the many articles on the subject on the Mines and Communities website. After the AGM ended, the questioner urged us also to read the very many articles about Mr Agarwal in the Hindi press, which he suggested would shock us even more – though I confess I may have to wait a while before I can experience the shock, as I do not yet read Hindi.]
Platinum Group Metals
87. The same shareholder then asked about Platinum Group Metals (PGMs). He said that a few years ago Anglo American had decided to concentrate on a few minerals, including PGMs. Most platinum, he said, is used by the motor industry. Much of what has been used in catalysts is now being recycled, and the jewellery market for platinum is collapsing. Hydrogen cars have not picked up the slack and it is clearer day by day that the future is lithium battery cars. Efforts to stimulate demand for platinum are not visible. How could Anglo American excite its shareholders over PGMs, especially after ‘Dieselgate’?
88. Stuart Chambers replied that regarding PGM demand, Mark Cutifani would be able to inspire the shareholders. He said that there is uncertainty in the PGM market. For the next seven to ten years Anglo American had no concern over supply and demand. “We have some very good assets,” he said. “We remain very positive about them. The die is not cast regarding electrification. Who knows where China and other big countries will go on this?”
89. Mark Cutifani said that the precious metals market, of which PGMs are a part, is about one third jewellery, one third various industrial applications and one third in catalysts. There has been little investment in jewellery and the industrial sector. Anglo American had been pushing the Platinum Investment Forum to encourage new uses for platinum especially in investment and jewellery. It was time to give the jewellery market a push, especially in China. “We are in the process of launching a venture capital fund with another major shareholder to encourage new uses of precious metals,” he said. Overall growth of vehicles in the world would ensure modest growth of precious metals even with the ‘sifting out’ of diesel vehicles. “That does not take account of the use of fuel cells,” he said. “We need to support development of those other hybrid options. But to us demand over the next ten years looks pretty solid. It’s more difficult to predict beyond that.” Over the last three to five years Anglo American had restructured and owned the best precious metals mine in the world. Costs were coming out across the business. Anglo American was the only major mining group which had not asked shareholders for more money in recent years. The company wanted to invest some of the money it was making in new markets.
90. [In confess that I was not inspired. Given the damage done by mining, it seems irresponsible in the extreme to encourage further demand for minerals when it has declined – and particularly to encourage the growth of demand from the jewellery industry or in order that bars of refined metal can sit in vaults somewhere. More sensible would be investment in dignified and well-paid alternative livelihoods for mine workers who are in danger of losing their jobs in the mining industry.]
Minas-Rio: good money after bad?
91. The same shareholder asked about Minas-Rio. This had cost shareholders a lot of money, he said. A few years ago the company had written off eleven billion dollars and now faced more fines, and had stopped production. When would shareholders see some money back from Minas-Rio?
92. Stuart Chambers said that in 2017 the EBITDA from Minas-Rio was around 400 million dollars. This year it would not be so high because of the pipeline problems, but with a reliable pipeline and increased output the company believes in the future of the mine. Time would tell.
93. The shareholder asked whether the company had a figure for how much the mine would have cost when it was up and running.
94. Mark Cutifani replied that the company had delivered on the capital it had predicted. Regarding operating costs, at full production rate it should be about 35 dollars a tonne, below the feasibility prediction.
95. Phil Clarke, who described himself as a ‘happy shareholder’ (as he has done at other mining company AGMs in recent years), congratulated the company on its “great results” and said that Mrs Clarke was grateful that the company had restored her dividend. But he said it was disappointing to see the numbers of fatalities at nine. “None of us want that,” he said. “Let’s see much better figures next time.”
96. He said he was excited to see the company’s cash flow [it is always interesting to note the different things that cause people excitement]. “You’ve got cash of eight billion and debt of twelve. You’ve issued new debt. Why have you issued new debt? The debt you’ve retired is cheap debt. Some of the new debt is much higher interest. Can you confirm there will be no share buybacks until net debt is down to zero?”
97. [It is also interesting to note the terminology now used when attempting to get money off people. In my experience, people use the terms ‘borrow’ and ‘lend’. They might say, “Can you lend us a fiver till the end of the week?” or “Could I borrow a few quid – I’m skint.” It is clear that they are asking you a favour. I have done the same myself. Now I realise how mistaken we have all been. We should instead offer to issue people debt. “Allow me to issue you a few quid debt till next month; actually, I am feeling so generous that I am willing to issue you a few thousand and will only require it back in ten years’ time.” It would sound as though it was us who was doing the other person a favour. “How kind of him!” they might say. “Look, he’s issued me with all this debt!” People would seek us out as our reputation for generosity grew and we magnanimously issued more and more debt. I must remember to try this in future.]
98. Stuart Chambers replied that the new debt is in the form of bonds. “Any company with such long life assets as ours needs to ensure that debts are covered by life of its assets,” he said. The renewal of the debt is part of this. The average life of the company’s debts in 2017 was four and a half years. It is now five years. Longer term, more expensive debt is more secure than short term lower interest debt.
99. Finance Director Stephen Pearce, one of the jolly directors sitting to the left of the Chairman, suddenly sprang to life, as if from a long period in suspended animation, openly delighted that a shareholder was asking about money. He said that the company would run a more conservative balance sheet than it had in the past. [This sounded rather dull and forbidding – perhaps not the sort of balance sheet with which one might wish to go on holiday]. He said that the company had lowered the average level of interest over its whole debt portfolio. Stuart Chambers added that the company could not box itself in by saying it would never do a share buyback until the net debt is zero. “Four and a half billion dollars of debt at this point in the cycle is too high and we need flexibility,” he said. [I am glad my debt does not amount to four and a half billion dollars, I must say.]
100. Mr Clarke said he was completely baffled by the company issuing new debt when it had so much cash on its balance sheet.
101. Shareholder Caroline Bowder said that Note F in the Notice of the AGM, regarding directors’ fees, mentioned an increase in the annual aggregate cap on remuneration. In the current climate of consciousness of the huge gap between the rich and the poor, she said, the increase in the cap on directors’ pay by 50% is excessive. Anglo American should lead the way regarding virtuous moderation of salaries to reduce the gap between the haves and the have-nots. [“Hear, hear!” I thought to myself. One of my colleagues said so out loud.]
102. Stuart Chambers agreed that it was a very big increase but explained that this was because the cap had not been amended for twenty years. Anglo American tried to follow the market in board pay but to keep an overall cap. The change was needed to allow for flexibility. “It is a backlogged inflationary move,” he said. Regarding pay restraint, it was incumbent on all of industry to look at itself and make sure that what is happening is reasonable. Sir Philip Hampton of the Remuneration Committee (sitting to the right of the Chairman and the Company Secretary) keeps eye on this [perhaps that’s why he was among the miserable-looking directors]. “We need to make sure that what we decide to recommend to shareholders is fair and appropriate for the market and avoid a situation where shareholders do badly and management do well, or vice versa. The larger shareholders believe our approach to remuneration is fine,” he said.
103. I wonder what the people who clean their offices or make their tea believe.
104. The meeting began at 2.30pm and ended at 4.50pm.