Report of the Rio Tinto AGMPublished by MAC on 2003-04-15
Report of the Rio Tinto Annual General Meeting 2003
Queen Elizabeth Conference Hall,
Thursday 17th April 2003 11am -12.45pm
This is a report written by a Partizans member, and is in brief note form. It is intended for information purposes only.
The meeting opened with a series of images of Rio Tintos operations world wide (similar to those in its Annual Review) to a background of soothing music no captions or voiceover to give any locations, context or explanation.
Chairmans address by Sir Robert Wilson (RW) This was almost a straight reading of the address in Annual Review (p2-3):
* Rio Tintos cautious remarks last year about future markets and prices had proved correct.
* Except for iron ore and gold, prices and/or demand have stagnated or dropped.
* Most Rio Tinto group companies showed lower profits due to lower global prices. Nevertheless, 2002 was Rio Tintos second best earning performance ever, with record cash flow of nearly US$4,000 million. This is due to the quality of Rio Tintos assets and the commitment of its employees
* Diamonds are going to become a more important part of Rio Tintos portfolio in future. A new diamond mine (Diavik) is opening in Canada.
* Growing importance of China, where there is 12% growth rate and high demand for iron and copper. This will help future profits (but wont last forever).
* Rio Tinto is proud of the contribution it made to the World Summit on Sustainable Development and its role as chair of the International Council on Mining and Minerals (ICMM).
* A new version of The Way We Work has been produced to reflect best practice.
* Geopolitical tensions will probably cause a slow recovery of prices.
* The key to Rio Tintos success is large-scale, long-life, low cost operations. This strategy has remained unchanged over the last 10 years. Our aim is the maximisation of shareholder value and consistency in the long term.
Reorganisation of Rio Tintos groups: Gold will now be partly covered by Copper and part by Exploration.
This is Robert Wilsons last AGM. He is retiring after 8 years. He had "enormously enjoyed the job, with all its plusses and minuses. But I've never been quite sure on which side of the ledger to put these annual general meetings".
Wilson welcomed Paul Skinner (ex head of Shell) as Rio Tintos new chairman, but said he will not be an executive chairman (as he was). Leigh Clifford remains Chief Executive.
Chief Executives address: Leigh Clifford (LC) Again, much the same as in Annual Review (p4-5).
* Improved performance overall, due to increased efficiency. Australian production has increased, notably at Hamersley. * Margins are strong across all product groups. * Clifford picked out a number of examples where there had been increased investment and/or new technology, including Robe River in Western Australia and Pilbara. The new Hismelt iron technology will revolutionalise the iron ore business.
* Increased investment in Escondida mine in Chile the worlds biggest copper producer
· The Diavik mine will double Rio Tintos income from diamonds and produce 8% of the worlds supply. * Hail Creek (coal) in Queensland, Australia is making good progress.
* The Comalco alumina refinery is on track for 2005 * Strong demand for iron ore from China is behind expansion plans or increased production at West Angelas, Hamersely and Yandicoogina operations in Australia.
Proposal of Resolution 10, on directors remuneration prompted several angry shareholder questions:
· Why are directors fees paid in sterling or Aus$ but profits etc. quoted in US$? (Wilson agreed that the current exchange rate meant a contraction in UK dividends, but people were paid in currency of their nationality) · Why have fees for non-executive directors been increased to £50,000 and executive directors getting 22% more? (Wilson claimed this was a one-off anomaly due to a change in system. Increased remuneration reflected increased work and responsibilities) · Dr Richard Sykes (chair of Rio Tintos Remuneration committee) was asked by several shareholders to justify his statement in the UK press that private shareholders should have no more business in running the company - or else to resign.
Resolution 11 concerned the Directors and auditors reports and financial statements for 2002 · (Albert Beale, shareholder): Where in the accounts does it state how much Rio Tinto has set aside to settle outstanding legal cases against the company? (Wilson): The Board has been advised that there will be no material cost to the company. Liabilities are negligible. The Auditor pointed out that there was a disclaimer in Financial Report (p185) about future legal costs.
Resolution 12: Other questions · (Snowy Jones) re Capper Pass claimants in the UK. There is a huge payoff for the chairman, but many men in Hull are now dying of cancer and children had contracted leukaemia, due to Rio Tintos past operations there. The claims had not been settled. (Wilson): Rio Tinto has set up an independent review board to investigate these allegations, but 6 years later no scientific evidence has been submitted to the Board. Claims were only submitted at the last minute this year. (Ms. Jones): Getting the evidence is a complex business. There have been synergistic effects throughout the operations.
· (Jacqueline Membup, Lihir community, PNG) expressed fears for her children due to waste disposal (by Subarmine Tailings Disposal) from Rio Tintos Lihir gold mine. (Wilson): There is no alternative means of disposal of mining waste for Lihir as this is a small island, so no possibility of disposal on land. Lihirs waste disposal is being seriously and sensitively addressed by independent researchers. Three separate research teams are confident that Lihirs waste disposal method does not represent any risk. (Clifford): The tailings are disposed of in the deep ocean at over 120m. This mining operation was approved under Australian and New Zealand environmental procedures. STD is quite a benign procedure. (Ms Mendup): The fish are dying on the reef. (Clifford) maintained that Lihirs waste dumping was safe and he invited Jacqueline and other PNG visitors to discuss this further with him after the meeting.
· (Yuyun Indradi, DTE/AMAN): Poboya, Central Sulawesi, Indonesia Community is concerned that a gold mine will be opened in this Forest Park where they live and which protects water supply for the nearby city of Palu. Rio Tinto still has the concession rights. Local government and parliament have rejected plans to mine there. The Forestry minister has confirmed Poboya will remain a Protected Area. Mr Indradi drew attention to yesterdays demonstration at the minesite and read out part of communitys statement. When will Rio Tinto return this land to the people? (Wilson): I am surprised that this question keeps popping up. We havent been there since 1999. We have no intention of mining there. Rio Tinto isnt there and wont be there. If another company exploits the area, that is their business.
· (Lyndon Ormond-Parker) read out a statement on the Jabiluka uranium project, on behalf of the Mirrar people of Kakadu. They see the mine as a threat to their culture and lives. They want a written statement and legal commitment from Rio Tinto that it will not develop this mine. Mr Ormond-Parker cited a commitment made by Wilson in a BBC World TV interview in Aug 2002, to restore the area by back filling. Will this commitment still stand after Wilson retires? (Wilson): Rio Tinto has repeatedly expressed its commitment in public not to develop the mine without the consent of the traditional owners .No, that commitment does not go with me.
· (Geoff Nettleton) noted that Wilson said Rio Tintos staff had been given new human rights guidelines. When would Rio Tinto provide these to shareholders? Mr.Nettleton also expressed grave concern about Rio Tintos involvement in countries with poor human rights records, including Indonesia, Laos, Turkey and China. How can the HR Guidelines be implemented in these countries. What assurances can Wilson give that Rio Tinto will not get involved in China-occupied Tibet? Wilson said he did not want to get drawn into discussing China-Tibet issue, but the company would not be involved in Tibet under Chinese rule.
· (Unknown shareholder) asked what Rio Tinto was doing to protect its staff in operations in Zimbabwe. Wilson acknowledged that there had been problems operating in Zimbabwe and providing assurances for staff while support was provided to staff if their human rights are threatened.
· (Unknown shareholder) quoted a statement by Barry Cusack of Bougainville Copper Ltd, that the company is involved in discussions with the government about disposal of assets. Is the aim to avoid litigation for Rio Tintos environmental crimes on the island? Wilson replied that he was not aware of any discussions. (Clifford): The process is caught up in the peace process. For 13years the company hasnt had access to the mine . it hasnt had any control over the site or waste management. Any discussions would be with the provincial or central government. These are still at a very preliminary stage. He doesnt have the details. Rio Tinto has no plans to re-open the mine. · · (Maggie Culver) Tio Tinto is prospecting in several places in Turkey along with a local company, Anatolia Minerals One of these prospects threatens an important Protected Area which is a sacred region for local people, covered by vital forests. The communities are resisting mining plans. (Wilson): These people have not approached us yet with their concerns. This would be sensible as we are only at the exploration stage.
· (Wayne Holland, Kennecott, Utah, USWA) referred to a statement in the Rio Tinto report (p14) that new safety and protection records have been set at the operations.. He said the smelter was held together with bailer twine and duct tape. 1,000 employees have signed a statement that their health has deteriorated. The safety record is atrocious. Will Rio Tinto direct the management to tackle this? (Clifford) said he couldnt comment on Nucor who would be taking over the management in the near future. Rio Tinto has invested nearly US$3bn since it took over Kennecott (in 1989). The union and company had reached an impasse, but now new working agreements have been agreed. It is true that 2 people had been burned and that was two too many. But this is unusual. Rio Tinto sets very high safety standards and is making tremendous efforts towards safety.
· (Ralph Astorga, Kennecott USWA representative) described how he had worked for the company for 41 years and was getting only a US$14,000 pension. Now the people taking over here have come from Freeport. We are being treated as Indonesian not as Americans. Wilson: We are in negotiation with the unions He invited both union reps. to talk afterwards (Certainly one went to the reception later).
· (Richard Harkinson) also drew attention to statements about Rio Tintos guidelines to managers on human rights. Mr Harkinson asked how this squared with human rights violations at the Grasberg gold/copper mine. He called for an independent review on human rights there especially in view of recent revelation by Rio Tintos partners Freeport McMoRan that it had paid US$5.6 million to the Indonesian military who had caused gross violations. Wilson replied that, although Rio Tinto had made considerable expenditure in the Grasberg mine, it is not the operator Freeport is. Freeport does take human rights seriously. The respected lawyer Gabriel McDonald is on Freeports board as an advisor. (Wilson refused to comment on payments to the military).
A cold reception
A Down to Earth representative went briefly to the company reception, after the AGM, in order to fulfil a promise made to Pak Pius Nyompe of LKMTL, the community organisation at the Kelian gold mine, East Kalimantan (PT KEM). This was that the British group would give Rio Tinto's Chairman a letter from LKMTL explaining why it had withdrawn from PT KEM's mine closure committee and working groups. The DTE representaive asked Robert Wilson who would be taking responsibility for the mine closure and ongoing social and environmental issues now that he was leaving (and his replacement would not have the same status). Also, since Rio Tinto had reorganised its group operatins, there was no longer a specific Gold Division. Wilson claimed that LKMTL had only withdrawn from one meeting and that the Indonesian Commission for Human Rights had set up a mechanism to address any outstanding issues (Both these claims according to DTE are not true).
Ed Matthew of Friends of the Earth (England, Wales and Northern Ireland) then presented Wilson with a highly critical report on Rio Tintos operations in Indonesia, carried out by WALHI (Friends of the Earth, Indoensia). Wilson politely thanked him and said he would contact FoE for discussions after he'd read it . He also commented that he regretted that FoE's website contained information which was out of date and/or wrong. For instance, NGOs were completely wrong "to keep going on about Poboya, as Rio Tinto had no involvement there since 1999". DTE corrected him, pointing out that technically Rio Tinto still owned the concession and therefore was indeed responsible. Wilson snapped back: "What another company does with the land is none of Rio Tinto's business". DTE replied that, signing a 'farm in agreement with Newcrest - or any other company - did not absolve Rio Tinto of responsibility. Wilson's parting shot was to the effect that|: "Well, if you can't accept that, there's nothing to discuss".
The following are the questions on KELIAN which DTE were unable to ask before shareholders at the 2003 Tio Tinto AGM:
The Kelian gold mine in East Kalimantan, Indonesia is 90% owned by Rio Tinto, through PT KEM. In this year's Annual Review (p26), it is stated that Rio Tinto's net earnings from this mine in 2002 were US$17 million - a substantial increase on 2001 due to an increase in production to 485,000oz/yr.
The Kelian mine has a long history of social and environmental problems, including documented cases of human rights abuses, violence against women and pollution from cyanide and acid rock drainage. It is due to close next year.
Sir Robert Wilson has told Rio Tinto shareholders in previous years with pride about the Kelian mine closure programme initiated through the World Bank's Business Partners for Development. This was intended to bring together the company, local government, academics and community representatives. Rio Tinto wants to promote Kelian's closure as a model of good practice.
Far from rehabilitating the concession area, KEM will not fill in the main pit or waste dumps then reforest the whole area. It will flood them to create artificial lakes and an artificial swamp. Sludge containing cyanides, heavy metal and other toxics will remain untreated. These could contaminate water supplies and enter the food chain. · The euphemistically named 'wet cover' and 'wetlands' methods are still experimental. Their long-term safety has not been proven scientifically. · Ground and surface water from these areas eventually drains into local rivers used by thousands of local people. · Dams can fail or flood, again releasing polluted water into local rivers. · The existing acid rock drainage problem will not be solved solely by covering other waste heaps with soil.
The community organisation LKMTL has repeatedly asked Rio Tinto and KEM - both through the Mine Closure Steering Committee and direct to senior management - to take responsibility for the long-term environmental security and protection of the community's health and livelihoods. They have asked for guarantees, independent environmental monitoring and free hospital facilities.
LKMTL withdrew from KEM's Mine Closure Committee and Working Groups on March 19th, because the committee was only a token gesture and did not take community concerns and solutions seriously (English translation of letter available from DTE).
Rio Tinto's new 'Way We Work' booklet says (p7): "We recognise that excellence in managing Rio Tinto's health, safety & environment and community responsibilities is essential. We also show that good working relations are fundamental to success".
1. How is Rio Tinto genuinely going to meet the Kelian community's needs after mine closure?
2. How does Rio Tinto intend to deal with the outstanding human rights, social and environmental problems extant before mine closure?
3. How will the Kelian experience influence Rio Tinto's other mine closure plans?
Response to Questions by Mineral Policy Institute (Australia) at Rio Tinto Ltd, AGM Perth, Australia
May 1 2003
(MPI) asked why, given human rights abuses committed by the Indonesian military, why does Rio Tinto, through its joint stake in the Freeport mine, makes payments directly to the military to protect the mine?
(Robert Wilson):"As you well know,the company called Freeport, not Rio Tinto, make payments to the Indonesian forces of law and order.(sic). It is not illegal to pay such money to protect mining interests there. Companies are required to pay money to get jobs done, as in many countries around the world. Rio Tinto is aware of human rights abuses in Indonesia. Freeport's human rights lawyer discusses issues with the local law enforcement agencies. Freeport has done a responsible job.
(MPI) asked whether Rio Tinto was going to cease dumping mine wastes into the sea at Lihir given the view that the dumping contravenes the London anti-dumping convention?) (Wilson): "There is no sensible alternative to pumping waste from the Lihir mine into the sea. The project would fail without dumping waste at sea. Studies by two Australian universities have shown that there is no risk whatsoever to the environment. The waste is pumped below the ocean mixing layers.
(MPI) asked again if, despite these findings by Australian universities, Rio Tinto was acting in contravention of the London Convention and hence creating an exposure for the company,
(Wilson) "The company does not feel exposed by the supposed illegality."
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