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Integrated reporting, Richard Carpenter, MerchantCantos
 

Integrated reporting, Richard Carpenter, MerchantCantos

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Richard Carpenter, managing partner at MerchantCanto and former editor of Investor Relations magazine, discusses the principles of integrated reporting.

Richard Carpenter, managing partner at MerchantCanto and former editor of Investor Relations magazine, discusses the principles of integrated reporting.

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    Integrated reporting, Richard Carpenter, MerchantCantos Integrated reporting, Richard Carpenter, MerchantCantos Presentation Transcript

    • 25 May 2012SES Re-brandBest practice21.04.11 reportingnarrativeManaging reputation in theOil, Gas and Mining IndustriesRichard CarpenterManaging Partner
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesContents• Changing reporting world — UK Government proposals — Executive remuneration — Integrated reporting• Best practice examples© MerchantCantos 2012 02
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesChangingreporting worldUK Government proposalsExecutive remunerationIntegrated reporting 03
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesWhat’s happening in the UK?• UK Government proposals to restructure narrative reporting• Plans for split of current reporting format into: — Strategic report — Annual Directors’ Statement• A  dditional plans to: — Reduce disclosure requirements — Reform executive pay disclosure© MerchantCantos 2012 04
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesWhat’s happening in the UK?Current ARA ARA Business review Directors’ report Accounts© MerchantCantos 2012
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesWhat’s happening in the UK?Current ARA ARA Business review Directors’ report AccountsFuture Strategic Annual report Directors’ Accounts? Statement Accounts? Key forward-looking information Detailed disclosures© MerchantCantos 2012
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesWhat’s happening in the UK?Current ARA ARA Business review Directors’ report AccountsFuture Strategic Annual Annual report Directors’ Directors’ Accounts? Statement Statement Accounts? Key forward-looking information Detailed disclosures Print version?© MerchantCantos 2012
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesSplit reporting format• Strategic report —  o provide key information including key T risks and forward-looking analysis – reputation management• Content: — Strategy — Business model — Performance (including key financial data) — Risks — Social and environmental information — Key governance and remuneration information© MerchantCantos 2012 08
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesSplit reporting format• Annual Directors’ Statement —  o provide more detailed disclosures T to underpin the strategic report• C  ontent: — Information required by law — Additional voluntary disclosures — To include: — Directors’ Remuneration Report — Corporate Governance Statement — Audit Committee Report© MerchantCantos 2012 09
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesSplit reporting formatNew reporting framework Strategic Report Annual Financial Directors’ Statements Statement Audit© MerchantCantos 2012 10
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesWhat do we think?• Like— Moving repetitive disclosures online— Cutting back on crossover• Dislike— Lack of understanding of bigger reporting issues— Still potentially too prescriptive—  emains a lot of debate on how best to move forward R—  overnment does not seem to know all G the ins and outs – but remains committed— Change is coming… but it may be slow— World may have moved on again© MerchantCantos 2012 11
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesExecutive remuneration• Massive reputational issue at the moment• Proposals include:—  equirement to disclose total remuneration R per director in a single cumulative figure—  otential to disclose remuneration below P board level— Greater linkage of pay and performance— Linkage back to strategic objectives—  istoric performance of CEO over last H five financial years—  isclosure of fees paid to remuneration D consultants© MerchantCantos 2012
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesIntegrated reporting• Current buzz phrase• Structured approach from IIRC (www.theiirc.org)• Integration of financial, non-financial and narrative• Strategic linkage and alignment© MerchantCantos 2012 13
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesNarrative reporting linkage What Why How we How we What could we do we do it plan to measure it knock us do it off course + + + + Mission/vision/ Marketplace Strategy/priorities/ KPIs Risk management at a glance discussion/ business model information context and resources Strategy KPIs Risk information CSR/sustainability© MerchantCantos 2012 14
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesBest practiceexamples
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesThe bucket list 16
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesBenchmarking• Group at a glance• Market context• Business model• Strategy• KPIs• Performance• Resources• Risks• Sustainability• Governance• Reporting centre© MerchantCantos 2012 17
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesThe great and the good© MerchantCantos 2012 18
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesGroup at a glance 19
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining Industries Group at a glance – Antofagastaroup at a glancea © MerchantCantos 2012 20
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesMarket context 21
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining Industries Market context – Evrazrket overviewctor discussion © MerchantCantos 2012 22
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesBusiness model 23
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesBusiness model – Fresnillo© MerchantCantos 2012 24
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesBusiness model – Fresnillo Annual report 2011 Fresnillo plc Our Business Model continued 1 2 3 4 Overview Business model component Description Strategic focus Business model component Description Strategic focus Value chain Strategic resources Operate The extraction and beneficiation of ore from our operating Maximise operational potential through full Financial strength The strict control of cash, assets, and costs and expenses Maximise value creation by controlling internal mines. We apply optimal mining methods in accordance capacity utilisation, reserve replacement, in order to secure operational continuity and retain our drivers of financial performance using tools Maximise the potential and control with the changing characteristics of each mine, benefited continuous improvements in productivity competitive position as a low cost producer, ensure such as long-term supply and service 1 of existing operations by the skills of our personnel and leading technology and cost controls. continuous investment in exploration, and maintain agreements, cost controls; inventory, trade tools. When coupled with high-quality assets selectively flexible capital funding options. and receivables management; fiscal planning; See Our Strategy and KPIs pages 26–27 added in the exploration and development phase, we and exchange rate hedging. It continues to See Financial Review pages 76–89 Strategic Review remain competitively positioned in cost performance be the Group’s policy not to hedge price among industry peers. exposure on silver and gold realisations. See Review of Operations pages 48–57 See Financial Review pages 76–89 Strategic relationships Key suppliers of equipment and services; contractors; Create mutual value by acting with fairness, customers; equity partners in our mines and projects; integrity and transparency, sharing best authorities and regulators. Also see Sustainable practices and fostering innovation. Develop The development and construction of new operating Deliver growth through the disciplined Development component. Creating Stakeholder Value pages 24–25 Performance mines, with disciplined adherence to schedules advancement of exploration projects towards Deliver growth through and budgets. Feasibility, engineering, procurement mine development, start-up and production. See Creating Stakeholder Value pages 24–25 2 development projects and construction teams work closely with operating Projects must meet stringent criteria personnel to ensure smooth transition from regarding mineral content and embedded construction to commissioning. cost. Economic viability is determined by factors such as metallurgy, mine design, See Review of Operations page 58 investment requirements, sustaining Technology Tools and processes that support exploration, Invest in innovation, maintain and continuously capital expenditures and rates of return. increase productivity, reinforce sustainability, upgrade technology and training to promote See Our Strategy and KPIs pages 28–29 enhance accountability, and support decision-making and productivity and efficiency. Governance financial planning processes. Explore The search for and quantification of mineral deposits that Extend the growth pipeline by deploying extend our resource base, with a focus on consolidating expert personnel, allocating sufficient Extend the mining districts in Mexico and Latin America. Our track investment capital, securing concessions 3 growth pipeline record of new discoveries is bolstered by continuous and surface land rights, and pursuing investment irrespective of metal prices, significant selective early stage partnerships Experienced The critical human factor upon which the successful Find, select, train and retain personnel with execution of our strategy relies. the requisite knowledge, skills and experience. Financial Statements technical expertise, and partnerships and early-stage and acquisitions. management and acquisitions that allow us to share the inherent benefits See Our Strategy and KPIs pages 30–31 skilled personnel See Community Relations pages 72–73, See Community Relations pages 72–73 and risks of prospect exploration. Executive Management page 95 Our project pipeline extends across the multiple stages of exploration (prospecting, drilling and resource definition). See Review of Operations pages 59–61 Licence to operate Risk management framework Sustainability The responsible operation of our business to create Reinforce the sustainable development of the Risk management The assessment, evaluation and mitigation of the At the operational level, to identify, assess value for and ensure the wellbeing of all stakeholders, Group by implementing and enforcing policies framework principal risks that could affect the Company’s ability and mitigate risk at mines, development Advance our without compromising future generations, through and procedures and investing in equipment to execute its strategy and deliver on its commitments. projects and exploration sites; within each sustainable the comprehensive management of health, safety, and training that put our people first in terms major capital project, to analyse and monitor 4 See Our Risk Management Framework pages 36–43 development environment and community relations programmes of health and safety; support strong project delivery risks; at the Executive from the earliest stages of exploration until mine closure. environmental management practices; Management and Board level, to assess benefit the communities where we operate; and mitigate strategic and financial risks. See Creating Stakeholder Value pages 24–25, Sustainability Report pages 62–75 and secure our adherence to best practices. See Our Risk Management Framework pages 36–43 See Our Strategy and KPIs pages 32–33, Sustainability Report pages 62–75 22 23© MerchantCantos 2012 25
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesStrategy 26
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesStrategy – BP Our strategy: Strategic priorities Business review: Group overview Our 10-point plan Our 10-point plan is how we intend to build a stronger, safer BP. The first five points What you can measure are things you can expect from us; the second five are things you can measure. 6 Active portfolio management We want to focus our portfolio further on our areas of strength, and deliver What you can expect from us increased financial flexibility. By the end of 2013, we expect to have completed $38 billion of disposals since the start of 2010. 1 We will keep a relentless focus on safety and managing risk We are determined that BP will deliver world-class performance in safety, risk 7 New projects with higher margins management and operational discipline. We will be a company that systematically We have a strong list of upstream projects due to come onstream over the applies our global standards as a single team. next three years. By 2014, unit cash marginsa on production from this new wave of projects are expected to be around double our existing average.b 2 We will play to our strengths We have had major successes at finding oil and gas at scale. We are also among 8 Operating cash flow growth the real pioneers of deepwater exploration. We have decades of experience We are aiming to generate an increase of around 50% net cash provided by managing giant fields and developing valuable gas value chains. We have built additional operating activities by 2014 compared with 2011c – approximately a world-class downstream business. Underpinning these strengths are deep half from ending Deepwater Horizon Oil Spill Trust fund payments and capabilities in building relationships and in developing technologies. around half from operations. Left BP moves gas 9 Use of cash flow for reinvestment and distributions from 6,000 metres below the Shah Deniz We will use additional operating cash prudently. We want to use around half field in Azerbaijan to for increased investment in our project inventory for growth, and around half markets in Western Europe, 3,000 for other purposes. This may include increased distributions to shareholders kilometres away. through dividends or share buybacks or repayment of debt. Right As part of a $1.2 billion investment 10 Strong balance sheet announced in 2011, We intend to enhance the strength of our balance sheet by targeting our the Kinnoull reservoir, UK North Sea, will be level of gearingd at the lower half of the 10-20% range over time. connected to BP’s Andrew platform. a Unit cash margin is net cash provided by operating activities for the relevant projects in our Exploration and Production segment, divided by the total number of barrels of oil and gas equivalent produced for the relevant projects. It excludes dividends and production for TNK-BP. 3 We will be stronger and more focused b Assuming a constant oil price of $100 per barrel. c Assuming an oil price of $100 per barrel in 2014. The projection reflects our expectation that all required We intend to be a stronger and more focused BP, with a base of assets that is payments into the $20-billion trust fund will have been completed by the end of 2012. It does not reflect high graded and high performing. any cash flows relating to other liabilities, contingent liabilities, settlements or contingent assets arising from the Gulf of Mexico oil spill which may or may not arise at that time. We are not able to reliably estimate the amount or timing of a number of contingent liabilities. See Financial statements – Note 43 on 4 We will be simpler and more standardized page 249 for further information. d Gearing refers to the ratio of the group’s net debt to net debt plus equity and is a non-GAAP measure. See Our organization is already much more standardized than it was before the Financial statements – Note 35 on page 230 for further information including a reconciliation to gross debt, Deepwater Horizon oil spill. The transformation of our Exploration and Production which is the nearest equivalent measure on an IFRS basis. segment from a regional business to one that is managed along lines of functional expertise is an example of this. Our footprint is smaller, with fewer assets and Operating cash flow momentum operations in fewer countries. Our internal reward and performance processes are more streamlined. This should drive better and more sustainable performance in safety, quality and efficiency, with less variation. 5 We will improve transparency through our reporting We will improve transparency in the reporting of our business segments. We now break out the numbers of certain parts of our businesses, such as lubricants and 2011 operating cash estimate Completion of Operational contributions to restoration Divested operations 2014 operating cash estimate petrochemicals in the downstream. From the first quarter of 2012, the group’s at oil price of the $20-billion and growth. and at oil price $113/bbl. trust fund. environment. of $100/bbl. investment in TNK-BP will be reported as a separate operating segment. Left Lingen refinery in Germany is one of Europe’s most complex refineries due to its ability to fully upgrade crude during processing. 38 BP Annual Report and Form 20-F 2011 BP Annual Report and Form 20-F 2011 39© MerchantCantos 2012 27
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesKPIs 28
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesPIs –Tullow Oils KPIson- non- l andures kuneration n © MerchantCantos 2012 29
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesPerformance 30
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesPerformance – Anglo American OPERATING AND FINANCIAL REVIEW IRON ORE AND MANGANESE IRON ORE AND MANGANESE Operating and financial review BUSINESS OVERVIEW three global producers of manganese alloy. 2011 Iron ore Financial highlights Its operations produce a combination of ores, production(1) Our Iron Ore portfolio principally comprises alloys and metal from sites in South Africa Total 1,825 Mt $ million (unless otherwise stated) 2011 2010 a 65.2% shareholding in Kumba Iron Ore and Australia. Operating profit 4,520 3,681 Limited (Kumba), a leading supplier of seaborne iron ore, and Iron Ore Brazil’s Kumba Iron Ore 4,397 3,396 100% interest in Anglo Ferrous Minas-Rio INDUSTRY OVERVIEW Iron Ore Brazil (42) (97) Mineração S.A., a 49% shareholding in Demand for iron ore globally is linked LLX Minas-Rio, which owns the port of primarily to the state of the global steel Chris Griffith Samancor 165 382 Açu (currently under construction) from CEO – Kumba industry and, more specifically, to the EBITDA 4,733 3,856 which iron ore from the Minas-Rio project steel manufacturing sector in China. will be exported (together, the Minas-Rio The country is the largest steel producer Net operating assets 13,069 11,701 project), and a 70% interest in the Amapá and consumer in the world and accounts Capital expenditure 1,732 1,195 iron ore system. for more than two-thirds of global seaborne Kumba, listed on the Johannesburg Stock iron ore imports. Share of Group operating profit 41% 38% Exchange, produces a leading quality In 2011, global steel production increased 6% Western Europe 1.5% Share of Group net operating assets 30% 27% lump ore. Export ore is transported via the Other Europe and CIS 10.6% to 1.5 billion tonnes (2010: 1.4 billion tonnes), North America 5.9% Sishen-Saldanha Iron Ore Export Channel to of which 685 Mt were produced in China South America 19.4% Saldanha Port. The rail and port operations (2010: 627 Mt), an increase of 9% (2010: 10%). Africa 4.0% Asia 32.9% are owned and operated by the South African China’s seaborne iron ore imports rose by Oceania 25.7% Paulo Castellari-Porchia parastatal Transnet. Kumba is well positioned 11% to 684 Mt (2010: 619 Mt). The balance Source: CRU CEO – Iron Ore Brazil to supply the high growth Asia-Pacific and of China’s iron ore needs was met by (1) Apparent production of iron ore pellets, Middle East markets and European steel domestic iron ore production, which rose sinter fines and lump. markets in light of an expected decline in by approximately 7% to 305 Mt. OPERATING PROFIT lump ore supplies from other sources. (2010: $3,681m) 2011 Iron ore Kumba operates three mines – Sishen mine $4,520 m STRATEGY AND GROWTH consumption(1) in the Northern Cape, which produced Total 1,825 Mt 38.9 Mt of iron ore in 2011, Thabazimbi mine Anglo American’s core strategy is to grow in Limpopo, with an output of 0.9 Mt, and our position in iron ore and to supply premium Kolomela mine, also in the Northern Cape, iron ore products against a background of SHARE OF GROUP which was brought into production during declining quality global iron ore supplies. OPERATING PROFIT 2011 and produced 1.5 Mt during the year. We have a unique iron ore resource profile, (2010: 38%) In 2011, Kumba exported more than 85% with extensive, high quality resource bases of its total iron ore sales volumes of 43.6 Mt, in South Africa and Brazil. Significant 41% with 68% of these exports destined for China and the remainder for Europe, Japan, South Korea and the Middle East. future growth will come from Minas-Rio (including expansion potential) and expansion at Kolomela. Our Minas-Rio iron ore project is located Kumba seeks to sustainably maximise total EBITDA shareholder value by enhancing the value in the states of Minas Gerais and Rio de (2010: $3,856 m) of its current operations through the Janeiro and will include open pit mines and a $4,733 m Unaccounted imports/stock changes 2.6% beneficiation plant in Minas Gerais producing implementation of its asset optimisation Western Europe 6.7% Other Europe and CIS 9.1% high grade pellet feed. On completion of programmes, capturing value across the North America 4.2% Phase 1, ore will be transported through a value chain through its commercial and South America 3.5% 525 kilometre slurry pipeline to the port of logistics strategy, executing its growth Africa 0.8% Asia 72.5% Açu in Rio de Janeiro state. Amapá, in Amapá projects and ensuring that it has the Oceania 0.6% state in northern Brazil, continues to ramp up organisational resources and capabilities Source: CRU its pellet feed and sinter feed production, to execute its strategy. (1) Apparent consumption of iron ore pellets, 01 which reached 4.8 Mt in 2011, and is Kumba plans to grow its business organically sinter fines and lump. expected to produce 5.5 Mt in 2012. in order to achieve production of 80 to GROUP STRATEGY ACTIONS Operating – safely, 90 Mtpa of iron ore by 2020, 70 Mtpa from sustainably and responsibly Our Manganese interests consist of a Investing – in world class assets in the most Kumba had an outstanding safety performance 40% shareholding in Samancor Holdings, South Africa and the remainder from other attractive commodities in the year, ending 2011 fatality-free and with an which owns Hotazel Manganese Mines countries in Africa. At our Minas-Rio iron ore project in Brazil, more LTIFR 33% below 2010. and Metalloys, both in South Africa, and a than 200 km of pipeline that will transport iron ore Minas-Rio will capture a significant part of Employing – the best people 40% shareholding in each of the Australian- the high growth pellet feed market with its slurry from the mine in the state of Minas Gerais to the port of Açu has been installed. Envision, Kumba’s broad-based employee share based operations Groote Eylandt Mining premium product featuring high iron content participation scheme, which includes over 6,000 Company (GEMCO) and Tasmanian Electro and low contaminants. Phase 1 of the Organising – efficiently and effectively permanent employee members, reached its first Metallurgical Company (TEMCO), with In our manganese businesses, a change in Minas-Rio project will produce 26.5 Mtpa, maturity in 2011. At the conclusion of its first five BHP Billiton owning 60% and having with first production scheduled after product mix, to focus on less energy intensive year phase it was valued at $319 million. management control. Samancor is the completion and commissioning of the 01 Construction of a pump station FeMn production, has helped offset the high cost at the mine site of Minas-Rio environment experienced in the year. world’s largest producer of seaborne project, which is anticipated in the second iron ore project in Minas Gerais manganese ore and is among the top half of 2013. During the year, civil works state, Brazil. 54 Anglo American plc Annual Report 2011 Anglo American plc Annual Report 2011 55© MerchantCantos 2012 31
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesResources 32
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining Industries Resources –Anglo Americansourcesurcesondiscussion © MerchantCantos 2012 33
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesRisks 34
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining Industriesks Risks –uncertainties and Tullow Oilanagementnsibilitiesin the documentp responds toncipal risks andde performanceesponsibility,stems, mitigation in the year © MerchantCantos 2012 35
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesSustainability 36
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesSustainability – Xstrata Delivering sustainable excellence xii To succeed in our aim of delivering sustainable value We work in partnership with government, boost community development, enterprise xiii NGOs, international donors and others to and job creation, health and education | | to all of our stakeholders, we must balance economic, Xstrata | Annual Report 2011 | www.xstrata.com Xstrata | Annual Report 2011 | www.xstrata.com support the development of small-and initiatives and environmental schemes. medium-sized businesses and alternative We set aside $109 million in 2011. environmental and social considerations in managing income-generating opportunities. our business. At least 1% of our profits before tax is set aside every year to fund initiatives that benefit the communities in which we operate. We support local culture and arts projects, programmes to Our economic contriibution cono contr We operate our business in a manner that is As our business strategy has progressed economically, socially and environmentally from primarily acquisition-led growth to sustainable over the long term. We believe organic growth, we have refined our safety that excellence in sustainable development is management focus and priorities accordingly. a source of competitive advantage, enhancing We make no distinction between the safety $33,877 $33,877m our corporate reputation and providing direct of our contractors and that of our employees. Revenue even business benefits that are essential for We work collaboratively with our major delivering our strategy, including: contractors on each project, sharing $505m 505m experiences and skills to enhance each Economic value retained val retained – gaining access to new resources; other’s safety management systems. – maintaining a ‘licence to operate’ from society We identify, reduce and, when possible, $16,831m $16,831m and enhancing the security of our operations; eliminate any significant environmental impact Paym Payment to suppliers y suppl – attracting and retaining the best people; from our mining, metallurgical and exploration $3,454m $3,454m activities. We identify opportunities and Empl Employee wages and benefits p benefi – accessing diverse and low-cost sources of undertake initiatives to protect and improve capital; and our operating landscapes. The core of our $3,508m 3,508m – identifying and managing new business management approach is to preserve and Payments to government opportunities and risks. restore the natural environments we operate We aim to operate a safe and healthy in throughout our activities’ lifecycle. $1,314m $1,314m workplace. We believe that every work-related Our activities and investments create lasting Payments to providers of capital of cap p illness and injury is preventable and so our social and economic benefits for the $100m 100m primary objective is to operate without communities and countries in which we operate Corp Corporate social involvement (cash spend) social invol (cash spend) fatalities and injuries. that extend beyond jobs and taxes to include skills and enterprise development, improved $8, $8,165m infrastructure and enhanced access to education Total revenue revenue Capital expenditure expenditure and health services, amongst others.© MerchantCantos 2012 37
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesGovernance 38
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining IndustriesGovernance – Antofagasta 72 Antofagasta plc Annual Report and Financial Statements 2011 Antofagasta plc Annual Report and Financial Statements 2011 73 Governance: Corporate governance report Overview Strategic review Key Board activities in 2011 Compliance with the UK Corporate Governance Code Our governance structure Overview Operational review The Company now reports under the UK Corporate Governance Code (the 2010 The Antofagasta plc Board (“the Board”) is collectively responsible for the long-term Appointment of three new Directors to the Board, who bring Code) which sets out governance recommendations and best practice provisions success of the Group. It is responsible for the leadership and strategic direction a considerable range of experience and expertise in the which apply to UK listed companies. The 2010 code applies in place of the of the Group, and for oversight of the Group’s performance, its risks and internal international mining sector, with many years of operational, Combined Code on Corporate Governance. The Company is required to report control systems. The Board is assisted in the performance of its responsibilities financial, strategic and corporate finance experience across on the extent to which it complies with the main principles and the provisions of the by its four committees – the Audit and Risk Committee, the Remuneration a wide range of countries. UK Corporate Governance Code and explain the reasons for any non-compliance. and Talent Committee, the Nomination Committee and the Sustainability and Stakeholder Management Committee. More detail of the role of the Board and Approval of key steps in the Group’s growth plans, with approval Financial review The Company complied with the detailed code provisions contained in the its committees is set out below. of the Antucoya project and initiation of the feasibility study UK Corporate Governance Code throughout 2011 except as follows: The Group’s businesses are divided into three divisions – mining, transport for the Centinela District and pre-feasibility study for the – the Board did not have a separately identified Chief Executive and hence and water. The mining division represents over 90% of the Group’s earnings. Los Pelambres District. at Board level there is no formal separation of the functions of Chairman and Chief Executive (provision A.2.1). The Board considers that its predominantly Antofagasta plc Board and Committees Approved updated Ethics Code, which was launched by non-executive composition combined with the delegation of significant “Good governance is central to our business, and the Chairman. responsibility for operational management to a divisional level achieves we believe that it is core to the Group’s ongoing Ongoing review and monitoring of operational performance, an appropriate balance and prevents a concentration of power Antofagasta plc Board Governance development. For Antofagasta good governance is including the ramp-up of Esperanza. in its Executive Chairman; much more than a matter of compliance – it is about Reviewed the Group’s ongoing capital management, including – performance-related pay measures did not apply to Board members (principle D1). The Board considers this appropriate given its predominantly non-executive having the right people, culture and structures in place approving total dividends of US$1.1 billion which were paid out composition and the role of the only Executive Director, who is a member of the Audit and Risk Nomination Sustainability Remuneration to make sure we make the right decisions for our to shareholders during 2011. controlling family, as Chairman of the Board. Performance-related remuneration Committee Committee and Stakeholder and Talent structures are in place for senior executive management in the Group; and business and for our shareholders. We strive to instill Page 78 Page 80 Management Committee – Charles Bailey retired from the Board and also therefore from the Audit and Committee Page 82 Financial statements a culture throughout the Group which reflects our core Risk Committee, the Remuneration and Talent Committee and the Nomination Page 81 principles of respect, honesty and transparency. In this Committee on 8 June 2011. Additional appointments were made to those report we discuss the key features of the governance Committees with effect from 1 July 2011, however for the intervening 22 days Business Divisions/Divisional Boards the Audit and Risk Committee and the Remuneration and Talent Committee structures, processes and people we have in place in did not comprise three independent Non-Executive Directors (provisions C.3.1 Transport Mining Water order to achieve our objectives.” and D.2.1) and the Nomination Committee did not comprise a majority of independent Non-Executive Directors (provision B.2.1). No committee Jean-Paul Luksic Other information Mining Division Corporate Centre meetings were held during this intervening 22-day period. Chairman Executive CEO and Business Development Committee Vice-Presidents Committee Mining Division Subsidiary Companies/Boards© MerchantCantos 2012 39
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesReporting centre 40
    • Best practice narrative reporting: Managing reputation in the Oil, Gas and Mining Industriesrting Centres – Rio Tinto Reporting centreth simple navigation to the © MerchantCantos 2012 41
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesQuestions, questions,questions… 42
    • Best practice narrative reporting: Managing reputation in the Oil,Corporate communications: An introduction to MerchantCantos Gas and Mining IndustriesThank youRichard CarpenterManaging PartnerT: +44 (0)20 7396 3581E: rcarpenter@merchantcantos.com 43