Report on the AGM of Antofagasta plc, held at Church House, Westminster, London SW1, on Wednesday 22 May 2019
By Richard Solly, Co-ordinator, London Mining Network
Chairman Jean-Paul Luksic’s address can be found on the company’s website at http://www.antofagasta.co.uk/investors/news/2019/chairmans-comments-at-the-2019-annual-general-meeting/.
Matters covered in the CEO’s address can also be found at http://www.antofagasta.co.uk/investors/annual-report-2018/ceo-statement/.
1. Chairman Jean-Paul Luksic regretted that there had been a fatal accident at the company’s Los Pelambres copper mine in Chile last year. He stressed that safety is very important to Antofagasta.
2. He also reported that the company had achieved record production. It had implemented a new operating model and started construction of the Los Pelambres expansion project. It was looking for sustainable growth opportunities, focusing on the Americas.
3. He noted that there are substantial mineral resources in Chile which, he said, will be developed over time. Chile provides a favourable environment for the mining industry not only because of this mineralisation but also because of what he called its ‘robust public institutions’ and ‘functioning democracy’. [Some critics of the company and of the Chilean government take a different view of these matters, alleging serious corruption, not least in the government’s relationship to mining companies.]
4. Jean-Paul Luksic said that the board had recently approved the expansion of Los Pelambres and construction is under way. This, he said, will add 60,000 tonnes of copper to the company’s production each year. There will be a desalination plant to provide water. The company had advanced studies on the expansion of its Centinela mine and decided to focus on the evaluation of a second concentrator.
5. The company’s transport division, he said, had celebrated its 130th anniversary last year and is moving into a period of growth having won new contracts and acquired new locomotives.
6. Regarding corporate governance, he said, in 2018 the company had complied with all the provisions of the UK governance code. The board and committees provided input into important developments including diversity and inclusion, risk management and executive pay. The company is looking to double the number of women in its workforce by 2022.
7. He said that the company’s investment horizon is very long. The company is very sensitive to the views and interests of its stakeholders, he said. Its current governance structures support the representation of stakeholder views in its activities.
8. Independent director Bill Hayes would not be standing for re-election, he said. He welcomed Michael Anglin, who had joined the board as an independent non-executive director in April. Mr Anglin had worked in base metals in the Americas for over 30 years. Most recently he had been Chief Operating Officer of BHP in South America.
9. Francisca Castro had been appointed as chair of the Remuneration and Talent Management Committee. [That sounded very jolly to me – rather like Britain’s Got Talent or the X-Factor, I thought, though perhaps with larger sums of money in play.]
10. The copper market looks tight, he went on. [Has it been drinking too much? I wondered.] There is short-term volatility because of current trade tensions. But the low carbon economy needs minerals, he said, especially copper, which allows the efficient use of electricity. [Yes, we had been expecting this: the metals mining industry is now presenting itself as the saviour of the world. Even companies such as BHP, which are also involved in the continuing extraction of oil, coal and gas, are presenting themselves as the heroes who will save us all from climate change because they are also mining copper – or cobalt, or lithium, or whatever else is required for electric vehicles or renewable energy – despite the fact that even metal mining has enormous impacts on the climate and extractivism in general is the greatest generator of biodiversity loss.] “With our new production and portfolio,” said Jean-Paul Luksic, “we are well positioned to benefit from this growth. By focusing on safe and efficient operations we will continue to succeed.”
11. He concluded by saying that 2018 had been a year of good progress for the company and it is well positioned to continue executing its strategy over the coming years. He thanked all the company’s employees and contractors.
12. Chief Executive Officer (CEO) Ivan Arriagada then explained that Antofagasta had done a lot of work to determine the purpose of the company. This purpose motivates everyone at Antofagasta. The process of deciding it had been as important as the outcome. The board had consulted externally and internally and concluded that its purpose is ‘developing mining for a better future’. This is the “core to who we are and how we operate”. [It is good to know that the company now knows why it is doing what it is doing. It is always helpful to know why one is doing what one is doing, if only to help in answering the question, “What the deuce did you thundering well do that for? – or similar questions couched in more contemporary and idiomatic terminology.]
13. Copper is a key enabler of a modern and lower carbon economy, he went on. It is linked to increasing urbanisation and electricity supply. There are major changes on the way, associated with clean transport and green energy. There will be positive for demand for copper in the future. Future demand for copper will be driven by urbanisation, renewable energy and electric vehicles, he said.
14. He noted that 9% of Antofagasta’s employees are women and 54% are from local areas around the company’s operations. It has 6,500 employees and 15,000 contractors. It is working to double the number of women involved. A woman had just been appointed as General Manager of the Transport Division.
15. In 2018, he reported, after 26 months without a fatality, a contractor had been killed at Los Pelambres late last year. The company regretted this very much indeed. It has a strong safety culture, and safety remains its top priority.
16. With regard to community relations, no material incidents had been reported by communities, but a dust incident had been reported due to climatic conditions at Los Pelambres. An engagement strategy had been started at Los Pelambres called Somos Choapa. Various Corporate Social Responsibility projects were being pursued, including in education and sports.
17. He said that 45% of the water used in the company’s operations was now seawater, and this is to increase. At Centinela 86% and at Antucoya 96% of water used is from the sea. Renewable energy use is up to 23% from 5% in 2015. The company will continue to decarbonise its energy supply. Operations at Zaldivar and Antucoya will use 100% renewable energy by 2022. Antofagasta is committed to reducing its carbon emissions by 300,000 tonnes by 2022, he said. Its strategy includes leaving green areas around its operations. At Centinela it is producing thickened tailings to reduce water use.
18. Chile has very strict regulations governing all tailings dam construction, he said. It prohibits the upstream design used at Brumadinho in Brazil where the disastrous collapse had occurred in January this year. [‘Upstream’ tailings dams are those which, as they are gradually raised to keep pace with increases in waste deposition, rest partly on the fine waste material which they are holding back. The more expensive ‘downstream’ tailings dams are raised by being built in the other direction, away from the fine wastes which they contain, so that they do not have to rest on the wastes.] Regulations in Chile also require monitoring and regular review of emergency procedures. Thickened tailings will reduce pressure on the dam at Centinela. At Los Pelambres, the Mauro dam is designed for extreme weather conditions and earthquakes and is closely monitored. The company’s dams are reviewed twice a year by a group of international experts who report their findings directly to Antofagasta’s CEO. Antofagasta supports the development of an independent international standard and will work with the ICMM and other bodies to ensure its success. [The ICMM is the International Council on Mining and Metals, an industry body devoted, it is said, to raising standards in the industry, or greenwashing, or a bit of both, depending on one’s standpoint.]
19. The transport division had had no fatalities in 2018. New locomotives are being introduced. The company had achieved record production of 725,300 tonnes of copper at $1.29 per pound. It is promoting primary sulphide leaching, thickened tailings, and improvements in material movement. It will continue working for fatality free operations.
Questions and answers
Tailings dams and reporting
20. A shareholder asked about the improvement of the company’s tailings dams and how different they are from those which have collapsed in recent years in Brazil. [He was referring to tailings dam collapses at Samarco in November 2015 and Brumadinho in January 2019. Both caused deaths and environmental contamination on a massive scale.]
21. Jean-Paul Luksic replied that the most recent tragedy in Brazil had hit the whole industry. It had been extensively discussed in the Chilean press. As a country with seismic issues, where earthquakes do happen, the standards of construction in Chile are different from those in Brazil. In Brazil the ‘upstream’ method is used. This is prohibited in Chile. At Antofagasta, the downstream method of construction if used, and this has proven to withstand earthquakes and other issues. Antofagasta’s handling of tailings over the years, both in design and operation, had been of a very high standard. “We have had an independent board of specialists reviewing how we operate our tailings,” he said, “and we get recommendations from them on certain issues. We have used the best method and this has proven to be very solid.”
22. Richard Harkinson, of London Mining Network, asked further about the company’s management of waste. He noted that CEO Ivan Arriagada had said that the company would agree to help move forward on international standards on tailings dams. Major institutional investors led by the Church of England and the Swedish ethics board had written to mining companies including Antofagasta. “Their questions go to your plans for tailings management over the next five years,” he said. “You are moving to a much larger taillings dam which will last way after 2036 and is planned to contain 2.1 billion tonnes of waste. That is a giant figure compared to the Brazilian dams which have caused such disastrous consequences. Brumadinho caused around 300 deaths. At MLP you have operated the dam above the community of Caimanes, with 1600 inhabitants who live in some fear.” Richard said he appreciated that the company has evacuation procedures and monitoring, but was concerned about how the company justified designing the tailings dam to withstand an earthquake level of 7.5 at the site or 8.3 at a distance of 80 kilometres. He pointed our that there had been a 9.5 earthquake at Valdivia in Chile in 1960 and more recently at Coquimbo an 8.3. He said that when Antofagasta designed for maximum earthquake strength there is a degree of risk involved. The Mauro dam at the Pelambres mine is the largest waste dam in Latin America, “and you may be underestimating the calculation of the size of the maximum earthquake.” There is a worry there for everyone, investors and community members, and a possible loss of earnings as at Vale [responsible for the January 2015 disaster at Brumadinho].
23. “You plan to increase production,” he went on, “and we know nothing about grades, so you may move to an 80% increase with an accompanying increase in the amount of waste deposited. You pride yourself on construction of the dam out of waste rock, but the Mount Polley dam failure [in British Columbia, Canada, in 2014] was disastrous, and that was not an upstream dam.” The inquiry into that disaster had issued a set of recommendations which included mandatory independent review. “You say you do a twice yearly review of tailings dam stability,” Richard said. “Are you making this transparent? What is being said in independent reviews is important to people and should be published. We would like to know who is doing it too. You have been ICMM members since 2014. In 2016 ICMM issued guidance on tailings. Are you doing better than ICMM best practice?”
24. Jean-Paul Luksic said that Antofagasta, along with over 600 other mining companies around the world, had received the letter led by the Church of England and the Swedish fund. “We, like most mining companies, are preparing our answer to that questionnaire and are expected to give our answer by 7 June,” he said. “We expect to be slightly before that. We will make all our tailings issues very transparent. We are all for transparency regarding our tailings. Regarding earthquakes, this was very much debated. In1960 we had the world’s largest earthquake, 9.5, but when you talk to seismologists they say it does not mean it will happen all over Chile. A 9.5 can only happen in the Valdivia area, so when we designed the Mauro dam the experts say you cannot have more than an 8.3, and the design was for 8.5, and this was based on scientific evidence and looking at over 1,000 years of earthquakes in the region.”
25. Ivan Arriagada added: “Transparency is key, and we are completing the request by the Church of England and will make it public. We have been working on a project in Chile which aims at making some of the key information on tailings available to communities and local authorities in real time. Proyecto Tranque is being sponsored by the government. We are leading the effort to see this project through to a conclusion and will have very open and transparent reporting on tailings with the community. We are working with ICMM actively. The standard being proposed will be independently evaluated and will include the entire life cycle.”
26. Richard Harkinson replied, that he found it difficult to believe that the experts consulted could rule out a level of earthquake as at Valdivia. He said that in 2010 there was an 8.8 elsewhere in Chile and the possibility of strong earthquakes exists because of the intersection of tectonic plates. Although there is an unpredictability about where earthquakes might occur and how strong they might be, there is a certainty that there will be an earthquake. “I welcome the news that the tragic events in Brazil have reactivated a stalled project for transparency to inform local people and others,” he said. “In the mean time, what is your commitment to transparency and making stability audits public? This is the essence of transparency. I would like to hear you commit to that.”
27. Ivan Arriagada replied, “We are responding with a full set of information as requested by investors, which includes information on design, operation and stability, and so we do not have a reservation. The project of working with communities began before Brumadinho and we have been quite keen on promoting it and we will provide all the information requested with no reservation.”
28. [Neither Jean-Paul Luksic nor Ivan Arriagada actually answered Richard’s twice-repeated question about whether they would make the information contained in stability audits public. Perhaps famous television interviewer Jeremy Paxman might have wheedled the information out of them. For the time being, we had better assume that the answer is “No”. I would be delighted to be corrected.]
Earthquakes and security
29. Another shareholder said that she had stuck with the company when the share price collapsed. She said she had asked about the size of earthquakes at the AGM three years ago. The issue is not simply the size but the angle at which shock waves hit the tailings dam, she said. She had been hit by an earthquake in a hotel in Katmandu in Nepal and it had been very alarming. She asked if anyone had analysed the cost of the failure of the Mauro dam. “There will be a lot of bodies, ” she said. “There are 1,600 people at Caimanes. How much production will you lose from your biggest asset? Will we be solvent? Has anyone done this analysis? If I lived in Caimanes I would blow something up. What is your security in Los Pelambres and will you do anything more as you expand the mine? Legal costs: how much has the company paid in legal costs? You have been citing this for years. You have fought things and got them overturned but at what cost?”
30. Ivan Arriagada replied that on emergency response plans, the company had been working intensively for some time on readiness and preparedness around them. It was integral to the way the company manages the tailings dam, and this is assessed periodically. He said that the company is complying with what is expected. Seismic risk is tested independently. Regarding expanding the dam, he said that the company is not contemplating any changes to the tailings dam in the current project. There is to be no change in the Mauro tailings dam in the current expansion project, he repeated. Regarding legal costs, the company had a couple of outstanding legal cases concerning the Mauro dam, but they were concluded with rulings from the courts in 2015 and 2016. “What has followed,” he said, “has simply been the execution of those rulings, but there is no legal cost as such as that litigation is over.” On security, he said, “We have strong security around our facilities. This follows a certain standard common to all our sites. It is relevant and appropriate for the kind of sites we have. Security for unexpected events is part of what we plan for. People are rotated regularly to ensure alertness.” [I should have thought that if people are rotated regularly they would be more likely to feel giddy and fall over, but I said nothing.]
Another appeal for transparent reporting
31. Richard Harkinson said, “The Chief Executive has assured us that Antofagasta will participate in the Church of England request for information, but this was different from my question about making transparent your stability audits. Will you put them on your website? The ICMM are in discussion with the Church of England. Going forward, I can see projection of mining to 2036. The extension programme was agreed in 2018 but the question is about financial assurance, not just insurance, so that when you leave the legacy of accumulated waste, and you hit your target of waste, you have separate rock solid financial provision binding for waste management in perpetuity.”
32. Jean-Paul Luksic said that it was important to stress that in Chile there is a government body very much involved in oversight of all tailings dams, and the closure programmes required by law have all been agreed with the Ministry. It is not purely a question of the company’s thoughts but is required by law. He said he was “comfortable” with the way that the government and the company are dealing with tailings.
33. A representative of ShareAction asked about gender diversity. He said it is important to be able to demonstrate meaningful progress. Could the company provide more information and meet with ShareAction to speak more about diversity and inclusion?
34. Jean-Paul Lukcsic replied that diversity and inclusion are part of the Antofagasta’s strategy and the company wants to double the number of women involved by 2022. The board is working across the company and with contractors. The company is also trying to employ as many people as possible from the local area. the board would be happy to engage with ShareAction to hear from them how it could improve. He invited the ShareAction representative to speak to Ivan Arriagada about this.
35. Sebastian Ordonez, of War on Want, said: “I am asking a question on behalf of the Red Territorial de Choapa – The Choapa Territorial Network – which is comprised of the indigenous Diaguita Taucan community, OCAS, the Environmental Citizens Organisation of Salamanca, and many other organisations living in the Choapa Province, where your Los Pelambres mine is situated.
36. “You recently inaugurated the start of the Complementary Infrastructure Project at Los Pelambres, granted by Resolution of Environmental Qualification Number 16 on February 16, 2018. However, since 2015, the water crisis in the Choapa Valley has worsened, with evident pollution in terms of water quality, air pollution, noise pollution and the tangible impacts of the two mega tailings dams which can be felt throughout the surrounding territory. The Choapa River basin has been significantly depleted. Despite this, the exploitation of the river by the mining company and agro-industry is excessive and with low fiscal regulation, affecting the natural channels of the aquifers, directly affecting family agriculture, and significantly putting the food sovereignty of the people of the valley at risk.
37. “Communities believe this project will cause environmental destruction and a breakdown in the social fabric across the valley and all the way to the sea. They also believe the project was approved omitting the necessary process of indigenous consultation request raised by the Taucan Diaguita Indigenous Community, as required by international law. And that the citizen participation process carried out by the SEIA did not cover the standards that the law demands, because it did not effectively collect the opinion of civil society organisations.
38. “They are calling on the authorities to take responsibility for the omissions committed in the SEIA process, and are demanding a review and revocation of RCA No. 16 for the reasons mentioned above. They are determined to defend the territory from the devastation of extractive violence and will continue to raise awareness of the social and environmental impacts generated by the mine. They vow to fight with their lives to leave a dignified and sustainable Valley for their children and grandchildren.
39. “These are serious allegations, which if true, could see the INCO project stopped. What is the company doing to address the concerns of communities, and how will it address the claims that international and national standards have not been adhered to?”
40. Jean-Paul Luksic said he wanted to stress the importance of relations between the company and the community. The company had pushed forward a programme called Somos Choapa to allow conversations between the company and different communities. The way the company was talking to different stakeholders had improved enormously and “we feel there is good support for the company.” There are always issues that cause differences of opinion, he said, “and we have worked hard to address those.” A case in point was the high wind which had created dust problems never seen before, and one part of the community was worried, “and we sat with them to discuss what we would do and how to prepare for another such incident in the future.”
41. “Likewise with most other issues which we think have been dealt with before,” he continued. “The indigenous people took this matter to the courts of Chile and the courts rejected their claim, so the whole procedure was not required as the court did not agree that they were a minority community. We are trying to talk to all stakeholders, but the courts decided that they were not indigenous people, but we continue to talk to them.”
42. [Defining indigenous people out of existence so you can ignore their demands and violate their rights as indigenous people is certainly not a strategy unique to Chile. I remember what happened to the family of my very dear departed friend and co-worker Lorraine Sinclair, an indigenous environmental activist in Alberta, Canada, in the 1990s. The Sinclair family had some European ancestry as well as Cree, and were involved with Metis (that is, mixed indigenous and European) communities, but they considered themselves Cree and spoke Cree. But Lorraine’s father joined the Canadian army in the second world war, and thus, under Canadian law at that time, forfeited his own indigenous status and that of his descendants. Decades later, the Canadian government passed legislation enabling indigenous people who had been denied legal recognition as indigenous people to reclaim that recognition. Lorraine’s family applied for it. Two of her siblings were given ‘Indian’ status as Cree people. The others were refused. Then some were recognised as ‘Metis’. At one stage, some siblings were recognised as ‘Indian’, others as ‘Metis’ and others were considered white. Then the siblings who had been recognised as ‘Indian’ were deprived of legal recognition again. Finally, all the siblings were granted legal recognition as ‘Indian’. All along, they had been Cree. The notion that an imported settler government, whether in Canada or Chile or anywhere else, has the right to decide who is and who is not indigenous is, of course, and absurdity and an outrage. The Sinclairs maintained their struggle through the disciplined deployment of music and humour. When they finally won, Lorraine’s mother Edna, a fine guitarist, sang a song to the tune of Woody Guthrie’s famous song, ‘This land is my land, this land is your land…’. She sang, ‘This land is my land, it isn’t your land…’ May the Taucan Diaguita Indigenous Community soon be able to sing something similar.]
A new director
43. I then asked whether the new director, Michael Anglin, had had any involvement with BHP’s non-operated joint ventures at Samarco in Brazil and Cerrejon in Colombia during his many years at BHP in Latin America. He replied that he had not: he had only had involvement with the company’s copper operations, and had nothing to do with coal or iron ore. [So that was a comfort, given the environmental and human rights records at those operations. Odd, though, that BHP’s Chief Operating Officer in South America had had nothing to do with joint ventures in iron ore and coal. Indeed, on second thoughts, perhaps that is not very comforting at all. I wonder what Chief Operating Officers do, or what kind of oversight BHP has been offering at its joint ventures. Perhaps if the company had been exercising stricter oversight, some of the events of recent years might have been avoided.]
Trouble with archaeological remains, and the need for vegetation
44. The shareholder who had mentioned the possibility of blowing things up at Los Pelambres asked if the company had had any more trouble with archaeologists. She said she did not want any more fines [the company was fined heavily for its failure to act quickly enough on agreed plans for looking after disturbed archaeological patrimony]. She said that if there were problems with dust, surely the company could plant more grass and trees to minimise the problems.
45. Jean-Paul Luksic replied that the outdoor archaeological park at Monte Aranda had been completed and the community is very happy to visit it and “go and be part of the history.” [An interesting turn of phrase, I thought.] He was not aware of any further archaeological issues. Regarding trees and grass, he said, the company’s operations are in a semi-arid place. “Some of our old tailings are already covered with vegetation, more a natural process than using a direct plantation system. We have not contemplated that. As part of our closure plan we need to deal with this but at the moment it does not require either seeding grass or planting trees. We do have a plan with the community where the community are growing small trees on a part of the old tailings.” [This sounded to me as though the company could not be bothered to do the work needed to revegetate the area or to encourage vegetation to reduce dust generation, but if natural processes or local people cared to do the work for them, that was fine.]
A final attempt to get a commitment to transparency
46. After the meeting ended, Richard Harkinson tried again, in informal conversation, to get a commitment from the company to publish its tailings dam stability audits. He encouraged the board to be leaders in the industry in transparency on this matter. He promised that if the company did become the first in the industry to publish its tailings dam stability audits, London Mining Network would be happy to give it credit for being the first in the industry to publish its tailings dam stability audits. And indeed we would. Let us see what happens.