Anglo American's "gaps year" - and plenty of them!

Anglo American's "gaps year" - and plenty of them!

4th May 2006

Occasionally we post on our site verbatim reports of mining company annual shareholders' meetings - if they give a different impression than the company itself tries to present. This report on the recent Anglo American AGM, by MAC editor, Richard Solly, is no exception.

What's clearly revealed here are: the extremely well-informed nature of individual challenges to the company's claims of corporate social responsibility and the gaping holes in AAC's implementation of its avowed policies. There's also an obvious inconsistency between its claims to be improving lives and human rights, and its self-confessed inability to exert real influence over recalcitrant governments.

A report on the Anglo American plc AGM, held on 25 April 2006 at Institute of Electrical Engineers, London, England.

Various activists, including Richard Solly, Glevys Rondon, Andrew Whitmore, Frank Nally and Geoff Nettleton attended the AGM to ask questions about the company's activities, particularly focusing on Colombia, Philippines and Venezuela.

For a good summary of the introductory remarks by company Chair, Sir Mark Moody Stuart (MMS), please refer to the Mineweb story based on Anglo American's press release - at http://www.mineweb.net/sections/mining_finance/267408.htm.

MMS noted that the Chief Executive Officer, Tony Trahar, will retire around the middle of next year when the 'next/final phase of the strategy' is implemented. He noted that 70% of Anglo American's business was now in 'developing' countries, where institutions were weak, their operations had a big social and environmental impact and they were extracting a non-renewable resource - which meant they had to try hard to 'create capital' to mitigate this, but it was difficult in poor states, where money can be embezzled. As the assets were immobile it was crucial to make an accommodation with the relevant stakeholders. MMS then complained about governments getting greedy with tax regimes in this current boom time, and talked about how the company believes it contributes positively to society through various industry initiatives. He also noted on the issue of climate change that the company consumes the energy equivalent of Finland in its activities, and while mentioning coal went on to talk about how they were helping climate change through energy savings & mining platinum for fuel cells etc. (See the company's annual report for further details).

Tony Trahar (TT) explained the company's strategy - which included transparency & Corporate Social Responsibility. He explained at some length the further reasons for divesting in AngloGold Ashanti when gold was high. He talked about their work in Black Economic Empowerment in South Africa (BEE) and their promotion of 'historically disadvantaged' South Africans [the same people whom they exploited to build the company]. He talked about their involvement in Brazil, Russia, India and China - and as part of this he noted that they were looking for a representative office in India to look at production opportunities (already a big market).He then talked about health and safety and what they were doing to improve their record after a year of 46 fatalities.

Geoff Nettleton (GN) asked a question on the Cordillera in the Philippines, where the Cordillera Peoples Alliance (CPA) has written to Anglo American and notified them of a problem with the certificates of Free Prior Informed Consent (FPIC) that it is claimed has been issued to the company in Kalinga province. The people claim they have been fraudulently issued. The CPA is asking for dialogue with the company over this - will Anglo American commit to it?

MMS said that the company would dialogue with the communities. He said he would be surprised if it was not happening already. FPIC is a difficult thing to define. The World Bank's Extractive Industries Review (EIR) said it did not mean that everyone had to agree, but if there is a significant proportion of the community which disagrees then it is an issue. In the Philippines this is a matter for government, and the government issues the certificate. It would be distressing if there were some fraud.

Simon Thompson (ST) then added that the situation in the Philippines is that Anglo American was exploring with Philex in Mindanao, and exploring alone in the North of Luzon. He understood we there was a dialogue with the CPA, and that the problem of alleged fraud involved the local government rather than Anglo American. He stressed that the permit was only for exploration, not mining, and the exploration would be non-intrusive. So far the only activity had been positive community activity, like building and improving roads, which was popular.

GN said that he took the point that the problem was with the government, but the complaint was that the community were not consulted and this was backed by popular petitions, which the company had received. He was sure that the communities would welcome dialogue.

MMS said that it was company policy to involve stakeholders. He suggested it might be better to say there was a problem with local government rather than use the term fraud, which was emotive.

GN explained that he did not use the term lightly. There was a track record of it with regard to FPIC in the Philippines. His research suggested he was not overstating the case in using that term.

Glevys Rondon (GR) said: 'Throughout the state of Zulia in north western Venezuela, a climate of fear has been created within those indigenous groups which are resisting the presence of the company Carbon del Guasare and the plans for the Socuy mine. Up until now, each time the company representatives visit the communities, they are accompanied by armed national guardsmen and a group of lawyers. Since August 25th 2005, the army has targeted indigenous people and peasants with violent operations as a way of forcing them to leave the area. So on the one hand there is much publicity about the mine, the company receives awards for being socially responsible, there is talk of consulting communities and sharing benefits; but on the other hand this is combined with repression.

'The Wayuu people who I am representing here ask: Why is their right to decide not recognised? Why are they harassed and intimidated, when all they want is to protect their land and the Sierra de Perija which they have inhabited for thousands of years?

'Is this what Anglo American refers to when it states in the annual report that it wishes "to promote strong relationships" with the communities in which it operates?'

MSS stressed that the company was aware of the situation, but only had a 24% stake in the company, which was completely controlled by the Venezuelan government. The company was not happy with the situation. It had complained to the Venezuelan government. The company is not involved at all in the Socuy mine project. The government had actively excluded the company.

TT said that he agreed with this analysis. The government had a very firm control. The company had very little influence and was no longer actively involved in that project.

MMS suggested that Ms Rondon raise it with the Venezuelan government and that the company would do what it could to support her.

Richard Solly (RS) said: 'A number of residents of Roche, Tamaquitos and Chancleta have reported that they have been denied fishing rights in the Rio Rancheria and the smaller rivers around El Cerrejon by private security personnel employed by Carbones del Cerrejon. This has a very serious impact on people who rely on fish to supplement their diet. Our understanding is that rivers in Colombia are legally public property, together with a small strip of land on either side of them, so people should be allowed to fish even if the area bordering the river is private property. There are reports of people being detained by the police in Barrancas for fishing close to the mine against the wishes of private security personnel. If these reports are accurate, the behaviour of the private security personnel is clearly unacceptable. What steps will Anglo American take to ensure that the very poor people living around the Cerrejon mine are not deprived of their right to fish in the rivers?'

MMS said that it was true that fishing rights were open to the public. He said that people had not been prevented from exercising their right to fish but that security personnel would have suggested to people that it was not wise to fish where mining activity is taking place. All the mine's security personnel have been trained in human rights by a reputable third party. In the mine area, the strip of land along the river had been used by some people not to fish, but to remove company property from the mine. It is these people who were arrested. There is a question of people's legitimate rights being carried out in a way which will not endanger their safety in areas where heavy mining equipment is moving around. The company had had many discussions with local residents about the removal of villages and there had been concern raised about livestock and other matters but fishing had not been mentioned, so he assumed that it was a supplementary rather than a core issue for villagers.

RS: 'It is now clear that the company intends to divert the Rio Rancheria to enable further expansion of the Cerrejon mine. The company has said that there will be 'no' environmental impacts - a very large claim, especially given the fact that the river is the major water source in a dry region. Apparently, Corpoguajira, the departmental body with responsibility for evaluating such proposals, has said that it would be good to divert the river. I understand that in, I think, 2004, Corpoguajira received 12,608,080,488 pesos [5,337,250 US dollars] from Carbones del Cerrejon. Is this true? If so, was this money paid directly to Corpoguajira or through other state entities? Does it come from royalties paid by the mine? Does the arrangement not prejudice the independence of the Corpoguajira study? May I have a copy of the Corpoguajira study? Have any truly independent studies been conducted into the impacts of the river diversion, and if so, what have they said and can they also be made available to shareholders and local residents?'

MMS said that the diversion of the Rio Rancheria was under consideration but that it could only go ahead with the relevant processes and with government permissions. If it is true that the company stated that there would be 'no' environmental impact, this was over-enthusiastic, since all human activity, even walking over the grass, has an environmental impact. He said that it is not Corpoguajira which issues permissions but the Ministry of the Environment. The company made a direct payment to Corpoguajira of the equivalent of 167,000 US dollars in 2005 [394,500,760 pesos at exchange rate of 7 April 2006], a figure lower than the one Mr Solly had quoted. This is a statutory payment made under Colombian environmental law for the use of surface waters, forests etc. It does not therefore undermine the agency's independence. The larger figure may represent a tranche of the mine's royalties distributed to government agencies. The company had been unable to track it down. But the company had made no unofficial payments to Corpoguajira.

Tony Redman (TR) (Chair, Anglo Coal) added that the river diversion plan was in the pre-feasibility stage, that it was clear that diversion would cause a lot of emotion in the area and that no decision had so far been made.

Neither MMS nor TR referred to the existence of environmental studies other than the Corpoguajira study or the availability of existing studies to shareholders or local residents.

S. Lewis (SL) said that her question concerned the Paso Diablo mine, in which the company had a 24% stake. It was easy for the company to shift its responsibility to the government, but the company was actively involved in the Paso Diablo mine and there were respiratory problems in the area. Would the company use its influence to stop the planned mine expansion?

MMS agreed that the company had a 24% interest, but reiterated that it was not in control. The company was not dodging the issue. Even as a minor shareholder it would always express its opinions. However the control was with the Venezuelan government, and the current situation was that foreign companies did not have much of a say. The company shared some of Ms Lewis's frustrations. With regard to the Paso Diablo mine the only issues of which the company was aware were transportation issues. MMS said he was sure problems could be solved by discussions with people. With regard to the expansion, the company is specifically excluded from this. So complaints should be addressed directly to the government. The company was happy to support the standards to which it subscribes.

Andy Whitmore (AW) asked a question on the Boyangan project in Mindanao. He noted that the company's Annual Review talked about extending the copper resources there. He asked what the plans for the project were.

ST replied that he company had recently extended its licence for two years, was still drilling on site and involved in community engagement activities on site and discussions with holders of surrounding land regarding consolidation.

AW said: 'My second question is with regard to the 46 fatalities you highlighted and how unacceptable this is. I also note that you are moving into coal in China, which has a notoriously bad health & safety record. So can you tell us if the deaths quoted include any at Xinhua in China and whether you'll commit not to expand into Chinese coal until all health and safety issues are first addressed?'

MMS replied that It was a grave concern that despite improvements the company had reached a plateau on mining fatalities. He noted that the Chinese coal industry had an extremely bad record of fatalities per to,n two orders of magnitude worse than international standards. Anglo American did due diligence before investing in Xinhua and it had a first rate health and safety record. All of the industry should not be lumped together. Tarmac had a quarry 150km from Shanghai, which it took over from five small-scale operators. It had previously had a poor record (10-15 fatalities per year), but in the last 18 months there had been no fatalities (last year the only lost time injury was caused by a manager tripping & hurting his knee). The company was in discussion with the Chinese government, specifically the safety ministry, to improve the situation and the Chinese government had made certain commitments. The company could never commit not to go into a mine where the standards were not at its levels. This would be severely restricting. But the company would only invest if it felt that safety standards could be brought up to its level within a reasonable amount of time. It would want continuous improvement.

RS said: 'There are concerns about gold exploration in the Quinchia and Sur de Bolivar areas of Colombia, reportedly by a company called Kedahda. I understand that Kedahda is a subsidiary of Anglo Gold Ashanti, in which Anglo American holds a 41.8% interest. It is estimated that 5000 people rely on the 1200 existing artisanal miners in the municipality of Quinchia, organised into 22 Mining Associations. What will be the impact on them if Kedahda secures a working licence for the very area which they already work? Can you confirm that Kedahda is indeed a subsidiary of Anglo Gold Ashanti? If so, what provision will the company make for their continuing livelihood? Exploration by Anglo Gold in the Sur de Bolivar area some years ago was preceded by brutal paramilitary massacres of artisanal miners and small farmers. When Anglo Gold discovered this, to its great credit it pulled out of the area rather than profit from such appalling abuses. What has changed to make interest in the area morally acceptable now?'

MMS confirmed that Kedahda was 100% owned by Anglo Gold Ashanti and that Anglo Gold Ashanti was now 41.8% owned (down from previous 51%) by Anglo American plc.

Bobby Godsell (BG) (CEO, Anglo Gold Ashanti) said that not only had Anglo got the share, but there was a "complete value congruence with regard to corporate citizenship". He confirmed that the company was energetically exploring Colombia in the hope of finding profitable gold mines. He said that in any area in which gold had been present, there had been a pattern of artisanal gold mining. This presented challenges and opportunities. The single greatest challenge was the company's sustainable development strategy. It had worked globally on artisanal mining projects with the likes of the World Bank, DfID, UNIDO & the Global Mercury intiative. The company wished to mine sustainably while co-operating with artisanal miners. In Quinchia, the company had secured agreements with two major alliances of artisanal miners. The general principle was to secure rather than displace artisanal livelihoods while making environmental improvements. Of 40,000 people in the municipality, a relatively small number were involved in artisanal mining. What Mr Solly said of the south of Bolivar was true in the past. The company was thinking of returning to the northern part of this region where the government had now brought law and order.

MMS added that the company had a commitment to dialogue with small-scale miners.

RS expressed regret that the company was relying on government forces in the area as Colombian government forces were implicated in numerous serious human rights abuses. MMS replied that at El Cerrejon the company trained government forces in respect for human rights.

Fr Frank Nally reiterated the point that Anglo American stated in its materials that it wanted to be a good neighbour, and with regard to Venezuela asked whether the company could not demonstrate this. Anglo may only have a 24% stake. But could it not use it to greater effect, and threaten to withdraw if the Venezuelan government would not listen to them?

MMS said that he believed that the Venezuelan government would be delighted if Anglo American withdrew.