[Music]
What I would like to say is I have done a few of these
before I like them to be very interactive. What I would say
ask any question you want. I never like to have any question
off balance, I know I am being tapped so some questions I
maybe able to answer a bit more frankly than others I will
do my best to be as frank as possible. Sometimes maybe if it
was just a private I could be very frank but I encourage you
to ask any question you would like, you want to send me
that's why we are here to have a discussion. So whatever is
on your mind, please feel free to ask me. What I would like
to do is go through just I have a few slides that I would
like to take maybe five minutes of walkthrough just to give
you if you are familiar and maybe give you an idea of who we
are, what we do, what are some of the issues we face, and
then I have a last slide on a couple of issues, matters that
I thought would be of interest. If our questioning takes us
in other directions that's great because this is not about
me, it's about you. And so the things that I have are some
of the issues that we are facing as an industry and also
some of the experiences that I have had around managing
people and managing a career and some things that I think
are useful for you to know that you began that track. And so
quickly I would just like to walkthrough a few slides that
go through where we operate. So it gives you an idea of
where we are located, where we might have operations, where
we are building projects around the world. And so we are
very diverse, I should say we are very diverse
geographically, we are not as diverse if you look at our
people in our organization. We are very, we look a lot like
me, if I can say it that way. And we are trying to change
that, and but you can see we are probably a little
underrepresented in Africa which is been an issue that we
are trying to correct as we go forward. We have a couple of
very large projects that we are looking at in Africa but
also in South America also. But the key about one of the
keys about our business is and as we talk maybe at the end
about some of the issues we are facing, we can't choose
where we go to operate, we have to go where the resources
are. And a lot of the easy resources have been found and a
lot of those that are in more stable countries are already
in operation. And some of the more perspective areas or
places like Africa, where governments are not as stable
operating environments and physical regimes are not quite
the same and legal institutions are not as strong and so
those are some of the issues that we are facing as an
organization. If you look at what we do this just kind of
gives you an idea of the various areas we were at and where
we are in those markets size wise. I have another slide
shortly that will show profits that will give you an idea
where our profitability is spread across those markets. Some
of you might have seen that many companies will say well we
have to be number one or two in a market or we don't want to
be in it. The way we look at it is we search for the best
opportunities, we do put opportunities or commodities
through a review there are certain commodities that we
preferred not to be in because we don't see the industry
dynamics as being that favorable. I will say zinc maybe one
of those where it is more plentiful, you don't find large
resources. Our mantra and our strategy is very large, low
cost, long life so we are looking at things that will last
for a minimum of 20 years hopefully 50, 60, 70, 80 years
which is a very long time for a mine and that will produce
when you look its production rates compared to other mines
are very large mines. In copper we have interest in some of
you know the top if you look across I think we have interest
in three of the top 10 mines in the world. The one thing I
was going to say I am just going to go back as we come back.
There is also a reason I put this picture on the slide and I
will come back to it hopefully a little bit later but I just
want you to remember that and I will plant a seed. One of
the things that we attend to that we are very proud of and I
truly believe that is that we work very hard on being
environmentally responsive, sustainable development which I
include environment, health and safety both of communities
but also our workers but also how we deal with governments
and communities. But when you look at that picture we will
never be seeing as a green company really, no matter what we
do. We can be the best in our industry but we will never be
seeing as somebody that's a stand out because we have an
impact. You know in some areas this is not a mine that we
will clean up and we will be gone once we are done but some
types of mining that we do once we are done you wouldn't
know we have been there but this won't be one of them. If
you look at where we sell and what we sell as of way by
destination we do sell around the world but you can see how
Asia is really beginning to dominate our industry. If you
looked at China five years ago, six years ago instead of
being 25% of our revenue it would have been less than 10% so
that gives you an idea of how it's been growing. If you look
at what we sell you know pretty diverse but we have been a
bit more way to towards iron ore and aluminum. Iron ore to
partly because its price has been so high so it's kind of
skewing that a little bit.
I put this up just to give you, you can see where we make
money but certain commodities come in and out of favor if I
can say it that way from a pricing perspective. So these
things go up and down over time but what I would point out
is if you look at 2008 that was a record year for us and
look at the first half of 2010 which is that last part
there. We made almost in the first half of this year as we
almost made as much as we made in 2009 and pricing for most
of our commodities have gotten better in the second half
than they were in the first half. I mean if you just look at
consensus for what we will do, well this would be a record
year for us and we are still in a very uncertain economy,
particularly in the US as I travel around the world
different economies you get different fields for how people
feel what's going on and what the future is like. In the US
it's still very uncertain people are unwilling to really
kind of start investing. We are investing, we haven't
announced it to the market yet so I can't get into a lot of
detail yet but what I would say is come February look and
see what we start, well I think we are going to start saying
and talking about it in November. Our investment pipeline
for the next 5 years is more than we have ever spent before,
very high levels of investment. And I will talk about maybe
a couple of those.
[Audience]
So it didn't really here tell about October, we were going
gangbusters and literally our iron ore group was just flat
out doing everything it could to produce more iron ore and I
am not kidding you over a weekend in October the ships
disappeared at the ports in Australia they just left, orders
to stride out and things just fell apart. So there were
wobbles but for it really didn't hit till the end of '08 and
then but when you look well this is going to be a record
year work demand on what we need to do from to build new
supply is just enormous for us. We cannot invest, we
actually are having trouble getting our people in businesses
to spend capital fast enough. And when I tell people that
that are in other businesses they just kind of look at me,
and what we want to prove capital, let alone, we can't get
them to move fast enough coming out of the global financial
crisis where we had to take some very significant steps
because while we had a record years that year we were also
under very heavy debt after making that all kind of
acquisition if you are familiar with our company maybe which
was an all-cash deal, the markets fell apart, we had in
hindsight had bought something. That was a very big
acquisition near to the top of the market and we couldn't
term out that debt in some of those things as a result that
we were, our main competitor was coming after us trying to
buy us and so we were kind of stepping a position. And then
suddenly the markets fell apart and we had a huge amount of
debt. I would say that in June of last year so almost 18
months ago we had $40 billion of debt. At the end of this
year and if you looked at what the analysts are saying we
will have somewhere around $5 billion in debt and they are
about right. So it just gives you an idea of how the world
for us has changed in 18 months. Just quickly I mean if you
look at what's happening in the world and we have been
caught off to some degree in different areas as surprised as
everybody else, as the Asian economies are taking off they
are going through that period of growth that is very
material intensive that you saw Japan go through say in the
50s and the 60s, US and European economies went through that
much before them, but just to give you an idea let's say
copper over the next 20 years we expect more copper to be
used in the world than has been used in the last 70 years.
And when we look at what we, we have to be producing twice
as much copper in 20 years as we are today. And we produce
as a world about in round terms I will use about 15 millions
tons of copper a year. So we are going to have to produce
somewhere around 30 million tons of copper in 20 years. We
are developing one of the largest mines in Mongolia right
now that will produce a little less than a half a million
tons of copper. So to meet the demand going forward in 20
what years we are going to have to produce 30 of those
operations over the next 20 years about and it's costing us
about $5 billion to develop that one operation. That just
gives you a little bit of view on the scale that our
industry is facing as we move forward. And just quickly the
only reason I really put this up is as you see what's
happening in China, as well as India is starting to follow,
it's a little bit slower, it's not as command and control as
China is so it's not happening quite as quickly and
smoothly. When I say smoothly it's such a consistent rapid
pace year on year but I think in India as I visit there more
and more my view is the genie is out of the bottle. The
people that the up and coming generation in India wants and
this is happening around the world, they want everything
that you have and that genie is out of the bottle and it's
coming. So you know happy for questions I was just a lot
brief introduction that I wanted to give, a little bit about
our company, what's happening. I think you may have done
some reading, there have been some case studies that have
been done. There are things around some of the issues that
we face as a company. I think somebody mentioned to me that
I might get some questions on, the bribery issues that we
faced in China and our four people that were arrested and
subsequently found guilty and sentenced to jail there, our
Afghan acquisition and some of the dynamics around that, and
how it kind of put the company in a difficult position. I am
happy to answer or discuss any of those like I said nothing
off of limits, yes.
[Audience]
Yeah we were realizing that we have been somewhat in some
instances conservative when it comes around moving into more
risky locations. So we had an opportunity and we actually
had an interest in Columbia in a coal operation, which has
turned out to be very successful operation over time. We
sold out of that in the mid-90s mainly due to risk around
operating into Columbia. And looking back we can say we did
that way too early. If you go back 30 years ago now two of
the biggest operations and most profitable operations that
really drove our company were in Africa. It was a copper
operation in South Africa and uranium operation in Namibia.
And so we have worked in less secure places or you know less
developed places but sometimes we have been a little
reluctant to be as aggressive as I think we should be in
those areas, any we are realizing we do need to change that.
Guinea we have a massive iron ore opportunity there. And we
are having one of the issues that we are facing is that
first group of mining issues is that the view that Guinea
sees around the strategic nature of that resource because it
is so big and governments wanting the bigger piece of the
pie. That's probably about a $10 to $12 billion development,
massive impact on the country. And so you see the struggles
that we are facing and trying to develop it but what the
government wants as well. We also have to go where the
resources are as I said earlier. So wherever we have to
define resources and Africa is one of the untapped
potentials for very large resources including if you want to
be in copper over time one of the biggest is the copper belt
in Africa which includes Zambia and the DRC. And so we are
going to have to be there over time if we are going to be in
these commodities and so we are going to have to adapt one
of the things as be much better about government relations
than we are today.
[Audience]
Yeah I think copper is one that has probably the best set of
fundamentals because it's growing so quickly. It's plentiful
but not plentiful in high concentrations. You can find it at
what grades that we would say about 0.5, 0.4 which are very
hard to mine profitably. A 1% copper mine used to be a low
grade copper mine. Nowadays if you find a 1% copper mine at
that it's a superb fine. They are also getting deeper so if
you look at underground mining for copper today it's about
25% of copper is produced from underground. We figure by
about 2020 it will be about double that amount. So it's
getting deeper and the deeper harder to find more complex to
develop, much more expensive. There is the really big block
caving copper opportunities probably right today it can only
be developed by three maybe four companies. That will evolve
over time but right now, Metcal so I used in iron ore may
use in steel making, not as plentiful and where it is being
found now is in more difficult locations like Mozambique to
develop. I think it has very strong fundamentals. Iron ore
mainly because usually it's such a logistics challenge to
get when you mine iron ore it's not about mining it's all
about logistics we were talking about that. Our iron ore
mines in Australia which are some of the biggest in the
world, we own about 1500 kilometers of a private rail system
that we run ourselves, we run it through an Automated
Operation Center that's based in Perth, which is about
probably 1500 to 2000 kilometers away from where the mines
are. It's a combination of about 20 mines and they have to
mine it and train it all to the same locations and blend it
into a common final product that than is loaded on the
ships. And so when you think about taking 20 different
operations and some were up and some were down and some have
problems maybe could have breaks or whatever and managing
that logistics chain to make sure that you are blending to a
certain spec of a final product is you know something you
have helped us with is quite an undertaking.
[Audience]
Question: What's the competitive environment like competing
in China, with Chinese firms and do you think that the
arrest imprisonment of your employees was in anyway related
to that?
It's very difficult. We don't believe we can operate in
China at least as the majority owner, so we are looking to
partner with Chinese. We very much see it as a strategic
resource, you have seen this with the debate that China has
recently gotten into over some of the sea issues and they
have been using rare ores it appears things like say as kind
of a part of the tool against Japan in this debate. China
wants to own these resources and that's one of the issues.
When you look at what China faces they realize what they
have to, they don't have the ability to meet their own
internal means through their own commodities in country. So
you will see them going out more and more and trying to buy
commodities run operations in other countries. And they have
been doing that very aggressively in Africa and South
America, successful sometimes, not so successful in any
other ways. Sometimes they haven't been haven't worked
really well with in dealing with community and community
issues. We think we need to partner with Chinese and that's
why we have been working with Chinalco because they will be
doing that. And they have cheap financing which could be a
big boom to us but also we have technology and capabilities
that they would like to have, we have reputation around the
way we operate and our excellence that could be beneficial
that gets us access to certain commodities or deposits so I
should say that they might not be able to get. So we think
that that can be a win-win. We think we just, we have been
working on negotiating an exploration agreement within China
to try and work with them to identify deposits in China, but
we also recognize we are not going to be the majority owner.
We maybe able to operate because for a period they will want
to gain their own operational expertise over time and
replace us we do recognize that. The arrest, hard to say but
I think the evidence would say they were probably somewhat
connected, yes and but looking back and having done our
investigation we now know that this was something that was
going on for some period of time as well. Our people were
taking bribes, it was completely outside of our systems, it
was cash and grudges and things like that but they were
doing it and they were guilty of what they were found guilty
of doing as well. And that hurt us, it hurt us with other
governments around the world but it hurt us in China. And
after we bought Alcan and got ourselves into a very debt-
heavy position and weren't able to do things like share
issuances or terming out that debt and some of the things we
might have been able to do before the global financial
crisis hit. As I said our competitor came after us in a bid
and so we kind of had our hands tied as to what some of the
things we could do externally. We couldn't issue stock to
help pay down some of the debt which may have been an option
we were considering because we couldn't issue stock and put
a price on our stock that they could say we will buy at that
price. So we found ourselves in a very difficult position.
After the whole world fell apart then and we were still
heavy with that debt, there weren't a lot of options for us
to try and bolster the finances of the company. And we
entered into an agreement I don't know how many of you are
familiar. We entered into an agreement with Chinalco to make
a significant investment of almost $20 billion into our
company. And at the time there weren't any other options.
The financial markets were closed, we couldn't borrow money,
we couldn't issue stock, our stock price went down 80%. We
probably didn't want to issue stock. Yeah, it was a scary
time and my whole net worth is tied to the Rio Tinto share
price. It was a very scary time for a lot of people. Within
six months things started really changing. We could do other
things and it was apparent that the deal that we had
negotiated at that time which was the best we could do was
no longer the best deal we can do. And so we changed
direction and that's didn't go over very well in China. And
iron ore pricing was going through the roof, we were looking
at ways of changing the way iron ore was priced from long-
term contracts that where the pricing was set annually to
more of a quarterly or a spot market price, they didn't like
that. Then there was an arrest of our people for something
they had been doing for some times though I mean these
things all damaged us quite significantly to be honest with
you in China. We had been working on that relationship very
hard and we have been using some very renowned experts to
help us as well. And we have made quite a bit of progress
but we still have work to do. But I would say we are very
happy with the progress we have made today. There is one up
here.
[Audience]
No it's the inability of supply to keep up with demand. So
China and in round figures I should have slightly more
precise but in round numbers that would be I think importing
around 600 million tons of iron ore this year. If you go
back to when I was the CFO in the iron ore group it was a
100 million. And if you would have told somebody that
someday not even 10 years from now but someday they might be
importing 500 million tons of iron ore they would have just
left you out of the room, absolutely left you out of the
room. And they are doing it 10 years later. And so there has
been a massive underinvestment and supply and there is a
catch up but it's still finding resources, finding big
resources, there are infrastructure issues, there are all
the issues around negotiating with governments for fiscal
stability. I will just use an example I will go from iron
ore to copper because I was intimately involved in our
entering to the Mongolian copper asset. But it took us about
two years maybe two an half to negotiate an investment
agreement that would allow us to fill comfortable investing
$5 billion in that country. But to put that in perspective
if that mine was up and running today that single operation
would represent 25% of the GDP of the country. So you can
understand why they were nervous. They were nervous that a
western company was going to take advantage of them but they
were going to negotiate a bad deal that in hindsight three
to four years later if prices were much better or other
things that didn't look so good and we were nervous of that
as well. This is an operation that will last for 60,
probably more, but at least 60 years. We don't want to make
an investment and start operating something and find that
four or five years later because of issues that we have we
lose it due to expropriations. So it's all these issues that
governments are struggling with as well that we struggle
with and as a permitting process you can imagine as I showed
in the picture in the first, people are going to fight us on
permitting. They don't necessarily want that in their being
done. But they want their air-conditioning, they want their
refrigerators, they want their cars, they want their houses,
they want their apartments, they want their iPads, their
iPods. And you know if you can't grow it usually comes from
mining. And so whether we like that or not it's the truth so
we have got to do one or the other and maybe you know over
time the world will become where we grow more things and
then dig in the amount of the earth. But that is going to
take a very long time to change. Those are not the things
that happen overnight.
[Audience]
And that does vary from place to place, so in Australia
where you see a lot of not only commodities, well gas is a
commodity but you see the energy but when I talk about
commodities I mean copper, coal, iron ore those sorts of
things. There you cannot get enough engineers and just
people to do construction and run operations is going to be
a big deal. In other places like Africa or Mongolia we have
people but they are not and I don't mean this rudely. So
they are not educated and trained to do the work we are
asking them to do. We just build a massive operation. It's
very similar to what I said about Mongolia in Madagascar.
And a billion dollars in round terms, poor massive mining
operations for TIO2. The people that we have hired and
trained to work there, to build it, to now operate it don't
even wear shoes. And yet they can't come work on our
operations without hard toe boots and safety gear and you
know the training, welders, mechanics we train those people
to do that but you know that takes time to do and so that's
another issue that we face in developing countries. That is
a major issue. In the supply chain it varies but things like
just like we cannot bring on enough supply of copper, iron
ore are further down our supply chain people that make
trucks, shovels, tires, explosives those are all things that
I think over time that will be bottlenecks and they will
expand at different paces and some of those bottlenecks
might disappear for a while and they will open up some place
else but those kinds of things shipping could be one as
well. It isn't right now but with all that trade that's
going on in the water you can have times where you have a
lack of global shipping capacity.
[Audience]
Yeah there is quite a bit of pressure on us and it's kind of
fine that we do get different pressures from different
shareholders and I will come back to that in a minute. But
there is a pressure on us to grow, partly due to our
customers because they don't want to have the high prices as
high as they are encountering. Copper recently it's fallen
back over the last few days but went over $4 a pound with
you know iron ore prices as you said are very high.
Customers don't like paying that and so there is pressure
there, the pressure from our shareholders to grow into these
very profitable pricing regimes that we face right now. Some
shareholders that are more, that are not necessarily company
pickers are so big that they have to invest across the
commodity space. Sometimes we get pressure for them to not
invest too quickly because that creates oversupply and
drives prices down and will bring profits and evaluations
down for the whole industry. So we get that which is kind of
anomaly as well. But it's getting harder to find really true
tier-one assets and they take a long time to develop. And
that's one of the issues that we are trying to get our hands
around. We found that what we would refer to as a tier one
diamond deposit in Canada and it's been an operation for
quite sometime but from find to first diamond was a decade.
And it's getting worse, find to first copper is now taking
in places maybe 15 years and so it is becoming very hard to
find and develop and get in an operation. Now, for us we
usually like to develop a massive operation. And that's one
of the issues we have been facing in Guinea is they see us
taking too much time studying and figuring out how to build
and get the logistics in place to build a $12 billion
operation. They want jobs today. They don't want jobs in a
decade, well you can imagine politicians. They don't care
about jobs in a decade they want the jobs today. And so how
can we go in and develop one or two million ton operation
that cost $600 or $700 million that gets things flowing
today while we finish the studies and then build something
bigger. That isn't in our DNA that it needs to be and so we
are looking at how we have to change that. Buying companies,
our shareholders, our investors, when I say shareholders not
just the mom and pop in the street but kind of the city, the
people from the city are very worried that we will pay too
much and that's a big concern. So there is that constant
friction. Yeah I am sorry if I am not going in order but.
[Audience]
So we think around the way in which we operate so that's
both from excellence and that we are efficient and we run a
very good operation that is a safe operation. And you see
when there are issues you saw the recent issuing in Chile
where the miners were trapped underground. Safety is a big
issue for our industry. I would say that, I don't have a
slide today. But if I was to put up a slide of how our
industry does against other industries and then how we do
within our industry you will find that you would be
surprised to find that the safety in our industry is much
better than a lot of industries that you would expect. And
that the way we perform within our industry is one of the
best. But it is something that we work on and work on and
work on. We take it very seriously. I am very comfortable in
saying this is a true value. It doesn't mean we are perfect,
it doesn't mean we get it all right, it doesn't mean that
people don't get hurt. This year we have two fatalities
within Rio Tinto, you know our goal is obviously no
fatalities ever but it's something that we work very hard
with. We work very hard on managing the impact on the
environment. As I said in the first picture we have an
environmental impact but managing that the best we can I
think we have a competitive advantage in doing that. We are
working on biodiversity. We now have a stated goal of
neutral impact in biodiversity so that when we go in and we
have to develop an operation we are very careful about
figuring out an understanding, the makeup of what animals
are there, what planet life and what not and that we make
out for the impact that we have, working with the
communities and governments. And I have seen that in
Mongolia so when we went into Mongolia there is not a
resource we found somebody else found and we had to be buy
into it and then we had to help negotiate the investment
agreement. The government of Mongolia would only sign that
agreement with two companies and we were one of those two
companies, the other one was they would have with BHP, they
would have. But you know so as we went through that, it
became so clear to me that was a competitive advantage for
us. We are now working very hard at making technology and
innovation competitive advantage and we have a few instances
were we have done very well were we run our train system in
Australia remotely. Driverless trains, we are working on
driverless trucks. We are working on automated tunneling,
for underground mines. We are working on sorting systems,
sorting systems that are used in the food industry but if we
could bring them into our industry we could open up
resources that are now uneconomic and make them economic. We
are spending a lot of money on innovation and I will be
honestly thinking mining companies have not been head of the
innovative curve. I think -
[Audience]
It varies by commodity so you can imagine in a diamonds
mine, not much with logistics we basically carry it out in a
suitcase. We try to make sure other people don't do that
that we do. Actually when I was in charge of our diamond
operations I went into our and they laid out on a table that
was about twice as wide about 200,000 carats of diamonds.
Gold, not much in the logistics but when you think about
bauxite which goes in the first portion of making aluminum
it takes a lot of oxide to make aluminum. It's a logistics
shipping and so it's mainly around rail and shipping are the
biggest logistic challenge. Challenges that we face and when
we find deposits quite often they are not near ports or they
are not real rail infrastructure and it used to be when I
was in iron ore, it used to cost a million dollars of
kilometer to build a rail line. I am assuming now it's
probably at least 2 to 2 and half million dollars a
kilometer. So if you are 1000 kilometers away from a port
it's very expensive to build a rail line. And so you have to
build an operation that is so big enough to support that
major investment you can't just build this a small mine. And
usually then if you sometimes we have to build our own ports
which are very expensive as well. Coming back to the China
question, one of the reasons we are trying to work with
China is because they can build infrastructure like that
including rail and port much cheaper than we can so we are
trying to access that capability. Come over here.
[Audience]
We have a lot of joint ventures and we enter them for
different reasons. I think they will continue to be a major
aspect of our business. We would much rather in most
instances own and operate a 100% of our project. I think
what you will find now is that going forward governments
will want a piece of that pie. So there would be more joint
ventures that will include a piece with the government. In
our project in Madagascar they got 20%, in Mongolia they got
a 3rd, they want it half. They actually want a 51% a 3rd so
you are seeing that they see these are strategic resources
they want to be involved. We may do it because we need to
access somebody else's capabilities like Chinese strengths
and building infrastructure and so they may need to have a
cut of the pie as well and part of it is these projects are
becoming so big as a financial diversification as well. A
big project used to be $500 million was an enormous project
in the mining space a decade ago. We are looking at
developing a really quite what we refer to as tier one asset
in Arizona for a copper project we will spend a billion
dollars on it before we decide if we are going to build it.
And so when you look at the kinds of investments that we
have to make as a company I mean they are just enormous
investments and so joint ventures kind of play in that as
well. But they introduce their own problems as well.
[Audience]
Yeah it's something I will be honest with you that we
struggle with. We have knowledge of markets that other
people that should be better than other people, that we
should be able to use this to our advantage in trading. And
we can also manage some of the risks that we have around our
operations through trading. We do use trading for that and I
think we do that fairly well. But we have always struggled
with being more like a Glencore if you are familiar with
Glencore real trader because first of all we will be
competing against banks, financial institutions and we are
not sure we are best suited to compete against them firstly
because our compensation systems are so different and so can
we hire the best and brightest to do that and so will we
truly have a competitive advantage against those companies
and groups. We kind of keep coming down that we probably
don't. Now Glencore actually does do operations and trading,
they do both and I know the CEO of Glencore very well. And
he talks that they have two completely different
compensation and systems of managing people and they don't
seem to clash. I am not sure in our company of having a
group of 500 people maybe 20% of them all make more than the
CEO of the company that causes, those are the issues that we
struggle with. Our core strengths are mining and whether it'
s the operational excellence, environment sustainable
development, dealing with governments running operation and
we have tended to say those are our strengths, those are our
core strengths we will stay with those.
[Audience]
And we continue to test that and I won't say that 5 years
from now we won't come to a different decision we are at
today. But those are kind of the arguments that we go back
and forth in making those decisions internally. I think-
[Audience]
It's a very good question so the Dutch Disease issue. What
we did when we went as we were working with the government,
we helped them go to places like Chile, Alaska, Canada,
which I think is managed, there are resource country but
they suffer from it as well. I mean you see there what's
happened to their currency. When I lived in Australia the
Aussie Dollar was 50 cents to the US dollars, it's a parity
today. So they do get impacted by commodity pricing and
swings, there is no data about it. But what we try to do is
take them to places that have managed it well and so that
they could learn upfront because they will suddenly get an
influx of money and let's be I was going to say being
politicians I don't care if you are a Mongolian politician
or US politician it doesn't really matter. Your instinct is
they are going to use it to get reelected next time because
they have very short term horizons and so we have tried to
work with them to set up schemes like Alaska has or Chile
has actually done a very good job where they have based
their government spending on what they consider a long term
price of copper, moving coppers above that. They put it all
into their rainy day fund and when it's below it they are
not afraid to draw from it so they help manage that. But it'
s still going to have an impact and you just try and help
work best that you can that they can set up mechanisms and
institutions that help manage it.
[Audience]
No we know we don't do hedging other than in very specific
circumstances. If we have a very large capital spend over a
short period of time and when I say short over a year or two
or three we may hedge that large capital spend so that we
don't get significant spikes but over long periods we don't
hedge our operations either from a commodity or currency.
Our customer, our shareholders buy into our company for
commodity exposure to commodity prices so we let them take
that. And from a currency perspective our view is and it
largely plays out is that currencies are countered on
commodity price and so as prices come down currencies become
less valuable and the cost go down in US dollars and so it's
kind of an offset to lower commodity prices. Our costs go
down and when prices are higher our costs go up but margin
wise make a lot more money.
[Audience]
Yeah, it's an interesting question I did want to talk about
careers for a minute but we are kind of running out of time.
I guess I would say from that perspective is as you enter
the workforce, have an idea which may evolve over time of
what you would like to do or where you want to go. And
without being pushy and without being you know the moment
you get a new job don't start talking to your boss about
what the next job is, do your job, do a good job but don't
let it go forever. I believe it is very important and I as a
leader I think it's very important for me my most important
job is managing people. I will say something that is true
but probably not very popular I don't do any work. And
people over in the organization probably love they hear me
say that. I do work through people that's the only way I get
at where you know when you get to a certain point it's
usually around in the US system what I would refer to is
around that vice president level in an organization.
Everything you do is through people so managing people is
very important, so both sides of that, first the employee. I
have been not aggressive but I regularly through my career
had conversations with my boss about how I am doing, what
are my expectations and do they meet your expectations. I
think I can do X, Y I was going to say Z I will say Z, do
you think I can do that and if not what do I need to do to
fill the gaps? Can I work on projects, can I do this, and as
long as I word I use is alignment if there is alignment in
between you and the organization that's great you are
working in the right path. If there is not then you have to
figure out how you are going to fill those gaps and if your
view of what you can do in the organization's view is
different and you can't bridge that gap then you are going
to have to decide am I okay with that and is that where I
will be and if not then you may have to move some place
else. I mean I think those and I can use a few experiences
that mean when I was in working in London for the first time
I was the head of our financial planning analysis and I came
to understand how important understanding and working in
Australia was in our company and I said I would really like
to work in Australia. I went and talked to my boss about
this one. A month later it just so happened, a job opened in
Australia which was perfect for me. I ended up moving to
Australia about 3 months later. I got that experience which
was very important. I had a very similar experience before
that, my job before that where I had only been in the job
for about a year. I talked to my boss I said listen I don't
want you to wonder if a job comes up, is he interested in
going and working in London, I said I am. If I am
opportunity comes up in London I am interested in it. I know
I have only been in my job for 14 months I am now looking
for it today. I am not kidding you within the month he
called me up and said there is a job in London do you want
to go, and I went to work in London. And so I think it's
very important that you do that. I had a very similar
experience when I went from being a CFO to a CEO of one of
our business operations, where I had somebody that mentored
me and helped me. The other thing is from a leader so as you
become a leader one of the key things is managing people and
it's one of the hardest things you will do. It's easy when
people are doing well because it's easy to work with them,
to praise them, to reward them when they are doing well.
When they are not doing well it sucks, it's the hardest
thing you will have to do, but you have to do it. And so you
have to treat people with respect, you have to treat them
with dignity but you have to work with them to try and turn
them around. If they are not working out what are the
reasons, what can we do to help fix it? Sometimes that's
successful, sometimes it's not and when it's not successful
I am not trying to sound like an overt but when it's not
successful if you have people that are not carrying their
load on your team it will only drag you down and the rest of
your team and you can't accept it. And it's one of the
hardest things you have to do as a leader you don't want to
do it you don't want to face up to. So as an employee put
yourself on the other side of that equation. If things aren'
t quite working out quite often your leader won't tell you
because it's not any fun. So that's why you sometimes as a
person have to make sure you are keeping that dialog open.
The more and more times that I have heard CEOs of companies
talked they come back to this point over and over again.
They were too slow to make decisions on people that were not
performing well. And it's no fun and you always treat people
with dignity and respect. And you try and help them to do
better but sometimes it is just not a good fit and you need
to move on from what people say. So that was I was going to
talk a little bit about more careers but that was kind of a
condensed.
[Audience]
We are realizing and we are starting to invest a lot more in
our people systems it's probably an area that we haven't
done the greatest job in the past. So what we have been
spending over the last 6 or 7 years but even more so over
the last couple of years, a lot more on training, mentoring,
coaching and we are starting to really do a lot more on
diversity both gender and national diversity as well. And we
have been working on gender diversity now with some emphasis
for about 5 or 6 or 7 years with some real concerted effort
and we are showing some progress. When you look at national
diversity where we are going in the future we don't have
those people working in our company. So if you think we are
going to go develop stuff in the Congo or in Guinea, how
many Canadians do we have working in our office, very few.
And particularly at levels that can engage with prime
ministers, presidents and that language skills so we are
very heavily, we speak, if I can say American, Australian
and Canadian now and British English very heavy. We were
starting to get more French because of the Alcan
acquisition. We have very few, if you look at the scheme of
things people that are from South America in our company and
we have just made a decision that we are going to have to go
out and hire 100 Indians and we are going to have to bring
them into our operations and train them and hopefully over
time you know as we develop operations in India we are doing
the same thing with Mongolia. So you are just going out we
are doing scholarship programs but we are hiring people out
of university and bringing them into our operations and
getting them trained. Because when we run an operation in
Mongolia we don't want to run it by a bunch of White British
or Americans to be honest with you. We want to run by
Mongolians ultimately. What happens on day one because they
might not have the skills but over time we want Mongolians
or Indians or Guineans to run those operations but we are
little bit behind that but we are starting, it's money and
effort.
[Informal Talk]
