Anglo American Platinum : Annual General Meeting

03 April 2014
Comment by Valli Moosa,

Welcome to this annual general meeting of Anglo American Platinum Limited.

The past year, my first in this position as chairman, has, to put it euphemistically, been eventful.

At the last AGM, you will recall, we were in the early phases of the implementation of the business review which had been carried out in the latter months of 2012. That review had been necessitated by a weakened platinum price due to adverse economic conditions in Europe, in particular by falling automotive demand and an increase in the supply of recycled product into the market. The structural change in the supply and demand fundamentals of our market still endures today.

Poor metals price performance had been exacerbated by significant cost pressures propelled in the first instance by rapid power price increases and productivity challenges which arose from the need for continuing above-inflation increases in labour costs while, as mines age, the ore mined is of lower grade, deeper and further from the shafts.

While the implementation of our business review attracted much attention, I am happy to be able to report that its implementation has been effective and largely as planned.

Equally pleasing is that this was achieved on the basis of a consensus reached with the regulator and with organised labour, including AMCU, though in the latter case it followed a 2-week strike.

The final approach adopted in October did make some concessions to the concerns of those we consulted with, as is proper given our long term vision and the desire for co-operative relationships with these parties. We accepted a review of the exit compensation packages and a staggered approach over 12 months to managing staff numbers down to the desired levels. Nonetheless, the revised plan will still enable us to reach our strategic restructuring goal of reducing high-cost, non-profitable ounces from our production profile. The company is hence better positioned to ensure competitiveness, profitability and sustainability.

Even through this challenging operating environment, the Company returned a satisfactory operating performance in 2013. Progress was made in improving safety performance, although zero harm has not yet been achieved. Regrettably, six employees lost their lives in work-related accidents. On the behalf of the Board, I extend my deepest sympathies to their families, friends and colleagues and believe we should observe a moment's silence .

Management should however be encouraged by the many safety achievements individual operations attained during the year and that the Company worked without a fatality for 130 consecutive days - more than a third of the year. This performance supports the Board's belief that operations can work without fatalities.

In 2013, the Company saw a return to profitability, with headline earnings increasing R2.9 billion from 2012. This was despite the number of one-off restructuring costs that impacted the results. A number of headwinds impacted production including the intermittent strikes, safety stoppages and the industrial action mentioned earlier.

Notwithstanding these headwinds the Company delivered a solid operational performance during the period. Equivalent refined platinum production was 2.32 million ounces, refined platinum production was 2.38 million ounces, and sales volumes at 2.32 million ounces - in line with the strategy.

Our efforts to better position the Company for the future have however been challenged by the wage strike now in its 10th week. The strike has been called unprecedented in many quarters, and with this I must agree.

Though limited to the operations on the western limb, and excluding our processing division, the strike has had, and will have significant consequences for the company, its employees, our suppliers and business partners, as well as our local and labour-sending communities. Though the impact of the strike is significant, the impact of capitulating to unaffordable wage demands would have had an even more significant and permanent adverse impact. It is telling, and most unfortunate, that the operations affected by the strike are those whose viability is most tenuous.

During the course of 2013 it was anticipated that industrial action was likely due to the restructuring and wage negotiations with AMCU - a new union whose existence was founded on unrealistic demands that would always have been impossible to meet. The Company increased stock levels of platinum group metals in anticipation of potential stoppages which has enabled us to continue supplying our customers notwithstanding the 10 week stoppage at 40% of our operational output.

Regrettably, it does necessitate consideration of further measures be taken to ensure our operations remain viable. While we will not be rash in making decisions that affect the make-up of our operations, we sound an alarm to those involved - several hundred thousand people around the country are directly affected by the strike, and the longer it endures, the less likely companies, communities, families, individuals will be able to recover from its consequences. We need to reach a negotiated settlement - soon.

I believe that the disciplined and considered approach of our management, and that of our peers, is setting a benchmark for the new generation of organised labour on what is both fair and feasible. I am confident that this investment will hold us in good stead in the years ahead.

However, these challenges should not blind us to what has been, and what is being, achieved by our management team and, in the case of the current strike, also by the management of our largest peers too.

We have come a long way from the hugely destabilising labour issues of 2012. The restructuring exercise was concluded through constructive dialogue with stakeholders. The strike actions have largely been carried out in compliance with terms of the country's labour law - though we are concerned at incidents of intimidation. This has been - in part, we believe due to the company's vigorous defence of the need to observe the rule of the law and various agreements, including picketing rules. We will continue to pursue the current legal process in respect of claiming damages from AMCU for much the same reason. Damaging and reckless actions must have consequences.

Finally, I draw the attention of shareholders to our integrated annual report and our sustainable development report which supplement our annual financial statements, and provide much detailed information about our business.

Thank you for your presence. I now declare this annual general meeting open.