[miningmx.com] — I WOULD like to comment on the article entitled “Fingerpointing at Anglo AGM’ by your journalist Brendan Ryan which appeared in FIN.24 on 28/29 April 2009.
I would be most grateful if you would publish this letter in full.
I resigned as the executive chairman of Anglo Platinum on 30th June 2003 and was appointed non-executive chairman on the following day. My executive role in the company ceased some six years ago. I retired from the board of Anglo Plc at the end of 2005 and the non-executive chair of Anglo Platinum of Anglo Platinum at the end of 2006.
I recently attended the AGM of Anglo American Plc in my capacity as a shareholder of both that company and Anglo Platinum. It should be borne in mind that the AGM of a listed company is the only forum at which individual private shareholders are able to put their questions and air their views. Retired executives are obviously in no better position than any other individual private shareholder in obtaining information on group companies.
As background to my questions at the AGM I summarized the ten year history of Anglo Platinum’s production, unit cost and capital expenditure statistics, focusing particularly on the past three years, 2006 to 2008 inclusive.
Briefly the following:
Anglo Platinum’s refined production of platinum produced from its own mines (“own production’) that is, excluding that which it purchases from and processes for third parties, peaked at 2,507m ounces in 2006. This “own production’ obviously earns much higher margins than metal processed from purchased concentrate.
Since then, refined production of platinum from its own mines declined in 2007 to 2,164m ounces. In 2008, it declined further to 1,947m ounces. This 2008 level of production has taken the company back to what it was producing some ten years ago in 1999!
Focusing on the last three years, the 22,3% reduction in “own production’ over this period has had a devastating impact on unit production costs, margins, earnings and returns. On average, unit costs have risen by 31.0% per annum over the past three years! This decline in production has occurred in spite of some R26bn having been spent on stay in business and expansion capex.
Having formally added my congratulations to Ms. Carroll and management on the truly excellent improvement in safety, I asked the chairman what was being done and what further could be done, without in any way compromising on safety, to turn this most unsatisfactory production situation around. I also asked questions about the level of gearing in the company and its mineral right conversions.
Before replying, the chairman graciously expressed his pleasure at receiving questions relating to the operating business of the group.
Whilst my questions involved a level of detail which was perhaps a little difficult to address on the spot, the atmosphere in which the questions were put and answered was both polite and friendly to the point where Ms. Carroll after the meeting undertook to address my questions in a greater level of detail. I very much look forward to her response.
Ryan dwells extensively on the expansion targets which were missed in the early part of this decade. With respect, it is challenging to understand the relevance of that period to the difficulties currently facing Anglo Platinum. Why is the company producing less from its own mines than it did ten years ago? The real issue now is not the missing of historical expansion production targets but the precipitous decline over the past three years in “own production’ and the devastating effect this is having on costs and margins. I feel sure that all shareholders, Anglo Plc included, must be extremely concerned.
Ryan’s version of events at the AGM is somewhat different from my own recollection. His statement that “He (Davison) was given short shrift by both executives’ conflicts with the chairman’s expressed pleasure on receiving the questions, the content of the answers given and the impeccable manners with which both questions and answers were delivered.
Ryan’s statement that, “It’s unprecedented for a retired senior Anglo executive of Davison’s stature to quiz current management in such a manner in a pubic forum like the AGM’ is quaintly naive. I am a very concerned shareholder. A better understanding of the very serious issues facing the management and shareholders of Anglo Platinum would serve him and his readers well.
Perhaps someone fed him a line of cobblers. He was not at the AGM.
Yours faithfully
Barry Davison
Cc: Sir Mark Moody-Stewart, Ms Cynthia Carroll, Mr James Wyatt-Tilby.
BRENDAN RYAN REPLIES
The section of the article concerning the exchanges at the AGM – and including the statement that Davison got “short shrift’ – was e-mailed to London-based Anglo American media relations executive James Wyatt-Tilby to be checked for factual accuracy.
The e-mail response received from Wyatt-Tilby on April 27 stated, “that looks pretty accurate Brendan.’
After the full story was published on Miningmx.com and Fin24.com on April 28 I was e-mailed by Wyatt-Tilby as follows:
“Looks like a good story Brendan, though you might have recognised that the reason for the decrease in platinum production and the headcount reduction was due to the changed demand environment caused by the global economic crisis – there is, after all, little point in producing metal in quantities beyond market demand?’
Note that again there is no quibbling with my account of events at the AGM.
With respect, may I suggest that Davison revisit his subjective recollection of events at the AGM.
