Report on the London BHPBilliton AGM

Report on the BHPBilliton AGM held at the Queen Elizabeth II Conference Centre, London, on Thursday 20 October 2005

The meeting was attended by three BHPBilliton shareholders involved with member groups of the Mines and Communities Network.

BHPBilliton Chair Don Argus began by declaring that the company had made record profits again over the preceding year. It had acquired Australia’s WMC and ensured that the company was poised to make a massive expansion into uranium.

The company’s market capitalisation is now nearly twice that of its nearest rival, Rio Tinto, closely followed by CVRD then Anglo American – although if Anglo Gold were included in Anglo American’s figures, Anglo American would be number two.

Don Argus noted that many shareholders had accepted the company’s invitation to send in questions in writing before the meeting. He said that the three major areas on which questions were raised were the following:

1) Dividends – why did they not pay higher dividends during a time of such strong performance? The answer was long-winded and used plenty of buzz-words about how they wanted to take the extra cash to invest on behalf of the shareholders, rather than simply giving it to them, so they can build-up the company, looking into the future, eventual shareholder value maximization etc.

2) Uranium – As of August 2005 when they took over WMC they now had one third of the world’s known resources and currently supplied 8% of world’s uranium. The demand for nuclear energy was increasing, with 11 new reactors under construction (mainly in Asia) and more were being upgraded to continue beyond their initial lives. This was partly because of concerns over the impact of fossil fuel use on climate change. [BHPBilliton clearly does not share those concerns or it would reduce, rather than increase, its production of coal, oil and gas.] “We realise we are entering an area where there are community concerns,” said Don Argus. But the company is happy to continue because a) it is a very highly regulated industry b) Australia only supplies countries that have signed up to nuclear non-proliferation & c) Australia has further bi-lateral agreements to ensure safety. [There was no mention of issues around selling uranium to China]. The company realizes that there is an issue of weapons and of the storage of waste, and although it does not have direct responsibility for the storage of waste, it is concerned and is reassured that there are safeguards in place. [Don Argus did not comment on the likelihood of all future generations of human beings for the next quarter of a million years being able to deal safely with highly radioactive waste nor on the fact that the current chaos surrounding radioactive waste materials in the former Soviet Union does not bode well for this lengthy future. He is clearly not familiar with late antique and early medieval European history, which suggests that there is no guarantee that the technological capacity of one culture will inevitably be passed on to succeeding cultures.]

3) Executive remuneration – This issue had come up the previous year. Don Argus took a long time going through company policy, asking whether it was the right set of principles to attract & keep directors (the answer was of course yes).

Having dealt with these issues, presumably to stop people asking questions on them, Don Argus invited questions from the floor. There were three from shareholders involved with the Mines and Communities network.

Gag Island, Indonesia; Indigenous Peoples and Free Prior and Informed Consent

Geoff Nettleton of Philippine Indigenous Peoples’ Links asked whether the company would settle the future of Gag Island by making a clear commitment not to proceed with mining there. He noted that Indigenous Peoples generally had been increasingly getting involved in international fora on the issues of extractive industries. Particularly with regard to FPIC (Free Prior and Informed Consent), there is an emerging international standard although there is still ongoing discussions on its exact meaning – will they take the opportunity to FPIC make a commitment ahead of others?

Don Argus gave background on the issue of Gag Island (“it’s been around for some time”). The company had had the legal right to mine since the mid-90s, but it was withdrawn in 1999 because of legislation banning mining in protected forests. A government decree restored the right to mine in 2004. BHPBilliton has the right to explore, but the project is at the pre-feasibility stage. [Don Argus did not explain why this is so given that the company had had the right to mine for so long]. Don Argus confirmed that the company would not mine in a World Heritage site and would not engage in deep sea tailings disposal. Geoff said that this was less than the company’s previous commitment, but Don Argus gave no further commitment beyond that. On Indeigenous Peoples, Don Argus said that there is a full outline of “what we do with IPs” in its sustainability report. He stated that the company does not force people off their land. The company believes in engagement – there have been complaints in specific cases, but they have been investigated and the company is satisfied that all is well [he did not say which cases]. Chip Goodyear added that FPIC is a complex issue. It is currently not well defined. He referred to Geoff saying that the UN is now trying to define it and noted that the State is often involved too. BHPBilliton will be actively involved on talks on the issue. The company’s charter defines how it works and the company is proud of its recent ‘business in the community award’.

Geoff thanked Don Argus and Chip Goodyear for their answers and emphasised that the definition of FPIC was being moved forward, and given that there are those who are dragging their feet he wanted to raise it with BHPBilliton.

Cerrejon Zona Norte, Colombia

Richard Solly said that during the past year there had been no progress towards a settlement for families in Colombia displaced by coal strip mining at Cerrejon Zona Norte, a 33% owned subsidiary of BHPBilliton. Some of the displaced families from the settlement of Tabaco were still hoping for communal relocation and just compensation. Their hopes had been raised by a meeting with local management shortly before the 2004 BHPBilliton AGM. Richard said that earlier in the morning of this AGM he had received a message from a community representative expressing the displaced families’ disappointment that the dialogue had broken down. President of CZN Alberto Calderon had committed himself to a dialogue process from which the company had then withdrawn. The community wanted to know whether this was because those who had managed the mine for the previous twenty years had reasserted their power in Colombia or because local management had received orders from elsewhere to break off discussions. They wanted to know if BHPBilliton was truly committed to resolving the conflict or whether they wanted to carry on in the same way as before. Richard added that he would like to know why, with record profits, the company was unable to offer a more generous level of compensation to those who had been displaced.

Don Argus said in reply that after last year’s AGM, the company had investigated the claims that were made. They keep the matter in focus. The previous owners of the mine had operated a relocation plan. 195 families out of 213 agreed to this plan. There are now only seven outstanding claims. Much effort had been put in to get a resolution of outstanding problems. The company is committed to World Bank guidelines. The company is not comfortable with what happened under the mine’s previous ownership.

Richard added that he remained concerned about the physical wellbeing of those displaced. On his last visit he had met one former resident of Tabaco whom the company had rehoused and provided schooling and healthcare for her children, but the woman herself had been unable to find work and relied on the generosity of other displaced families in order to eat. Other families were also in very difficult circumstances and Richard said that the company should give this matter its most anxious scrutiny.

Mindanao, Philippines

Andrew Whitmore, also working with Philippine Indigenous Peoples Links, noted that the company was exploring for nickel and said that he was aware of two projects where the company was involved, one in Pujada Bay and one in Carascal, both on the island of Mindanao. “Bearing in mind the widespread opposition within civil society to mining, and the specific local opposition I have noted, as well as the sizeable military activity on Mindanao (noting the specific counter insurgency in the Carascal area), does the company intend to proceed into production with the projects or will they initiate any new exploration in the Philippines?” he asked.

Don Argus replied that the company is in the early stage of exploration. “We were made aware of your concerns and sent one of our guys to check it out. They met with the community and we can confirm that what you say about community opposition isn’t correct. There is widespread support for the project. However as mentioned it is at the early stages.”

Whit expressed surprise at these results, and said he had tried to meet widely – including with the company on the ground which for various reasons failed – and he would be keen to know with whom company representatives had met. This question remained unanswered.

Other matters

The meeting now entered the twilight zone. A Mr Day asked why the meeting couldn’t start a little later as 10.30am was too early for some. Don Argus agreed to look into it…

Mr Mikovsky asked why the share price had been falling every day for a fortnight – which led to potential for laughs all round (Don:- If I knew the answer as to how the stock markets worked I’d be a rich man – [answer: you are a rich man!]) and a longer, dry reply from Chip on the price not always following the reality of how company is doing. In the long term everything has been and is rosy.

Mr Shah then asked if the ‘telephone book’ sized reports could be cut down a little – again Don said he would look into it.

There were a few later interventions on how the company’s reporting, during the AGM, of proxy votes was slightly misleading as they did not show who had not voted. Don Argus admitted that the voter turnout this year was only 67%, down from 72-3% last year. Many shareholders who could vote were failing to do so.

Report written by Andrew Whitmore and Richard Solly.